ADM Reports Adjusted Second Quarter 2014 Earnings of $0.77 per Share
DECATUR, Ill.--(BUSINESS WIRE)--Archer Daniels Midland Company (NYSE: ADM) today reported financial results for the quarter ended June 30, 2014.
The company reported adjusted earnings per share1 of $0.77, up from $0.46 in the same period last year. Adjusted segment operating profit1 was $819 million, up 32 percent from $621 million in the year-ago period.
Net earnings for the quarter were $533 million, or $0.81 per share, and segment operating profit1 was $888 million.
“In the second quarter, the ADM team continued to execute very well and delivered strong results. We capitalized on robust ethanol demand, a recovery of U.S. grain export volumes and continuing strong demand for oilseeds products,” said ADM Chairman and CEO Patricia Woertz.
“The team also continues to drive improved returns, with this quarter’s ROIC showing a 200-basis-point improvement over last year.
“Today, the crops in North America and Europe are developing nicely, so we are preparing for what could be very large harvests.”
Second Quarter 2014 Highlights1
- Adjusted EPS of $0.77 excludes approximately $73 million in pretax LIFO income, or $0.07 per share, and $31 million in pretax costs related to restructuring, or about $0.03 per share.
- Oilseeds Processing increased $18 million, as continued good North American crushing results were partially offset by weaker origination results in South America and lower results from Wilmar.
- Corn Processing increased $69 million on strong ethanol demand and steady sweetener volumes.
- Agricultural Services increased $122 million, driven by strong U.S. exports and significantly improved results from international merchandising.
- Trailing four-quarter-average adjusted ROIC increased 200 basis points year over year.
- The net debt position2 of the company declined to $3.6 billion, compared to $5.5 billion in the same period last year, which also resulted in a lower net interest expense.
- ADM repurchased 7.2 million shares during the quarter, bringing year-to-date buybacks to 11.5 million shares for about $500 million.
Oilseeds Earnings Steady with Strong N.A. Crush Offset by Weaker S.A. Origination and Wilmar
Oilseeds operating profit of $328 million represented an increase of $18 million from the same period one year earlier. These numbers exclude a negligible charge for cocoa hedge timing effects, versus a gain of $11 million, or $0.01 per share, in the year-ago period.
Crushing and origination operating profit declined $22 million to $163 million. North and South American soybean crushing operations and North American canola crushing operations all saw good volumes and margins. Those were offset by lower results from South American origination amid slower farmer selling.
Refining, packaging, biodiesel and other generated a profit of $119 million for the quarter, up $26 million with good volumes and margins for refined and packaged oils in South America and record results for lecithin and protein specialties.
Cocoa and other earned $20 million in the quarter, up $37 million from the year-ago period, reflecting the improved margin environment in the cocoa business.
Oilseeds results in Asia for the quarter were down $23 million from the same period last year, principally reflecting lower results from Wilmar International Limited.
Corn Processing Results Improved Significantly on Strong Performances Across the Segment
Corn processing operating profit of $277 million represented an increase of $69 million from the same period one year earlier. These numbers exclude positive timing effects of $70 million, or $0.07 per share, versus $15 million, or $0.01 per share, in the year-ago period.
Sweeteners and starches results increased $25 million to $136 million on steady volumes, with lower average selling prices offset by lower net corn costs.
Bioproducts results increased $44 million to $141 million driven by strong demand and good margins in ethanol.
Agricultural Services Results Improve on Strong U.S. Grain Exports and International Merchandising
Agricultural Services operating profit was $203 million, up $122 million from the year-ago period.
Merchandising and handling earnings increased $101 million to $115 million, amid strong U.S. export volumes, partial recovery of a loss reserve, and continued improvement in international merchandising results.
Transportation results increased $24 million to $27 million with southbound barge freight utilization driven by strong U.S. exports, and with good northbound utilization.
Milling and other results were essentially flat as lower milling results were offset by strong performance by the edible bean business.
Other Items of Note
This quarter’s effective tax rate was 28 percent, versus 29 percent in the same period last year.
As additional information to help clarify underlying business performance, the tables on page 9 include both adjusted EPS as well as adjusted EPS excluding significant timing effects.
Conference Call Information
ADM will host a conference call and audio webcast on Aug. 5, 2014, at 8 a.m. Central Time to discuss financial results and provide a company update. A financial summary slide presentation will be available to download approximately 60 minutes prior to the call.
To listen to the call via the Internet or to download the slide presentation, go to www.adm.com/webcast. To listen by telephone, dial (888) 522-5398 in the U.S. or (706) 902-2121 if calling from outside the U.S. The access code is 69056477.
Replay of the call will be available from Aug. 6, 2014, to Aug. 12, 2014. To listen to the replay by telephone, dial (855) 859-2056 in the U.S. or (404) 537-3406 if calling from outside the U.S. The access code is 69056477. The replay will also be available online for an extended period of time at www.adm.com/webcast.
For more than a century, the people of Archer Daniels Midland Company (NYSE: ADM) have transformed crops into products that serve vital needs. Today, 31,000 ADM employees around the globe convert oilseeds, corn, wheat and cocoa into products for food, animal feed, industrial and energy uses. With more than 270 processing plants, 470 crop procurement facilities, and the world’s premier crop transportation network, ADM helps connect the harvest to the home in more than 140 countries. For more information about ADM and its products, visit www.adm.com.
1 These are non-GAAP financial measures; see pages 4 and 9
for explanations and reconciliations.
2 Total debt less cash and cash equivalents and short-term marketable securities.
Financial Tables Follow
|Segment Operating Profit and Corporate Results|
|A non-GAAP financial measure|
Six months ended
|Oilseeds Processing Operating Profit|
|Crushing and origination||$||163||$||185||$||(22||)||$||324||$||341||$||(17||)|
|Refining, packaging, biodiesel, and other||119||93||26||232||201||31|
|Cocoa and other (excluding timing effects)||20||(17||)||37||50||(44||)||94|
|Cocoa hedge timing effects*||(1||)||11||(12||)||(25||)||16||(41||)|
|Total Oilseeds Processing||$||327||$||321||$||6||$||661||$||634||$||27|
|Corn Processing Operating Profit|
|Sweeteners and starches (excluding timing effects)||$||136||$||111||$||25||$||243||$||231||$||12|
|Bioproducts (excluding timing effects )||141||97||44||295||174||121|
|Corn hedge timing effects*||70||15||55||5||(29||)||34|
|Total Corn Processing||$||347||$||223||$||124||$||543||$||376||$||167|
|Agricultural Services Operating Profit|
|Merchandising and handling||$||115||$||14||$||101||$||184||$||100||$||84|
|Milling and other||61||64||(3||)||112||123||(11||)|
Total Agricultural Services
|Other Operating Profit|
|Segment Operating Profit||$||888||$||647||$||241||$||1,579||$||1,277||$||302|
|*Memo: Adjusted Segment Operating Profit||$||819||$||621||$||198||$||1,599||$||1,290||$||309|
|LIFO credit (charge)||$||73||$||(39||)||$||112||$||(86||)||$||(73||)||$||(13||)|
|Interest expense - net||(78||)||(104||)||26||(171||)||(209||)||38|
|Unallocated corporate costs||(109||)||(71||)||(38||)||(189||)||(153||)||(36||)|
|Minority interest and other||(8||)||(36||)||28||(1||)||(45||)||44|
|Earnings Before Income Taxes||$||735||$||317||$||418||$||1,101||$||692||$||409|
Segment operating profit is ADM’s consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items and timing effects (see items denoted*). Timing effects relate to hedge ineffectiveness and mark-to-market hedge timing effects. Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADM’s performance because they provide investors information about ADM’s business unit performance excluding corporate overhead costs as well as specified items and timing effects. Segment operating profit and adjusted segment operating profit are non-GAAP financial measures and are not intended to replace earnings before income tax, the most directly comparable GAAP financial measure. Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered alternatives to income before income taxes or any other measure of consolidated operating results under U.S. GAAP.
|Consolidated Statements of Earnings|
Six months ended
|(in millions, except per share amounts)|
|Cost of products sold||20,322||21,734||40,343||42,705|
|Selling, general, and administrative expenses||426||452||819||888|
|Asset impairment, exit, and restructuring costs||31||—||31||—|
|Equity in (earnings) losses of unconsolidated affiliates||(78||)||(62||)||(210||)||(199||)|
|Other (income) expense - net||3||22||(20||)||25|
|Earnings before income taxes||735||317||1,101||692|
|Net earnings including noncontrolling interests||532||226||800||496|
|Less: Net earnings (losses) attributable to noncontrolling interests||(1||)||3||—||4|
|Net earnings attributable to ADM||$||533||$||223||$||800||$||492|
|Diluted earnings per common share||$||0.81||$||0.34||$||1.21||$||0.74|
|Average number of shares outstanding||659||663||661||663|
Other (income) expense - net consists of:
|Gain on sales of assets/business (a)||$||(13||)||(16||)||(34||)||(21||)|
|Net loss (gain) on marketable securities transactions||—||(5||)||—||(5||)|
|Loss on Australian foreign exchange hedges||—||51||—||51|
|Other - net||16||(8||)||14||—|
(a) Current period gain includes individually insignificant disposals in Oilseeds (Q2 $0, YTD $15 million), Ag Services (Q2 $13 million, YTD $20 million), Corporate (Q2 and YTD $1 million) and a loss in Corn (Q2 $1 million, YTD $2 million). Prior period gain includes individually insignificant disposals in Oilseeds (Q2 $6 million, YTD $8 million), Corn (Q2 and YTD $3 million), Ag Services (Q2 $3 million, YTD $6 million), Other (Q2 and YTD $6 million) and a loss in Corporate (Q2 and YTD $2 million).
|Summary of Financial Condition|
|NET INVESTMENT IN|
|Cash and cash equivalents||$||1,630||$||1,848|
|Short-term marketable securities||366||181|
|Operating working capital (a)||11,024||12,042|
|Property, plant, and equipment||10,110||10,091|
|Investments in and advances to affiliates||3,419||3,145|
|Long-term marketable securities||539||720|
|Other non-current assets||1,204||1,246|
|Long-term debt, including current maturities||5,389||6,508|
(a) Current assets (excluding cash and cash equivalents and short-term marketable securities) less current liabilities (excluding short-term debt and current maturities of long-term debt).
|Summary of Cash Flows|
Six months ended
|Depreciation and amortization||432||454|
|Other - net||(180||)||(243||)|
|Changes in operating assets and liabilities||(69||)||1,641|
|Total Operating Activities||983||2,348|
|Purchases of property, plant and equipment||(398||)||(442||)|
|Net assets of businesses acquired||—||(16||)|
|Marketable securities - net||50||324|
|Other investing activities||91||192|
|Total Investing Activities||(257||)||58|
|Long-term debt borrowings||1||20|
|Long-term debt payments||(1,162||)||(260||)|
|Net borrowings (payments) under lines of credit||(129||)||(1,787||)|
|Purchases of treasury stock||(493||)||(11||)|
|Acquisition of noncontrolling interest||(157||)||—|
Total Financing Activities
|Increase (decrease) in cash and cash equivalents||(1,491||)||134|
|Cash and cash equivalents - beginning of period||3,121||1,714|
|Cash and cash equivalents - end of period||$||1,630||$||1,848|
|Segment Operating Analysis|
Six months ended
|(in '000s metric tons)|
|Milling and Cocoa||1,788||1,755||3,561||3,486|
|Total processed volumes||15,909||15,363||32,120||30,743|
Six months ended
|Adjusted Earnings Per Share|
|A non-GAAP financial measure|
Six months ended
|Reported EPS (fully diluted)||$||0.81||$||0.34||$||1.21||$||0.74|
|LIFO (credit) charge (a)||(0.07||)||0.04||0.08||0.07|
|Restructuring/relocation charges (b)||0.03||—||0.03||—|
|FCPA charges (c)||—||0.03||—||0.06|
|GrainCorp-related charges (d)||—||0.05||—||0.05|
|Effective tax rate adjustments (e)||—||—||—||(0.01||)|
|Adjusted earnings per share (non-GAAP)||$||0.77||$||0.46||$||1.32||$||0.91|
|Memo: Timing effects (gain) loss|
|Sub-total timing effects||(0.07||)||(0.02||)||0.02||0.01|
|Adjusted EPS excluding timing effects (non-GAAP)||$||0.70||$||0.44||$||1.34||$||0.92|
|(a)||The company’s pretax changes in its LIFO reserves during the period, tax effected using the company’s U.S. effective income tax rate.|
|(b)||Relocation of the global headquarters to Chicago, Ill., costs related to integration of Toepfer following the acquisition of the noncontrolling interest, and other restructuring charges totaling $31 million, pretax, tax effected using the applicable tax rates.|
|(c)||Charges, net of estimated tax, related to settlements with government agencies pertaining to potential violations of anti-corruption practices.|
|(d)||The loss on Australian dollar foreign exchange hedges tax effected using the Company's U.S. effective income tax rate.|
|(e)||Impact to EPS due to the change in annual effective tax rate.|
|(f)||Corn timing effects in the current quarter are comprised of corn hedge ineffectiveness losses of $0.01 per share and ethanol mark-to-market gains of $0.08 per share. The prior period timing item is a gain of $0.01 per share for corn hedge ineffectiveness.|
|(g)||The company’s pretax cocoa timing effects, tax effected using the company's effective tax rate.|
Adjusted EPS and adjusted EPS excluding timing effects reflect ADM’s fully diluted EPS after removal of the effect on Reported EPS of certain specified items and timing effects as more fully described above. Management believes that these are useful measures of ADM’s performance because they provide investors additional information about ADM’s operations allowing better evaluation of ongoing business performance. These non-GAAP financial measures are not intended to replace or be an alternative to Reported EPS, the most directly comparable GAAP financial measure, or any other measures of operating results under GAAP. Earnings amounts in the tables above have been divided by the company’s diluted shares outstanding for each respective quarter in order to arrive at an adjusted EPS amount for each specified item and timing effect.
Archer Daniels Midland Company