UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.  20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20202021
OR
☐ 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)(Zip Code)
(312) 312) 634-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueADMNYSE
1.000% Notes due 2025NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes  ☒  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  ☒  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☒Accelerated Filer☐Emerging Growth Company☐
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐  No  ☒.
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 – 556,389,049559,441,260 shares
(October 29, 2020)25, 2021)

SAFE HARBOR STATEMENT

This Form 10-Q contains forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995 that is subject to risks and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking information.  Risks and uncertainties that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, as may be updated in our subsequent Quarterly Reports on Form 10-Q. To the extent permitted under applicable law, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events.







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

Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2021202020212020
(In millions, except per share amounts)
Revenues$20,340 $15,126 $62,159 $46,377 
Cost of products sold19,014 14,084 57,822 43,276 
Gross Profit1,326 1,042 4,337 3,101 
Selling, general, and administrative expenses720 636 2,208 1,938 
Asset impairment, exit, and restructuring costs2 4 84 61 
Equity in (earnings) losses of unconsolidated affiliates(110)(160)(398)(403)
Investment income(20)(20)(83)(94)
Interest expense61 100 188 270 
Other (income) expense – net20 282 36 202 
Earnings Before Income Taxes653 200 2,302 1,127 
Income tax expense (benefit)120 (26)364 38 
Net Earnings Including Noncontrolling Interests533 226 1,938 1,089 
Less: Net earnings attributable to noncontrolling interests7 1 11 4 
Net Earnings Attributable to Controlling Interests$526 $225 $1,927 $1,085 
Average number of shares outstanding – basic564 561 564 561 
Average number of shares outstanding – diluted566 562 566 563 
Basic earnings per common share$0.93 $0.40 $3.42 $1.93 
Diluted earnings per common share$0.93 $0.40 $3.41 $1.93 
Dividends per common share$0.37 $0.36 $1.11 $1.08 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2020 2019 2020 2019
 (In millions, except per share amounts)
        
Revenues$15,126
 $16,726
 $46,377
 $48,327
Cost of products sold14,084
 15,648
 43,276
 45,349
Gross Profit1,042
 1,078
 3,101
 2,978
        
Selling, general, and administrative expenses636
 578
 1,938
 1,839
Asset impairment, exit, and restructuring costs4
 53
 61
 200
Interest expense100
 97
 270
 307
Equity in (earnings) losses of unconsolidated affiliates(160) (88) (403) (279)
Interest income(16) (47) (71) (142)
Other (income) expense – net278
 (18) 179
 (39)
Earnings Before Income Taxes200
 503
 1,127
 1,092
        
Income tax (benefit) expense(26) 95
 38
 212
Net Earnings Including Noncontrolling Interests226
 408
 1,089
 880
        
Less: Net earnings attributable to noncontrolling interests1
 1
 4
 5
        
Net Earnings Attributable to Controlling Interests$225
 $407
 $1,085
 $875
        
Average number of shares outstanding – basic561
 562
 561
 564
        
Average number of shares outstanding – diluted562
 563
 563
 565
        
Basic earnings per common share$0.40
 $0.72
 $1.93
 $1.55
        
Diluted earnings per common share$0.40
 $0.72
 $1.93
 $1.55
        
Dividends per common share$0.36
 $0.35
 $1.08
 $1.05

See notes to consolidated financial statements.




3



Archer-Daniels-Midland Company

Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
(In millions)
Net earnings including noncontrolling interests$533 $226 $1,938 $1,089 
Other comprehensive income (loss):
Foreign currency translation adjustment(24)(154)305 (429)
Tax effect(30)51 (78)37 
Net of tax amount(54)(103)227 (392)
Pension and other postretirement benefit liabilities adjustment13 (5)102 — 
Tax effect5 3 (22)(9)
Net of tax amount18 (2)80 (9)
Deferred gain (loss) on hedging activities75 112 258 111 
Tax effect(1)(22)(41)(23)
Net of tax amount74 90 217 88 
Unrealized gain (loss) on investments6 (28)4 (25)
Tax effect— — (1)(1)
Net of tax amount6 (28)3 (26)
Other comprehensive income (loss)44 (43)527 (339)
Comprehensive income (loss) including noncontrolling interests577 183 2,465 750 
Less: Comprehensive income (loss) attributable to noncontrolling interests6 2 10 9 
Comprehensive income (loss) attributable to controlling interests$571 $181 $2,455 $741 
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2020 2019 2020 2019
 (In millions)
        
Net earnings including noncontrolling interests$226
 $408
 $1,089
 $880
Other comprehensive income (loss):       
Foreign currency translation adjustment(154) (251) (429) (236)
Tax effect51
 (35) 37
 (38)
Net of tax amount(103) (286) (392) (274)
        
Pension and other postretirement benefit liabilities adjustment(5) 7
 0
 10
Tax effect3
 0
 (9) 15
Net of tax amount(2) 7
 (9) 25
        
Deferred gain (loss) on hedging activities112
 (2) 111
 (65)
Tax effect(22) 8
 (23) 13
Net of tax amount90
 6
 88
 (52)
        
Unrealized gain (loss) on investments(28) 7
 (25) 12
Tax effect0
 0
 (1) (1)
Net of tax amount(28) 7
 (26) 11
Other comprehensive income (loss)(43) (266) (339) (290)
Comprehensive income (loss) including noncontrolling interests183
 142
 750
 590
        
Less: Comprehensive income (loss) attributable to noncontrolling interests2
 0
 9
 4
        
Comprehensive income (loss) attributable to controlling interests$181
 $142
 $741
 $586

See notes to consolidated financial statements.





4



Archer-Daniels-Midland Company

Consolidated Balance Sheets
(In millions)September 30, 2020 December 31, 2019(In millions)September 30, 2021December 31, 2020
(Unaudited)   (Unaudited)
Assets   Assets  
Current Assets   Current Assets  
Cash and cash equivalents$948
 $852
Cash and cash equivalents$1,083 $666 
Segregated cash and investments5,484
 4,458
Segregated cash and investments7,891 5,890 
Trade receivables2,616
 2,267
Trade receivables3,797 2,793 
Inventories8,762
 9,170
Inventories11,169 11,713 
Current assets held for saleCurrent assets held for sale130 — 
Other current assets4,956
 4,600
Other current assets5,220 6,224 
Total Current Assets22,766
 21,347
Total Current Assets29,290 27,286 
   
Investments and Other Assets 
  
Investments and Other Assets  
Investments in and advances to affiliates4,771
 5,132
Investments in and advances to affiliates5,148 4,913 
Goodwill and other intangible assets5,275
 5,476
Goodwill and other intangible assets5,705 5,413 
Right of use assetsRight of use assets1,005 1,102 
Other assets2,167
 1,936
Other assets1,302 1,054 
Total Investments and Other Assets12,213
 12,544
Total Investments and Other Assets13,160 12,482 
   
Property, Plant, and Equipment 
  
Property, Plant, and Equipment  
Land and land improvements538
 592
Land and land improvements523 545 
Buildings5,429
 5,381
Buildings5,557 5,522 
Machinery and equipment18,992
 19,005
Machinery and equipment18,955 19,154 
Construction in progress1,037
 1,021
Construction in progress1,126 1,118 
25,996
 25,999
 26,161 26,339 
Accumulated depreciation(16,180) (15,893)Accumulated depreciation(16,313)(16,388)
Net Property, Plant, and Equipment9,816
 10,106
Net Property, Plant, and Equipment9,848 9,951 
Total Assets$44,795
 $43,997
Total Assets$52,298 $49,719 
   
Liabilities, Temporary Equity, and Shareholders’ Equity 
  
Liabilities, Temporary Equity, and Shareholders’ Equity  
Current Liabilities 
  
Current Liabilities  
Short-term debt$209
 $1,202
Short-term debt$314 $2,042 
Trade payables3,347
 3,746
Trade payables4,617 4,474 
Payables to brokerage customers6,069
 5,022
Payables to brokerage customers8,675 6,460 
Accrued expenses and other payables4,280
 3,757
Accrued expenses and other payables4,121 4,943 
Current lease liabilitiesCurrent lease liabilities268 261 
Current maturities of long-term debt2
 7
Current maturities of long-term debt581 2 
Total Current Liabilities13,907
 13,734
Total Current Liabilities18,576 18,182 
   
Long-Term Liabilities 
  
Long-Term Liabilities  
Long-term debt7,922
 7,672
Long-term debt8,039 7,885 
Deferred income taxes1,344
 1,194
Deferred income taxes1,351 1,302 
Non-current lease liabilitiesNon-current lease liabilities759 863 
Other2,196
 2,114
Other1,358 1,391 
Total Long-Term Liabilities11,462
 10,980
Total Long-Term Liabilities11,507 11,441 
   
Temporary Equity - Redeemable noncontrolling interest85
 58
Temporary Equity - Redeemable noncontrolling interest225 74 
   
Shareholders’ Equity 
  
Shareholders’ Equity  
Common stock2,760
 2,655
Common stock2,964 2,824 
Reinvested earnings19,311
 18,958
Reinvested earnings21,081 19,780 
Accumulated other comprehensive income (loss)(2,749) (2,405)Accumulated other comprehensive income (loss)(2,076)(2,604)
Noncontrolling interests19
 17
Noncontrolling interests21 22 
Total Shareholders’ Equity19,341
 19,225
Total Shareholders’ Equity21,990 20,022 
Total Liabilities, Temporary Equity, and Shareholders’ Equity$44,795
 $43,997
Total Liabilities, Temporary Equity, and Shareholders’ Equity$52,298 $49,719 
   
See notes to consolidated financial statements.

5



Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows
(Unaudited)
(In millions)Nine Months Ended
September 30,
 20212020
Operating Activities  
Net earnings including noncontrolling interests$1,938 $1,089 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities  
Depreciation and amortization739 727 
Asset impairment charges54 50 
Deferred income taxes(95)57 
Equity in earnings of affiliates, net of dividends(36)(165)
Stock compensation expense135 114 
Loss on debt extinguishment36 410 
Deferred cash flow hedges258 111 
Gains on sales of assets and businesses/investment revaluation(95)(132)
Other – net156 34 
Changes in operating assets and liabilities  
Segregated investments594 147 
Trade receivables(1,060)(343)
Inventories405 370 
Deferred consideration in securitized receivables— (4,603)
Other current assets1,187 (467)
Trade payables170 (389)
Payables to brokerage customers2,236 1,060 
Accrued expenses and other payables(769)414 
Total Operating Activities5,853 (1,516)
Investing Activities  
Purchases of property, plant, and equipment(714)(558)
Proceeds from sales of assets and businesses73 708 
Net assets of businesses acquired(501)(3)
Investments in and advances to affiliates(7)(5)
Distributions from affiliates5 — 
Investments in retained interest in securitized receivables— (2,121)
Proceeds from retained interest in securitized receivables— 6,724 
Other – net(143)(17)
Total Investing Activities(1,287)4,728 
Financing Activities  
Long-term debt borrowings1,330 1,790 
Long-term debt payments(533)(2,032)
Net borrowings (payments) under lines of credit agreements(1,726)(993)
Share repurchases— (117)
Cash dividends(626)(607)
Other – net1 16 
Total Financing Activities(1,554)(1,943)
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents3,012 1,269 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period4,646 2,990 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period$7,658 $4,259 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets
Cash and cash equivalents$1,083 $948 
Restricted cash and restricted cash equivalents included in segregated cash and investments6,575 3,311 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$7,658 $4,259 
Supplemental Disclosure of Noncash Investing Activity:
Retained interest in securitized receivables$— $4,656 
(In millions)Nine Months Ended
September 30,
 2020 2019
Operating Activities   
Net earnings including noncontrolling interests$1,089
 $880
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities 
  
Depreciation and amortization727
 742
Asset impairment charges50
 50
Deferred income taxes57
 8
Equity in earnings of affiliates, net of dividends(165) (92)
Stock compensation expense114
 66
Loss on debt extinguishment410
 0
Deferred cash flow hedges111
 (65)
Gains on sales of assets and businesses(132) (37)
Other – net34
 148
Changes in operating assets and liabilities 
  
Segregated investments147
 300
Trade receivables(343) 276
Inventories370
 994
Deferred consideration in securitized receivables(4,603) (5,714)
Other current assets(467) (444)
Trade payables(389) (808)
Payables to brokerage customers1,060
 263
Accrued expenses and other payables414
 (206)
Total Operating Activities(1,516) (3,639)
    
Investing Activities 
  
Purchases of property, plant, and equipment(558) (566)
Proceeds from sales of assets and businesses708
 43
Net assets of businesses acquired(3) (1,946)
Purchases of marketable securities(2) (26)
Proceeds from sales of marketable securities1
 67
Investments in and advances to affiliates(5) (12)
Investments in retained interest in securitized receivables(2,121) (3,813)
Proceeds from retained interest in securitized receivables6,724
 9,527
Other – net(16) (23)
Total Investing Activities4,728
 3,251
    
Financing Activities 
  
Long-term debt borrowings1,790
 3
Long-term debt payments(2,032) (615)
Net borrowings (payments) under lines of credit agreements(993) 960
Share repurchases(117) (150)
Cash dividends(607) (592)
Other – net16
 (36)
Total Financing Activities(1,943) (430)
    
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents1,269
 (818)
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period2,990
 3,843
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period$4,259
 $3,025
    
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets   
    
Cash and cash equivalents$948
 $932
Restricted cash and restricted cash equivalents included in segregated cash and investments3,311
 2,093
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$4,259
 $3,025
    
Supplemental Disclosure of Noncash Investing Activity:   
Retained interest in securitized receivables$4,656
 $5,657

See notes to consolidated financial statements.

6



Archer-Daniels-Midland-Company

Consolidated Statements of Shareholders’ Equity
(Unaudited)
Common Stock 
Reinvested
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
Shareholders’
Equity
Common StockReinvested
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interests		Total
Shareholders’
Equity
(In millions, except per share amounts)Shares Amount (In millions, except per share amounts)SharesAmount
Balance, June 30, 2021Balance, June 30, 2021559 $2,941 $20,762 $(2,121)$21 $21,603 
Comprehensive incomeComprehensive income      
Net earningsNet earnings 526  7  
Other comprehensive income (loss)Other comprehensive income (loss)   45 (1) 
Total comprehensive incomeTotal comprehensive income     577 
Dividends paid - $0.37 per shareDividends paid - $0.37 per share  (209)  (209)
Stock compensation expenseStock compensation expense— 21    21 
OtherOther— 2 2 — (6)(2)
Balance, September 30, 2021Balance, September 30, 2021559 $2,964 $21,081 $(2,076)$21 $21,990 
Balance, December 31, 2020Balance, December 31, 2020556 $2,824 $19,780 $(2,604)$22 $20,022 
Comprehensive incomeComprehensive income      
Net earningsNet earnings 1,927  11  
Other comprehensive income (loss)Other comprehensive income (loss)   528 (1) 
Total comprehensive incomeTotal comprehensive income     2,465 
Dividends paid - $1.11 per shareDividends paid - $1.11 per share  (626)  (626)
Stock compensation expenseStock compensation expense3 135    135 
OtherOther— 5 — 0(11)(6)
Balance, September 30, 2021Balance, September 30, 2021559 $2,964 $21,081 $(2,076)$21 $21,990 
Balance, June 30, 2020556
 $2,705
 $19,293
 $(2,705) $18
 $19,311
Balance, June 30, 2020556 $2,705 $19,293 $(2,705)$18 $19,311 
Comprehensive income 
  
  
  
  
  
Comprehensive income      
Net earnings   
 225
  
 1
  
Net earnings 225  1  
Other comprehensive income (loss) 
  
  
 (44) 1
  
Other comprehensive income (loss)   (44)1  
Total comprehensive income 
  
  
  
  
 183
Total comprehensive income     183 
Dividends paid - $0.36 per share 
  
 (202)  
  
 (202)Dividends paid - $0.36 per share  (202)  (202)
Share repurchases0
   (5)     (5)Share repurchases— (5)(5)
Stock compensation expense0
 39
  
  
  
 39
Stock compensation expense— 39   39 
Other0
 16
 0
 0
 (1) 15
Other— 16 — — (1)15 
Balance, September 30, 2020556
 $2,760
 $19,311
 $(2,749) $19
 $19,341
Balance, September 30, 2020556 $2,760 $19,311 $(2,749)$19 $19,341 
           
Balance, December 31, 2019557
 $2,655
 $18,958
 $(2,405) $17
 $19,225
Balance, December 31, 2019557 $2,655 $18,958 $(2,405)$17 $19,225 
Impact of ASC 326 (see Note 2)    (8)     (8)
Impact of ASC 326 (see Note 1)Impact of ASC 326 (see Note 1)(8)(8)
Balance, January 1, 2020557
 $2,655
 $18,950
 $(2,405) $17
 $19,217
Balance, January 1, 2020557 2,655 18,950 (2,405)17 19,217 
Comprehensive income 
  
  
  
  
  
Comprehensive income      
Net earnings   
 1,085
  
 4
  
Net earnings 1,085  4  
Other comprehensive income (loss) 
  
  
 (344) 5
  
Other comprehensive income (loss)   (344)5  
Total comprehensive income 
  
  
  
  
 750
Total comprehensive income     750 
Dividends paid - $1.08 per share 
  
 (607)  
  
 (607)Dividends paid - $1.08 per share  (607)  (607)
Share repurchases(3)   (117)     (117)Share repurchases(3)(117)(117)
Stock compensation expense2
 114
  
  
  
 114
Stock compensation expense2 114    114 
Other0
 (9) 0
 


 (7) (16)Other— (9)— — (7)(16)
Balance, September 30, 2020556
 $2,760
 $19,311
 $(2,749) $19
 $19,341
Balance, September 30, 2020556 $2,760 $19,311 $(2,749)$19 $19,341 
           
           
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
Other0
 8
 0
 0
 (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
Other0
 (9) (9) 0
 3
 (15)
Balance, September 30, 2019557
 $2,617
 $18,651
 $(2,395) $22
 $18,895
           
See notes to consolidated financial statements.

7




Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements
(Unaudited)

Note 1.
Note 1.    Basis of Presentation


The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021.  For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Principles of Consolidation

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

Reclassifications

Effective January 1, 2020, the Company started reporting its newly created dry mill ethanol subsidiary, Vantage Corn Processors (VCP), as a sub-segment within the Carbohydrate Solutions segment. VCP replaces the Bioproducts sub-segment which included the combined results of the Company’s corn dry and wet mill ethanol operations. The wet mill ethanol operations that were previously reported in Bioproducts are now included in the Starches and Sweeteners sub-segment. In addition to dry mill ethanol production, VCP sells/brokers ADM’s wet mill ethanol production as the sole marketer of ethanol produced at the Company’s facilities. The change does not have an impact on the total results of the Carbohydrate Solutions segment.

Prior period information in Notes 4 and 14 has been reclassified to conform to the current period segment 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 consolidated statements of cash flows.

Receivables

The Company records receivables at net realizable value in trade receivables, other current assets, and other assets.  These amounts include allowances for estimated uncollectible accounts totaling $105$82 million and $110$100 million at September 30, 20202021 and December 31, 2019,2020, respectively, to reflect any loss anticipated on the accounts receivable balances including any accrued interest receivables thereon. Long-term receivables recorded in other assets were not material to the Company’s overall receivables portfolio.



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 1.Basis of Presentation (Continued)

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

The Company recorded bad debt expense in selling, general, and administrative expenses of $1 million and $9 million in the three and nine months ended September 30, 2021, respectively, and $7 million and $32 million in the three and nine months ended September 30, 2020, respectively, and $3 million and $10 million in the three and nine months ended September 30, 2019.2020.

8
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 1.    Basis of Presentation (Continued)
Inventory Valuation

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

The Company concluded that the accounting change doesdid not have a material effect on prior periods’ financial statements and elected not to apply the change on a retrospective basis. As a result, the Company recorded a reduction in cost of products sold of $91 million ($69 million after tax, equal to $0.12 per diluted share) for the cumulative effect of the change in the three months ended March 31, 2020 with no impact to the statement of cash flows. The Company does not expect the change to have a material impact on its results for the year ending December 31, 2020.

If the Company had not made the accounting change, the effect of LIFO valuation on ADM’s operating results would have been an increase in cost of products sold of $50 million ($38 million after tax, equal to $0.07 per diluted share) in the three months ended September 30, 2020 and an increase in cost of goods sold of $7 million ($5 million after tax, equal to $0.01 per diluted share) in the nine months ended September 30, 2020 with no impact to the consolidated statement of cash flows.

Reclassification

During the quarter and nine months ended September 30, 2021, the Company recorded revaluation gains on cost method investments of $9 million and $49 million, respectively, in connection with observable third-party transactions in investment income (previously interest income) in the consolidated statements of earnings. Revaluation gains previously recorded in other (income) expense - net of $4 million and $23 million in the quarter and nine months ended September 30, 2020, respectively, were reclassified to conform to the current presentation.

Note 2.
Note 2.    New Accounting Standards

Effective January 1, 2020, the Company adopted the amended guidance of Topic 326, 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 the prior “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 was 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. The Company evaluated its current methodology of estimating allowance for doubtful accounts and the risk profile of its receivable portfolio and developed a model that includes the qualitative and forecasting aspects of the “expected loss” model under the amended guidance. The Company finalized its assessment of the impact of the amended guidance and recorded a $8 million cumulative effect adjustment to retained earnings at January 1, 2020. For more information about the Company’s receivables, see Note 1.

Effective January 1, 2020,2021, the Company adopted the amended guidance of ASC Topic 820,740, Fair Value MeasurementIncome Taxes (Topic 740), which modifiessimplifies the disclosure requirements on fair value measurements.accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also simplify and improve consistent application of other areas of Topic 740. The adoption of thisthe amended guidance did not have a significant impact on the Company’s consolidated financial results.statements.


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 3.
Note 3.    Pending Accounting Standards

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.

Effective January 1, 2021, the Company will be required to adopt the amended guidance of ASC Topic 740, Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify other areas of Topic 740. Early adoption is permitted. The Company has not yet completed its assessment of the impact of the amended guidance on the consolidated financial statements but does not expect the adoption of the amendments to have a significant impact on its financial results.

Through December 31, 2022, the Company has the option to adopt the amended guidance of ASC Topic 848, Reference Rate Reform, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amended guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.  The Company plans to adopt the expedients and exceptions provided by the amended guidance before the December 31, 2022 expiry date but has not yet completed its assessment of the impact on the consolidated financial statements.


Note 4.Revenues












9

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 manufacturedmanufacturing products used as ingredientsfor use in food, beverages, feed, energy, and industrial products.applications, and ingredients and solutions for human and animal nutrition. Revenue is measured based on the consideration specified in the contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The Company applies the practical expedient in paragraph 10-50-14 of ASC 606, Revenue from Contracts with Customers (Topic 606) and does not disclose information about remaining performance obligations that have original expected durations of one year or less. For transportation service contracts, the Company recognizes revenue over time as the barge, ocean-going vessel, truck, rail, or container freight moves towards its destination in accordance with the transfer of control guidance of Topic 606. The Company recognized revenue from transportation service contracts of $153 million and $408 million for the three and nine months ended September 30, 2021, respectively, and $87 million and $310 million for the three and nine months ended September 30, 2020, respectively, and $134 million and $377 million for the three and nine months ended September 30, 2019, respectively. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20).
Shipping and Handling Costs

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



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)


Contract Liabilities

Contract liabilities relate to advance payments from customers for goods and services that the Company has yet to provide. Contract liabilities of $344$374 million and $604$626 million as of September 30, 20202021 and December 31, 2019,2020, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheets. Contract liabilities recognized as revenues were $128 million and $697 million for the three and nine months ended September 30, 2021, respectively, and $121 million and $742 million for the three and nine months ended September 30, 2020, were $121 million and $742 million, respectively, and $193 million and $519 million for the three and nine months ended September 30, 2019, respectively.

















10
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

Disaggregation of Revenues

The following tables present revenue disaggregated by timing of recognition and major product lines for the three and nine months ended September 30, 20202021 and 2019.2020.

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

11
 Three Months Ended September 30, 2020
 Topic 606 Revenue
Topic 815(1)
Total
 Point in TimeOver TimeTotalRevenueRevenues
 (In millions)
Ag Services and Oilseeds     
Ag Services$776
$87
$863
$6,489
$7,352
Crushing113
—
113
2,204
2,317
Refined Products and Other462
—
462
1,396
1,858
Total Ag Services and Oilseeds1,351
87
1,438
10,089
11,527
Carbohydrate Solutions     
Starches and Sweeteners1,162
—
1,162
412
1,574
Vantage Corn Processors490
—
490
—
490
Total Carbohydrate Solutions1,652
—
1,652
412
2,064
Nutrition     
Human Nutrition719
—
719
—
719
Animal Nutrition732
—
732
—
732
Total Nutrition1,451
—
1,451
—
1,451
      
Other Business84
—
84
—
84
Total Revenues$4,538
$87
$4,625
$10,501
$15,126

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)
Note 4.    Revenues (Continued)

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

12
 Nine Months Ended September 30, 2020
 Topic 606 Revenue
Topic 815(1)
Total
 Point in TimeOver TimeTotalRevenueRevenues
 (In millions)
Ag Services and Oilseeds     
Ag Services$2,504
$310
$2,814
$20,116
$22,930
Crushing493
—
493
6,542
7,035
Refined Products and Other1,501
—
1,501
3,881
5,382
Total Ag Services and Oilseeds4,498
310
4,808
30,539
35,347
Carbohydrate Solutions     
Starches and Sweeteners3,539
—
3,539
1,230
4,769
Vantage Corn Processors1,625
—
1,625
—
1,625
Total Carbohydrate Solutions5,164
—
5,164
1,230
6,394
Nutrition     
Human Nutrition2,161
—
2,161
—
2,161
Animal Nutrition2,198
—
2,198
—
2,198
Total Nutrition4,359
—
4,359
—
4,359
      
Other Business277
—
277
—
277
Total Revenues$14,298
$310
$14,608
$31,769
$46,377










Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)
Note 4.    Revenues (Continued)


 Three Months Ended September 30, 2019
 Topic 606 Revenue
Topic 815(1)
Total
 Point in TimeOver TimeTotalRevenueRevenues
 (In millions)
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 Sweeteners1,098
—
1,098
428
1,526
Vantage Corn Processors1,039
—
1,039
—
1,039
Total Carbohydrate Solutions2,137
—
2,137
428
2,565
Nutrition     
Human Nutrition703
—
703
—
703
Animal Nutrition754
—
754
—
754
Total Nutrition1,457
—
1,457
—
1,457
      
Other Business88
—
88
—
88
Total Revenues$5,854
$134
$5,988
$10,738
$16,726
 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 Sweeteners3,507
—
3,507
1,275
4,782
Vantage Corn Processors2,627
—
2,627
—
2,627
Total Carbohydrate Solutions6,134
—
6,134
1,275
7,409
Nutrition     
Human Nutrition2,105
—
2,105
—
2,105
Animal Nutrition2,158
—
2,158
—
2,158
Total Nutrition4,263
—
4,263
—
4,263
      
Other Business273
—
273
—
273
Total Revenues$15,390
$377
$15,767
$32,560
$48,327

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

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


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.Revenues (Continued)


Ag Services and Oilseeds

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

Carbohydrate Solutions

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



13
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

Nutrition

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

Other Business

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

Note 5.    Acquisitions

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

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

The Company has the option to acquire the remaining 25% interest in P4 from December 31, 2023 to March 31, 2025, based on a fixed multiple of earnings before interest, taxes, depreciation, and amortization for the twelve months prior to the exercise of this option. The noncontrolling interest holders also have the option to put the 25% interest to the Company on the same terms. The Company records the 25% remaining interest in temporary equity - redeemable noncontrolling interest.

Goodwill recorded in connection with the acquisitions is primarily attributable to synergies expected to arise after the Company’s acquisition of the businesses, of which, $358 million is expected to be deductible for tax purposes.

Nutrition segment results include the post-acquisition financial results of these acquisitions which were immaterial.









14


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.
Note 6.    Fair Value Measurements


The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 20202021 and December 31, 2019.2020.
 Fair Value Measurements at September 30, 2021
 
Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)		Significant
 Other
 Observable
 Inputs
 (Level 2)		Significant 
Unobservable
Inputs
(Level 3)		Total
 (In millions)
 
Assets:    
Inventories carried at market$— $4,912 $2,502 $7,414 
Unrealized derivative gains:    
Commodity contracts— 963 485 1,448 
Foreign currency contracts— 337 — 337 
Interest rate contracts— 58 — 58 
Cash equivalents326 — — 326 
Segregated investments1,099 — — 1,099 
Total Assets$1,425 $6,270 $2,987 $10,682 
Liabilities:    
Unrealized derivative losses:    
Commodity contracts$— $904 $703 $1,607 
Foreign currency contracts— 256 — 256 
Interest rate contracts— 1 — 1 
Debt conversion option— — 17 17 
Inventory-related payables— 735 15 750 
Total Liabilities$— $1,896 $735 $2,631 
15
 Fair Value Measurements at September 30, 2020
 

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$0
 $3,572
 $2,092
 $5,664
Unrealized derivative gains:       
Commodity contracts0
 894
 580
 1,474
Foreign currency contracts0
 292
 0
 292
Interest rate contracts0
 32
 0
 32
Cash equivalents496
 0
 0
 496
Marketable securities9
 0
 0
 9
Segregated investments1,158
 0
 0
 1,158
Deferred receivables consideration0
 272
 0
 272
Total Assets$1,663
 $5,062
 $2,672
 $9,397
        
Liabilities:       
Unrealized derivative losses:       
Commodity contracts$0
 $592
 $796
 $1,388
Foreign currency contracts0
 547
 0
 547
Interest rate contracts0
 34
 0
 34
Debt conversion option0
 0
 32
 32
Inventory-related payables0
 482
 7
 489
Total Liabilities$0
 $1,655
 $835
 $2,490
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

 Fair Value Measurements at December 31, 2019
 
 
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$0
 $3,227
 $1,477
 $4,704
Unrealized derivative gains:       
Commodity contracts0
 277
 201
 478
Foreign currency contracts0
 138
 0
 138
Interest rate contracts0
 3
 0
 3
Cash equivalents505
 0
 0
 505
Marketable securities5
 0
 0
 5
Segregated investments628
 0
 0
 628
Deferred receivables consideration0
 446
 0
 446
Total Assets$1,138
 $4,091
 $1,678
 $6,907
        
Liabilities:       
Unrealized derivative losses:       
Commodity contracts$0
 $375
 $199
 $574
Foreign currency contracts0
 125
 0
 125
Interest rate contracts0
 43
 0
 43
Inventory-related payables0
 702
 27
 729
Total Liabilities$0
 $1,245
 $226
 $1,471

Note 6.    Fair Value Measurements (Continued)
 Fair Value Measurements at December 31, 2020
  
Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)		Significant
 Other
 Observable
 Inputs
 (Level 2)		Significant 
Unobservable
Inputs
(Level 3)		Total
 (In millions)
Assets:    
Inventories carried at market$— $5,758 $2,183 $7,941 
Unrealized derivative gains:    
Commodity contracts— 1,905 859 2,764 
Foreign currency contracts— 283 — 283 
Interest rate contracts— 61 — 61 
Cash equivalents297 — — 297 
Marketable securities1 — — 1 
Segregated investments1,067 — — 1,067 
Total Assets$1,365 $8,007 $3,042 $12,414 
Liabilities:    
Unrealized derivative losses:    
Commodity contracts$— $1,116 $918 $2,034 
Foreign currency contracts— 535 — 535 
Interest rate contracts— 15 — 15 
Debt conversion option— — 34 34 
Inventory-related payables— 498 11 509 
Total Liabilities$— $2,164 $963 $3,127 

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

16
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

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

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

The Company’s 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 program (the “First Program”) which represents notes receivable fromdebt conversion option is the purchasers underequity-linked embedded derivative related to the First Program (see Note 16 for more information). This amount is reflectedexchangeable bonds issued in other current assets on the consolidated balance sheets (see Note 7 for more information). The Company carries the deferred receivables consideration at fair value determined by calculating the expected amount of cash to be received.August 2020. The fair value is principally based on observable inputs (a Level 2 measurement) consisting mainly of the face amountembedded derivative is included in long-term debt, with changes in fair value recognized as interest, and is valued with the assistance of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate. Payment of deferred receivables consideration is not subject to significant risks other than delinquencies and credit losses on accounts receivable transferreda third-party pricing service (a level 3 measurement under the First Program, which have historically been insignificant.



Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

applicable accounting standards).

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 September 30, 20202021.
.

 Level 3 Fair Value Asset Measurements at
 September 30, 2020
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, June 30, 2020$1,399
 $442
 $1,841
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*258
 286
 544
Purchases3,181
 0
 3,181
Sales(2,703) 0
 (2,703)
Settlements0
 (96) (96)
Transfers into Level 3290
 13
 303
Transfers out of Level 3(333) (65) (398)
Ending balance, September 30, 2020$2,092
 $580
 $2,672

 Level 3 Fair Value Asset Measurements at
September 30, 2021
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, June 30, 2021$2,824 $551 $3,375 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*70 288 358 
Purchases7,351 — 7,351 
Sales(7,346)— (7,346)
Settlements— (311)(311)
Transfers into Level 3205 34 239 
Transfers out of Level 3(602)(77)(679)
Ending balance, September 30, 2021$2,502 $485 $2,987 

* Includes increase in unrealized gains of $392$435 million relating to Level 3 assets still held at September 30, 20202021.
17
Archer-Daniels-Midland Company
.

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.    Fair Value Measurements (Continued)
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 September 30, 20202021.
.

 Level 3 Fair Value Liability Measurements at
 September 30, 2020
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 Debt Conversion Option 
 
Total 
Liabilities
 (In millions)
        
Balance, June 30, 2020$14
 $363
 $0
 $377
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*(3) 618
 15
 630
Purchases and issuance of debt conversion option3
 0
 17
 20
Sales(7) 0
 —
 (7)
Settlements0
 (188) —
 (188)
Transfers into Level 30
 24
 —
 24
Transfers out of Level 30
 (21) —
 (21)
Ending balance, September 30, 2020$7
 $796
 $32
 $835

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

* Includes increase in unrealized losses of $635$313 million relating to Level 3 liabilities still held at September 30, 20202021.
.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.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 September 30, 20192020.
 Level 3 Fair Value Asset Measurements at
September 30, 2020
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, June 30, 2020$1,399 $442 $1,841 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*258 286 544 
Purchases3,181 — 3,181 
Sales(2,703)— (2,703)
Settlements— (96)(96)
Transfers into Level 3290 13 303 
Transfers out of Level 3(333)(65)(398)
Ending balance, September 30, 2020$2,092 $580 $2,672 
.
 Level 3 Fair Value Asset Measurements at
 September 30, 2019
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, June 30, 2019$1,388
 $159
 $1,547
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*27
 91
 118
Purchases2,772
 0
 2,772
Sales(2,643) 0
 (2,643)
Settlements0
 (106) (106)
Transfers into Level 3213
 21
 234
Transfers out of Level 3(327) (4) (331)
Ending balance, September 30, 2019$1,430
 $161
 $1,591

* Includes increase in unrealized gains of $165$392 million relating to Level 3 assets still held at September 30, 20192020.
18
Archer-Daniels-Midland Company
.

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.    Fair Value Measurements (Continued)

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 September 30, 20192020.
Level 3 Fair Value Liability Measurements at
 September 30, 2020
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
 (In millions)
Balance, June 30, 2020$14 $363 $— $377 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*(3)618 15 630 
Purchases3 — 17 20 
Sales(7)— — (7)
Settlements— (188)— (188)
Transfers into Level 3— 24 — 24 
Transfers out of Level 3— (21)— (21)
Ending balance, September 30, 2020$7 $796 $32 $835 
.
 Level 3 Fair Value Liability Measurements at
 September 30, 2019
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 
 
Total 
Liabilities
 (In millions)
      
Balance, June 30, 2019$22
 $216
 $238
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*(3) 82
 79
Purchases26
 0
 26
Sales(4) 0
 (4)
Settlements0
 (167) (167)
Transfers into Level 30
 13
 13
Transfers out of Level 30
 (4) (4)
Ending balance, September 30, 2019$41
 $140
 $181

* Includes increase in unrealized losses of $81$635 million relating to Level 3 liabilities still held at September 30, 20192020.
.




























19
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

Note 6.    Fair Value Measurements (Continued)
The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2020.2021.
 Level 3 Fair Value Asset Measurements at
 September 30, 2020
 
Inventories
 Carried at
 Market
 
Commodity
Derivative
Contracts
Gains
 
 
Total 
Assets
 (In millions)
      
Balance, December 31, 2019$1,477
 $201
 $1,678
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*626
 732
 1,358
Purchases9,600
 0
 9,600
Sales(9,838) 0
 (9,838)
Settlements0
 (331) (331)
Transfers into Level 3290
 57
 347
Transfers out of Level 3(63) (79) (142)
Ending balance, September 30, 2020$2,092
 $580
 $2,672

Level 3 Fair Value Asset Measurements at
 September 30, 2021
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, December 31, 2020$2,183 $859 $3,042 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*875 804 1,679 
Purchases20,899 — 20,899 
Sales(21,334)— (21,334)
Settlements— (1,134)(1,134)
Transfers into Level 31,131 79 1,210 
Transfers out of Level 3(1,252)(123)(1,375)
Ending balance, September 30, 2021$2,502 $485 $2,987 

* Includes increase in unrealized gains of $1.2$1.7 billion relating to Level 3 assets still held at September 30, 20202021.
.

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, 2020.2021.
 Level 3 Fair Value Liability Measurements at
 September 30, 2020
 
Inventory-
 related
 Payables
 
Commodity
Derivative
Contracts
Losses
 Debt Conversion Option 
 
Total 
Liabilities
 (In millions)
        
Balance, December 31, 2019$27
 $199
 $0
 $226
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*1
 1,070
 15
 1,086
Purchases and issuance of debt conversion option11
 0
 17
 28
Sales(32) 0
   (32)
Settlements0
 (521)   (521)
Transfers into Level 30
 79
   79
Transfers out of Level 30
 (31)   (31)
Ending balance, September 30, 2020$7
 $796
 $32
 $835


Level 3 Fair Value Liability Measurements at
 September 30, 2021
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
 (In millions)
Balance, December 31, 2020$11 $918 $34 $963 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*3 1,372 (17)1,358 
Purchase30 — — 30 
Sales(29)— — (29)
Settlements— (1,667)— (1,667)
Transfers into Level 3— 284 — 284 
Transfers out of Level 3— (204)— (204)
Ending balance, September 30, 2021$15 $703 $17 $735 
* Includes increase in unrealized losses of $1.1$1.4 billion relating to Level 3 liabilities still held at September 30, 2020.2021.

20
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

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, 2019.2020.
 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
 0
 8,118
Sales(8,425) 0
 (8,425)
Settlements0
 (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


 Level 3 Fair Value Asset Measurements at
September 30, 2020
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, December 31, 2019$1,477 $201 $1,678 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*626 732 1,358 
Purchases9,600 — 9,600 
Sales(9,838)— (9,838)
Settlements— (331)(331)
Transfers into Level 3290 57 347 
Transfers out of Level 3(63)(79)(142)
Ending balance, September 30, 2020$2,092 $580 $2,672 
* Includes increase in unrealized gains of $656 million$1.2 billion relating to Level 3 assets still held at September 30, 20192020.
.

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, 2019.2020.
 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
 0
 41
Sales(16) 0
 (16)
Settlements0
 (354) (354)
Transfers into Level 30
 37
 37
Transfers out of Level 30
 (42) (42)
Ending balance, September 30, 2019$41
 $140
 $181


Level 3 Fair Value Liability Measurements at
 September 30, 2020
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
 (In millions)
Balance, December 31, 2019$27 $199 $— $226 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*1 1,070 15 1,086 
Purchases11 — 17 28 
Sales(32)— — (32)
Settlements— (521)— (521)
Transfers into Level 3— 79 — 79 
Transfers out of Level 3— (31)— (31)
Ending balance, September 30, 2020$7 $796 $32 $835 
* Includes increase in unrealized losses of $258 million$1.1 billion relating to Level 3 liabilities still held at September 30, 2019.2020.

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.





21
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.Fair Value Measurements (Continued)

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

The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of September 30, 20202021 and December 31, 2019.2020. 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 September 30, 20202021 is a weighted average 20.6%33.3% of the total price for assets and 56.4%14.5% of the total price for liabilities.

 Weighted Average % of Total Price
 September 30, 2020 December 31, 2019
Component TypeAssets Liabilities Assets Liabilities
Inventories and Related Payables       
Basis20.6% 56.4% 28.2% 14.7%
Transportation cost15.8% 0% 24.7% 0%
        
Commodity Derivative Contracts       
Basis12.6% 18.7% 16.0% 20.2%
Transportation cost5.2% 4.3% 9.7% 3.1%

Weighted Average % of Total Price
September 30, 2021December 31, 2020
Component TypeAssetsLiabilitiesAssetsLiabilities
Inventories and Related Payables
Basis33.3 %14.5 %4.3 %13.7 %
Transportation cost16.2 %— %10.6 %— %
Commodity Derivative Contracts
Basis25.6 %33.5 %28.3 %0.7 %
Transportation cost3.7 %3.4 %1.9 %1.3 %

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 6.Derivative Instruments and Hedging Activities
Note 7.    Derivative Instruments and Hedging Activities

Derivatives Not Designated as Hedging Instruments

The majority of the Company’s derivative instruments have not been designated as hedging instruments. The Company uses exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural product 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 product inventories, which include amounts acquired under deferred pricing contracts, are stated at market value.  Inventory is not a derivative and therefore fair values of and changes in fair values of inventories are not included in the tables below.






22
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Derivative Instruments and Hedging Activities (Continued)

Note 7.    Derivative Instruments and Hedging Activities (Continued)
The following table sets forth the fair value of derivatives not designated as hedging instruments as of September 30, 20202021 and December 31, 20192020.
.

 September 30, 2020 December 31, 2019
 Assets Liabilities Assets Liabilities
 (In millions)
        
Foreign Currency Contracts$276
 $547
 $125
 $120
Commodity Contracts1,474
 1,388
 478
 574
Debt Conversion Option0
 32
 0
 0
Total$1,750
 $1,967
 $603
 $694

 September 30, 2021December 31, 2020
 AssetsLiabilitiesAssetsLiabilities
 (In millions)
Foreign Currency Contracts$328 $139 $283 $270 
Commodity Contracts1,448 1,607 2,764 2,034 
Debt Conversion Option— 17 — 34 
Total$1,776 $1,763 $3,047 $2,338 

The following tables set forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended September 30, 20202021 and 2019.2020.
Other expense (income) - net
 Cost ofInterest
(In millions)Revenuesproducts soldexpense
Three Months Ended September 30, 2021
Consolidated Statement of Earnings$20,340 $19,014 $20 $61 
Pre-tax gains (losses) on:
Foreign Currency Contracts$13 $(92)$62 $— 
Commodity Contracts— 214 — — 
Debt Conversion Option— — — 7 
Total gain (loss) recognized in earnings$13 $122 $62 $7 $204 
Three Months Ended September 30, 2020
Consolidated Statement of Earnings$15,126 $14,084 $282 $100 
Pre-tax gains (losses) on:
Foreign Currency Contracts$8 $(77)$(85)$— 
Commodity Contracts— (272)— — 
Debt Conversion Option— — — (15)
Total gain (loss) recognized in earnings$8 $(349)$(85)$(15)$(441)
23
     Other expense (income) - net    
   Cost of  Interest  
(In millions)Revenues products sold  expense  
Three Months Ended September 30, 2020  
      
Consolidated Statement of Earnings$15,126
 $14,084
 $278
 $100
  
          
Pre-tax gains (losses) on:         
Foreign Currency Contracts$8
 $(77) $(85) $—
  
Commodity Contracts—
 (272) 0
 —
  
Debt Conversion Option—
 —
 —
 (15)  
Total gain (loss) recognized in earnings$8
 $(349) $(85) $(15) $(441)
          
Three Months Ended September 30, 2019         
Consolidated Statement of Earnings$16,726
 $15,648
 $(18) $97
  
          
Pre-tax gains (losses) on:         
Foreign Currency Contracts$17
 $(81) $(6) $—
  
Commodity Contracts—
 153
 —
 —
  
Total gain (loss) recognized in earnings$17
 $72
 $(6) $—
 $83
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

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

    Other expense (income) - net    Other expense (income) - net
  Cost of Interest   Cost ofInterest
(In millions)Revenues products sold expense  (In millions)Revenuesproducts soldexpense
Nine Months Ended September 30, 2021Nine Months Ended September 30, 2021
Consolidated Statement of EarningsConsolidated Statement of Earnings$62,159 $57,822 $36 $188 
Pre-tax gains (losses) on:Pre-tax gains (losses) on:
Foreign Currency ContractsForeign Currency Contracts$— $(140)$137 $— 
Commodity ContractsCommodity Contracts— (1,241)— — 
Debt Conversion OptionDebt Conversion Option— — — 17 
Total gain (loss) recognized in earningsTotal gain (loss) recognized in earnings$— $(1,381)$137 $17 $(1,227)
Nine Months Ended September 30, 2020         Nine Months Ended September 30, 2020
Consolidated Statement of Earnings$46,377
 $43,276
 $179
 270
  Consolidated Statement of Earnings$46,377 $43,276 $202 $270 
         
Pre-tax gains (losses) on:         Pre-tax gains (losses) on:
Foreign Currency Contracts$54
 $(738) $(13) $—
  Foreign Currency Contracts$54 $(738)$(13)$— 
Commodity Contracts—
 321
 55
 —
  Commodity Contracts— 321 55 — 
Debt Conversion Option—
 —
 —
 (15)  Debt Conversion Option— — — (15)
Total gain (loss) recognized in earnings$54
 $(417) $42
 $(15) $(336)Total gain (loss) recognized in earnings$54 $(417)$42 $(15)$(336)
         
Nine Months Ended September 30, 2019         
Consolidated Statement of Earnings$48,327
 $45,349
 $(39) $307
  
         
Pre-tax gains (losses) on:         
Foreign Currency Contracts$15
 $(30) $(22) $—
  
Commodity Contracts—
 142
 —
 —
  
Total gain (loss) recognized in earnings$15
 $112
 $(22) $—
 $105

Changes in the market value of inventories of certain merchandisable agricultural product inventories, 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 Fair Value orand Net Investment Hedging Strategies

The Company had certain derivatives designated as cash flow and net investment hedges as of September 30, 20202021 and cash flow, fair value, and net investment hedges as of December 31, 2019.2020.

For derivative instruments that were designated and qualify as fair value hedges, changes in the fair value of the hedging instrument and changes in the fair value of the hedged item were recognized in the consolidated statement of earnings during the period.

The Company used interest rate swaps designated as fair value hedges to protect the fair value of $495 million in fixed-rate debt due to changes in interest rates. The terms of the interest rate swaps matched the terms of the underlying debt. At December 31, 2019, the Company had $3 million in other current assets representing the fair value of the interest rate swaps and a corresponding increase in the underlying debt for the same amount with no net impact to earnings. In June 2020, the Company redeemed the debt and recorded a gain of $8 million from the termination of the swaps.

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

The Company uses cross-currency swaps and foreign exchange forwards designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. The Company executed USD-fixed to Euro-fixed cross-currency swaps with an aggregate notional amount of $1.3 billion and $1.2 billion as of September 30, 20202021 and December 31, 2019, respectively,2020, and foreign exchange forwards with an aggregate notional amount of $1.7 billion and $1.8 billion as of September 30, 2020.

2021 and December 31, 2020, respectively.

As of September 30, 20202021 and December 31, 2019,2020, the Company had after-tax losses of $80$82 million and after-tax gains of $6$202 million in AOCI, respectively, related to foreign exchange gains and losses from these net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Derivative Instruments and Hedging Activities (Continued)

For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flow that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of 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.
24
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.    Derivative Instruments and Hedging Activities (Continued)
The Company usesCompany’s structured trade finance programs use 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 - netrevenues over the period in which the related interest payments are paid to the banks. The amounts are recorded in revenues as the underlying commodity trade flows are also recorded in revenues. As of September 30, 2021 and December 31, 2020, the Company had interest rate swaps maturing on various dates with aggregate notional amounts of $0.2 billion and $3.3 billion, respectively.

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

million, respectively.

As of September 30, 20202021 and December 31, 2019,2020, the Company had after-tax lossesgains of $8$44 million and $43$31 million in AOCI, respectively, related to the interest rate swaps and the swap locks. The Company expects to recognize this amount in its consolidated statements of earnings during the life of the debt instruments.


For each of the hedge programs described below, the derivatives are designated as cash flow hedges.  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 and losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable. As of September 30, 20202021 and December 31, 2019,2020, the Company had after-tax lossesgains of $41$371 million and $5$164 million in AOCI, respectively, related to gains and losses from these programs.  The Company expects to recognize $41$371 million of the September 30, 20202021 after-tax lossesgains in its consolidated statements 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 normally grind approximately 72 million bushels of corn per month. DueFrom April 2020 to March 2021, the Company temporarily idled dry mill assets the Company is currentlyand was grinding approximately 56 million bushels of corn per month.  In April 2021, the Company resumed ethanol production at its two corn dry mill facilities. During the past 12 months, the Company hedged between 20%23% and 60%34% of its monthly grind. At September 30, 2020,2021, the Company had designated hedges representing between 11%3% and 34%31% of its anticipated monthly grind of corn for the next 12 months.

The Company, from time to time, also uses futures, options, and swaps to 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 and as of September 30, 2021, the Company hedged between 0 and 91 million gallons of ethanol sales per month under these programs. The Company had 0no hedges related to ethanol sales as of September 30, 2020.under these programs.


The Company uses futures and options contracts to hedge the purchase price of the anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities.facilities, subject to certain program limits. The Company also uses futures or options contracts to hedge the sales prices of the anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities.facilities, subject to certain program limits. During the past 12 months, the Company hedged between 52%27% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. At September 30, 2020,2021, the Company had 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 Company uses futures and OTC swaps to hedge the purchase price of anticipated volumes of natural gas consumption in a future month for certain of its facilities in North America and Europe, subject to certain program limits. During the past 12 months, the Company hedged between 20% and 94% of the anticipated monthly natural gas consumption at the designated facilities. At September 30, 2021, the Company had designated hedges representing between 10% and 96% of the anticipated monthly natural gas consumption over the next 12 months.

25
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Derivative Instruments and Hedging Activities (Continued)

Note 7.    Derivative Instruments and Hedging Activities (Continued)

The following table sets forth the fair value of derivatives designated as hedging instruments as of September 30, 20202021 and December 31, 20192020.
.

 September 30, 2020 December 31, 2019
 Assets Liabilities Assets Liabilities
 (In millions)
Foreign Currency Contracts$16
 $0
 $13
 $5
Interest Rate Contracts32
 34
 3
 43
Total$48
 $34
 $16
 $48

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

The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended September 30, 20202021 and 2019.2020.
   Cost of products sold Interest expense Other expense (income) - net  
(In millions)Revenues     
Three Months Ended September 30, 2020      
Consolidated Statement of Earnings$15,126
 $14,084
 $100
 $278
  
          
Effective amounts recognized in earnings         
Pre-tax gains (losses) on:         
Commodity Contracts$1
 $79
 $—
 $0
  
Interest Contracts—
 —
 0
 (14)  
Total gain (loss) recognized in earnings$1
 $79
 $0
 $(14) $66
          
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
 $—
 $0
  
Interest Contracts—
 —
 0
 (21)  
Total gain (loss) recognized in earnings$3
 $1
 $0
 $(21) $(17)

Cost of products sold
(In millions)Revenues
Three Months Ended September 30, 2021
Consolidated Statement of Earnings$20,340 $19,014 
Effective amounts recognized in earnings 
Pre-tax gains (losses) on:
Commodity Contracts$— $122 
Total gain (loss) recognized in earnings$— $122 $122 
Three Months Ended September 30, 2020
Consolidated Statement of Earnings$15,126 $14,084 
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Commodity Contracts$1 $79 
Interest Contracts(14)— 
Total gain (loss) recognized in earnings$(13)$79 $66 
26
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.Derivative Instruments and Hedging Activities (Continued)

   Cost of products sold Interest expense Other expense (income) - net  
(In millions)Revenues     
Nine Months Ended September 30, 2020       
Consolidated Statement of Earnings$46,377
 $43,276
 $270
 $179
  

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

        
Commodity Contracts$9
 $19
 $—
 $0
  
Interest Contracts—
 —
 (8) (55)  
Total gain (loss) recognized in earnings$9
 $19
 $(8) $(55) $(35)
          
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—
 —
 0
 (29)  
Total gain (loss) recognized in earnings$(5) $7
 $0
 $(29) $(27)


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

The Company has designated €1.5€1.8 billion and €1.7€1.5 billion of its outstanding long-term debt and commercial paper borrowings at September 30, 20202021 and December 31, 2019,2020, respectively, as hedges of its net investment in a foreign subsidiary. As of September 30, 20202021 and December 31, 2019,2020, the Company had after-tax gains of $11 million and losses of $29 million and after-tax gains of $7$87 million in AOCI, respectively, related to foreign exchange gains and losses from these net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.























27

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 7.8.     Other Current Assets

The following table sets forth the items in other current assets:
 September 30, December 31,
 2020 2019
 (In millions)
Unrealized gains on derivative contracts$1,798
 $619
Deferred receivables consideration272
 446
Customer omnibus receivable888
 1,014
Financing receivables - net (1)
331
 395
Insurance premiums receivable25
 41
Prepaid expenses308
 318
Biodiesel tax credit89
 541
Tax receivables665
 579
Non-trade receivables (2)
296
 369
Other current assets284
 278
 $4,956
 $4,600
    

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 7.     Other Current Assets (Continued)


September 30,December 31,
20212020
 (In millions)
Unrealized gains on derivative contracts$1,843 $3,108 
Margin deposits and grain accounts580 500 
Customer omnibus receivable1,075 860 
Financing receivables - net (1)
154 297 
Insurance premiums receivable17 35 
Prepaid expenses325 290 
Biodiesel tax credit40 101 
Tax receivables765 680 
Non-trade receivables (2)
270 218 
Other current assets151 135 
 $5,220 $6,224 
(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 $4$3 million and $3$4 million at September 30, 20202021 and December 31, 2019,2020, respectively. Interest earned on financing receivables of $2 million and $8 million for the three and nine months ended September 30, 2021, respectively and $4 million and $15 million for the three and nine months ended September 30, 2020, respectively, and $5 million and $19 million for the three and nine months ended September 30, 2019, respectively, is included in interestinvestment income in the consolidated statements of earnings.

(2) Non-trade receivables included $77$28 million and $81$40 million of reinsurance recoverables as of September 30, 20202021 and December 31, 2019,2020, respectively.

28

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 8.9.     Accrued Expenses and Other Payables

The following table sets forth the items in accrued expenses and other payables:
September 30,December 31,
20212020
 (In millions)
Unrealized losses on derivative contracts$1,881 $2,584 
Accrued compensation421 396 
Income tax payable132 41 
Other taxes payable154 127 
Insurance claims payable207 238 
Contract liability374 626 
Other accruals and payables952 931 
 $4,121 $4,943 
 September 30, December 31,
 2020 2019
 (In millions)
Unrealized losses on derivative contracts$1,969
 $742
Accrued compensation349
 300
Income tax payable61
 72
Other taxes payable120
 120
Biodiesel tax credit payable17
 332
Insurance claims payable277
 284
Contract liability344
 604
Current maturities - operating leases251
 215
Other accruals and payables892
 1,088
 $4,280
 $3,757


Note 9.
Note 10.    Debt and Financing Arrangements


On March 27, 2020,September 10, 2021, the Company issued $0.5 billion and $1.0 billion aggregate principal amounts of 2.75% Notes due in 2025 and 3.25% Notes due in 2030, respectively. Net proceeds before expenses for the 2.75% and 3.25% Notes were $492 million and $988 million, respectively.

During the second half of 2020, the global credit market stabilized with corporate credit spreads below pre-pandemic levels. Continued actions by central banks provided additional support in both the short-term and long-term funding markets further stabilizing corporate credit markets. Low benchmark yields and favorable credit spreads coupled with continued strong cash flow generation during the second half of the year presented opportunities for ADM to re-balance the company’s liability portfolio to pre-pandemic levels. Starting in June 2020, ADM began a series of liability management transactions including multiple early debt redemptions and the $0.7 billion debt tender in September 2020 to capitalize on all-time low interest rates:

In June 2020, the Company redeemed $495$750 million aggregate principal amount of 4.479% debentures2.700% Notes due inSeptember 15, 2051 (the “Notes”). Net proceeds before expenses were $732 million.

In September 2021, the Company used the proceeds of the Notes to redeem $500 million aggregate principal amount of 2.750% notes due March 27, 2025 and recognized a debt extinguishment charge of $14 million in the nine months ended September 30, 2020.

In September 2020, the Company redeemed $400 million aggregate principal amount of 3.375% notes due in 2022 and recognized a debt extinguishment charge of $19$36 million in the quarter ended September 30, 2020.2021.






Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 9.    Debt and Financing Arrangements (Continued)

In September 2020,On March 25, 2021, the Company repurchased $665issued, in a private placement transaction, €500 million aggregate principal amount of certain of its outstanding notes and debentures (the “Debentures”) validly tendered and not withdrawn. Pursuant to the terms of its cash tender offers, the Company paid aggregate total consideration of $933 million for the Debentures accepted for repurchase. The cash tender offers were partially financed by the proceeds of the exchangeable bonds issued by the Company's wholly-owned subsidiary, ADM Ag Holding Limited (“ADM Ag”), on August 26, 2020 as discussed below. The Company recognized a debt extinguishment charge of $374 million in the quarter endedFixed-to-Floating Rate Senior Notes due September 30, 2020 which consisted of make-whole premiums and the write-off of debt issuance costs.

In September 2020, the Company’s wholly-owned subsidiary, ADM Germany GmbH, redeemed $100 million aggregate principal amount of private placement notes due in 2021 and 2024 and recognized a debt extinguishment charge of $3 million in the quarter ended September 30, 2020.

25, 2022.
On
August 26, 2020, ADM Ag issued $300 million aggregate principal amount of 0 coupon exchangeable bonds (the “Bonds”) due in 2023 to non-U.S. persons outside of the U.S. Subject to and upon compliance with the terms and conditions of the Bonds and any conditions, procedures, and certifications prescribed thereunder, the Bonds will be exchangeable for ordinary shares of Wilmar International Limited (“Wilmar”) currently held by the Company’s consolidated subsidiaries. Effective October 6, 2020, holders of the Bonds will be entitled to receive 50,597.0453 Wilmar shares (the “Exchange Property per Bond”) for each $200,000 principal amount of the Bonds, on the exercise of their exchange rights, subject to dividend adjustments. Effective February 26, 2022, ADM Ag has the option to call the outstanding Bonds at their principal amount if the value of the Exchange Property per Bond exceeds 120% of the principal amount for 20 consecutive trading days. The Company accounts for the Bond’s exchange feature as an equity-linked embedded derivative that is not clearly and closely related to the host debt instrument since it is indexed to Wilmar’s stock. As such, it does not qualify for the scope exception in ASC Topic 815, Derivatives and Hedging and is bifurcated and measured at fair value with changes in fair value recognized as interest expense. The fair value of the embedded derivative included in long-term debt as of September 30, 2020 was $32 million, valued with the assistance of a third-party pricing service (a level 3 measurement under applicable accounting standards). The Company unconditionally and irrevocably guarantees the payment of all sums payable and the performance of all of ADM Ag’s other obligations under the Bonds. In contemplation of the issuance of the Bonds, the Company's wholly-owned subsidiary, Archer Daniels Midland Asia-Pacific Limited, that holds shares in Wilmar, entered into a stock borrowing and lending agreement with Goldman Sachs International.

At September 30, 2020,2021, the fair value of the Company’s long-term debt exceeded the carrying value by $2.2$1.7 billion, as estimated using quoted market prices (a Level 2 measurement under applicable accounting standards).

At September 30, 2020,2021, the Company had lines of credit, including the accounts receivable securitization programs described below, totaling $10.7$12.4 billion, of which $9.1$10.5 billion was unused.  Of the Company’s total lines of credit, $5.0$6.5 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was 0no commercial paper outstanding at September 30, 2020.

2021.

The Company has accounts receivable securitization programs (the “Programs”). The Programs provide the Company with up to $1.8$2.1 billion in funding resulting from the sale of accounts receivable of which $0.4with $0.6 billion was unused capacity as of September 30, 20202021 (see Note 16 for more information about the Programs).
29

Archer-Daniels-Midland Company
Note 10.Income Taxes

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

The Company’s effective tax rates for the three and nine months ended September 30, 2021 were 18.4% and 15.8%, respectively, compared to a benefit of 13.0% and an expense of 3.4% for the three and nine months ended September 30, 2020, respectively, compared to an expense of 18.9% and 19.4% forrespectively. The low rate in the three and nine months ended September 30, 2019, respectively. The change in rates for2020 included the three and nine months was due to a shift ineffects of the geographical mix of forecasted pretax earnings and significant transactions that occurred during the quarter, including the early debt retirement, and the tax-free sale of a portion of the Company'sCompany’s shares in Wilmar which resulted in a significant decreaseand changes in the previously forecasted geographical mix of pretax earnings on the 2020 annual effective tax rate. rate in that period. The changefavorable tax rate in ratesthe nine months ended September 30, 2020 was also due to the impact of U.S. tax credits signed into law in December 2019, including a $73 million discrete tax benefit related to 45G railroad tax credits recognizedmaintenance expenses, and changes in the quarter ended March 31, 2020. The 45G railroad tax credits have an offsetting expense in costforecasted geographical mix of products sold.



Apretax earnings.rcher-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 10.     Income Taxes (Continued)

In March 2020, the Coronavirus Aid Relief and Economic Security Act (CARES Act) was signed into law in the United States. The Company continues to assess the effects of the provisions of the CARES Act and does not expect any income tax effects to have a material impact on the annual effective tax rate for the year ending December 31, 2020. The Company also continues to evaluate the effects of COVID-19 on its ability to indefinitely reinvest foreign earnings and does not expect any change in its assertion to have a material impact on the annual effective tax rate for the year ending December 31, 2020.

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.

The 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 1999 through 2011. As of September 30, 2020,2021, these assessments totaled $11$9 million in tax and $44$39 million in interest (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 believes that it has complied with all Argentine tax laws. To date, the Company has not received assessments for closed years subsequent to 2011. While the statute of limitations has expired for tax years 2012 and 2013, the Company cannot rule out receiving additional assessments challenging transfer prices used to price grain exports for years subsequent to 2013, and estimates that these potential assessments could be approximately $34$62 million in tax and $25$35 million in interest (adjusted for variation in currency exchange rates as of September 30, 2020)2021).  In the second quarter of 2021, Argentine tax authorities initiated criminal tax proceedings related to the Argentine tax matters. The Company believes that it has appropriately evaluated the transactions underlying these assessments, and has concluded, based on Argentine tax law, that its tax position would be sustained, and accordingly, has not recorded a tax liability for these assessments. In accordance with the accounting requirements for uncertain tax positions, the Company has not recorded an uncertain tax liability for this assessment because it has concluded that it is more likely than not to prevail on the matter based upon its technical merits and because the taxing jurisdiction’s process does not provide a mechanism for settling at less than the full amount of the assessment. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for years subsequent to 2013.
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 September 30, 2020,2021, this assessment was $95$94 million in tax and $38$33 million in interest (adjusted for variation in currency exchange rates). In September 2019, the Company received an interim decision on its appeal which directed the parties to work toward a settlement. On April 23, 2020, the court issued an unfavorable ruling and in October 2020, assigned a third party expert to establish a valuation by early 2021. During the second quarter of 2021, the third party expert issued a final valuation. The Company expects the court to issue a ruling on this matter in the first quarter of 2022. 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 reviewed the valuation and evaluated the underlying transactions and has concluded that the amount of gain recognized on the reorganization for tax purposes was appropriate. As of September 30, 2020,2021, the Company has accrued its best estimate of what it believes will be the likely outcome of the litigation and will vigorously defend its position against the assessment.

During the quarter ended June 30, 2020, the ongoing litigation between the Company’s wholly-owned subsidiary, ADM do Brasil Ltda. and the Brazilian Federal Revenue Servicewas favorably resolved without any tax due. The litigation related to assessments received with respect to the tax deductibility of commodity hedging losses and related expenses. The Company does not expect to receive any additional tax assessments with respect to this issue.

30

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 11.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 10 months 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 September 30, 2020.

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.

The following table sets forth the amounts relating to the Company’s total lease cost and other information.
 Three Months EndedNine Months Ended
 Sep 30, 2020Sep 30, 2019Sep 30, 2020Sep 30, 2019
 (In millions)
Lease cost:    
Operating lease cost$84
$51
$231
$197
Short-term lease cost19
24
73
71
Total lease cost$103
$75
$304
$268
     
Other information:    
Operating lease liability principal payments

$222
$149
Right-of-use assets obtained in exchange for new operating lease liabilities

$244
$192
     
   Sep 30, 2020Dec 31, 2019
Weighted-average remaining lease term - operating leases (in years)



7
7
Weighted average discount rate - operating leases


4.3%4.6%

Below is a tabular disclosure of the future annual undiscounted cash flows for operating lease liabilities.
 Undiscounted
 Cash Flows
 (In millions)
Remainder of 2020$76
2021284
2022252
2023204
2024144
202583
Thereafter250
Total1,293
  
Less interest (1)
(180)
Lease liability$1,113
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 11.     Leases (Continued)


(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.
As of September 30, 2020 and December 31, 2019, the Company had right-of-use assets included in Other assets of $1.1 billion and $1.0 billion, respectively, current lease liabilities included in Accrued expenses and other payables of $251 million and $215 million, respectively, and non-current lease liabilities included in Other long-term liabilities of $862 million and $781 million, respectively, in its consolidated balance sheets.

Note 12.     Accumulated Other Comprehensive Income

The following tables set forth the changes in AOCI by component for the three and nine months ended September 30, 20202021 and the reclassifications out of AOCI for the three and nine months ended September 30, 20202021 and 2019:2020:
Three months ended September 30, 2021
 Foreign Currency Translation AdjustmentDeferred Gain (Loss) on Hedging ActivitiesPension Liability AdjustmentUnrealized Gain (Loss) on InvestmentsTotal
 (In millions)
Balance at June 30, 2021$(2,143)$328 $(303)$(3)$(2,121)
Other comprehensive income (loss) before reclassifications(149)197 5 6 59 
Gain (loss) on net investment hedges126 — — — 126 
Amounts reclassified from AOCI— (122)8 — (114)
Tax effect(30)(1)5 — (26)
Net of tax amount(53)74 18 6 45 
Balance at September 30, 2021$(2,196)$402 $(285)$3 $(2,076)
Nine months ended September 30, 2021
 Foreign Currency Translation AdjustmentDeferred Gain (Loss) on Hedging ActivitiesPension Liability AdjustmentUnrealized Gain (Loss) on InvestmentsTotal
 (In millions)
Balance at December 31, 2020$(2,424)$185 $(365)$— $(2,604)
Other comprehensive income (loss) before reclassifications14 693 12 4 723 
Gain (loss) on net investment hedges292 — — — 292 
Amounts reclassified from AOCI— (435)90 — (345)
Tax effect(78)(41)(22)(1)(142)
Net of tax amount228 217 80 3 528 
Balance at September 30, 2021$(2,196)$402 $(285)$3 $(2,076)
 Three months ended September 30, 2020
 Foreign Currency Translation Adjustment Deferred Gain (Loss) on Hedging Activities Pension Liability Adjustment Unrealized Gain (Loss) on Investments Total
 (In millions)
Balance at June 30, 2020$(2,445) $(14) $(275) $29
 $(2,705)
Other comprehensive income (loss) before reclassifications(155) 178
 (5) (28) (10)
Amounts reclassified from AOCI0
 (66) 0
 0
 (66)
Tax effect51
 (22) 3
 0
 32
Net of tax amount(104) 90
 (2) (28) (44)
Balance at September 30, 2020$(2,549) $76
 $(277) $1
 $(2,749)
          
 Nine months ended September 30, 2020
 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, 2019$(2,152) $(12) $(268) $27
 $(2,405)
Other comprehensive income (loss) before reclassifications(434) 76
 (5) (25) (388)
Amounts reclassified from AOCI0
 35
 5
 0
 40
Tax effect37
 (23) (9) (1) 4
Net of tax amount(397) 88
 (9) (26) (344)
Balance at September 30, 2020$(2,549) $76
 $(277) $1
 $(2,749)


31
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 12.     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 statements of earnings
Details about AOCI components20202019 20202019
 (In millions) 
Foreign currency translation adjustment     
 $0
$0
 $0
$(1)Other (income) expense-net
 0
0
 0
0
Tax
 $0
$0
 $0
$(1)Net of tax
       
Deferred loss (gain) on hedging activities      
 $(1)$(3) $(9)$5
Revenues
 (79)(1) (19)(7)Cost of products sold
 14
21
 55
29
Other (income) expense-net
 0
0
 8
0
Interest expense
 (66)17
 35
27
Total before tax
 19
4
 5
0
Tax
 $(47)$21
 $40
$27
Net of tax
       
Pension liability adjustment      
Amortization of defined benefit pension items:      
Prior service credit$(9)$0
 $(25)$(13)Other (income) expense-net
Actuarial losses9
3
 30
10
Other (income) expense-net
 0
3
 5
(3)Total before tax
 1
1
 (10)16
Tax
 $1
$4
 $(5)$13
Net of tax
       


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

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

The following table sets forth the items in other (income) expense:
Three Months EndedNine Months Ended
September 30,September 30,
 2021202020212020
 (In millions)
Gains on sales of assets$(7)$(68)$(46)$(132)
Debt extinguishment charges36 396 36 410 
Pension settlement1 — 83 — 
Other – net(10)(46)(37)(76)
Other (Income) Expense - Net$20 $282 $36 $202 
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2020 2019 2020 2019
 (In millions)
Gains on sales of assets$(68) $(7) $(132) $(37)
Early debt retirement charges396
 0
 410
 0
Other – net(50) (11) (99) (2)
Other (Income) Expense - Net$278
 $(18) $179
 $(39)





Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

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


Gains on sales of assets in the three and nine months ended September 30, 2021 consisted of gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business. Gains on sales of assets in the three and nine months ended September 30, 2020 included gains related to the sale of a portion of the Company's shares in Wilmar, which decreased the Company’s ownership interest from 24.8% as of December 31, 2019 to 22.1% as of September 30, 2020, and net gains on the sale of certain other assets, and disposals of individually insignificant assets in the ordinary course of business. Gains on sales of assets

Debt extinguishment charges in the nine months ended September 30, 2020 included gains oncurrent period were related to the saleearly redemption of a portion$500 million aggregate principal amount of the Company's shares2.750% notes due in Wilmar shares, an investment revaluation gain, net gains on the sale of certain assets, and disposals of individually insignificant assetsMarch 2025. Debt extinguishment charges in the ordinary course of business. Gains on sales of assets in the three months ended September 30, 2019 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.prior period were related to multiple early debt redemptions.

32
Archer-Daniels-Midland Company
Early debt retirement charges
Notes to Consolidated Financial Statements (Continued)
(Unaudited)

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

Pension settlement in the three and nine months ended September 30, 20202021 was related to multiple early debt redemptionsthe purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the $0.7 billion debt tenderCompany’s ADM Retirement Plan and ADM Pension Plan for Hourly-Wage Employees to independent third parties.

Other - net in the three and nine months ended September 2020 (see Note 9 for more information).

30, 2021 included the non-service components of net pension benefit income of $1 million and $12 million, respectively, foreign exchange gains, and other expense. Other - net in the three and nine months ended September 30, 2020 included the non-service components of net pension benefit income of $7 million and $28 million, respectively, and other income. Other - net in the nine months ended September 30, 2020 also included loss provisions related to the Company’s futures commission and brokerage business and foreign exchange gains. Other - net in the three and nine months ended September 30, 2019 included the non-service components of net pension benefit income of $2 million and $10 million, respectively, and other income, partially offset by foreign exchange losses.

Note 14.     Segment Information

As discussed in Note 1, prior period results have been reclassified to conform to the current period segment presentation.

The Company’s operations are organized, managed, and classified into 3 reportable business segments: 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 Business.

The Ag Services and Oilseeds segment includes global activities related to the origination, merchandising, transportation, and storage of agricultural raw materials, and the crushing and further processing of oilseeds such as soybeans and soft seeds (cottonseed, sunflower seed, canola, rapeseed, and flaxseed) into vegetable oils and protein meals. Oilseeds products produced and marketed by the segment include ingredients for food, feed, energy, and industrial customers. 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. The Ag Services and Oilseeds segment is also a major supplier of peanuts, tree nuts, and peanut-derived ingredients to both the U.S. and export markets. In North America, cotton cellulose pulp is manufactured and sold to the chemical, paper, and other industrial markets. 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, and structured trade finance activities. This segment also includes the Company's share of the results of its equity investment in Wilmar and its share of the results of its Pacificor, Stratas Foods LLC, Edible Oils Limited, Olenex Sarl, and SoyVen joint ventures. In August 2020, the Company sold a portion of its shares in Wilmar, decreasing its ownership interest from 24.8% as of December 31, 2019 to 22.1% as of September 30, 2020.









Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 14.Segment Information (Continued)

The 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 products and ingredients used in the food and beverage industry including sweeteners, corn and wheat starches, syrup, glucose, wheat 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., Red Star Yeast Company, LLC, and Aston Foods and Food Ingredients.

The Nutrition segment serves customer needs for food, beverages, health and wellness, and more. The segment engages in the manufacturing, sale, and distribution of a wide array of products from nature including plant-based proteins, natural flavor ingredients, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products including probiotics, prebiotics, enzymes, and botanical extracts, and other specialty food and feed ingredients. The Nutrition segment includes the 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 January 2020, ADM acquired Yerbalatina, a natural plant-based extracts and ingredients manufacturer.

Other Business includes the Company’s 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, and interest costexpense net of investment income,interest income. Corporate results also include revaluation gains and losses on cost method investments and the equityshare of the results of equity investments in early-stage start-up companies that ADM Ventures has investments in, andin.

For more information about the Company’s sharebusiness segments, refer to Note 17 of “Notes to Consolidated Financial Statements” included in Item 8, “Financial Statements and Supplementary Data” included in the results of its equity investment in Compagnie Industrielle et Financiere des Produits Amylaces SA (Luxembourg) (CIP), which was sold inCompany’s Annual Report on Form 10-K for the year ended December 2019.31, 2020.
























33
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 14.Segment Information (Continued)

 Three Months Ended Nine Months Ended
 September 30, September 30,
(In millions)2020 2019 2020 2019
Gross revenues       
Ag Services and Oilseeds$13,415
 $14,440
 $40,196
 $41,041
Carbohydrate Solutions2,335
 3,018
 7,102
 8,472
Nutrition1,481
 1,481
 4,471
 4,322
Other Business84
 88
 277
 273
Intersegment elimination(2,189) (2,301) (5,669) (5,781)
Total gross revenues$15,126
 $16,726
 $46,377
 $48,327
        
Intersegment sales 
  
  
  
Ag Services and Oilseeds$1,888
 $1,824
 $4,849
 $4,659
Carbohydrate Solutions271
 453
 708
 1,063
Nutrition30
 24
 112
 59
Total intersegment sales$2,189
 $2,301
 $5,669
 $5,781
        
Revenues from external customers 
  
  
  
Ag Services and Oilseeds       
Ag Services$7,352
 $8,246
 $22,930
 $23,653
Crushing2,317
 2,465
 7,035
 7,130
Refined Products and Other1,858
 1,905
 5,382
 5,599
Total Ag Services and Oilseeds11,527
 12,616
 35,347
 36,382
Carbohydrate Solutions       
Starches and Sweeteners1,574
 1,526
 4,769
 4,782
Vantage Corn Processors490
 1,039
 1,625
 2,627
Total Carbohydrate Solutions2,064
 2,565
 6,394
 7,409
Nutrition       
Human Nutrition719
 703
 2,161
 2,105
Animal Nutrition732
 754
 2,198
 2,158
Total Nutrition1,451
 1,457
 4,359
 4,263
        
Other Business84
 88
 277
 273
Total revenues from external customers$15,126
 $16,726
 $46,377
 $48,327
        
        
        
        
        
        
        
        
        
        

Note 14.    Segment Information (Continued)
Three Months EndedNine Months Ended
September 30,September 30,
(In millions)2021202020212020
Gross revenues    
Ag Services and Oilseeds$16,410 $13,415 $51,148 $40,196 
Carbohydrate Solutions3,227 2,335 9,132 7,102 
Nutrition1,755 1,481 5,172 4,471 
Other Business88 84 290 277 
Intersegment elimination(1,140)(2,189)(3,583)(5,669)
Total gross revenues$20,340 $15,126 $62,159 $46,377 
Intersegment sales    
Ag Services and Oilseeds$721 $1,888 $2,181 $4,849 
Carbohydrate Solutions361 271 1,223 708 
Nutrition58 30 179 112 
Total intersegment sales$1,140 $2,189 $3,583 $5,669 
Revenues from external customers    
Ag Services and Oilseeds
Ag Services$9,899 $7,352 $32,860 $22,930 
Crushing2,842 2,317 8,411 7,035 
Refined Products and Other2,948 1,858 7,696 5,382 
Total Ag Services and Oilseeds15,689 11,527 48,967 35,347 
Carbohydrate Solutions
Starches and Sweeteners1,972 1,574 5,563 4,769 
Vantage Corn Processors894 490 2,346 1,625 
Total Carbohydrate Solutions2,866 2,064 7,909 6,394 
Nutrition
Human Nutrition808 719 2,410 2,161 
Animal Nutrition889 732 2,583 2,198 
Total Nutrition1,697 1,451 4,993 4,359 
Other Business88 84 290 277 
Total revenues from external customers$20,340 $15,126 $62,159 $46,377 
34
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 14.Segment Information (Continued)

 Three Months Ended Nine Months Ended
 September 30, September 30,
(In millions)2020 2019 2020 2019
Segment operating profit       
Ag Services and Oilseeds$436
 $417
 $1,271
 $1,196
Carbohydrate Solutions246
 182
 509
 470
Nutrition147
 118
 447
 316
Other Business20
 47
 69
 72
Specified Items:       
Gains (losses) on sales of assets and businesses(1)
57
 0
 80
 12
Impairment, restructuring, and settlement charges(2)
(2) (6) (60) (52)
Total segment operating profit904
 758
 2,316
 2,014
Corporate(704) (255) (1,189) (922)
Earnings before income taxes$200
 $503
 $1,127
 $1,092
        


Note 14.    Segment Information (Continued)
Three Months EndedNine Months Ended
September 30,September 30,
(In millions)2021202020212020
Segment operating profit
Ag Services and Oilseeds$618 $436 $1,965 $1,271 
Carbohydrate Solutions213 246 855 509 
Nutrition176 147 531 447 
Other Business(5)20 10 69 
Specified Items:
Gains (losses) on sales of assets and businesses(1)
— 57 22 80 
Impairment, restructuring, and settlement charges(2)
(2)(2)(133)(60)
Total segment operating profit1,000 904 3,250 2,316 
Corporate(347)(704)(948)(1,189)
Earnings before income taxes$653 $200 $2,302 $1,127 
(1) Current year-to-date gains consisted of gains on the sale of certain assets. Prior quarter and year-to-date gaingains consisted of a gain on the sale of a portion of the Company’s shares in Wilmar and certain other assets. Prior

(2) Current quarter charges were related to restructuring. Current year-to-date gains consisted of a gain on the salecharges related to impairment of certain long-lived assets, restructuring, and a step-up gain on an equity investment.

(2) Currentlegal settlement. Prior quarter and year-to-date charges related to the impairment of certain long-lived assets, restructuring, and a settlement. Prior quarter and year-to-date charges related to the impairment of certain long-lived assets and a settlement.

Note 15.     Asset Impairment, Exit, and Restructuring Costs

Asset impairment, exit, and restructuring costs in the three months ended September 30, 2021 consisted of $2 million of restructuring charges, presented as specified items within segment operating profit. Asset impairment, exit, and restructuring costs in the nine months ended September 30, 2021 consisted of $54 million of impairments related to certain long-lived assets and $26 million of restructuring charges, presented as specified items within segment operating profit, and $4 million of restructuring charges in Corporate.

Long-lived assets held for sale with a net book value of $0.1 billion were not considered impaired as of September 30, 2021.

Asset impairment, exit, and restructuring costs in the three months ended September 30, 2020 consisted of individually insignificant long-lived asset impairments of $3 million and restructuring charges of $1 million. Asset impairment, exit, and restructuring costs in the nine months ended September 30, 2020 consisted primarily of $50 million of impairments related to certain intangible and other long-lived assets and $11 million of restructuring charges.

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

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

In April 2020, the Company temporarily idled ethanol production at its corn dry mill facilities in Cedar Rapids, Iowa, and Columbus, Nebraska. During the quarter ended September 30, 2020, the Company performed an impairment assessment on its corn processing business, which includes all assets where ethanol is produced, and determined that no impairment was required based on the Company’s forecast of undiscounted cash flows. The Company currently expects that the idled facilities will be restarted as demand for ethanol improves within the next 12 months.
Note 16.     Sale of Accounts Receivable

The Company has an accounts receivable securitization program (the “First Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “First Purchasers”).  Under the First Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC (“ADM Receivables”). Prior to October 1, 2020, ADM Receivables in turn transferstransferred such purchased accounts receivable in their entirety to the First Purchasers pursuant to a receivables purchase agreement.  In exchange for the transfer of the accounts receivable, ADM Receivables receivesreceived a cash payment of up to $1.2 billiona certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On October 1, 2020, the Company restructured the First Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Receivables transfers certain of the purchased accounts receivable to each of the First Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Receivables receives a cash payment of up to $1.5 billion, an increase from $1.2 billion as of December 31, 2020, for the accounts receivable transferred. The First Program terminates on May 18, 2021,2022, unless extended.
35
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 16.     Sale of Accounts Receivable (Continued)

The Company also has an accounts receivable securitization program (the “Second Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Second Purchasers”). Under the Second Program, certain non-U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Ireland Receivables Company (ADM Ireland Receivables). Prior to April 1, 2020, ADM Ireland Receivables transferred 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 received a cash payment up to a certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On April 1, 2020, the Company restructured the Second Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Ireland Receivables transfers a portioncertain of the purchased accounts receivable to each of the Second Purchasers together with an equally proportionala security interest in all of its right, title, and interest in the remaining purchased accounts receivable to each of the Second Purchasers.receivable. In exchange, ADM Ireland Receivables receives a cash payment of up to $0.6 billion (€0.5 billion) for the accounts receivables transferred. The Second Program terminates on March 12, 2021,February 14, 2022, unless extended.

Under the First and Second Programs (collectively, the “Programs”), ADM Receivables and ADM Ireland Receivables use the cash proceeds from the transfer of receivables to the First Purchasers and Second Purchasers (collectively, the “Purchasers”) and other consideration, as applicable, to finance the purchase of receivables from the Company and the ADM subsidiaries originating the receivables. The Company accounts for these transfers as sales. The Company has no retained interests in the transferred receivables, other than collection and administrative responsibilities and its right to the deferred consideration under the First Program.responsibilities. At September 30, 20202021 and December 31, 2019,2020, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions, and its insignificant cost of servicing the receivables sold.


As of September 30, 20202021 and December 31, 2019,2020, the fair value of trade receivables transferred to the Purchasers under the Programs and derecognized from the Company’s consolidated balance sheets was $1.7$1.5 billion and $1.9$1.6 billion, respectively. In exchangeTotal receivables sold were $36.7 billion and $24.9 billion for the transfers as of nine months ended September 30, 20202021 and December 31, 2019, the Company received cash of $1.4 billion and $1.4 billion, respectively, and recorded a receivable for deferred consideration included in other current assets of $0.3 billion and $0.4 billion,2020, respectively. Cash collections from customers on receivables sold were $24.2$34.2 billion and $25.1$24.2 billion for the nine months ended September 30, 20202021 and 2019,2020, respectively. Of thisthe amount in the nine months ended September 30, 2020, $6.7 billion and $9.5 billion were cash collections on the deferred receivables consideration reflected as cash inflows from investing activities for the nine months ended September 30, 2020. As of September 30, 2021 and December 31, 2020, and 2019, respectively. Deferred receivables consideration is paidpledged as collateral to the Company in cash on behalf ofPurchasers were $1.1 billion and $0.4 billion, respectively.

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

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

Transfers of receivables under the Programs resulted in an expense for the loss on sale of $2 million and $5$8 million for the three months ended September 30, 2020 and 2019, respectively, and $7 million and $14 million for the nine months ended September 30, 20202021, respectively, and 2019,$2 million and $7 million for the three and nine months ended September 30, 2020, respectively, which is classified as selling, general, and administrative expenses in the consolidated statements of earnings.

In accordance with the amended guidance of Topic 230, the Company reflectsreflected cash flows related to the deferred receivables consideration as investing activities in its consolidated statements of cash flows. All other cash flows are classified as operating activities because the cash received from the 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.








36
Archer-Daniels-Midland Company
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 16.     Sale of Accounts Receivable (Continued)
17.     Subsequent Events

OnIn October 1, 2020,2021, the Company restructuredexecuted acquisition and investment agreements with a total aggregate consideration of approximately $0.7 billion. In addition, the First Program fromCompany executed an agreement to sell its ethanol production complex in Peoria, Illinois with a deferred purchase pricebook value of approximately $0.1 billion, which will have an immaterial impact on operating results. These transactions are expected to a pledge structure. Underclose before December 31, 2021, subject to the new structure, ADM Receivables transfers a portionsatisfaction of the purchased accounts receivable together with an equally proportional security interest in all of its right, title,customary closing conditions and interest in the remaining purchased accounts receivable to each of the First Purchasers. In exchange, ADM Receivables receives a cash payment for the accounts receivables transferred.regulatory approval.

37



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

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

Company Overview

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

ADM is a global leader in human and animal nutrition and one of the world’s premier agricultural origination and processing companies. It is one of the world’s leading producers of ingredients for human and animal nutrition, and other products made from nature. The Company uses its significant global asset base to originate and transport agricultural commodities, connecting to markets in more than 190200 countries.  The Company also processes corn, oilseeds, and wheat into products for food, animal feed, chemical and energy uses.  The Company also engages in the manufacturing, sale, and distribution of specialty products including natural flavor ingredients, flavor systems, natural colors, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products, and other specialty food and feed ingredients. The Company uses its global asset network, business acumen, and its relationships with suppliers and customers to efficiently connect the harvest to the home thereby generating returns for our shareholders, principally from margins earned on these activities.

Effective January 1, 2020, the Company started reporting its newly created dry mill ethanol subsidiary, Vantage Corn Processors (VCP), as a sub-segment within the Carbohydrate Solutions segment. VCP replaces the Bioproducts sub-segment which included the combined results of the Company’s corn dry and wet mill ethanol operations. The wet mill ethanol operations that were previously reported in Bioproducts are now included in the Starches and Sweeteners sub-segment. In addition to dry mill ethanol production, VCP sells/brokers ADM’s wet mill ethanol production as the sole marketer of ethanol produced at the Company’s facilities. The change does not have an impact on the total results of the Carbohydrate Solutions segment. The Company’s review of its strategic options related to VCP is ongoing.

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

The Company’s operations are organized, managed, and classified into three reportable business segments: 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 Business. Financial information with respect to the Company’s reportable business segments is set forth in Note 14 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements”.

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

•the announcement in March 2021 of a new ADM policy to protect forests, biodiversity and communities, furthering the Company’s commitment to sustainable, ethical, and responsible production;
•the announcement in April 2021 of the resumption of dry mill ethanol production;
•the acquisition in January 2020April 2021 of Yerbalatina, a natural plant-based extracts and ingredients manufacturer in Brazil;Golden Farm Production & Commerce Company Limited;
the temporary idling in April 2020 of ethanol production at the corn dry mill facilities in Cedar Rapids, Iowa, and Columbus, Nebraska due to reduced demand. To better align production with current demand, the Company has also reduced the ethanol grind at its corn wet mill plants and rebalanced grind to produce more industrial alcohol for the sanitizer market and industrial starches for the container board market;
the sale in August 2020 of a portion of the Company’s shares in Wilmar and the issuance of $300 million aggregate principal amount of zero-coupon bonds, exchangeable into Wilmar shares;
the repurchase and redemption in September 2020 of $1.2 billion aggregate principal amount of debentures and notes;
•the announcement in October 2020May 2021 of ADM’s participation as a signatory to the German Charter for Diversity in the Workplace which aims to advance the recognition and inclusion of diversity in companies;
•the announcement in May 2021 of a plan to build a dedicated soybean crushing plant and refinery in North Dakota to meet fast-growing demand from food, feed, industrial and biofuel customers, including producers of renewable diesel, which is expected to be open in 2023;
•the announcement in June 2021 of ADM Ventures, the corporate venture capital arm of ADM, joining the Genesis Consortium, a global alliance of venture capital firms and corporations dedicated to supporting startups that leverage biology to promote human and planetary health;
•the announcement in July 2021 of an agreement to purchase, subject to regulatory approvals, Sojaprotein for $0.4 billion, a leading European provider of non-GMO soy ingredients;
•the announcement in August 2021 of an agreement to form a joint venture with Spiber Inc. (Spiber) to expandMarathon Petroleum Corp. for the production of Spiber’s innovative Brewed Protein™ polymerssoybean oil to supply rapidly growing demand for userenewable diesel fuel;
•the acquisition in apparelSeptember 2021 of a 75% majority stake in P4, premier providers of private label pet treats and other consumer products;supplements;
•the announcement in October 2020September 2021 of the Company’s plana memorandum of understanding with LG Chem, a leading global diversified chemical company, to construct a new, state-of-the-art facility in Valencia, Spain, that will expand its capabilitiesexplore US-based production of lactic acid to meet growing demand for microbiome solutions; anda wide variety of plant-based products, including bioplastics, through the creation of two joint ventures;

•the unveiling in September 2021 of a state-of-the-art, fully automated flavor production facility situated in Pinghu, Zhejiang Province, China;

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

•the announcement in October 20202021 of an agreement with Qingdao Vland Biotech Group Co., Ltd., a leading producer of enzymes and probiotics, to form a joint venture, subject to regulatory approval, to manufacture and sell human probiotics to serve growing Chinese demand;
•the announcement in October 2021 of an agreement to sell the Company’s ethanol production complex in Peoria, Illinois to BioUrja Group;
•the announcement in October 2021 of an equity investment in Acies Bio, a Slovenia-based biotechnology company specializing in research and development and manufacturing services for developing and scaling synthetic biology and precision fermentation technologies for food, agriculture, and industrial applications; and
38


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
•the announcement in October 2021 of a memorandum of understanding with Gevo, Inc., a pioneer in transforming renewable energy into low carbon, energy-dense liquid hydrocarbons, to support the production of up to 500 million gallons of sustainable aviation fuel and other low carbon-footprint hydrocarbon fuels.

The next phase of the launch of PlantPlus Foods, a 30% joint venture with Marfrig, oneCompany’s strategic transformation is focused on two strategic pillars: Productivity and Innovation.

The Productivity pillar includes (1) advancing the roles of the world’s leading beef producersCompany’s Centers of Excellence in procurement, supply chain, and operations to deliver additional efficiencies across the world’s largest beef patty producer, that will offer a wide rangeenterprise; (2) continued roll out of finished plant-based food products across Norththe 1ADM business transformation program and South Americaimplementation of improved standardized business processes; and (3) increased use of technology, analytics, and automation at production facilities, in offices, and with customers.

The Company executes its strategic vision through three pillars: Optimize the Core, Drive Efficiencies,Innovation activities include expansions and Expand Strategically, all supported by its Readiness effort. The Company launched Readiness to drive new efficiencies and improveinvestments in (1) improving the customer experience, including leveraging producer relationships and enhancing the use of state-of-the-art digital technology to help customers grow; (2) sustainability-driven innovation, which encompasses the full range of products, solutions, capabilities, and commitments to serve customers’ needs; and (3) growth initiatives, including organic growth to support additional capacity and meet growing demand, and mergers and acquisitions opportunities.

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

Environmental and Social Responsibility

The Company’s new policy to protect forests, biodiversity, and communities includes provisions that promote conservation of water resources and biodiversity in agricultural landscapes, promote solutions to reduce climate change and greenhouse gas emissions, and support agriculture as a combinationmeans to advance sustainable development by reducing poverty and increasing food security. Additionally, the policy confirms ADM’s commitment to protect human rights defenders, whistleblowers, complainants, and community spokespersons; ADM’s aspiration to cooperate with all parties necessary to enable access to fair and just remediation; and the Company’s non-compliance protocol for suppliers. By the end of data analytics, process simplification2022, the Company expects to achieve full traceability of its direct and standardization,indirect sourcing throughout its soy supply chains in Brazil, Paraguay, and behavioralArgentina. ADM aims to eliminate deforestation from all of the Company’s supply chains by 2030.

In 2020, ADM announced new environmental goals, collectively called “Strive 35” – an ambitious plan to, by 2035, reduce absolute greenhouse gas emissions by 25 percent, reduce energy intensity by 15 percent, reduce water intensity by 10 percent, and cultural change, building upon its earlier 1ADM and operational excellence programs.achieve a 90 percent landfill diversion rate, as part of an aggressive plan to continue to reduce the Company’s environmental footprint.

Operating Performance Indicators

The Company is exposed to certain risks inherent to an agricultural-based commodity business. These risks are further described in Item 1A, “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.

The Company’s Ag 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. As a result, changes in agricultural commodity prices have relatively equal impacts on both revenues and cost of products sold. Therefore, changes in revenues of these businesses do not necessarily correspond to the changes in margins or gross profit. Thus, gross margins per volume or metric ton are more meaningful than gross margins as percentage of revenues.

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


39


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

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

Market Factors Influencing Operations or Results in the Three Months Ended September 30, 20202021

The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, North America origination was impacted by widening elevation margins and Hurricane Ida impacting export execution. South American origination volumes were negatively impacted by low farmer selling activity. Ocean freight rates remain high due to increased global demand and supply chain bottlenecks. Crushing margins benefited from strong demand and tight soybean and canola/rapeseed stocks. Refined oil margins were driven by strong demand, declining global oil stocks, and increased biofuels consumption. In Carbohydrate Solutions, margins in starches and sweeteners were negatively impacted by higher corn basis cost while demand remained steady. Ethanol demand and margins were negatively impacted early in the quarter due to the limited availability of affordable corn but improved when the North American graincorn harvest started. Increased corn prices drove ethanol industry production volumes lower causing stocks on hand to decline. Domestic ethanol demand remained steady in the quarter, but slightly below pre-pandemic levels. Nutrition benefited from overall strong demand in various product categories. In Human Nutrition, demand for flavors, flavor systems, specialty proteins, bioactives, and oilseeds exportfibers were strong. In Animal Nutrition, weak demand was strong with good buying from China and the resthigher input costs as a result of the world. Global crushing margins and margins for oil and biodieselCOVID-19 in South America strengthenedwere partially offset by the growing demand in complete food for petfood. Amino acids pricing and margins improved due to the increasingly tight soybean supplies in South America. Margins for starches and sweeteners and wheat flour remained solid while demand was soft due to the impacts of COVID-19 in the food service sector. ADM and many ethanol producers have idled some capacity due to low current demand. Ethanol margins were positive during the quarter and demand for USP-grade industrial alcohol for hand sanitizer remained strong. Nutrition benefited from growing demand for flavors, pet food, feed for livestock, plant-based proteins, and probiotics. Lower out-of-home consumption caused by COVID-19 lockdown measures negatively impacted flavors volumes especially in the food service channel.





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

a tighter global supply environment.

Three Months Ended September 30, 20202021 Compared to Three Months Ended September 30, 20192020

Net earnings attributable to controlling interests decreased $182increased $301 million from $407$225 million to $225$526 million. Segment operating profit increased $146$96 million from $758$904 million to $904$1.0 billion. Included in segment operating profit in the current quarter were restructuring charges of $2 million. Included in segment operating profit in the currentprior year quarter was net income of $55 million consisting of gains onrelated to the sale of a portion of the Company’s shares in Wilmar and certain other assets of $57 million, partially offset by asset impairment, restructuring, and settlement charges. Included in segment operating profit in the prior year quarter were asset impairment charges of $6$2 million. Adjusted segment operating profit increased $85$153 million to $849 million$1.0 billion due primarily to higher results in Crushing, Refined Products and Other, Starches and Sweeteners, Vantage Corn Processors, and Human and Animal Nutrition, and higher equity earnings from the Wilmar investment, partially offset by lower results in Ag Services, Crushing,Starches and Sweeteners, and Other Business.Business, and lower equity earnings from the Wilmar investment. Corporate results were a net charge of $704$347 million in the current quarter compared to $255a net charge of $704 million in the prior year quarter. Corporate results in the current quarter included early debt retirement charges of $36 million, a mark-to-market gain of $7 million on the conversion option of the exchangeable bonds issued in August 2020, expenses related to an acquisition of $3 million, and a pension settlement charge of $1 million. Corporate results in the prior year quarter included early debt retirement charges of $396 million, a mark-to-market loss of $15 million on the conversion option of the exchangeable bonds issued in August 2020, and an impairment charge of $6 million. Corporate results in the prior year quarter included restructuring and pension settlement charges of $47 million related to early retirement and reorganization initiatives and a credit of $16 million from the effect of changes in agricultural commodity prices on LIFO inventory valuation reserves.





40


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income tax expense decreased $121increased $146 million to a benefit of $26$120 million. The Company’s effective tax rate for the quarter ended September 30, 20202021 was (13.0)%an expense of 18.4% compared to 18.9%a benefit of 13.0% for the quarter ended September 30, 2019.2020. The change inlow prior year quarter rate included the rate was due to a shift ineffects of the geographical mix of forecasted pretax earnings and significant transactions that occurred during the quarter, including the early debt retirement, and the tax-free sale of a portion of the Company’s shares in Wilmar, which resulted in a significant decreaseand changes in the previously forecasted 2020 effective tax rate. The impactgeographical mix of U.S. tax credits, primarily the biodiesel and railroad tax credits, also contributed significantly to the decreased rate.

In March 2020, the CARES Act was signed into law in the United States. The Company does not expect the provisions of the CARES Act to have a material impactpretax earnings on the 2020 annual effective tax rate for the year ending December 31, 2020.in that period.

Analysis of Statements of Earnings

Processed volumes by product for the quarter are as follows (in metric tons):
 Three Months Ended 
 September 30,  
(In thousands)2020 2019 Change
Oilseeds8,970
 9,062
 (92)
Corn4,084
 5,619
 (1,535)
   Total13,054
 14,681
 (1,627)

Three Months Ended
September 30,
(In thousands)20212020Change
Oilseeds8,509 8,970 (461)
Corn5,051 4,084 967 
   Total13,560 13,054 506 
The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall decrease in oilseeds processed volumes is primarily related to scheduled downtime at multiple facilities in North America during the quarter. The overall increase in corn processed is primarily related to the idling of two dry mill facilities in the second quarter of 2020 in response to the current low ethanol demand.challenging operating environment. The Company currently expects that therestarted these idled facilities will be restarted as demand for ethanol improves within the next 12 months.in April 2021.


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

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



41


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 Three Months Ended  
 September 30,  
 2020 2019 Change
 (In millions)
Ag Services and Oilseeds     
Ag Services$7,352
 $8,246
 $(894)
Crushing2,317
 2,465
 (148)
Refined Products and Other1,858
 1,905
 (47)
Total Ag Services and Oilseeds11,527
 12,616
 (1,089)
      
Carbohydrate Solutions 
  
  
Starches and Sweeteners1,574
 1,526
 48
Vantage Corn Processors490
 1,039
 (549)
Total Carbohydrate Solutions2,064
 2,565
 (501)
      
Nutrition     
Human Nutrition719
 703
 16
Animal Nutrition732
 754
 (22)
Total Nutrition1,451
 1,457
 (6)
      
Other Business84
 88
 (4)
Total$15,126
 $16,726
 $(1,600)

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 because 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 $1.6increased $5.2 billion to $15.1 billion. Lower$20.3 billion due to higher sales prices ($5.6 billion) partially offset by lower sales volumes ($0.4 billion). Higher sales prices of rice, ethanol,animal feeds, alcohol, biodiesel, meal, oils, corn, soybeans, and wheat, and higher volumes of wheat and cotton, were partially offset by higherlower sales pricesvolumes of oils and soybeans. Ag Services and Oilseeds revenues decreased 9%increased 36% to $11.5$15.7 billion due to higher sales prices ($4.8 billion) partially offset by lower sales volumes ($1.4 billion), partially offset by higher sales prices ($0.30.6 billion). Carbohydrate Solutions revenues decreased 20%increased 39% to $2.1$2.9 billion due primarily to lowerhigher sales prices ($0.7 billion) and higher sales volumes of ethanol ($0.50.1 billion). Nutrition revenues of $1.5increased 17% to $1.7 billion were comparabledue to the prior year quarter.higher sales prices ($0.1 billion) and higher sales volumes ($0.1 billion).

Cost of products sold decreased $1.6increased $4.9 billion to $14.1$19.0 billion due principally to lower volumes. Included in cost of products sold in the prior quarter was a credit of $16 million from the effect of changes in agriculturalhigher average commodity prices on LIFO inventory valuation reserves.costs. Manufacturing expenses of $1.4increased $0.2 billion were comparable to the prior year quarter.$1.6 billion due principally to higher energy costs, maintenance, operating supplies, storage and warehousing, and salaries and benefits.

Foreign currency translation impacts had an immaterial impact on bothincreased revenues and cost of products sold.sold by $0.2 billion.

Gross profit decreased $36 millionincreased $0.3 billion or 3%27%, to $1.0 billion. Lower$1.3 billion due principally to higher results in Crushing ($70 million) and Ag Services ($66 million) were offset by higher results in Starches and Sweeteners ($59223 million), Refined Products and Other ($48103 million), and Human Nutrition ($3656 million), partially offset by lower results in Ag Services ($53 million), Carbohydrate Solutions ($35 million) and Other ($7 million). These factors are explained in the segment operating profit discussion on page 45. The effect of changes in agricultural commodity prices on LIFO inventory valuation reserves had a positive impact on gross profit of $16 million in the prior year quarter compared to no impact in the current quarter due to the discontinuation of LIFO effective January 1, 2020. Railroad maintenance expenses in Corporate of $28 million in the current quarter also contributed to the decrease in gross profit.44.



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

Selling, general, and administrative expenses increased $58$84 million to $636$720 million due principallyprimarily to variable performance-related compensation expense accruals which were low in the prior-year quarter.higher salaries and benefits and IT expenses.

Asset impairment, exit, and restructuring costs decreased $49$2 million to $4$2 million. Charges in the current quarter consisted of $2 million of restructuring charges, presented as specified items within segment operating profit. Charges in the prior year quarter consisted of individually insignificant long-lived asset impairments of $3 million and restructuring charges of $1 million. Charges

Equity in earnings of unconsolidated affiliates decreased $50 million to $110 million due primarily to lower earnings from the Company’s investments in Wilmar, Almidones Mexicanos S.A., Olenex Sarl, SoyVen, and Hungrana Ltd., partially offset by higher earnings from the Company’s investment in Stratas Foods LLC.

Investment income of $20 million was comparable to the prior period.

Interest expense decreased $39 million to $61 million due to lower interest rates and the favorable liability management actions taken in the prior year quarter consisted of $6 million of impairments related to certain long-lived assets presented as specified items within segment operating profit and $47 million of restructuring and pension settlement charges in Corporate related to early retirement and reorganization initiatives.

year. Interest expense increased $3in the current quarter also included a $7 million to $100 million due to the mark-to-market lossgain adjustment related to the conversion option of the exchangeable bonds issued in August 2020 partially offset by net interest savings from cross currency swaps and lower interest rates and short-term debt balances.compared to a $15 million mark-to-market loss adjustment in the prior year quarter.

Equity in earnings of unconsolidated affiliates increased $72 million to $160 million due to higher earnings from the Company’s investments in Wilmar and Pacificor.

Other expense - net increased $296decreased $262 million to $278$20 million. Expense in the current quarter included charges of $36 million related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025 and other expense, partially offset by gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and foreign exchange gains. Expense in the prior year quarter included charges of $396 million related to multiple early debt redemptions, and the $0.7 billion debt tender in September 2020, partially offset by a $58 million gain on the sale of a portion of the Company’s shares in Wilmar, gains on the sales of certain other assets, the non-service components of net pension benefit income, and other income. Income in the prior year quarter included gains on disposals of individually insignificant assets in the ordinary course of business and other income, partially offset by foreign exchange losses.


42

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

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

 Three Months Ended  
 September 30,  
Segment Operating Profit (Loss)2020 2019 Change
 (In millions)
Ag Services and Oilseeds     
Ag Services$147
 $161
 $(14)
Crushing66
 138
 (72)
Refined Products and Other127
 80
 47
Wilmar96
 38
 58
Total Ag Services and Oilseeds436
 417
 19
      
Carbohydrate Solutions 
  
  
Starches and Sweeteners257
 197
 60
Vantage Corn Processors(11) (15) 4
Total Carbohydrate Solutions246
 182
 64
      
Nutrition     
Human Nutrition128
 102
 26
Animal Nutrition19
 16
 3
Total Nutrition147
 118
 29
      
Other Business20
 47
 (27)
      
Specified Items:     
Gains (losses) on sales of assets and businesses57
 —
 57
Asset impairment, restructuring, and settlement charges(2) (6) 4
Total Specified Items55
 (6) 61
      
Total Segment Operating Profit$904
 $758
 $146
      
Adjusted Segment Operating Profit(1)
$849
 $764
 $85
      
Segment Operating Profit$904
 $758
 $146
Corporate(704) (255) (449)
Earnings Before Income Taxes$200
 $503
 $(303)

Three Months Ended
September 30,
Segment Operating Profit (Loss)20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$36 $147 $(111)
Crushing280 66 214 
Refined Products and Other236 127 109 
Wilmar66 96 (30)
Total Ag Services and Oilseeds618 436 182 
Carbohydrate Solutions   
Starches and Sweeteners178 257 (79)
Vantage Corn Processors35 (11)46 
Total Carbohydrate Solutions213 246 (33)
Nutrition
Human Nutrition139 128 11 
Animal Nutrition37 19 18 
Total Nutrition176 147 29 
Other Business(5)20 (25)
Specified Items:
Gains (losses) on sales of assets and businesses— 57 (57)
Asset impairment and restructuring charges(2)(2)— 
Total Specified Items(2)55 (57)
Total Segment Operating Profit$1,000 $904 $96 
Adjusted Segment Operating Profit(1)
$1,002 $849 $153 
Segment Operating Profit$1,000 $904 $96 
Corporate(347)(704)357 
Earnings Before Income Taxes$653 $200 $453 

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







43


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

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Ag Services and Oilseeds operating profit increased 5%42%. Ag Services executed well in a challenging environment, including a rapid return to operation after Hurricane Ida. Overall results were significantly lower year-over-year. Strong executionversus the prior-year quarter driven by net negative timing effects that should reverse in North America which drovecoming quarters and a $54 million insurance settlement recorded in the prior-year quarter and lower export volumes caused by Hurricane Ida. Global trade continued its strong performance. Crushing had substantially higher year-over-year exportresults. The business executed well, delivering stronger margins in a dynamic environment that included strong demand for vegetable oil to support existing food customers as well as increasing production of renewable diesel. Results were also driven by net positive timing effects in the current quarter. Refined Products and volumesOther results were offsetsignificantly higher than the prior-year period, driven by negativepositive timing impacts whicheffects that are expected to reverse in the coming quarters. Results were lower in South America, driven by slower Brazilian farmer selling following the aggressive selling in the first half of the year. Global Trade’s continued focus on serving customers contributed significantly to results as did a $54 million settlement related to U.S. high water insurance claims in 2019. Crushing was lower versus the prior-year period driven largely by negative timing impacts which are expected to reverse in the coming quarters. Strongfuture quarters, along with strong execution in an environment of tighter soybean suppliesEurope, Middle East, and solid globalAfrica (EMEA) and North American biodiesel and strong refining premiums due to demand for mealrenewable diesel and oil supported improved execution marginsfoodservice recovery in North and South America, partially offset by lower year-over-year margins in EMEAI. Refined Products and Other delivered significantly higher year-over year results, driven by improved biodiesel margins around the globe and contributions from packaged oils in South America. Equity earnings from Wilmar were substantially higherlower versus the prior-year quarter.third quarter of 2020.

Carbohydrate Solutions operating profit increased 35%decreased 13%. Starches and Sweeteners, including ethanol production from the wet mills, managed through dynamic market conditions, optimizing mix between sweeteners and ethanol production through the quarter. Year-over-year results were substantiallysignificantly lower primarily due to higher input costs. Vantage Corn Processors results were much higher versus the third quarter of 2019. In North America, balanced ethanol industry supply2020, supported by the resumption of production at the two dry mills and demand drove improved wet millfuel ethanol margins, versus the prior-year quarter. Demand for starches in North America was substantially stronger than earlierparticularly late in the year, and higher than the prior-year quarter. Reduced food service demand affected sweetener and flour volumes though retail demand for flour remained solid. Strong risk management and improved net corn costs contributed positively to results. EMEAI delivered improved results on higher demand and reduced manufacturing and raw material costs. Vantage Corn Processors results were higher driven by distribution gains on wet mill ethanol and significantly improved year-over-year industry ethanol margins, partially offset by fixed costs from the two temporarily idled dry mills. Increased volumes and margins of USP-grade industrial alcohol for hand sanitizer also supported improved performance.

Nutrition operating profit increased 25%20%. Human Nutrition results were substantially higher versusthan the prior-year quarter, with improved results across the business portfolio. Flavors delivered another exceptional quarter, driven by increased revenue globallyquarter. Higher volume and improved product mix, with particular strength in beverage, drove support strong flavor results in EMEA and margins. Plant-basedNorth America, partially offset by lower results in Asia Pacific (APAC). Specialty ingredients continued to benefit from strong demand for alternative proteins, helped drive a solid performance in Specialty Ingredients. Salesoffset by some higher costs. Health and wellness results were higher on robust sales growth in probioticsbioactives and enzymes, along with income from fermentation, contributed to strong results in Health & Wellness.fiber. Animal Nutrition results were higher year-over-year. Continued delivery of Neovia synergies,year-over-year, driven primarily by strength in livestock feed, and year-over-year improvement in amino acids wereas well as feed additives and ingredients, partially offset by softer aquaculture feedhigher costs in Latin America and slower demand as well as negative foreign currency impacts.recovery in APAC.

Other Business operating profit decreased 57% due to lower results from the Company’s futures commission and brokerage business and lower underwriting results from the125% driven primarily by captive insurance operations,underwriting losses, most of which included a $17 million settlement for the high water claimswere offset by corresponding recoveries in Ag Services and Oilseeds.other business segments.

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











44


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
 Three Months Ended  
 September 30,  
 2020 2019 Change
 (In millions)
LIFO adjustment$—
 $16
 $(16)
Interest expense-net(83) (85) 2
Unallocated corporate costs(196) (139) (57)
Early debt retirement charges(396) —
 (396)
Loss on debt conversion option(15) —
 (15)
Impairment and restructuring charges(6) (47) 41
Other income (charges)(8) —
 (8)
Total Corporate$(704) $(255) $(449)










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

Corporate results were a net charge of $704$347 million in the current quarter compared to $255a net charge of $704 million in the prior year quarter. The effect of changes in agricultural commodity prices on LIFO inventory valuation reserve resulted in a credit of $16Interest expense-net decreased $17 million due to lower interest rates and the favorable liability management actions taken in the prior quarter. Interest expense-net decreased $2 million due principally to lower short-term debt balances and net interest savings from cross currency swaps.year. Unallocated corporate costs increased $57$35 million due primarily to higher variable performance-related compensation expense accruals. Early debt retirementIT operating and project-related costs and the continued cost centralization in procurement, supply chain, and operations. Acquisition expenses were related to the P4 acquisition. Debt extinguishment charges in the current quarter were related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the prior year quarter were related to multiple early debt redemptions and the $0.7 billion debt tender in September 2020. Lossredemptions. Gain (loss) on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. RestructuringOther charges in the current quarter included railroad repairs and maintenance expenses of $31 million, partially offset by an investment revaluation gain of $9 million, the non-service components of net pension benefit income of $1 million, and other income. Other charges in the prior quarter, which included pension settlement charges, were related to early retirement and reorganization initiatives. Other charges in the currentyear quarter included railroad maintenance expenses of $28 million, partially offset by an investment revaluation gain of $4 million, the non-service components of net pension benefit income of $7 million, and other income.

Non-GAAP Financial Measures

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

Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of specified items. Adjusted EBITDA is defined as earnings before taxes, interest, andtaxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.

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























45


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The table below provides a reconciliation of diluted EPS to adjusted EPS for the three months ended September 30, 20202021 and 2019.2020.
 Three months ended September 30,
 2020 2019
 In millions Per share In millions Per share
Average number of shares outstanding - diluted562
   563
  
        
Net earnings and reported EPS (fully diluted)$225
 $0.40
 $407
 $0.72
Adjustments:       
LIFO adjustment - net of tax of $4 million (1)
—
 —
 (12) (0.02)
(Gains) losses on sales of assets and businesses - net of tax of $3 million(2)
(54) (0.10) —
 —
Early debt retirement charges - net of tax of $96 million (2)
300
 0.53
 —
 —
Loss on debt conversion option - net of tax of $0 (1)
15
 0.03
 —
 —
Asset impairment, restructuring, and settlement charges - net of tax of $3 million in 2020 and $12 million in 2019 (2)
5
 0.01
 41
 0.08
Certain discrete tax adjustments8
 0.02
 (5) (0.01)
Total adjustments274
 0.49
 24
 0.05
Adjusted net earnings and adjusted EPS$499
 $0.89
 $431
 $0.77

Three months ended September 30,
20212020
In millionsPer shareIn millionsPer share
Average number of shares outstanding - diluted566 562 
Net earnings and reported EPS (fully diluted)$526 $0.93 $225 $0.40 
Adjustments:
(Gains) losses on sales of assets and businesses - net of tax of $3 million in 2020 (1)
— — (54)(0.10)
Debt extinguishment charges - net of tax of $9 million in 2021 and $96 million in 2020 (1)
27 0.05 300 0.53 
(Gain) loss on debt conversion option - net of tax of $0 (1)
(7)(0.01)15 0.03 
Asset impairment, restructuring, and settlement charges - net of tax of $0 million in 2021 and $3 million in 2020 (1)
3 0.01 5 0.01 
Expenses related to acquisitions - net of tax of $1 million in 20212 — — — 
Certain discrete tax adjustments(3)(0.01)8 0.02 
Total adjustments22 0.04 274 0.49 
Adjusted net earnings and adjusted EPS$548 $0.97 $499 $0.89 
(1)Tax effected using the Company’s U.S. tax rate. LIFO accounting was discontinued effective January 1, 2020.
(2) Tax effected using the U.S. and other applicable tax rates.



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

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the three months ended September 30, 20202021 and 2019.2020.
Three months ended
September 30,
(In millions)20212020Change
Earnings before income taxes$653 $200 $453 
Interest expense61 100 (39)
Depreciation and amortization247 238 9 
(Gains) losses on sales of assets and businesses— (57)57 
Debt extinguishment charges36 396 (360)
Expenses related to acquisitions3 — 3 
Railroad maintenance expenses31 28 3 
Asset impairment, restructuring, and settlement charges3 8 (5)
Adjusted EBITDA$1,034 $913 $121 
Three months ended
September 30,
(In millions)20212020Change
Ag Services and Oilseeds$711 $527 $184 
Carbohydrate Solutions297 323 (26)
Nutrition230 201 29 
Other Business(3)21 (24)
Corporate(201)(159)(42)
Adjusted EBITDA$1,034 $913 $121 

46
 Three months ended  
 September 30,  
(In millions)2020 2019 Change
Earnings before income taxes$200
 $503
 $(303)
Interest expense100
 97
 3
Depreciation and amortization238
 249
 (11)
LIFO—
 (16) 16
(Gains) losses on sales of assets and businesses(57) —
 (57)
Early debt retirement charges396
 —
 396
Railroad maintenance expenses28
 —
 28
Asset impairment, restructuring, and settlement charges8
 53
 (45)
Adjusted EBITDA$913
 $886
 $27
      
 Three months ended  
 September 30,  
(In millions)2020 2019 Change
Ag Services and Oilseeds$527
 $511
 $16
Carbohydrate Solutions323
 264
 59
Nutrition201
 175
 26
Other Business21
 55
 (34)
Corporate(159) (119) (40)
Adjusted EBITDA$913
 $886
 $27


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


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

Market Factors Influencing Operations or Results in the Nine Months Ended September 30, 20202021

The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, North American crushing margins were volatile due to slow farmer selling and COVID-19 impacts on demand for meal and oil earlier in the year but strengthened in the third quarter due to the increasingly tight soybean stocks in South America. South America saw record origination volumes in the first half of the year as it benefited from strong farmer selling in Brazil driven by the devaluation of the Brazilian Real. Demand and margins for biodiesel remained solid in North and South America. Margins for starches and sweeteners and wheat flour remained solid whileexport demand was soft due to the impacts of COVID-19 in the food service sector. Ethanol margins were mixed as U.S. industry ethanol production exceeded demand and inventories remained high early in the year but improvedwhile South American origination volumes were impacted by the delayed harvest and low farmer selling activity. Crushing margins benefited from strong demand and tight soybean and canola/rapeseed stocks. Demand for refined oils was strong, driven by the regional lifting of COVID-19 restrictions in the secondU.S. and third quarters as ADMdemand for renewable green diesel. In Carbohydrate Solutions, margins in starches and many ethanol producers idled some capacitysweeteners were solid despite softer sweetener demand early in the year due to continued COVID-19 restrictions. Starch demand continued to be robust. Co-product prices were strong. Ethanol demand remained steady as COVID-19 restrictions were lifted regionally. Ethanol margins were volatile initially supported by improving domestic demand, then challenged in the low demand.summer months prior to harvest due to limited availability of corn. Nutrition benefited from growingoverall strong demand in various product categories. In Human Nutrition, demand for flavors, petflavor systems, specialty proteins, bioactives, and fibers were strong. In Animal Nutrition, weak demand and higher input costs as a result of COVID-19 in South America were partially offset by the growing demand in complete food feed for livestock, plant-based proteins,petfood. Amino acids pricing and probiotics. Lower out-of-home consumption caused by COVID-19 lockdown measures negatively impacted flavors volumes, especially in the food service channel, and demand for aqua feed and amino acids. Global demand for amino acids was also negatively impacted by lower livestock counts following an African swine fever outbreak.

margins improved due to a tighter global supply environment.

Nine Months Ended September 30, 20202021 Compared to Nine Months Ended September 30, 20192020

Net earnings attributable to controlling interests increased $0.2$0.8 billion to $1.1$1.9 billion. Segment operating profit increased $0.3$0.9 billion to $2.3$3.3 billion. Included in segment operating profit in the current period was a net charge of $111 million consisting of asset impairment, restructuring, and settlement charges of $133 million, partially offset by gains on the sale of certain assets of $22 million. Included in segment operating profit in the prior period was net income of $20 million consisting of gains on the sale of a portion of the Company’s shares in Wilmar and certain other assets of $80 million, partially offset by asset impairment, restructuring, and settlement charges. Included in segment operating profit in the prior period was a net chargecharges of $40 million consisting of asset impairment and settlement charges, a gain on the sale of certain assets, and a step-up gain on an equity investment.$60 million. Adjusted segment operating profit increased $0.2$1.1 billion to $2.3$3.4 billion due primarily to higher results in Ag Services,Crushing, Refined Products and Other, Vantage Corn Processors,Carbohydrate Solutions, and Human and Animal Nutrition, and higher equity earnings from the Wilmar investment, partially offset by lower results in Crushing, Starches and Sweeteners,Ag Services and Other Business.Business, and lower equity earnings from the Wilmar investment. Corporate results were a net charge of $0.9 billion in the current period compared to $1.2 billion forin the nine months comparedprior period. Corporate results in the current period included a pension settlement charge of $83 million, early debt retirement charges of $36 million, a mark-to-market gain of $17 million on the conversion option of the exchangeable bonds issued in August 2020, expenses related to $0.9 billionan acquisition of $3 million, and a restructuring charge of $4 million. Corporate results in the sameprior period last year. Corporate results included a credit of $91 million from the elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020 and early debt retirement charges of $410 million, a mark-to-market loss of $15 million on the conversion option of the exchangeable bonds issued in August 2020, and an impairment charge of $5 million for the nine months, compared to restructuring and pension settlement and remeasurement charges of $150 million related to early retirement and reorganization initiatives and a charge of $10 million from the effect of changes in agricultural commodity prices on LIFO inventory valuation reserves during the same period last year.million.

Income taxes of $38$364 million decreased $174increased $326 million. The Company’s effective tax rate for the nine months ended September 30, 20202021 was 3.4%15.8% compared to 19.4%3.4% for the nine months ended September 30, 2019.2020. The change infavorable 2020 tax rate was due primarily to the impact of U.S. tax credits signed into law in December 2019, including a $73 million discrete tax benefit related to 45G railroad tax credits recognized in the quarter ended March 31, 2020.2020, and changes in the forecasted geographical mix of pretax earnings. The 45G railroad tax credits have an offsetting expenseimpact in cost of products sold.

In March 2020, the CARES Act was signed into law in the United States. The Company does not expect the provisions of the CARES Act to have a material impact on the annual effective tax rate for the year ending December 31, 2020.
Analysis of Statements of Earnings

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

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

47
 Nine Months Ended 
 September 30,  
(In thousands)2020 2019 Change
Oilseeds27,236
 27,002
 234
Corn13,717
 16,297
 (2,580)
   Total40,953
 43,299
 (2,346)



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

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

The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall increasedecrease in oilseeds isprocessed volumes was due to increased capacity utilization at new plants combined with downtimecold weather and natural gas curtailments in the prior year due to weather-related issues.North America and delays in soybean harvest in South America. The overall decreaseincrease in corn processed isvolumes was primarily related to the idling of two dry mill facilities in the second quarter due to the current low ethanol demand.of 2020. The Company currently expects that therestarted these idled facilities will be restarted as demand for ethanol improves within the next 12 months.in April 2021.

Revenues by segment for the nine months are as follows:

 Nine Months Ended  
 September 30,  
 2020 2019 Change
 (In millions)
Ag Services and Oilseeds     
Ag Services$22,930
 $23,653
 $(723)
Crushing7,035
 7,130
 (95)
Refined Products and Other5,382
 5,599
 (217)
Total Ag Services and Oilseeds35,347
 36,382
 (1,035)
      
Carbohydrate Solutions     
Starches and Sweeteners4,769
 4,782
 (13)
Vantage Corn Processors1,625
 2,627
 (1,002)
Total Carbohydrate Solutions6,394
 7,409
 (1,015)
     

Nutrition     
Human Nutrition2,161
 2,105
 56
Animal Nutrition2,198
 2,158
 40
Total Nutrition4,359
 4,263
 96
     
Other Business277
 273
 4
Total$46,377
 $48,327
 $(1,950)
      

Nine Months Ended
September 30,
 20212020Change
 (In millions)
Ag Services and Oilseeds
Ag Services$32,860 $22,930 $9,930 
Crushing8,411 7,035 1,376 
Refined Products and Other7,696 5,382 2,314 
Total Ag Services and Oilseeds48,967 35,347 13,620 
   
Carbohydrate Solutions
Starches and Sweeteners5,563 4,769 794 
Vantage Corn Processors2,346 1,625 721 
Total Carbohydrate Solutions7,909 6,394 1,515 
Nutrition
Human Nutrition2,410 2,161 249 
Animal Nutrition2,583 2,198 385 
Total Nutrition4,993 4,359 634 
Other Business290 277 13 
Total$62,159 $46,377 $15,782 
Revenues and cost of products sold in a commodity merchandising and processing business are 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 because 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 $2.0increased $15.8 billion to $46.4$62.2 billion due to higher sales prices ($16.0 billion) partially offset by lower sales volumes partially offset($0.2 billion). Higher sales prices of animal feed, alcohol, biodiesel, meal, oils, corn, soybeans, wheat, and corn by products and higher sales prices. Lower sales volumes of rice, alcohol, oils,wheat, cotton, and soybeans and lower sales prices of biodiesel and corn,barley, were partially offset by higherlower sales volumes of biodiesel and corn and higher sales prices ofmeal, oils, and soybeans. Ag Services and Oilseeds revenues decreased 3%increased 39% to $35.3$49.0 billion due to lowerhigher sales prices ($13.5 billion) and higher sales volumes ($1.30.1 billion). Carbohydrate Solutions revenues increased 24% to $7.9 billion due to higher sales prices ($1.8 billion), partially offset by higher sales prices ($0.3 billion). Carbohydrate Solutions revenues decreased 14% to $6.4 billion due to lower sales volumes ($0.8 billion) and lower sales prices ($0.20.3 billion). Nutrition revenues increased 2%15% to $4.4$5.0 billion due to higher sales volumes and prices.prices ($0.7 billion).





48


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

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Cost of products sold decreased $2.1increased $14.5 billion to $43.3$57.8 billion due to principally to lower volumes.higher average commodity costs. Included in cost of products sold in the prior period was a credit of $91 million from the effect of the elimination of the LIFO reserve in connection with the accounting change in the current period compared to a charge of $10 million from the effect of changes in agricultural commodity prices on LIFO inventory valuation reserves in the prior period.effective January 1, 2020. Manufacturing expenses decreased $0.1increased $0.3 billion to $4.2$4.5 billion due principally to lowerhigher energy costs, maintenance, storage and decreasedwarehousing, operating supplies, salaries and maintenance expenses,benefits, and contracted labor, partially offset by lower railroad maintenance expenses.

Foreign currency translation impacts decreased bothincreased revenues and cost of productsgoods sold by $0.4$1.0 billion.

Gross profit increased $0.1$1.2 billion or 4%40% to $3.1 billion. Higher$4.3 billion due to higher results in Human and Animal Nutrition ($154 million), Ag Services and Oilseeds ($117746 million), Refined ProductsCarbohydrate Solutions ($333 million), Nutrition ($148 million), and Other ($74 million), and Vantage Corn Processors ($42 million) were partially offset by lower results in Crushing ($273 million) and Starches and Sweeteners ($1549 million). These factors are explained in the segment operating profit discussion on page 52.51. In Corporate, the positive period over period impact from LIFO of $101 million due to the elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020 and the changes in agricultural commodity priceshad a positive impact on LIFO inventory valuation reservesgross profit of $91 million in the prior period were offset by railroad maintenance expenses of $101 million.period.

Selling, general, and administrative expenses increased $0.1$0.3 billion to $1.9$2.2 billion due principally to higher variable performance-relatedsalaries and benefits, performance-based compensation expense accruals, compared to lower accruals in the prior period.IT expenses, and a legal settlement.

Asset impairment, exit, and restructuring costs decreased $139increased $23 million to $61$84 million. Charges in the current period consisted primarilyof $54 million of impairments related to certain long-lived assets and $26 million of restructuring charges, presented as specified items within segment operating profit, and $4 million of restructuring charges in Corporate. Charges in the prior period consisted of $50 million of impairments related to certain intangible and other long-lived assets and $11 million of restructuring charges. Prior

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

Investment income decreased $11 million to $83 million due to lower interest rates on segregated funds in the Company’s futures commission and brokerage business, partially offset by a $49 million investment revaluation gain in the current period charges consisted of $50compared to a $23 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 chargesinvestment revaluation gain in Corporate primarily related to early retirement and reorganization initiatives.the prior period.

Interest expense decreased $37$82 million to $270$188 million due to lower interest rates and net interest savings from cross currency swaps, partially offset by the favorable liability management actions taken in the prior year. Interest expense in the current period also included a $17 million mark-to-market lossgain adjustment related to the conversion option of the exchangeable bonds issued in August 2020.

Equity in earnings of unconsolidated affiliates increased $1242020 compared to a $15 million to $403 million due to higher earnings from the Company’s investments in Wilmar and Pacificor, partially offset by amark-to-market loss adjustment in the current period from the Company’s investment in Olenex.prior period.

Other expense - net increased $218decreased $166 million to $179$36 million. CurrentExpense in the current quarter included a non-cash pension settlement charge of $83 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s ADM Retirement Plant and ADM Pension Plan for Hourly-Wage Employees, charges of $36 million related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025, and other expense, partially offset by gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and foreign exchange gains. Expense in the prior period expense included charges of $410 million related to related to multiple early debt redemptions and the $0.7 billion debt tender in September 2020 and loss provisions related to the Company’s futures commission and brokerage business, partially offset by gains related to the sale of a portion of the Company’s shares in Wilmar and certain other assets, the non-service components of net pension benefit income, foreign exchange gains, and other income. Prior 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.









49

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

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

 Nine Months Ended  
 September 30,  
Segment Operating Profit (Loss)2020 2019 Change
 (In millions)
Ag Services and Oilseeds    

Ag Services$482
 $326
 $156
Crushing249
 493
 (244)
Refined Products and Other286
 223
 63
Wilmar254
 154
 100
Total Ag Services and Oilseeds1,271
 1,196
 75
      
Carbohydrate Solutions

   

Starches and Sweeteners533
 547
 (14)
Vantage Corn Processors(24) (77) 53
Total Carbohydrate Solutions509
 470
 39
      
Nutrition     
Human Nutrition372
 293
 79
Animal Nutrition75
 23
 52
Total Nutrition447
 316
 131
     

Other Business69
 72
 (3)
      
Specified Items:     
Gains (losses) on sales of assets and businesses80
 12
 68
Asset impairment, restructuring, and settlement charges(60) (52) (8)
Total Specified Items20
 (40) 60
      
Total Segment Operating Profit$2,316
 $2,014
 $302
      
Adjusted Segment Operating Profit(1)
$2,296
 $2,054
 $242
      
Segment Operating Profit$2,316
 $2,014
 $302
Corporate(1,189) (922) (267)
Earnings Before Income Taxes$1,127
 $1,092
 $35

Nine Months Ended
September 30,
Segment Operating Profit (Loss)20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$435 $482 $(47)
Crushing812 249 563 
Refined Products and Other467 286 181 
Wilmar251 254 (3)
Total Ag Services and Oilseeds1,965 1,271 694 
   
Carbohydrate Solutions
Starches and Sweeteners706 533 173 
Vantage Corn Processors149 (24)173 
Total Carbohydrate Solutions855 509 346 
Nutrition
Human Nutrition429 372 57 
Animal Nutrition102 75 27 
Total Nutrition531 447 84 
Other Business10 69 (59)
Specified Items:
Gains (losses) on sales of assets and businesses22 80 (58)
Asset impairment, restructuring, and settlement charges(133)(60)(73)
Total Specified Items(111)20 (131)
Total Segment Operating Profit$3,250 $2,316 $934 
Adjusted Segment Operating Profit(1)
$3,361 $2,296 $1,065 
Segment Operating Profit$3,250 $2,316 $934 
Corporate(948)(1,189)241 
Earnings Before Income Taxes$2,302 $1,127 $1,175 

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





50


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

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Ag Services and Oilseeds operating profit increased 6%55%. Ag Services results were higher than the prior period, which were negatively impacted by high water conditions in North America. Strong performance in global trade was driven by strong results in destination marketing and structured trade finance. Robust farmer selling in Brazil drove higher origination margins, which were partially offset by weaker results in North America. Current period results also included a $54 million settlement related to U.S. high water insurance claims in 2019. Crushing results were lower than the prior year period. VolumesIn North America, strong Chinese demand and favorable positions in a dynamic pricing environment delivered significantly higher results. South American origination results were strongsignificantly lower due to decreased farmer selling activity versus the prior year period and execution marginsthe effects from the slightly delayed harvest and higher freight costs. Global Trade results were solid although below the high realized marginsimpacted by negative timing effects related to ocean freight positions which are expected to reverse in the first half of 2019. Negativecoming quarters. Crushing results were significantly higher due to strong softseed crush margins driven by tight supplies and negative timing impacts also contributed to the lower results in the currentprior year period. Refined Products and Other results were higher due to improved biodieselyear-over-year on stronger margins in both North America and South America.Europe, Middle East, Africa, and India (EMEAI), partially offset by impacts related to the reduction in Brazilian biodiesel mandates. Equity earnings from Wilmar were higher year-over-year.lower versus the prior year period.

Carbohydrate Solutions operating profit increased 8%68%. Starches and Sweeteners results, including ethanol production from the wet mills, were down driven largely by negative mark-to-market timing effectssignificantly higher than the prior year period. The business managed risk well, capitalizing on forward salesrising prices in the ethanol complex and favorable co-product values in an industry environment of corn oil. Absent those impacts,improving margins, falling inventories, and higher input costs. Corn oil results were higher due to better operating performance at the Decatur facility, strong results in wheat milling, and improved conditions in EMEAI. VCP resultssignificantly improved from the prior year period, due to effective risk managementwhich had been impacted by significant mark-to-market effects. Demand for flour by the foodservice sector remained below the prior year period. Vantage Corn Processors results were substantially higher, driven by improved margins on the distribution of fuel ethanol and increased demand for industrial ethanol.strong performance in USP-grade alcohol and the resumption of production at the two dry mills.

Nutrition operating profit increased 41%19%. Human Nutrition results were higher than the prior year period. Flavors results were up, driven by strong sales across various market segments. In North America and EMEAI, the flavors business delivered strong performancevolumes and improved product mix, particularly in the beverage segment. Specialty Ingredients delivered strong sales growth in specialty proteins, though results were negatively impacted by the effects of pantry loading in the prior year period, normalization of prices in the wholesale ingredients business, COVID-related shifts in demand across its broad portfolio. Strong execution to meet rising customerthe portfolio, and higher costs. Health and Wellness results were strong, with robust demand for plant-based proteins and edible beans drove higherdriving strong results in Specialty Ingredients. Additional income from fermentation and strong sales for probiotics and fiber drove higher performance in Health & Wellness. Flavors continued to deliver solid results.fibers. Animal Nutrition results improved year-over-yearwere higher on favorable results in amino acids, driven by strong performance from Neovia, goodimproved margins and product mix, partially offset by lower demand and higher input costs as a result of pandemic effects in commercial and livestock premix, and solid sales in pet care.South America.

Other Business operating profit decreased 4%. Lower86% primarily due to lower underwriting results including loss provisions related to the Company’s futures commission and brokerage business, were partially offset by improvements in underwriting performance atfrom the captive insurance operations.operations, most of which were offset by corresponding recoveries in other business segments.

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








51
 Nine Months Ended  
 September 30,  
 2020 2019 Change
 (In millions)
LIFO credit (charge)$91
 $(10) $101
Interest expense-net(246) (276) 30
Unallocated corporate costs(579) (454) (125)
Expenses related to acquisitions—
 (14) 14
Early debt retirement charges(410) —
 (410)
Loss on debt conversion option(15) —
 (15)
Impairment and restructuring charges(5) (150) 145
Other charges(25) (18) (7)
Total Corporate$(1,189) $(922) $(252)


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Corporate results were a net charge of $1.2$0.9 billion in the current period compared to $0.9$1.2 billion in the prior period. The elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020 resulted in a credit of $91 million in the current period compared to a LIFO charge of $10 million in the prior period. Interest expense-net decreased $30$46 million due principally to lower interest rates and net interest savings from cross currency swaps.the favorable liability management actions taken in the prior year. Unallocated corporate costs increased $125$102 million due principallyprimarily to higher variable performance-related compensation expense accruals.accruals, the continued cost centralization in procurement, supply chain, and operations, and additional investments in IT and related projects. Acquisition expenses were related to the P4 acquisition. Debt extinguishment charges in the current period were related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the prior period were related to the Neovia acquisition. Early debt retirement charges were related to multiple early debt redemptions and the $0.7 billion debt tender in September 2020. Lossredemptions. Gain (loss) on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. RestructuringImpairment, restructuring, and settlement charges in the priorcurrent period which included a non-cash pension settlement and remeasurement charges, werecharge of $83 million related to early retirementthe purchase of group annuity contracts that irrevocably transferred the future benefit obligations and reorganization initiatives.annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s ADM Retirement Plant and ADM Pension Plan for Hourly-Wage Employees to independent third parties, and restructuring charges. Other income in the current period included the non-service components of net pension benefit income of $12 million, an investment revaluation gain of $49 million, and other income, partially offset by railroad maintenance expenses of $34 million. Other charges in the currentprior period included railroad maintenance expenses of $101 million that had an offsetting benefit in income tax expense, partially offset by foreign exchange gains, an investment revaluation gain of $23 million, and the non-service components of net pension benefit income. Other charges in the prior period included foreign exchange losses, partially offset by the non-service componentsincome of net pension benefit$28 million, and other income.


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, andtaxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.

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


















52


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

The table below provides a reconciliation of diluted EPS to adjusted EPS for the nine months ended September 30, 20202021 and 2019.2020.
Nine months ended September 30,Nine months ended September 30,
2020 201920212020
In millions Per share In millions Per shareIn millionsPer shareIn millionsPer share
Average number of shares outstanding - diluted563
   565
  Average number of shares outstanding - diluted566 563 
       
Net earnings and reported EPS (fully diluted)$1,085
 $1.93
 $875
 $1.55
Net earnings and reported EPS (fully diluted)$1,927 $3.41 $1,085 $1.93 
Adjustments:       Adjustments:
LIFO charge (credit) - net of tax of $22 million in 2020 and $2 million in 2019 (1)
(69) (0.12) 8
 0.01
(Gains) losses on sales of assets and businesses - net of tax of $8 million in 2020 and $3 million in 2019 (2)
(72) (0.13) (9) (0.02)
Asset impairment, restructuring, and settlement charges - net of tax of $16 million in 2020 and $46 million in 2019 (2)
49
 0.09
 156
 0.28
Expenses related to acquisitions - net of tax of $5 million (2)
—
 —
 9
 0.02
Early debt retirement charges - net of tax of $99 million (2)
311
 0.55
 —
 —
Loss on debt conversion option - net of tax of $0 (1)
15
 0.03
 —
 —
LIFO charge (credit) - net of tax of $22 million (1)
LIFO charge (credit) - net of tax of $22 million (1)
— — (69)(0.12)
(Gains) losses on sales of assets and businesses - net of tax of $5 million in 2021 and $8 million in 2020 (2)
(Gains) losses on sales of assets and businesses - net of tax of $5 million in 2021 and $8 million in 2020 (2)
(17)(0.03)(72)(0.13)
Asset impairment, restructuring, and settlement charges - net of tax of $53 million in 2021 and $16 million in 2020 (2)
Asset impairment, restructuring, and settlement charges - net of tax of $53 million in 2021 and $16 million in 2020 (2)
167 0.30 49 0.09 
Expenses related to acquisitions - net of tax of $1 million (2)
Expenses related to acquisitions - net of tax of $1 million (2)
2 — — — 
Debt extinguishment charges - net of tax of $9 million in 2021 and $99 million in 2020 (2)
Debt extinguishment charges - net of tax of $9 million in 2021 and $99 million in 2020 (2)
27 0.05 311 0.55 
Gain (loss) on debt conversion option - net of tax of $0 (2)
Gain (loss) on debt conversion option - net of tax of $0 (2)
(17)(0.03)15 0.03 
Certain discrete tax adjustments16
 0.03
 (7) (0.01)Certain discrete tax adjustments(4)(0.01)16 0.03 
Total adjustments250
 0.45
 157
 0.28
Total adjustments158 0.28 250 0.45 
Adjusted net earnings and adjusted EPS$1,335
 $2.38
 $1,032
 $1.83
Adjusted net earnings and adjusted EPS$2,085 $3.69 $1,335 $2.38 
       
(1) Tax effected using the Company’s U.S. tax rate. LIFO accounting was discontinued effective January 1, 2020.
(2) Tax effected using the U.S. and other applicable tax rates.





























53


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

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the nine months ended September 30, 20202021 and 2019.2020.
Nine months ended
September 30,
(In millions)20212020Change
Earnings before income taxes$2,302 $1,127 $1,175 
Interest expense188 270 (82)
Depreciation and amortization739 727 12 
LIFO— (91)91 
(Gains) losses on sales of assets and businesses(22)(80)58 
Debt extinguishment charges36 410 (374)
Expenses related to acquisitions3 — 3 
Railroad maintenance expenses34 101 (67)
Asset impairment, restructuring, and settlement charges220 65 155 
Adjusted EBITDA$3,500 $2,529 $971 
Nine months ended
September 30,
(In millions)20212020Change
Ag Services and Oilseeds$2,243 $1,543 $700 
Carbohydrate Solutions1,106 745 361 
Nutrition692 617 75 
Other Business15 75 (60)
Corporate(556)(451)(105)
Adjusted EBITDA$3,500 $2,529 $971 
54
 Nine months ended  
 September 30,  
(In millions)2020 2019 Change
Earnings before income taxes$1,127
 $1,092
 $35
Interest expense270
 307
 (37)
Depreciation and amortization727
 742
 (15)
LIFO(91) 10
 (101)
(Gains) losses on sales of assets and businesses(80) (12) (68)
Early debt retirement charges410
 —
 410
Expenses related to acquisitions—
 14
 (14)
Railroad maintenance expenses101
 —
 101
Asset impairment, restructuring, and settlement charges65
 202
 (137)
Adjusted EBITDA$2,529
 $2,355
 $174
      
      
 Nine months ended  
 September 30,  
(In millions)2020 2019 Change
Ag Services and Oilseeds$1,543
 $1,478
 $65
Carbohydrate Solutions745
 716
 29
Nutrition617
 482
 135
Other Business75
 97
 (22)
Corporate(451) (418) (33)
Adjusted EBITDA$2,529
 $2,355
 $174



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


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

Liquidity and Capital Resources

A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital-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 ADM’s control, to fund its working capital needs and capital expenditures. The primary source of funds to finance ADM’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 and accounts receivable securitization programs.  In addition, the Company believes it has access to funds from public and private equity and debt capital markets in both U.S. and international markets.

Cash used inprovided by operating activities was $1.5$5.9 billion for the nine months ended September 30, 2021 compared to $3.6a use of $1.5 billion for the same period last year. Working capital changes including the increase in deferred consideration, decreasedas described below increased cash by $3.8$2.8 billion for the nine months ended September 30, 2021 compared to $5.3a decrease of $3.8 billion for the same period last year. year which included the impact of deferred consideration. During 2020, the Company restructured its accounts receivable securitization programs from a deferred purchase price to a pledge structure. As a result, operating cash flows in the current period no longer include the impact of deferred consideration which decreased operating cash flows in previous years.

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

Increase in deferredDeferred consideration in securitized receivables of $4.6 billion and $5.7 billion for the nine months and the same period last year, respectively,ended September 30, 2020 was offset by $4.6 billion and $5.7 billionthe same amount of net consideration received for beneficial interest obtained for selling trade receivables for the nine months and the same period last year, respectively.receivables.

Cash provided byused in investing activities was $4.7$1.3 billion for the nine months ended September 30, 2021 compared to $3.3cash provided of $4.7 billion for the same period last year. Capital expenditures for the nine months ofended September 30, 2021 were $0.7 billion compared to $0.6 billion were comparable tofor the same period last year. Net assets of businesses acquired were $3 million$0.5 billion for the nine months ended September 30, 2021 compared to $1.9 billion$3 million for the same period last year primarily due to the P4 acquisition of Neovia in 2019.September 2021. Proceeds from sales of business and assets for the nine months ofended September 30, 2021 were $0.1 billion compared to $0.7 billion for the same period last year which related to the sale of a portion of the CompanyCompany’s shares in Wilmar and certain other assets compared to $43 million for the same period last year.assets. Net consideration received for beneficial interest obtained forrelated to selling trade receivables was $4.6 billion for the nine months compared to $5.7 billion the same period last year.ended September 30, 2020.

Cash used in financing activities was $1.9$1.6 billion for the nine months ended September 30, 2021 compared to $0.4$1.9 billion for the same period last year. Long-term debt borrowings for the nine months ended September 30, 2021 of $1.3 billion consisted of the $750 million aggregate principal amount of 2.700% Notes due 2051 issued on September 10, 2021 and the €0.5 billion aggregate principal amount of Fixed-to-Floating Rate Senior Notes due 2022 issued in a private placement on March 25, 2021, compared to long-term debt borrowings for the same period last year of $1.8 billion which consisted of the $0.5 billion and $1.0 billion aggregate principal amounts of 2.75% Notes due in 2025 and 3.25% Notes due in 2030, respectively, issued on March 27, 2020 and the $0.3 billion aggregate principal amount of zero coupon exchangeable bonds due in 2023 issued on August 26, 2020, compared2020. Proceeds from the borrowings in the current period were used to long-termredeem debt and for general corporate purposes. Proceeds from the borrowings of $3 million forin the sameprior period last year.were used to reduce short-term debt. Commercial paper net payments for the nine months ended September 30, 2021 were $1.0$1.7 billion compared to net borrowings of $1.0 billion for the same period last year. Proceeds from the borrowings in the current period will be used for general corporate purposes, including the reduction of short-term debt. Long-term debt payments of $0.5 billion for the nine months ended September 30, 2021 consisted of the early redemption of the $500 million aggregate principal amount of 2.750% notes due 2025 in September 2021, compared to $2.0 billion related tofor the same period last year which consisted of the early redemption of the $0.5 billion and $0.4 billion aggregate principal amounts of 4.479% debentures due in 2021 and 3.375% debentures due in 2022, respectively, the repurchase of $0.7 billion aggregate principal amount of Debentures,debentures, and the redemption of $0.1 billion aggregate principal amount of private placement notes due in 2021 and 2024, compared to $0.6 billion for the same period last year which primarily related to the €0.5 billion Floating Rate Notes that matured in June 2019.2024. Share repurchases for the nine months ended September 30, 2021 were $0.1 billioninsignificant compared to $0.2$0.1 billion for the same period last year. Dividends of $0.6 billion for the nine months wereended September 30, 2021were comparable to the same period last year.




55


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
At September 30, 2020,2021, the Company had $0.9$1.1 billion of cash and cash equivalents and short-term marketable securities and a current ratio, defined as current assets divided by current liabilities, of 1.6 to 1. Included in working capital was $5.6$7.4 billion of readily marketable commodity inventories. At September 30, 2020,2021, the Company’s capital resources included shareholders’ equity of $19.3$22.0 billion and lines of credit, including the accounts receivable securitization programs described below, totaling $10.7$12.4 billion, of which $9.1$10.5 billion was unused. The Company’s ratio of long-term debt to total capital (the sum of the Company’s long-term debt and shareholders’ equity) was 29%27% and 28% at September 30, 20202021 and December 31, 2019.2020, respectively. 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 27%26% and 29%32% at September 30, 20202021 and December 31, 2019,2020, respectively. Of the Company’s total lines of credit, $5.0$6.5 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was no commercial paper outstanding at September 30, 2020.2021.





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

COVID-19 has not significantly impacted ADM’s capital and financial resources, and pricing on its revolving credit facility remains unchanged. However, in line with the overall markets, COVID-19 has created dislocations in the credit markets during certain periods in the first half of 2020 with corporate spreads increasing, partially offset by a decline in benchmark yields. The Company has utilized its diversified sources of liquidity, including its inventory financing and bilateral bank facilities, to ensure it has ample cash and is prepared for possible unexpected credit market disruptions. Additionally, ADM has been accepted into the Federal Reserve’s Commercial Paper Financing Facility and the Bank of England’s COVID Corporate Financing Facility ensuring uninterrupted access to both the U.S. and European commercial paper markets.  To date, the Company has not utilized these facilities.

During the second half of 2020, the global credit market stabilized with corporate credit spreads below pre-pandemic levels. Continued actions by central banks provided additional support in both the short-term and long-term funding markets further stabilizing corporate credit markets. Low benchmark yields and favorable credit spreads coupled with continued strong cash flow generation during the second half of the year presented opportunities for ADM to re-balance the company’s liability portfolio to pre-pandemic levels. Starting in June 2020, ADM began a series of liability management transactions including multiple early debt redemptions and the $0.7 billion debt tender in September 2020 to capitalize on all-time low interest rates.

As of September 30, 2020,2021, the Company had $0.9$1.1 billion of cash and cash equivalents, $0.4$0.5 billion of which was cash held by foreign subsidiaries whose undistributed earnings are considered 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 $6.2$8.1 billion, the Company has asserted that these funds are indefinitely reinvested outside the U.S.

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

For the nine months ended September 30, 2020,2021, the Company spent approximately $0.6$0.7 billion in capital expenditures and $0.6 billion in dividends, and $0.1 billion in share repurchases.dividends. The Company has a stock repurchase program. Under the program, the Company acquired 3.5 millionan insignificant number of shares for the nine months ended September 30, 2020,2021, and has 104.9104.5 million shares remaining that may be repurchased until December 31, 2024.

TheIn 2021, the Company expects total capital expenditures of approximately $0.9 billion to $1.0 billion, approximately $0.8 billion in dividends, of $0.8and up to $0.5 billion andin share repurchases, subject to other strategic uses of capital.

In October 2021, the Company executed acquisition and investment agreements with a total aggregate consideration of approximately $0.7 billion. In addition, the Company executed an agreement to sell its ethanol production complex in Peoria, Illinois with a book value of approximately $0.1 billion, during 2020.which will have an immaterial impact to operating results. These transactions are expected to close before December 31, 2021, subject to the satisfaction of closing conditions and regulatory approval. In addition, the previously announced Sojaprotein acquisition of $0.4 billion is also expected to close before December 31, 2021.

Contractual Obligations and Commercial Commitments

The Company’s purchase obligations as of September 30, 20202021 and December 31, 20192020 were $19.5$16.9 billion and $12.2$19.7 billion, respectively.  The increasedecrease is primarily related to obligations to purchase higherlower quantities of agricultural commodity inventories. As of September 30, 2020,2021, the Company expects to make payments related to purchase obligations of $18.1$12.9 billion within the next twelve months. There were no other material changes in the Company’s contractual obligations during the quarter ended September 30, 20202021.
.

Off Balance Sheet Arrangements

On October 1, 2020,September 24, 2021, the Company restructuredamended the First Program and increased the facility from a deferred purchase price$1.4 billion as of March 31, 2021 to a pledge structure. Under the new structure, ADM Receivables transfers a portion of the purchased accounts receivable together with an equally proportional security interest in all of its right, title, and interest in the remaining purchased accounts receivable to each of the First Purchasers. In exchange, ADM Receivables receives a cash payment for the accounts receivables transferred.$1.5 billion. See Note 16 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information about the First Program.

There were no other material changes in the Company’s off balance sheet arrangements during the quarter ended September 30, 20202021.
.

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

There were no material changes in the Company’s critical accounting policies during the quarter ended September 30, 2020.2021.


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


The market risk inherent in the Company’s market risk sensitive instruments and positions is the potential loss arising from adverse changes in: commodity market prices as they relate to the Company’s net commodity position, foreign currency exchange rates, and interest rates.  Significant changes in market risk sensitive instruments and positions for the quarter ended September 30, 20202021 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, 2019.2020.

Commodities

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

The fair value of the Company’s commodity position is a summation of the fair values calculated for each commodity by valuing all 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) limits. VaR measures the potential loss, at a 95% confidence level, that could be incurred over a one-year period. Volumetric limits are monitored daily and VaR calculations and sensitivity analysis are monitored weekly.

In addition to measuring the hypothetical loss resulting from an adverse two standard deviation move in market prices (assuming no correlations) over a one-year period using VaR, sensitivity analysis is performed measuring the potential loss in fair value resulting from a hypothetical 10% adverse change in market prices. The highest, lowest, and average weekly position together with the market risk from a hypothetical 10% adverse price change is as follows:
Nine months endedYear ended
September 30, 2021December 31, 2020
Long/(Short) (In millions)
Fair ValueMarket RiskFair ValueMarket Risk
Highest position$1,426 $143 $966 $97 
Lowest position(98)(10)(842)(84)
Average position710 71 111 11 
  Nine months ended Year ended
  September 30, 2020 December 31, 2019
Long/(Short) (In millions)
 Fair Value Market Risk Fair Value Market Risk
Highest position $668
 $67
 $576
 $58
Lowest position (842) (84) (83) (8)
Average position (131) (13) 280
 28

The change in fair value of the average position was due to a decreasean increase in average quantities, and, to a lesser extent,partially offset by a decrease in price underlying the weekly commodity position.

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ITEM 4.
ITEM 4.    CONTROLS AND PROCEDURES


As of September 30, 2020,2021, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (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.




ITEM 4.CONTROLS AND PROCEDURES (Continued)


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) system on a worldwide basis, which is expected to occur in phases over the next several years. The Company is also beginning the transition of certain portions of its corporate operations to a global professional services firm which is expected to be substantially completed by end of fiscal 2021. 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 system and the transition of certain corporate operations to a professional services firm in these circumstances hashave not materially affected its internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
ITEM 1.    LEGAL PROCEEDINGS

The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability (see Note 1011 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. 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.










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ITEM 1.    LEGAL PROCEEDINGS (Continued)

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. On March 16, 2021, AOT allegesfiled an amended complaint adding a second named plaintiff Maize Capital Group, LLC. AOT and Maize allege that members of the putative class suffered “hundreds of millions of dollars in damages” as a result of the Company’s alleged actions. In May 2020, the court granted in part and denied in part the Company’s motion to dismiss, and the parties are engaged in discovery. On July 14, 2020, Green Plains Inc. and its related entities (“GP”) filed a putative class action lawsuit, alleging substantially the same operative facts, in federal court in Nebraska, seeking to represent all sellers of ethanol. On July 23, 2020, Midwest Renewable Energy, LLC (“MRE”) filed a putative class action in federal court in Illinois alleging substantially the same operative facts and asserting claims under the Sherman Act. On November 11, 2020, United Wisconsin Grain Producers LLC (“UWGP”) and five other ethanol producers filed a lawsuit in federal court in Illinois alleging substantially the same facts and asserting claims under the Sherman Act and Illinois, Iowa, and Wisconsin law. The court granted ADM’s motion to dismiss the MRE and UWGP complaints without prejudice on August 9, 2021 and September 28, 2021, respectively. On August 16, 2021, the court granted ADM’s motion to dismiss the GP complaint, dismissing one claim with prejudice and declining jurisdiction over the remaining state law claim. MRE filed an amended complaint on August 30, 2021, which ADM moved to dismiss on September 27, 2021. UWGP filed an amended complaint on October 19, 2021. The Company denies liability, and is vigorously defending itself in these actions. As these actions are 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. In May 2020, the court denied the Company’s motion to dismiss, and the parties are engaged in discovery.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.
ITEM 1A.    RISK FACTORS

The information presented below updates, and should be read
There were no significant changes in conjunction with, the Company’s risk factors induring the quarter ended September 30, 2021. For further information about the Company’s risk factors, refer to Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Except as presented below, there were no other significant changes in the Company’s risk factors during the quarter ended September 30, 2020.

The Company faces risks related to health epidemics, pandemics, and similar outbreaks.
ADM is monitoring the novel coronavirus (COVID-19) global pandemic and taking steps to mitigate the potential risks posed by its spread, including working with its customers, employees, suppliers, local communities, and other stakeholders. COVID-19 or other health epidemics, pandemics, or similar outbreaks could impact the Company’s operations if significant portions of its workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures, or other restrictions. Additionally, third party service providers, suppliers, joint ventures, customers, and other business partners may not be able fulfill their commitments creating additional disruptions for the Company. In such circumstances, ADM may be unable to perform fully on its contractual obligations, critical global supply chain and logistical networks may be affected, and costs and working capital may increase. These cost increases may not be fully recoverable or adequately covered by insurance. In addition, demand for certain products that ADM produces, particularly biofuels and ingredients that go into food and beverages that support the food services channels, may be materially impacted from a prolonged outbreak of COVID-19 or significant local resurgences of the virus, leading to additional government lockdowns, quarantines, or other restrictions. The Company cannot at this time predict the impact of the COVID-19 pandemic on its future financial or operational results, but the impact could potentially be material over time.

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

Issuer Purchases of Equity Securities

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

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

(2)On August 7, 2019, the Company’s Board of Directors approved the extension of the stock repurchase program through December 31, 2024 and the repurchase of up to an additional 100,000,000 shares under the extended program. 
59
Period 
Total Number of Shares Purchased(1)
 Average Price Paid per Share 
Total Number of Shares Purchased as Part of a Publicly Announced Program(2)
 
Number of Shares Remaining that May be Purchased Under the Program(2)
July 1, 2020 to        
July 31, 2020 1,579
 $41.767
 102
 104,961,558
         
August 1, 2020 to  
  
  
  
August 31, 2020 109,219
 43.528
 106,337
 104,855,221
         
September 1, 2020 to  
  
    
September 30, 2020 12,930
 47.610
 172
 104,855,049
Total 123,728
 $43.932
 106,611
 104,855,049


(1)Total shares purchased represents those shares purchased in the open market as part of the Company’s publicly announced share repurchase program described below, shares received as payment for the exercise price of stock option exercises, and shares received as payment for the withholding taxes on vested restricted stock awards. During the three-month period ended September 30, 2020, there were 17,117 shares received as payments for the minimum withholding taxes on vested restricted stock awards and for the exercise price of stock option exercises.

(2)On August 7, 2019, the Company’s Board of Directors approved the extension of the stock repurchase program through December 31, 2024 and the repurchase of up to an additional 100,000,000 shares under the extended program.




ITEM 6.    EXHIBITS
ITEM 6.EXHIBITS
(3)(i)
(3)(ii)
(31.1)(4.1)
(31.1)
(31.2)
(32.1)
(32.2)
(101)Inline XBRL file set for the consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
(104)Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL file set.


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SIGNATURES

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

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

Dated: October 30, 202026, 2021

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