2 Safe Harbor Statement - ADM · 2019-10-09 · 2 Safe Harbor Statement Some of our statements...

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Transcript of 2 Safe Harbor Statement - ADM · 2019-10-09 · 2 Safe Harbor Statement Some of our statements...

Page 1: 2 Safe Harbor Statement - ADM · 2019-10-09 · 2 Safe Harbor Statement Some of our statements constitute forward-looking statements that reflect management’s current views and
Page 2: 2 Safe Harbor Statement - ADM · 2019-10-09 · 2 Safe Harbor Statement Some of our statements constitute forward-looking statements that reflect management’s current views and

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Safe Harbor Statement

Some of our statements 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 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.

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Origination Oilseeds Carbohydrate

Solutions

Nutrition

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Our Key Beliefs and Our Noble Purpose

OUR

BELIEFS

Everyone has the right to the food

they need to sustain their lives

Food derived from nature

is an important driver

of health & wellness

Access to nutrition has

the power to solve many

of the world’s challenges

We unlock the

power of nature

to enrich the

quality of life

OUR

PURPOSE

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ADM: What We Do—Simply Explained

SpecialtiesOrigination

Origination

Origination of

Crops

For Internal Use

For External Sale

Transportation

Processing

Oilseeds

Carbohydrate

Solutions

Meal

Oil

Other Oilseed

Products

Starches &

Sweeteners

Wheat

Milling

Fuel

Other Corn

Products

Nutrition

Wild Flavors &

Specialty

Ingredients

Export &

Deliver to

Customer

Regional

Sales

Export to

Port

Customers &

End Users

Animal Nutrition

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CY18 Adjusted Segment Operating Profit

$3.4 Billion1

28%

44%

2%

Other

Oilseeds

10%

Nutrition

Ag Services

Corn

Processing

43%

28%

Other

FY04 Adjusted Segment Operating Profit

$1.6 Billion1

Oilseeds

Processing

23%

ADM: Profitable and Evolving Growth and Mix

Key Financial Statistics

CY18 revenue: $64B Facilities: 750+ Market cap (12/31/2018): ~$23B NYSE: ADM

32%

40%Origination

1Non-GAAP measure - see appendix

16%

Carbohydrate

Solutions

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Portfolio Actions Since 20147

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Advancing Growth and Driving Returns

Business

Turnarounds

Harvesting Growth

Investments

Poised to Capitalize on Significant Market Opportunities

for Earnings and Returns Growth in 2020 and Beyond

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Q2 2019 Accomplishments

• Announced Ag Services &

Oilseeds BU; centralized

Milling teams

• Realigned manufacturing

operations

• Expanded Centers of

Excellence

• Completed significant

global organizational

changes, including early

retirement

• Exchanged Midwest

elevators with Cargill

• Positive results from

peanut and tree nut

business turnaround

efforts

• Completed Ziegler

acquisition

• Cut ribbon at Beijing flavor

center

• Customer solutions:

◦ BIOSIPEC shrimp

production system

◦ New line of vegan

omega-3 blends

◦ Significant presence in

plant-based protein

market

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Readiness: On Track to Deliver $250-300M in Benefits in 2019

Targets

$1.2BRun Rate Savings

by end of 2020

275

$250-300MAccrued Benefits by

end of 2019$130M

$500M

650Prioritized

Initiatives

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Origination:ADM is the Premier Global Origination Company

• Merchandising and

Handling

• Transportation

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0

400

800

CY14 CY15 CY16 CY17 CY18

404

712

452

$ M

illio

n

Merchandising & Handling Transportation

Origination Operating Profit

Efficiently buy, store, clean and transport agricultural commodities

Prior periods have been restated to conform to current year presentation. See Appendix

Origination Adjusted Operating Profit

362

546

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ADM is the Premier Global Origination Company

Note: Origination Assets in South America are reported within the Oilseeds segment.

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Origination: Grain & Transportation Sources of Profitability

Physical Grain Assets

Physical Grain Assets

• Operating Expertise

• Elevation Capacity

• Volume

• Discounts

• Carry Charges

• Blending/Drying/Storage

• Connection to Farmers

Intellectual Capital

• Risk Management

• Market Intelligence

• Arbitrage—Grain & Freight

• Spreads/Options

• Diversified Product Portfolio

• Value Added Services

Transportation

• Operating Efficiency

• Centralized Negotiations

• Trade Knowledge/Relationships

• Round Trip Optimization

• Competitive Advantage

• 3rd Party Logistics

• Inland Port/Intermodal Ramp

• Multi-modal Flexibility

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Transportation: Core Competency & Competitive Advantage

Technology

Leverage

Fleet Optimization

Asset Utilization

Efficiency

28,000 Railcars

1,400 Semi Trailers 2,300 Barges

10 Owned Bulk Carriers

150 on Time Charters

Ship 160,000 (teu) ocean containers annually

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Origination: Growing Destination Marketing & Distribution

From Origin to Port

Domestic

Origination

River

Logistics

Strategic

Grain Export

Assets

Destination

Ports

Destination

Distribution

Ocean

Freight

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Oilseeds:World’s Most Diversified Oilseeds Business

• ~60 Different Products

• Meal

• Oil

• Other

• Processing Assets in

16 Countries

• Wilmar Equity

Investment-current

ownership of 24.9%

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Geographic Reach, Broad Range of Feedstocks Make Ours the

World’s Most Diversified Oilseeds Business

Crush – Refinery

Biodiesel

Elevator

Port

Packaging

Value Added

Golden Peanut

Golden Peanut Buying Point

Sales Office

Wilmar

Soybean Canola/Rapeseed Sunflower Flax Cottonseed PalmPeanut

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ADM Oilseeds at a Glance

• We originate, transport, merchandise,

crush, and further process soybeans,

softseeds and other oilseeds

• Meals and oils used in food, animal feeds,

renewable fuels, industrial products

• 120+ production facilities

• 170+ procurement facilities w/storage

capacity of ~4.1 million MTs

• Processing capacity: 150,000+ MTs/day

• Employees: ~10,000Czernin, Poland, crush complex

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-100

700

1,500

CY14 CY15 CY16 CY17 CY18

1,2861,3181,474

$ M

illio

n

Crushing & Origination Refining, Packaging, Biodiesel & OtherAsia Cocoa & Other

Oilseeds Processing Adjusted Operating Profit

Most diverse business from a product and geographic standpoint

Oilseeds Operating Profit

Prior periods have been restated to conform to current year presentation. See Appendix

825873

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Key Competitive Advantages

Global Footprint

• Scale

• Strategic presence in key regions

• Investing to grow globally

Diversification

• Geographic footprint

• Maximizing margins with switch plants

• Product mix

Operations

• Integrated facilities

• Global transport/logistics network provides significant efficiencies

• Experienced team

Risk-Management Focus

• Centralized hedge-desk operations

• Global market intelligence

Barcarena, Brazil

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Carbohydrate Solutions:World’s Largest Corn Processor

• ~30 Different Products

• 14 corn and 41 wheat

processing plants globally

• 40 feed and premix facilities

globally

• Grind capacity of ~2.9 million

bushels per day

• Wheat processing capacity of

~800,000 bushes per day

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0

500

1,000

1,500

CY14 CY15 CY16 CY17 CY18

Sweeteners & Starches Bioproducts

1,326

807

1,078

Carbohydrate Solutions Operating Profit

Carbohydrate Solutions Adjusted Operating Profit

Accelerating diversification of products and global footprint

$ M

illio

n

Prior periods have been restated to conform to current year presentation. See Appendix

981 945

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Carbohydrate Solutions: Expanding Global

Footprint and Feedstock Portfolio

Corn Processing Plant

Other Processing Plant

Sweetener Terminal

Ethanol Terminal

Export Flow

• 14 corn and 41 wheat processing plants in 8 countries

• 3 of 5 largest corn mills in the world

• Daily corn grind capacity of ~2.9 million bushels

Wheat Mill

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Carbohydrate Solutions: Footprint is Strategically

Positioned for Efficient Origination and Distribution

Corn Belt

Corn Processing Plant

Sweetener Terminal

Ethanol Terminal

ADM Export Facility

Wheat Mill

ADM Elevator

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Nutrition:World-Class Specialty Ingredient Business

• Industry’s Broadest Portfolio of On-Trend

Ingredients Addressing:

– Nutrition

– Function

– Texture

– Taste

• Specialty Ingredients Market = $50B

– $30B Ingredients

– $20B Flavors

– Market Growing 5-6%

• Animal Nutrition Market = $700B

– Market Growing 3%

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Nutrition: A Premier Specialty Ingredients Provider With Global

Reach

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Nutrition: Industry’s Broadest Portfolio of On-Trend Natural Ingredients

Specialty

Proteins

Hydrocolloids

Colors

Emulsifiers

Nuts, Seeds, &

Ancient Grains

Edible Beans

& PeasNutritional

Supplements

Flavors & Extracts

Fiber

Polyols

Ingredient

Systems

Addressing nutrition, function, texture and taste

Mint

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Nutrition: Creating Ingredient Solutions for our Global Customers

ADM Specialty Ingredients R&D

WILD Center of Excellence

WILD Product Dev & App

R&D and Applications (30+)

ADM Specialty Ingredients

WILD Flavors

Processing (30+)

ADM Specialty Ingredients

WILD Flavors

Sales Locations (50+)

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Ingredient Systems: A Key Differentiator

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313140

Nutrition Serves as an Extension of Customer Resources

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CY14 CY15 CY16 CY17 CY18

Oilseeds Carbohydrate Solutions Origination Nutrition Other

32

Adjusted Consolidated Segment Operating Profit

Prior periods have been restated to conform to current year presentation. See Appendix

$ B

illi

on 2.7

2.9

3.7

2.6

3.4

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3333

$1.65

$2.97

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

FY06 FY07 FY08 FY09 FY10 FY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18

2-Year Moving Average EPS (adj)

Earnings and EPS net of specified items (including LIFO)

In January 2013, ADM converted to a calendar year ending fiscal year. CY12 represents 12-months ending December 31, 2012. Prior FY’s represent 12-months ending June 30th

Earnings Trend History

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ROIC versus WACC

LT ROIC Objective: 10%

(1) Non-GAAP measure - see notes on page 25(2) Adjusted for LIFO and specified items - see notes on page 25(3) Adjusted for LIFO - see notes on page 25

Q2 CY19

Trailing 4Q Average Adjusted ROIC(1)(2) 6.9%

Annual WACC 6.75%

Trailing 4Q Average Adjusted EVA $42M

Long-Term WACC 7.0%

Trailing 4Q Average ROIC (1)(3) 5.9%

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$1.9

$1.6

$1.2 $1.2

$0.9 $0.9

$1.1

$0.9$1.0

$0.8

FY09 FY10 FY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18

$B

illi

on

sCapEx Discipline-Reducing CapEx to align with D&A

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$0.60$0.66 $0.70

$0.76

$0.96

$1.12$1.20

$1.28$1.34

$1.40

CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19

Annual Dividends per Share

(1H Annualized)

Steadily Increasing Dividends

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Dividend Payout Range Increased with Focus on More Stable Earnings and Cash Flows

Dividend Payout Ratios Ranges

20%-30%

Historical Range30%-40%

Medium-Term Range

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31%

0%

25%

50%

Q1 2011 Q2 2019

Net Debt/Total Capital

38

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. Total capital excludes cash from L/T debt

6.7

0.0

5.0

10.0

15.0

20.0

Q1 2011 Q2 2019

Available Liquidity ($Billions)

Total Liquidity with RMI Liquidity Available

Liquidity available includes commercial paper and other

sources of available credit capacity

Balance Sheet Strength-Solid Investment Grade

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Appendix

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Summary of Specified Items Excluded in Adjusted Earnings¹

(1) Non-GAAP measure – see appendix

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 CY12 CY13 CY14 CY15 CY16 CY17 CY18

Earnings as Reported 383 511 451 495 1,044 1,312 2,154 1,780 1,684 1,930 2,036 1,223 1,375 1,342 2,248 1,849 1,279 1.595 1,810

Specified Items:

LIFO Credit/(Charge) (1) (9) (74) 71 7 (129) (354) 322 26 (229) 6 2 140 152 1 12 (1) (14)

FX gain/(loss) (25) (63)

Acquisition-related items (164) 6Gains on Sales of Assets/Revaluations 132 24 89 456 (92) 10 (13)

Impairments, restructurings, and settlements 77 144 226

OPEB Adjustment (24)Discrete Tax Adjustments (15) 60 24 )

FCPA charge (37)

Start-up Costs (68) (59) 0

Debt Buyback/Exchange Costs (47) (9) (7) (118) 7

Golden Peanut Gain 44 0

Gruma Bank Disposal 49 0

Gain/(Loss) on Interest Rate Swaps (37) 19 0

Asset impairment and exit costs (274) (161) (88) (67) (172)

Valuation allowance (82)

Bioblenders' credit 55 0

Interest exp adj related to If-

converted method (13)

Tax on remeasurement (FY change) (14) (61)

Pension settlement (44)

Gain on GrainCorp 49

Tax adjustment 0 0 (366) (33)

Wilmar Tax (158)

Gruma Derivatives (171)

Wimar Restructure 286

Tyson/OSG shares 225

T& L Shares 119

Vitamin Settlement 91 17

Kalama Gain 97

CIP Gain 59

HFCS Litigation (252)

Repatriation Tax

Total Specified Items 59 90 8 (326) 190 7 514 (354) (7) (126) (198) (275) (144) (201) 132 227 3 (206) 172

Earnings Excluding Specified Items 324 421 443 821 854 1,305 1,640 2,134 1,691 2,056 2,234 1,498 1,519 1,543 2,116 1,622 1,276 1,389 1,982

EPS Adjusted for Specified Items 0.49 0.64 0.68 1.26 1.30 1.99 2.50 3.30 2.63 3.19 3.45 2.25 2.29 2.33 3.23 2.61 2.16 2.43 3.50

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Segment OP and Adjusted OP (a non-GAAP measure) Comparatives Introducing New SegmentsQtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended Year Ended

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

As Pro As Pro As Pro As Pro As Pro As Pro

Reported Forma Reported Forma Reported Forma Reported Forma Reported Forma Reported Forma

(Amounts in millions)

Segment Operating Profit(1) Segment Operating Profit(1) $ 704 $ 704 $ 902 $ 902 $ 881 $ 881 $ 786 $ 786 $ 3,273 $ 3,273

Specified items: Specified items:

(Gains) losses on sales of assets/businesses (Gains) losses on sales of assets/businesses — — — — (21) (21) 8 8 (13) (13)

Impairment, restructuring, and settlement charges

Impairment, restructuring, and settlement charges 13 13 22 22 1 1 66 66 102 102

Adjusted Segment Operating Profit(1)(2) Adjusted Segment Operating Profit(1)(2) $ 717 $ 717 $ 924 $ 924 $ 861 $ 861 $ 860 $ 860 $ 3,362 $ 3,362

Origination $ 46 $ — $ 191 $ — $ 131 $ — $ 184 $ — $ 552 $ —

Merchandising and handing 43 — 160 — 95 — 150 — 448 —

Transportation 3 — 31 — 36 — 34 — 104 —

Oilseeds $ 349 $ — $ 341 $ — $ 347 $ — $ 431 $ — $ 1,468 $ —

Crushing and origination 60 — 195 — 217 — 255 — 727 —

Refining, packaging, biodiesel, and other 180 — 94 — 50 — 74 — 398 —

Asia 109 — 52 — 80 — 102 — 343 —

Ag Services and Oilseeds $ — $ 395 $ — $ 532 $ — $ 478 $ — $ 615 $ — $ 2,020

Ag Services — $ 87 — $ 229 — $ 157 — $ 184 — 657

Crushing — $ 29 — $ 167 — $ 197 — $ 257 — 650

Refined products and other — $ 170 — $ 84 — $ 44 — $ 72 — 370

Wilmar — $ 109 — $ 52 — $ 80 — $ 102 — 343

Carbohydrate Solutions Carbohydrate Solutions $ 213 $ 213 $ 247 $ 247 $ 288 $ 288 $ 197 $ 197 $ 945 $ 945

Starches and sweeteners Starches and sweeteners 216 216 238 238 245 245 195 195 894 894

Bioproducts Bioproducts (3) (3) 9 9 43 43 2 2 51 51

Nutrition Nutrition $ 96 $ 96 $ 114 $ 114 $ 67 $ 67 $ 62 $ 62 $ 339 $ 339

Wild Flavors and Specialty Ingredients Wild Flavors and Specialty Ingredients 73 73 106 106 80 80 59 59 318 318

Animal Nutrition Animal Nutrition 23 23 8 8 (13) (13) 3 3 21 21

Other Other $ 13 $ 13 $ 31 $ 31 $ 28 $ 28 $ (14) $ (14) $ 58 $ 58

(1) Non-GAAP measure - see appendix; (2) Adjusted segment operating profit equals total segment operating profit excluding specified items and timing effects.

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Segment OP and Adjusted OP (a non-GAAP measure) as Currently Reported vs New SegmentsQuarter Ended Quarter Ended Six Months Ended

March 31, 2019 June 30, 2019 June 30, 2019

As Currently Pro As Currently Pro As Currently Pro

As Currently Reported Pro Forma Reported Forma Reported Forma Reported Forma

(In millions)

Segment Operating Profit(1) Segment Operating Profit(1) $ 611 $ 611 $ 645 $ 645 $ 1,256 $ 1,256

Specified items: Specified items:

(Gains) losses on sales of assets/businesses (Gains) losses on sales of assets/businesses (12) (12) — — (12) (12)

Impairment and restructuring charges Impairment and restructuring charges 9 9 37 37 46 46

Adjusted Segment Operating Profit(1)(2) Adjusted Segment Operating Profit(1)(2) $ 608 $ 608 $ 682 $ 682 $ 1,290 $ 1,290

Origination $ 76 $ — $ 71 $ — $ 147 $ —

Merchandising and handing 61 — 68 — 129 —

Transportation 15 — 3 — 18 —

Oilseeds $ 341 $ — $ 291 $ — $ 632 $ —

Crushing and origination 211 — 150 — 361 —

Refining, packaging, biodiesel, and other 76 — 79 — 155 —

Asia 54 — 62 — 116 —

Ag Services and Oilseeds $ — $ 417 $ — $ 362 $ — $ 779

Ag Services — 75 — 90 — 165

Crushing — 216 — 139 — 355

Refined products and other — 72 — 71 — 143

Wilmar — 54 — 62 — 116

Carbohydrate Solutions Carbohydrate Solutions $ 96 $ 96 $ 192 $ 192 $ 288 $ 288

Starches and sweeteners Starches and sweeteners 170 170 218 218 388 388

Bioproducts Bioproducts (74) (74) (26) (26) (100) (100)

Nutrition Nutrition $ 81 $ 81 $ 117 $ 117 $ 198 $ 198

Wild Flavors and Specialty Ingredients Wild Flavors and Specialty Ingredients 88 88 103 103 191 191

Animal Nutrition Animal Nutrition (7) (7) 14 14 7 7

Other Other $ 14 $ 14 $ 11 $ 11 $ 25 $ 25

(1) Non-GAAP measure - see appendix; (2) Adjusted segment operating profit equals total segment operating profit excluding specified items and timing effects.

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Notes: Non-GAAP ReconciliationThe Company uses certain “Non-GAAP” financial measures as defined by the Securities and Exchange Commission. These are measures of performance not defined by

accounting principles generally accepted in the United States, and should be considered in addition to, not in lieu of, GAAP reported measures.

(1) Adjusted earnings per share (EPS) and adjusted EPS excluding timing effects

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.

(2) Segment operating profit and adjusted segment operating profit

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. 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, and 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 as alternatives to income before income

taxes or any other measure of consolidated operating results under U.S. GAAP.

(3) Adjusted Return on Invested Capital (ROIC)

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 ROIC 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. 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.

(4) Average ROIC

Average ROIC is ADM’s trailing 4-quarter net earnings adjusted for the after-tax effects of interest expense and changes in the LIFO reserve divided by the sum of ADM’s equity

(excluding non-controlling interests) and interest-bearing liabilities adjusted for the after-tax effect of the LIFO reserve. Management uses average ROIC for investors as additional

information about ADM’s returns. Average ROIC is a non-GAAP financial measure and is not intended to replace or be an alternative to GAAP financial measures.

(5) Adjusted Economic Value Added

Adjusted economic value added is ADM’s trailing 4-quarter economic value added adjusted for LIFO and other specified items. The Company calculates economic value added by

comparing ADM’s trailing 4-quarter adjusted returns to its Annual WACC multiplied by adjusted invested capital. Adjusted economic value added is a non-GAAP financial measure

and is not intended to replace or be an alternative to GAAP financial measures.