Business Wire | Oct 29, 2020 04:06PM EDT

ADM Reports Third Quarter Earnings of $0.40 per Share, $0.89 per Share on an Adjusted Basis

Oct. 29, 2020

CHICAGO--(BUSINESS WIRE)--Oct. 29, 2020--ADM (NYSE: ADM) today reported financial results for the quarter ended September 30, 2020.

"We delivered an outstanding quarter, and I am proud of our team's continued great performance," said Chairman and CEO Juan Luciano.

"Across the enterprise, ADM colleagues are doing what it takes to help our customers and our company succeed and grow. Our strategic initiatives, combined with exceptional execution, are driving strong results across all of our businesses. Readiness is enhancing our performance, accelerating our work in areas ranging from operations to sales. Our strong cash generation is allowing us to retire higher-cost debt while retaining balance sheet flexibility. And Nutrition continues its impressive upward trajectory, delivering a fifth consecutive quarter of 20-plus percent year-over-year operating profit growth.

"From our Strive 35 sustainability goals, to our partnership with Spiber to produce plant-based polymers, to the announcement of a significant expansion in probiotics with our new state-of-the art facility in Valencia, we're advancing our work to enrich the quality of life around the globe. We're excited about our future as we look ahead to another strong quarter, with positive momentum continuing through 2021."

Third Quarter 2020 Highlights

(Amounts in millions except per share amounts) 2020 2019

Earnings per share (as reported) $ 0.40 $ 0.72

Adjusted earnings per share^1 $ 0.89 $ 0.77



Segment operating profit $ 904 $ 758

Adjusted segment operating profit^1 $ 849 $ 764

Ag Services and Oilseeds 436 417

Carbohydrate Solutions 246 182

Nutrition 147 118

Other Business 20 47

* EPS as reported of $0.40 includes a $0.53 per share charge related to early debt retirement, a $0.03 per share charge related to the mark-to-market adjustment of the exchangeable bond issued in August 2020, a $0.10 per share credit related to the gain on sale of Wilmar shares and certain assets, and other charges totaling $0.03 per share. Adjusted EPS, which excludes these items, was $0.89.1

1 Non-GAAP financial measures; see pages 5, 10, 11 and 13 for explanations and reconciliations, including after-tax amounts.

Results of Operations

Ag Services & Oilseeds results were higher than the third quarter of 2019. Both Ag Services and Crushing saw expanding margins during the quarter, resulting in approximately $155 million in total negative timing effects, which are expected to reverse in the coming quarters.

* Ag Services executed extremely well to capitalize on strong North American industry export margins and volumes. Results were lower in South America, as the pace of Brazilian farmer selling slowed as expected 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 2019 U.S. high water insurance claims. Negative timing impacts of almost $80 million led to lower overall results versus the prior year.

* In Crushing, strong execution in an environment of tighter soybean supplies and solid global demand for meal and oil supported improved execution margins in North and South America, partially offset by lower year-over-year margins in EMEAI. Negative timing impacts of approximately $75 million versus a gain of approximately $50 million recognized in the prior-year quarter led to lower year-over-year results.

* Refined Products and Other delivered significantly higher year-over-year results, driven by improved biodiesel margins around the globe. Packaged oils in South America also contributed.

* Equity earnings from Wilmar were substantially higher versus the prior-year period.

Carbohydrate Solutions results were significantly higher year over year.

* Starches and Sweeteners subsegment results were substantially higher versus the third quarter of 2019. In North America, balanced ethanol industry supply and demand drove improved wet mill ethanol margins versus the prior year. Demand for starches in North America was substantially stronger than earlier 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.

* In Vantage Corn Processors, distribution gains on wet mill ethanol, in addition to significantly improved year-over-year industry ethanol margins, helped to offset fixed costs from the two temporarily idled dry mills, driving higher year-over-year results. Increased volumes and margins of USP-grade industrial alcohol for hand sanitizer also supported improved performance.

Nutrition delivered its fifth consecutive quarter of 20-plus percent year-over-year profit growth.

* Human Nutrition results were substantially higher versus the prior-year quarter, with improved results across the business portfolio. Flavors delivered another exceptional quarter, driven by increased revenue globally and improved mix and margins. Plant-based proteins helped drive a solid performance in Specialty Ingredients. Sales growth in probiotics, along with income from the Spiber fermentation agreement, contributed to strong results in Health & Wellness.

* Animal Nutrition was higher year over year. Continued delivery of Neovia synergies, strength in livestock feed and year-over-year improvement in amino acids were partially offset by softer aquaculture feed demand as well as negative foreign currency impacts.

Other Business results were lower, driven by lower ADM Investor Services earnings and captive insurance underwriting losses, including a $17 million settlement impact for the high water claim with Ag Services & Oilseeds.

Other Items of Note

As additional information to help clarify underlying business performance, the table on page 10 includes reported earnings and EPS as well as adjusted earnings and EPS.

Segment operating profit of $904 million for the quarter includes charges related to asset impairment, restructuring, and settlement activities of $2 million and gains on the sale of Wilmar shares and certain assets of $57 million ($0.10 per share).

During the quarter, the company leveraged its strong cash position to re-balance its mix of long- and short-term debt, which will also reduce future interest payments, by economically retiring $1.2 billion of higher-coupon debt, resulting in a debt extinguishment charge of $396 million ($0.53 per share).

In Corporate results, unallocated corporate costs for the quarter were higher year over year due primarily to variable performance-related compensation expense accruals, which were low in the prior year. Other charges increased due to railroad maintenance expenses, partially offset by improved foreign hedging results on intercompany funding and investment gains in ADM Ventures. Corporate results also include the early debt retirement charge referenced above, a mark-to-market loss on the exchangeable bonds issued in August 2020 of $15 million ($0.03 per share), and an impairment charge of $6 million ($0.01 per share).

The effective tax rate for the quarter was a benefit of 13 percent compared to an expense of 19 percent in the prior year. The current quarter rate reflects the effects of the early debt retirement as well as the sale of Wilmar shares and increased year-over-year Wilmar earnings on the annual effective tax rate. The impact of U.S. tax credits, primarily the biodiesel and railroad tax credits, also contributed significantly to the decreased Q3 rate from the prior year; the railroad tax credits have an offsetting expense in cost of products sold. Absent the effect of EPS adjusting items, the effective tax rate for the current quarter was approximately 11 percent.

Note: Additional Facts and Explanations

Additional facts and explanations about results and industry environment can be found at the end of the ADM Q3 Earnings Presentation at www.adm.com/webcast.

Conference Call Information

ADM will host a webcast on October 30, 2020, at 8:00 a.m. Central Time to discuss financial results and provide a company update, including an overview of our Nutrition business. To listen to the webcast, go to www.adm.com/webcast. A replay of the webcast will also be available for an extended period of time at www.adm.com/webcast.

Forward-Looking Statements

Some of our comments and materials in this presentation constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events.

About ADM

At ADM, we unlock the power of nature to provide access to nutrition worldwide. With industry-advancing innovations, a complete portfolio of ingredients and solutions to meet any taste, and a commitment to sustainability, we give customers an edge in solving the nutritional challenges of today and tomorrow. We're a global leader in human and animal nutrition and the world's premier agricultural origination and processing company. Our breadth, depth, insights, facilities and logistical expertise give us unparalleled capabilities to meet needs for food, beverages, health and wellness, and more. From the seed of the idea to the outcome of the solution, we enrich the quality of life the world over. Learn more at www.adm.com.

Financial Tables Follow

Source: Corporate Release

Segment Operating Profit, Adjusted Segment Operating Profit (a non-GAAPfinancial measure)

and Corporate Results

(unaudited)

Quarter ended Nine months ended

September 30 September 30

(In millions) 2020 2019 Change 2020 2019 Change



SegmentOperating $ 904 $ 758 $ 146 $ 2,316 $ 2,014 $ 302 Profit

Specified items:

(Gains) losseson sales of (57 ) - (57 ) (80 ) (12 ) (68 )assets andbusinesses

Impairment,restructuring, 2 6 (4 ) 60 52 8 and settlementcharges

AdjustedSegment $ 849 $ 764 $ 85 $ 2,296 $ 2,054 $ 242 OperatingProfit



Ag Services and $ 436 $ 417 $ 19 $ 1,271 $ 1,196 $ 75 Oilseeds

Ag Services 147 161 (14 ) 482 326 156

Crushing 66 138 (72 ) 249 493 (244 )

RefinedProducts and 127 80 47 286 223 63 Other

Wilmar 96 38 58 254 154 100



Carbohydrate $ 246 $ 182 $ 64 $ 509 $ 470 $ 39 Solutions

Starches and 257 197 60 533 547 (14 )Sweeteners

Vantage Corn (11 ) (15 ) 4 (24 ) (77 ) 53 Processors



Nutrition $ 147 $ 118 $ 29 $ 447 $ 316 $ 131

Human Nutrition 128 102 26 372 293 79

Animal 19 16 3 75 23 52 Nutrition



Other Business $ 20 $ 47 $ (27 ) $ 69 $ 72 $ (3 )





SegmentOperating $ 904 $ 758 $ 146 $ 2,316 $ 2,014 $ 302 Profit



Corporate $ (704 ) $ (255 ) $ (449 ) $ (1,189 ) $ (922 ) $ (267 )Results



Interest (83 ) (85 ) 2 (246 ) (276 ) 30 expense - net

Unallocated (196 ) (139 ) (57 ) (579 ) (454 ) (125 )corporate costs

Other charges (8 ) - (8 ) (25 ) (18 ) (7 )

Specified items:

LIFO credit - 16 (16 ) 91 (10 ) 101 (charge)

Early debtretirement (396 ) - (396 ) (410 ) - (410 )charges

Expensesrelated to - - - - (14 ) 14 acquisitions

Loss on debtconversion (15 ) - (15 ) (15 ) - (15 )option

Impairment andrestructuring (6 ) (47 ) 41 (5 ) (150 ) 145 charges

Earnings Before $ 200 $ 503 $ (303 ) $ 1,127 $ 1,092 $ 35 Income Taxes

Segment operating profit is ADM's consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit, a non-GAAP financial measure, is segment operating profit excluding specified items. Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADM's performance because they provide investors information about ADM's business unit performance excluding corporate overhead costs as well as specified items. Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered alternatives to income before income taxes, the most directly comparable GAAP financial measure, or any other measure of consolidated operating results under U.S. GAAP.

Consolidated Statements of Earnings

(unaudited)

Quarter ended Nine months ended

September 30 September 30

2020 2019 2020 2019

(in millions, except per share amounts)



Revenues $ 15,126 $ 16,726 $ 46,377 $ 48,327

Cost of products sold ^(1) 14,084 15,648 43,276 45,349

Gross profit 1,042 1,078 3,101 2,978

Selling, general, and 636 578 1,938 1,839 administrative expenses ^(2)

Asset impairment, exit, and 4 53 61 200 restructuring costs ^(3)

Equity in (earnings) losses (160 ) (88 ) (403 ) (279 )of unconsolidated affiliates

Interest income (16 ) (47 ) (71 ) (142 )

Interest expense^ (4) 100 97 270 307

Other (income) expense - net 278 (18 ) 179 (39 )^(5)

Earnings before income taxes 200 503 1,127 1,092

Income tax (benefit) expense (26 ) 95 38 212 ^(6)

Net earnings including 226 408 1,089 880 noncontrolling interests



Less: Net earnings (losses)attributable to 1 1 4 5 noncontrolling interests

Net earnings attributable to $ 225 $ 407 $ 1,085 $ 875 ADM



Diluted earnings per common $ 0.40 $ 0.72 $ 1.93 $ 1.55 share



Average diluted shares 562 563 563 565 outstanding



(1) Includes a charge (credit) related to changes in the Company's LIFO reserves of $(91) million in the current YTD and $(16) million and $10 million in the prior quarter and YTD, respectively.

(2) Includes a settlement charge of $4 million in the current quarter and YTD and acquisition-related expenses of $14 million in the prior YTD.

(3) Includes charges related to impairment of certain assets and restructuring of $4 million and $61 million in the current quarter and YTD, respectively, and charges related to impairment of certain assets, restructuring, and pension settlement of $53 million and $200 million in the prior quarter and YTD, respectively.

(4) Includes charges related to the mark-to-market adjustment of the conversion option of the exchangeable bond issued in August 2020 of $15 million in the current quarter and YTD.

(5) Includes current quarter and YTD gains related to the sale of Wilmar shares and certain other assets totaling $57 million and $80 million, respectively, and early debt retirement charges of $396 million and $410 million, respectively, and prior YTD gains related to the sale of certain assets and a step-up gain on an equity investment of $12 million and a settlement charge of $2 million.

(6) Includes the tax benefit impact of the above specified items and tax discrete items totaling $88 million and $69 million, in the current quarter and YTD, respectively, and the tax benefit impact of the above specified items and certain discrete items totaling $13 million and $57 million in the prior quarter and YTD, respectively.

Summary of Financial Condition

(unaudited)

September September 30, 30, 2020 2019

(in millions)

Net Investment In

Cash and cash equivalents (a) $ 948 $ 932

Short-term marketable securities (a) - 26

Operating working capital (b) 8,122 7,457

Property, plant, and equipment 9,816 10,101

Investments in and advances to affiliates 4,771 5,399

Long-term marketable securities 9 10

Goodwill and other intangibles 5,275 5,401

Other non-current assets 2,158 1,715

$ 31,099 $ 31,041

Financed By

Short-term debt (a) $ 209 $ 1,242

Long-term debt, including current maturities (a) 7,924 7,646

Deferred liabilities 3,540 3,205

Temporary equity 85 53

Shareholders' equity 19,341 18,895

$ 31,099 $ 31,041

(a)

Net debt is calculated as short-term debt plus long-term debt (including current maturities) less cash and cash equivalents and short-term marketable securities.

(b)

Current assets (excluding cash and cash equivalents and short-term marketable securities) less current liabilities (excluding short-term debt and current maturities of long-term debt).

Net debt is calculated as short-term debt plus long-term debt (including(a) current maturities) less cash and cash equivalents and short-term marketable securities.

Current assets (excluding cash and cash equivalents and short-term(b) marketable securities) less current liabilities (excluding short-term debt and current maturities of long-term debt).

Summary of Cash Flows

(unaudited)

Nine months ended

September 30

2020

2019

(in millions)

Operating Activities

Net earnings

$

1,089

$

880

Depreciation and amortization

727

742

Asset impairment charges

50

50

(Gains) losses on sales of assets

(132

)

(37

)

Loss on debt extinguishment

410

-

Other - net

151

65

Change in deferred consideration in securitized receivables(a)

(4,603

)

(5,714

)

Other changes in operating assets and liabilities

792

375

Total Operating Activities

(1,516

)

(3,639

)

Investing Activities

Purchases of property, plant and equipment

(558

)

(566

)

Net assets of businesses acquired

(3

)

(1,946

)

Proceeds from sale of business/assets

708

43

Investments in retained interest in securitized receivables(a)

(2,121

)

(3,813

)

Proceeds from retained interest in securitized receivables(a)

6,724

9,527

Marketable securities - net

(1

)

41

Investments in and advances to affiliates

(5

)

(12

)

Other investing activities

(16

)

(23

)

Total Investing Activities

4,728

3,251

Financing Activities

Long-term debt borrowings

1,790

3

Long-term debt payments

(2,032

)

(615

)

Net borrowings (payments) under lines of credit

(993

)

960

Share repurchases

(117

)

(150

)

Cash dividends

(607

)

(592

)

Other

16

(36

)

Total Financing Activities

(1,943

)

(430

)

Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents

1,269

(818

)

Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period

2,990

3,843

Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period

$

4,259

$

3,025

Summary of Cash Flows

(unaudited)

Nine months ended

September 30

2020 2019

(in millions)

Operating Activities

Net earnings $ 1,089 $ 880

Depreciation and amortization 727 742

Asset impairment charges 50 50

(Gains) losses on sales of assets (132 ) (37 )

Loss on debt extinguishment 410 -

Other - net 151 65

Change in deferred consideration in securitized (4,603 ) (5,714 )receivables^(a)

Other changes in operating assets and liabilities 792 375

Total Operating Activities (1,516 ) (3,639 )



Investing Activities

Purchases of property, plant and equipment (558 ) (566 )

Net assets of businesses acquired (3 ) (1,946 )

Proceeds from sale of business/assets 708 43

Investments in retained interest in securitized (2,121 ) (3,813 )receivables^(a)

Proceeds from retained interest in securitized 6,724 9,527 receivables^(a)

Marketable securities - net (1 ) 41

Investments in and advances to affiliates (5 ) (12 )

Other investing activities (16 ) (23 )

Total Investing Activities 4,728 3,251



Financing Activities

Long-term debt borrowings 1,790 3

Long-term debt payments (2,032 ) (615 )

Net borrowings (payments) under lines of credit (993 ) 960

Share repurchases (117 ) (150 )

Cash dividends (607 ) (592 )

Other 16 (36 )

Total Financing Activities (1,943 ) (430 )



Increase (decrease) in cash, cash equivalents, 1,269 (818 )restricted cash, and restricted cash equivalents

Cash, cash equivalents, restricted cash, and restricted 2,990 3,843 cash equivalents - beginning of period

Cash, cash equivalents, restricted cash, and restricted $ 4,259 $ 3,025 cash equivalents - end of period

(a)

Cash flows related to the Company's retained interest in securitized receivables as required by ASU 2016-15 which took effect January 1, 2018.

(a) Cash flows related to the Company's retained interest in securitized receivables as required by ASU 2016-15 which took effect January 1, 2018.

Segment Operating Analysis

(unaudited)

Quarter ended

Nine months ended

September 30

September 30

2020

2019

2020

2019

(in '000s metric tons)

Processed volumes (by commodity)

Oilseeds

8,970

9,062

27,236

27,002

Corn

4,084

5,619

13,717

16,297

Total processed volumes

13,054

14,681

40,953

43,299

Quarter ended

Nine months ended

September 30

September 30

2020

2019

2020

2019

(in millions)

Revenues

Ag Services and Oilseeds

$

11,527

$

12,616

$

35,347

$

36,382

Carbohydrate Solutions

2,064

2,565

6,394

7,409

Nutrition

1,451

1,457

4,359

4,263

Other Business

84

88

277

273

Total revenues

$

15,126

$

16,726

$

46,377

$

48,327

Segment Operating Analysis

(unaudited)

Quarter ended Nine months ended

September 30 September 30

2020 2019 2020 2019

(in '000s metric tons)

Processed volumes (by commodity)

Oilseeds 8,970 9,062 27,236 27,002

Corn 4,084 5,619 13,717 16,297

Total processed volumes 13,054 14,681 40,953 43,299





Quarter ended Nine months ended

September 30 September 30

2020 2019 2020 2019

(in millions)

Revenues

Ag Services and Oilseeds $ 11,527 $ 12,616 $ 35,347 $ 36,382

Carbohydrate Solutions 2,064 2,565 6,394 7,409

Nutrition 1,451 1,457 4,359 4,263

Other Business 84 88 277 273

Total revenues $ 15,126 $ 16,726 $ 46,377 $ 48,327

Adjusted Earnings Per Share

A non-GAAP financial measure

(unaudited)

Quarter ended September 30

Nine months ended September 30

2020

2019

2020

2019

In millions

Per share

In millions

Per share

In millions

Per share

In millions

Per share

Net earnings and fully diluted EPS

$

225

$

0.40

$

407

$

0.72

$

1,085

$

1.93

$

875

$

1.55

Adjustments:

LIFO charge (credit) (a)

-

-

(12

)

(0.02

)

(69

)

(0.12

)

8

0.01

Losses (gains) on sales of assets and businesses (b)

(54

)

(0.10

)

-

-

(72

)

(0.13

)

(9

)

(0.02

)

Impairment, restructuring, and settlement charges (c)

5

0.01

41

0.08

49

0.09

156

0.28

Expenses related to acquisitions (d)

-

-

-

-

-

-

9

0.02

Early debt retirement charges (e)

300

0.53

-

-

311

0.55

-

-

Loss on debt conversion option (f)

15

0.03

-

-

15

0.03

-

-

Tax adjustment (g)

8

0.02

(5

)

(0.01

)

16

0.03

(7

)

(0.01

)

Sub-total adjustments

274

0.49

24

0.05

250

0.45

157

0.28

Adjusted net earnings and adjusted EPS

$

499

$

0.89

$

431

$

0.77

$

1,335

$

2.38

$

1,032

$

1.83

Adjusted Earnings Per Share

A non-GAAP financial measure

(unaudited)

Quarter ended September 30 Nine months ended September 30

2020 2019 2020 2019

In Per In Per In Per In Per millions share millions share millions share millions share

Net earningsand fully $ 225 $ 0.40 $ 407 $ 0.72 $ 1,085 $ 1.93 $ 875 $ 1.55 diluted EPS

Adjustments:

LIFO charge - - (12 ) (0.02 ) (69 ) (0.12 ) 8 0.01 (credit) (a)

Losses (gains)on sales of (54 ) (0.10 ) - - (72 ) (0.13 ) (9 ) (0.02 )assets andbusinesses (b)

Impairment,restructuring, 5 0.01 41 0.08 49 0.09 156 0.28 and settlementcharges (c)

Expensesrelated to - - - - - - 9 0.02 acquisitions(d)

Early debtretirement 300 0.53 - - 311 0.55 - - charges (e)

Loss on debtconversion 15 0.03 - - 15 0.03 - - option (f)

Tax adjustment 8 0.02 (5 ) (0.01 ) 16 0.03 (7 ) (0.01 )(g)

Sub-total 274 0.49 24 0.05 250 0.45 157 0.28 adjustments

Adjusted netearnings and $ 499 $ 0.89 $ 431 $ 0.77 $ 1,335 $ 2.38 $ 1,032 $ 1.83 adjusted EPS



(a)

Current YTD changes in the Company's LIFO reserves of $(91) million pretax ($69 million after tax), tax effected using the Company's U.S. income tax rate. Prior quarter and YTD changes in the Company's LIFO reserves of $(16) million and $10 million pretax, respectively ($12 million and $8 million after tax, respectively), tax effected using the Company's U.S. income tax rate.

(b)

Current quarter and YTD gain of $57 million pretax ($54 million after tax) and $80 million pretax ($72 million after tax), respectively, primarily related to the sale of Wilmar shares and certain other assets, tax effected using the applicable tax rates. Prior YTD gains of $12 million pretax ($9 million after tax) related to the sale of certain assets and a step-up gain on an equity investment, tax effected using the Company's U.S. income tax rate.

(c)

Current quarter and YTD charges of $8 million pretax ($5 million after tax) and $65 million pretax ($49 million after tax), respectively, related to the impairment of certain assets, restructuring, and a settlement, tax effected using the applicable rates. Prior quarter and YTD charges of $53 million and $202 million pretax, respectively ($41 million and $156 million after tax, respectively), related to the impairment of certain assets, restructuring, and pension settlement, tax effected using the applicable tax rates.

(d)

Prior YTD acquisition expenses of $14 million pretax ($9 million after tax) consisted of expenses primarily related to the Neovia acquisition.

(e)

Current quarter and YTD early debt retirement charges of $396 million pretax ($300 million after tax) and $410 million pretax ($311 million after tax), respectively, tax effected using the Company's U.S. income tax rate, related to the early repurchase of certain of the Company's debentures.

(f)

Current quarter and YTD loss on debt conversion option of $15 million pretax ($15 million after tax) related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020.

(g)

Tax adjustment totaling $8 million and $16 million due to certain discrete items in the current quarter and YTD, respectively, and $(5) million and $(7) million due to U.S. tax reform and certain discrete items in the prior quarter and YTD, respectively.

Adjusted net earnings reflects ADM's reported net earnings after removal of the effect on net earnings of specified items as more fully described above. Adjusted EPS reflects ADM's fully diluted EPS after removal of the effect on EPS as reported of specified items as more fully described above. Management believes that Adjusted net earnings and Adjusted EPS are useful measures of ADM's performance because they provide investors additional information about ADM's operations allowing better evaluation of underlying business performance and better period-to-period comparability. These non-GAAP financial measures are not intended to replace or be alternatives to net earnings and EPS as reported, the most directly comparable GAAP financial measures, or any other measures of operating results under GAAP. Earnings amounts described above have been divided by the company's diluted shares outstanding for each respective period in order to arrive at an adjusted EPS amount for each specified item.

Current YTD changes in the Company's LIFO reserves of $(91) million pretax ($69 million after tax), tax effected using the Company's U.S.(a) income tax rate. Prior quarter and YTD changes in the Company's LIFO reserves of $(16) million and $10 million pretax, respectively ($12 million and $8 million after tax, respectively), tax effected using the Company's U.S. income tax rate.

Current quarter and YTD gain of $57 million pretax ($54 million after tax) and $80 million pretax ($72 million after tax), respectively, primarily related to the sale of Wilmar shares and certain other assets,(b) tax effected using the applicable tax rates. Prior YTD gains of $12 million pretax ($9 million after tax) related to the sale of certain assets and a step-up gain on an equity investment, tax effected using the Company's U.S. income tax rate.

Current quarter and YTD charges of $8 million pretax ($5 million after tax) and $65 million pretax ($49 million after tax), respectively, related to the impairment of certain assets, restructuring, and a(c) settlement, tax effected using the applicable rates. Prior quarter and YTD charges of $53 million and $202 million pretax, respectively ($41 million and $156 million after tax, respectively), related to the impairment of certain assets, restructuring, and pension settlement, tax effected using the applicable tax rates.

(d) Prior YTD acquisition expenses of $14 million pretax ($9 million after tax) consisted of expenses primarily related to the Neovia acquisition.

Current quarter and YTD early debt retirement charges of $396 million pretax ($300 million after tax) and $410 million pretax ($311 million(e) after tax), respectively, tax effected using the Company's U.S. income tax rate, related to the early repurchase of certain of the Company's debentures.

Current quarter and YTD loss on debt conversion option of $15 million(f) pretax ($15 million after tax) related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020.

Tax adjustment totaling $8 million and $16 million due to certain(g) discrete items in the current quarter and YTD, respectively, and $(5) million and $(7) million due to U.S. tax reform and certain discrete items in the prior quarter and YTD, respectively.

Adjusted net earnings reflects ADM's reported net earnings after removal of the effect on net earnings of specified items as more fully described above. Adjusted EPS reflects ADM's fully diluted EPS after removal of the effect on EPS as reported of specified items as more fully described above. Management believes that Adjusted net earnings and Adjusted EPS are useful measures of ADM's performance because they provide investors additional information about ADM's operations allowing better evaluation of underlying business performance and better period-to-period comparability. These non-GAAP financial measures are not intended to replace or be alternatives to net earnings and EPS as reported, the most directly comparable GAAP financial measures, or any other measures of operating results under GAAP. Earnings amounts described above have been divided by the company's diluted shares outstanding for each respective period in order to arrive at an adjusted EPS amount for each specified item.

Adjusted Return on Invested Capital

A non-GAAP financial measure

(unaudited)

Adjusted ROIC Earnings (in millions)

Four Quarters

Quarter Ended Ended

Dec. 31, Mar. 31, Jun 30, Sep. 30, Sep. 30, 2019 2020 2020 2020 2020



Net earnings $ 504 $ 391 $ 469 $ 225 $ 1,589 attributable to ADM

Adjustments:

Interest expense 95 83 87 100 365

LIFO 27 (91 ) - - (64 )

Other adjustments 253 48 8 355 664

Total adjustments 375 40 95 455 965

Tax on adjustments (8 ) (7 ) (23 ) (120 ) (158 )

Net adjustments 367 33 72 335 807

Total Adjusted ROIC $ 871 $ 424 $ 541 $ 560 $ 2,396 Earnings



Adjusted Invested Capital (in millions)

Quarter Ended

Trailing Four

Dec. 31, 2019

Mar. 31, 2020

Jun 30, 2020

Sep. 30, 2020

Quarter Average

Equity (1)

$

19,208

$

18,952

$

19,293

$

19,322

$

19,194

+ Interest-bearing liabilities (2)

8,891

12,512

9,181

8,141

9,681

+ LIFO adjustment (net of tax)

69

-

-

-

17

Other adjustments

274

39

6

259

145

Total Adjusted Invested Capital

$

28,442

$

31,503

$

28,480

$

27,722

$

29,037

Adjusted Return on Invested Capital

8.3

%

(1) Excludes noncontrolling interests

(2) Includes short-term debt, current maturities of long-term debt, finance lease obligations, and long-term debt

Adjusted ROIC is Adjusted ROIC earnings divided by adjusted invested capital. Adjusted ROIC earnings is ADM's net earnings adjusted for the after tax effects of interest expense, changes in the LIFO reserve and other specified items. Adjusted invested capital is the sum of ADM's equity (excluding noncontrolling interests) and interest-bearing liabilities adjusted for the after tax effect of the LIFO reserve, and other specified items. Management believes Adjusted ROIC is a useful financial measure because it provides investors information about ADM's returns excluding the impacts of LIFO inventory reserves and other specified items and increases period-to-period comparability of underlying business performance. Management uses Adjusted ROIC to measure ADM's performance by comparing Adjusted ROIC to its weighted average cost of capital (WACC). Adjusted ROIC, Adjusted ROIC earnings and Adjusted invested capital are non-GAAP financial measures and are not intended to replace or be alternatives to GAAP financial measures.

Adjusted Earnings Before Taxes, Interest, and Depreciation and Amortization (EBITDA) A non-GAAP financial measure(unaudited)

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the trailing four quarters ended September 30, 2020.

Adjusted Invested Capital (in millions)



Quarter Ended Trailing Four

Dec. 31, Mar. 31, Jun 30, Sep. 30, Quarter 2019 2020 2020 2020 Average



Equity ^(1) $ 19,208 $ 18,952 $ 19,293 $ 19,322 $ 19,194

+ Interest-bearing 8,891 12,512 9,181 8,141 9,681 liabilities ^(2)

+ LIFO adjustment 69 - - - 17 (net of tax)

Other adjustments 274 39 6 259 145

Total Adjusted $ 28,442 $ 31,503 $ 28,480 $ 27,722 $ 29,037 Invested Capital





Adjusted Return on Invested 8.3 %Capital

(1) Excludes noncontrolling interests

(2) Includes short-term debt, current maturities of long-term debt, finance lease obligations, and long-term debt

Adjusted ROIC is Adjusted ROIC earnings divided by adjusted invested capital. Adjusted ROIC earnings is ADM's net earnings adjusted for the after tax effects of interest expense, changes in the LIFO reserve and other specified items. Adjusted invested capital is the sum of ADM's equity (excluding noncontrolling interests) and interest-bearing liabilities adjusted for the after tax effect of the LIFO reserve, and other specified items. Management believes Adjusted ROIC is a useful financial measure because it provides investors information about ADM's returns excluding the impacts of LIFO inventory reserves and other specified items and increases period-to-period comparability of underlying business performance. Management uses Adjusted ROIC to measure ADM's performance by comparing Adjusted ROIC to its weighted average cost of capital (WACC). Adjusted ROIC, Adjusted ROIC earnings and Adjusted invested capital are non-GAAP financial measures and are not intended to replace or be alternatives to GAAP financial measures.

Adjusted Earnings Before Taxes, Interest, and Depreciation and Amortization (EBITDA) A non-GAAP financial measure(unaudited)

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the trailing four quarters ended September 30, 2020.

Four Quarters

Quarter Ended Ended

Dec. 31, Mar. Jun 30, Sep. Sep. 30, 2019 31, 2020 30, 2020 2020 2020

(in millions)

Earnings before income $ 496 $ 375 $ 552 $ 200 $ 1,623 taxes

Interest expense 95 83 87 100 365

Depreciation and 251 245 244 238 978 amortization

LIFO charge (credit) 27 (91 ) - - (64 )

Losses (gains) on sales of 101 - (23 ) (57 ) 21 assets and businesses

Asset impairment and 103 41 16 8 168 restructuring charges

Railroad maintenance 51 73 - 28 152 expense

Early debt retirement - - 14 396 410 charges

Expenses related to 3 - - - 3 acquisitions

Adjusted EBITDA $ 1,127 $ 726 $ 890 $ 913 $ 3,656



Four Quarters

Quarter Ended Ended

Dec. 31, Mar. Jun 30, Sep. Sep. 30, 2019 31, 2020 30, 2020 2020 2020

(in millions)

Ag Services and Oilseeds $ 833 $ 514 $ 502 $ 527 $ 2,376

Carbohydrate Solutions 258 148 274 323 1,003

Nutrition 160 199 217 201 777

Other Business 20 15 39 21 95

Corporate (144 ) (150 ) (142 ) (159 ) (595 )

Adjusted EBITDA $ 1,127 $ 726 $ 890 $ 913 $ 3,656

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the trailing four quarters ended September 30, 2019.

Four Quarters

Quarter Ended Ended

Dec. Mar. Jun 30, Sep. Sep. 30, 31, 31, 2019 30, 2019 2018 2019 2019

(in millions)

Earnings before income $ 312 $ 315 $ 274 $ 503 $ 1,404 taxes

Interest expense 97 101 109 97 404

Depreciation and 235 245 248 249 977 amortization

LIFO charge (credit) (4 ) 1 25 (16 ) 6

Losses (gains) on sales of 8 (12 ) - - (4 )assets and businesses

Asset impairment,restructuring, & settlement 250 11 138 53 452 charges

Expenses related to 12 14 - - 26 acquisitions

Adjusted EBITDA $ 910 $ 675 $ 794 $ 886 $ 3,265



Four Quarters

Quarter Ended Ended

Dec. Mar. Jun 30, Sep. Sep. 30, 31, 31, 2019 30, 2019 2018 2019 2019

(in millions)

Ag Services and Oilseeds $ 711 $ 510 $ 457 $ 511 $ 2,189

Carbohydrate Solutions 281 178 274 264 997

Nutrition 99 134 173 175 581

Other Business (3 ) 24 18 55 94

Corporate (178 ) (171 ) (128 ) (119 ) (596 )

Adjusted EBITDA $ 910 $ 675 $ 794 $ 886 $ 3,265



Adjusted EBITDA is defined as earnings before taxes, interest, and depreciation and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. Management believes that adjusted EBITDA is a useful measure of the Company's performance because it provides investors additional information about the Company's operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EBITDA is a non-GAAP financial measure and is not intended to replace or be an alternative to earnings before income taxes, the most directly comparable GAAP financial measure.

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