adm10Qfy07q3
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D. C. 20549
FORM
10-Q
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended March 31, 2007
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
ARCHER-DANIELS-MIDLAND
COMPANY
(Exact
name of registrant as specified in its charter)
Delaware
|
41-0129150
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.
R. S. Employer
Identification
No.)
|
|
|
4666
Faries Parkway Box 1470
Decatur,
Illinois
(Address
of principal executive offices)
|
62525
(Zip
Code)
|
|
|
(217)
424-5200
|
(Registrant's
telephone number, including area
code)
|
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 X
No
___.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
Accelerated Filer X
Accelerated Filer ___ Non-accelerated Filer ___
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
No
X
.
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Common
Stock, no par value - xxx,xxx,xxx shares
(April
30,
2007)
PART
I - FINANCIAL INFORMATION
ITEM
1.
|
FINANCIAL
STATEMENTS
|
CONSOLIDATED
STATEMENTS OF EARNINGS
(Unaudited)
Archer-Daniels-Midland
Company
|
|
THREE
MONTHS ENDED
|
|
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands, except
|
|
|
per
share amounts)
|
|
|
|
|
|
|
|
|
Net
sales and other operating income
|
|
$
|
11,381,150
|
|
$
|
9,122,841
|
|
Cost
of products sold
|
|
|
10,635,240
|
|
|
8,352,109
|
|
Gross
Profit
|
|
|
745,910
|
|
|
770,732
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
294,037
|
|
|
297,295
|
|
Other
(income) expense - net
|
|
|
(104,331
|
)
|
|
(19,526
|
)
|
Earnings
Before Income Taxes
|
|
|
556,204
|
|
|
492,963
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
193,313
|
|
|
145,167
|
|
|
|
|
|
|
|
|
|
Net
Earnings
|
|
$
|
362,891
|
|
$
|
347,796
|
|
|
|
|
|
|
|
|
|
Average
number of shares outstanding - basic
|
|
|
648,737
|
|
|
653,995
|
|
|
|
|
|
|
|
|
|
Average
number of shares outstanding - diluted
|
|
|
653,177
|
|
|
657,130
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per common share
|
|
$
|
.56
|
|
$
|
.53
|
|
|
|
|
|
|
|
|
|
Dividends
per common share
|
|
$
|
.115
|
|
$
|
.10
|
|
See
notes
to consolidated financial statements.
CONSOLIDATED
STATEMENTS OF EARNINGS
(Unaudited)
Archer-Daniels-Midland
Company
|
|
NINE
MONTHS ENDED
|
|
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands, except
|
|
|
per
share amounts)
|
|
|
|
|
|
|
|
|
Net
sales and other operating income
|
|
$
|
31,804,111
|
|
$
|
27,048,775
|
|
Cost
of products sold
|
|
|
29,284,703
|
|
|
24,911,864
|
|
Gross
Profit
|
|
|
2,519,408
|
|
|
2,136,911
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
902,083
|
|
|
896,142
|
|
Other
(income) expense - net
|
|
|
(142,859
|
)
|
|
(32,630
|
)
|
Earnings
Before Income Taxes
|
|
|
1,760,184
|
|
|
1,273,399
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
553,280
|
|
|
371,588
|
|
|
|
|
|
|
|
|
|
Net
Earnings
|
|
$
|
1,206,904
|
|
$
|
901,811
|
|
|
|
|
|
|
|
|
|
Average
number of shares outstanding - basic
|
|
|
654,000
|
|
|
653,063
|
|
|
|
|
|
|
|
|
|
Average
number of shares outstanding - diluted
|
|
|
658,232
|
|
|
655,469
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
|
$
|
1.85
|
|
$
|
1.38
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share
|
|
$
|
1.83
|
|
$
|
1.38
|
|
|
|
|
|
|
|
|
|
Dividends
per common share
|
|
$
|
.315
|
|
$
|
.27
|
|
See
notes
to consolidated financial statements.
CONSOLIDATED
BALANCE SHEETS
Archer-Daniels-Midland
Company
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
MARCH
31,
|
|
|
JUNE
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
896,526
|
|
$
|
1,112,853
|
|
Segregated
cash and investments
|
|
|
1,402,389
|
|
|
1,220,666
|
|
Receivables
|
|
|
5,805,087
|
|
|
4,471,201
|
|
Inventories
|
|
|
6,603,449
|
|
|
4,677,508
|
|
Other
assets
|
|
|
535,907
|
|
|
344,049
|
|
Total Current Assets
|
|
|
15,243,358
|
|
|
11,826,277
|
|
|
|
|
|
|
|
|
|
Investments
and Other Assets
|
|
|
|
|
|
|
|
Investments
in and advances to affiliates
|
|
|
2,050,740
|
|
|
1,985,662
|
|
Long-term
marketable securities
|
|
|
1,175,227
|
|
|
1,110,177
|
|
Goodwill
|
|
|
320,322
|
|
|
322,292
|
|
Other
assets
|
|
|
738,810
|
|
|
731,590
|
|
|
|
|
4,285,099
|
|
|
4,149,721
|
|
|
|
|
|
|
|
|
|
Property,
Plant, and Equipment
|
|
|
|
|
|
|
|
Land
|
|
|
221,289
|
|
|
214,091
|
|
Buildings
|
|
|
2,901,919
|
|
|
2,774,164
|
|
Machinery
and equipment
|
|
|
11,728,837
|
|
|
11,131,992
|
|
Construction
in progress
|
|
|
744,790
|
|
|
430,997
|
|
|
|
|
15,596,835
|
|
|
14,551,244
|
|
Accumulated
depreciation
|
|
|
(9,773,876
|
)
|
|
(9,258,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
5,822,959
|
|
|
5,293,032
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,351,416
|
|
$
|
21,269,030
|
|
See
notes
to consolidated financial statements.
CONSOLIDATED
BALANCE SHEETS
Archer-Daniels-Midland
Company
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
MARCH
31,
|
|
|
JUNE
30,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Short-term
debt
|
|
$
|
1,142,765
|
|
$
|
549,419
|
|
Accounts
payable
|
|
|
4,872,322
|
|
|
4,014,392
|
|
Accrued
expenses
|
|
|
2,214,593
|
|
|
1,521,188
|
|
Current
maturities of long-term debt
|
|
|
71,876
|
|
|
79,768
|
|
Total
Current Liabilities
|
|
|
8,301,556
|
|
|
6,164,767
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
5,157,271
|
|
|
4,050,323
|
|
Deferred
income taxes
|
|
|
676,650
|
|
|
756,600
|
|
Other
|
|
|
536,590
|
|
|
490,460
|
|
|
|
|
6,370,511
|
|
|
5,297,383
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
Common
stock
|
|
|
5,067,901
|
|
|
5,511,019
|
|
Reinvested
earnings
|
|
|
5,088,222
|
|
|
4,081,490
|
|
Accumulated
other comprehensive income
|
|
|
523,226
|
|
|
214,371
|
|
|
|
|
|
|
|
|
|
|
|
|
10,679,349
|
|
|
9,806,880
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,351,416
|
|
$
|
21,269,030
|
|
See
notes
to consolidated financial statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Archer-Daniels-Midland
Company
|
|
NINE
MONTHS ENDED
|
|
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
Operating
Activities
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
1,206,904
|
|
$
|
901,811
|
|
Adjustments
to reconcile net earnings to net cash provided by
|
|
|
|
|
|
|
|
(used
in) operating activities
|
|
|
|
|
|
|
|
Depreciation
|
|
|
519,776
|
|
|
490,780
|
|
Asset
abandonments
|
|
|
1,393
|
|
|
27,013
|
|
Deferred
income taxes
|
|
|
9,279
|
|
|
(93,951
|
)
|
Gain
on marketable securities transactions
|
|
|
(24,244
|
)
|
|
(27,952
|
)
|
Equity
in earnings of affiliates, net of dividends
|
|
|
(137,252
|
)
|
|
(32,331
|
)
|
Stock
contributed to employee benefit plans
|
|
|
20,135
|
|
|
18,652
|
|
Pension
and postretirement accruals (contributions), net
|
|
|
34,601
|
|
|
(164,519
|
)
|
Other
- net
|
|
|
101,495
|
|
|
31,401
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
Segregated
cash and investments
|
|
|
(172,530
|
)
|
|
(236,627
|
)
|
Receivables
|
|
|
(544,181
|
)
|
|
(266,137
|
)
|
Inventories
|
|
|
(1,918,254
|
)
|
|
(519,857
|
)
|
Other
assets
|
|
|
(69,283
|
)
|
|
(41,852
|
)
|
Accounts
payable and accrued expenses
|
|
|
937,866
|
|
|
813,249
|
|
Total
Operating Activities
|
|
|
(34,295
|
)
|
|
899,680
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
Purchases
of property, plant, and equipment
|
|
|
(843,592
|
)
|
|
(533,494
|
)
|
Proceeds
from sales of property, plant, and equipment
|
|
|
25,915
|
|
|
42,025
|
|
Net
assets of businesses acquired
|
|
|
(92,372
|
)
|
|
(168,520
|
)
|
Investments
in and advances to affiliates
|
|
|
(49,737
|
)
|
|
(111,426
|
)
|
Distributions
from affiliates, excluding dividends
|
|
|
85,310
|
|
|
51,158
|
|
Purchases
of marketable securities
|
|
|
(659,117
|
)
|
|
(636,896
|
)
|
Proceeds
from sales of marketable securities
|
|
|
576,450
|
|
|
491,702
|
|
Other
- net
|
|
|
6,704
|
|
|
(18,856
|
)
|
Total
Investing Activities
|
|
|
(950,439
|
)
|
|
(884,307
|
)
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
Long-term
debt borrowings
|
|
|
1,165,633
|
|
|
603,874
|
|
Long-term
debt payments
|
|
|
(131,360
|
)
|
|
(262,042
|
)
|
Net
borrowings under line of credit agreements
|
|
|
570,315
|
|
|
196,982
|
|
Purchases
of treasury stock
|
|
|
(532,851
|
)
|
|
(74
|
)
|
Sale
of stock warrants
|
|
|
170,085
|
|
|
─
|
|
Purchase
of call options
|
|
|
(299,460
|
)
|
|
─
|
|
Cash
dividends
|
|
|
(206,543
|
)
|
|
(176,433
|
)
|
Other
- net
|
|
|
32,588
|
|
|
18,128
|
|
Total
Financing Activities
|
|
|
768,407
|
|
|
380,435
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
(216,327
|
)
|
|
395,808
|
|
Cash
and cash equivalents at beginning of period
|
|
|
1,112,853
|
|
|
522,420
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
896,526
|
|
$
|
918,228
|
|
|
|
|
|
|
|
|
|
See
notes
to consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Archer-Daniels-Midland
Company
Note
1. Basis of Presentation
The
accompanying unaudited consolidated financial statements have been prepared
in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, these statements do not include all of the information and
footnotes required by generally accepted accounting principles for complete
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 quarter and nine months ended March
31,
2007 are not necessarily indicative of the results that may be expected for
the
year ending June 30, 2007. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended June 30, 2006.
Last-in,
First-out (LIFO) Inventories
Interim
period LIFO calculations are based on interim period costs and management’s
estimates of year-end inventory levels. Because the availability and price
of
agricultural commodity-based LIFO inventories are unpredictable due to factors
such as weather, government farm programs and policies, and changes in global
demand, quantities of LIFO-based inventories at interim periods may vary
significantly from management’s estimates of year-end inventory
levels.
Subsequent
Event
During
April 2007, the Company sold equity securities of Tyson Foods Inc. and Overseas
Shipholding Group Inc. held at March 31, 2007 and received cash proceeds of
$556
million and recognized an after tax gain of $220 million, or $0.34 per
share.
Note
2. New Accounting Standards
During
July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation
Number 48, Accounting
for Uncertainty in Income Taxes
(FIN
48). FIN 48 clarifies the accounting for income taxes by prescribing the
minimum requirements a tax position must meet before being recognized in the
financial statements. In addition, FIN 48 prohibits the use of Statement
of Financial Accounting Standards (SFAS) Number 5, Accounting
for Contingencies,
in
evaluating the recognition and measurement of uncertain tax positions. The
Company will be required to adopt FIN 48 on July 1, 2007, and is in the process
of assessing the impact of the adoption of this standard on the Company’s
financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Archer-Daniels-Midland
Company
Note
2. New Accounting Standards (Continued)
During
September 2006, the FASB issued SFAS Number 157, Fair
Value Measurements.
SFAS
Number 157 establishes a framework for measuring fair value within generally
accepted accounting principles, clarifies the definition of fair value within
that framework, and expands disclosures about the use of fair value
measurements. SFAS Number 157 does not require any new fair value measurements
in generally accepted accounting principles. However, the definition of fair
value in SFAS Number 157 may affect assumptions used by companies in determining
fair value. The Company will be required to adopt SFAS Number 157 on July 1,
2008. The Company has not completed its evaluation of the impact of adopting
SFAS Number 157 on the Company’s financial statements, but currently believes
the impact of the adoption of SFAS Number 157 will not require material
modification of the Company’s fair value measurements and will be substantially
limited to expanded disclosures in the notes to the Company’s consolidated
financial statements.
During
September 2006, the FASB issued SFAS Number 158, Employers’
Accounting for Defined Benefit Pension and Other Postretirement
Plans.
This Statement requires an employer to recognize the overfunded or
underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its balance sheet and to
recognize changes in the funded status of a defined benefit postretirement
plan
in comprehensive income in the year in which the changes occur. SFAS Number
158
also requires companies to measure the funded status of defined benefit
postretirement plans as of the end of the fiscal year instead of a date up
to
three months prior to the end of the fiscal year. Pursuant to SFAS Number 158,
the Company will be required to recognize the funded status of its defined
benefit postretirement plans in its consolidated balance sheet as of June 30,
2007. The Company will be required to adopt the measurement date
provisions of SFAS Number 158 on June 30, 2009. Had the Company recognized
the overfunded and underfunded status of its defined benefit postretirement
plans as of June 30, 2006, other long-term assets, deferred income taxes, and
accumulated other comprehensive income would have been reduced $230 million,
$120 million, and $197 million, respectively, while other long-term liabilities
would have increased by $87 million.
During
February 2007, the FASB issued SFAS Number 159, The
Fair Value Option for Financial Assets and Financial
Liabilities.
SFAS
Number 159 allows entities to voluntarily choose, at specified election dates,
to measure many financial assets and financial liabilities at fair value. The
election is made on an instrument-by-instrument basis and is irrevocable. If
the
fair value option is elected for an instrument, SFAS Number 159 specifies that
all subsequent changes in fair value for that instrument shall be reported
in
earnings. The Company will be required to adopt SFAS No. 159 on July 1, 2008
and
has not yet assessed the impact of the adoption of this standard on the
Company’s financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Archer-Daniels-Midland
Company
Note
3. Long-Term Debt
In
February 2007, the Company issued $1.2 billion principal amount of convertible
senior notes due in 2014 (the Notes) in a private placement. The Notes were
issued at par and bear interest at a rate of 0.875% per year, payable
semiannually. The Notes may be convertible based on an initial conversion
rate
of 22.8343 shares per $1,000 principal amount of Notes (which is equal to
an
initial conversion price of approximately $43.79 per share). The Notes may
be
converted, subject to adjustment, only under the following circumstances:
1)
during any calendar quarter beginning after March 31, 2007, if the closing
price
of the Company’s common stock for at least 20 trading days in the 30 consecutive
trading days ending on the last trading day of the immediately preceding
quarter
is more than 140% of the applicable conversion price per share, which is
$1,000
divided by the then applicable conversion rate, 2) during the five consecutive
business day period immediately after any five consecutive trading day period
(the note measurement period) in which the average of the trading price per
$1,000 principal amount of Notes was equal to or less than 98% of the average
product of the closing price of the Company’s common stock and the conversion
rate of each date during the note measurement period, 3) if the Company makes
specified distributions to its common stockholders or specified corporate
transactions occur, or 4) at any time on or after January 15, 2014, through
the
business day preceding the maturity date. Upon conversion, a holder would
receive an amount in cash equal to the lesser of 1) $1,000 and 2) the conversion
value, as defined. If the conversion value exceeds $1,000, the Company will
deliver, at the Company’s election, cash or common stock or a combination of
cash and common stock for the conversion value in excess of $1,000. If the
Notes
are converted in connection with a change in control, as defined, the Company
may be required to provide a make-whole premium in the form of an increase
in
the conversion rate, subject to a stated maximum amount. In addition, in
the
event of a change in control, the holders may require the Company to purchase
all or a portion of their Notes at a purchase price equal to 100% of the
principal amount of the Notes, plus accrued and unpaid interest, if
any.
Concurrent
with the issuance of the Notes, the Company purchased call options in private
transactions at a cost of $299 million. The purchased call options allow
the
Company to receive shares of its common stock and/or cash from the
counterparties equal to the amounts of common stock and/or cash related to
the
excess of the current market price of the Company’s common stock over the
exercise price of the purchased call options. In addition, the Company sold
warrants in private transactions to acquire, subject to customary anti-dilution
adjustments, 26.3 million shares of its common stock at an exercise price
of
$62.56 per share and received proceeds of $170 million. If the average price
of
the Company’s common stock during a defined period ending on or about the
respective settlement dates exceeds the exercise price of the warrants, the
warrants will be settled, at the Company’s option, in cash or shares of common
stock. The purchased call options and warrants are intended to reduce the
potential dilution upon future conversions of the Notes by effectively
increasing the initial conversion price to $62.56 per share. The net cost
of the
purchased call options and warrant transactions of $129 million is recorded
as a
reduction of stockholder’s equity. The Company has also recorded a $114 million
increase in stockholder’s equity for the deferred tax assets recognized related
to the purchased call options.
As
of
March 31, 2007, none of the conditions permitting conversion of the Notes had
been satisfied. In addition, as of March 31, 2007, the market price of the
Company’s common stock was not greater than the exercise price of the purchased
call options or warrants.
Upon
closing of the sale of the Notes, $370 million of the net proceeds from the
Note
issuance and the proceeds from the warrant transactions were used to repurchase
10.3 million shares of the Company’s common stock under the Company’s stock
repurchase program.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Archer-Daniels-Midland
Company
Note
4. Comprehensive Income
The
components of comprehensive income, net of related tax, are as
follows:
|
|
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
|
|
MARCH
31,
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
362,891
|
|
$
|
347,796
|
|
$
|
1,206,904
|
|
$
|
901,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in unrealized gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(loss)
on investments
|
|
|
46,198
|
|
|
(13,700
|
)
|
|
61,265
|
|
|
(72,142
|
)
|
Deferred
gain (loss) on hedging
|
|
|
|
|
|
|
|
|
|
|
|
|
|
activities
|
|
|
(77,599
|
)
|
|
(16,410
|
)
|
|
49,545
|
|
|
8,350
|
|
Minimum
pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liability
adjustment
|
|
|
(3,792
|
)
|
|
(936
|
)
|
|
(4,115
|
)
|
|
(553
|
)
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
|
|
37,273
|
|
|
35,879
|
|
|
202,160
|
|
|
(3,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
364,971
|
|
$
|
352,629
|
|
$
|
1,515,759
|
|
$
|
833,640
|
|
Note
5.
Other (Income) Expense - Net
|
|
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
|
|
MARCH
31,
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
115,467
|
|
$
|
90,446
|
|
$
|
323,589
|
|
$
|
263,344
|
|
Investment
income
|
|
|
(66,352
|
)
|
|
(48,295
|
)
|
|
(191,683
|
)
|
|
(146,143
|
)
|
Net
(gain) loss on marketable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
transactions
|
|
|
(13,484
|
)
|
|
282
|
|
|
(24,244
|
)
|
|
(27,952
|
)
|
Equity
in earnings of affiliates
|
|
|
(84,975
|
)
|
|
(54,930
|
)
|
|
(207,576
|
)
|
|
(113,604
|
)
|
Other
- net
|
|
|
(54,987
|
)
|
|
(7,029
|
)
|
|
(42,945
|
)
|
|
(8,275
|
)
|
|
|
$
|
(104,331
|
)
|
$
|
(19,526
|
)
|
$
|
(142,859
|
)
|
$
|
(32,630
|
)
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Archer-Daniels-Midland
Company
Note
6.
Retirement Plan Expense
The
Company provides substantially all domestic employees and employees at certain
international subsidiaries with pension benefits. The Company also provides
substantially all domestic salaried employees with postretirement health care
and life insurance benefits. Retirement plan expense for these pension and
postretirement benefits for the quarter and nine months ended March 31, 2007
and
2006 is as follows:
|
|
Pension
Benefits
|
|
|
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
|
|
MARCH
31,
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost (benefits earned during the period)
|
|
$
|
15,358
|
|
$
|
13,465
|
|
$
|
46,074
|
|
$
|
51,714
|
|
Interest
cost
|
|
|
23,101
|
|
|
19,405
|
|
|
69,301
|
|
|
62,262
|
|
Expected
return on plan assets
|
|
|
(25,303
|
)
|
|
(17,756
|
)
|
|
(75,909
|
)
|
|
(57,907
|
)
|
Actuarial
loss
|
|
|
4,858
|
|
|
8,054
|
|
|
14,574
|
|
|
25,552
|
|
Net
amortization
|
|
|
1,561
|
|
|
1,313
|
|
|
4,683
|
|
|
3,923
|
|
Net
periodic defined benefit plan expense
|
|
$
|
19,575
|
|
$
|
24,481
|
|
$
|
58,723
|
|
$
|
85,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
Benefits
|
|
|
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
|
|
MARCH
31,
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost (benefits earned during the period)
|
|
$
|
1,757
|
|
$
|
1,665
|
|
$
|
5,269
|
|
$
|
4,995
|
|
Interest
cost
|
|
|
2,435
|
|
|
2,130
|
|
|
7,305
|
|
|
6,392
|
|
Actuarial
loss
|
|
|
158
|
|
|
107
|
|
|
476
|
|
|
321
|
|
Net
amortization
|
|
|
(279
|
)
|
|
(279
|
)
|
|
(837
|
)
|
|
(837
|
)
|
Net
periodic defined benefit plan expense
|
|
$
|
4,071
|
|
$
|
3,623
|
|
$
|
12,213
|
|
$
|
10,871
|
|
Note
7. Guarantees
The
Company has entered into debt guarantee agreements, primarily related to
equity-method investees, which could obligate the Company to make future
payments if the primary entity fails to perform its contractual obligation.
The
Company has not recorded a liability for these contingent obligations, as the
Company believes the fair value of these contingent obligations is immaterial.
The Company has collateral for a portion of these contingent obligations. These
contingent obligations totaled $141 million at March 31, 2007. Outstanding
borrowings under these contingent obligations were $112 million at March 31,
2007.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Archer-Daniels-Midland
Company
Note
8. Segment Information
The
Company is principally engaged in procuring, transporting, storing, processing,
and merchandising agricultural commodities and products. The Company’s
operations are classified into three reportable business segments: Oilseeds
Processing, Corn Processing, and Agricultural Services. Each of these segments
is organized based upon the nature of products and services offered. The
Company’s remaining operations are aggregated and classified as Other.
The
Oilseeds Processing segment includes activities related to processing oilseeds
such as soybeans, cottonseed, sunflower seeds, canola, peanuts, and flaxseed
into vegetable oils and meals principally for the food and feed industries.
In
addition, oilseeds may be resold into the marketplace as a raw material for
other processors. Crude vegetable oil is sold "as is" or is further processed
by
refining, bleaching, and deodorizing into salad oils. Salad oils can be further
processed by hydrogenating and/or interesterifying into margarine, shortening,
and other food products. Partially refined oil is sold for use in chemicals,
paints, and other industrial products. Refined oil can be further processed
for
use in the production of biodiesel. Oilseed meals are primary ingredients used
in the manufacture of commercial livestock and poultry feeds.
The
Corn
Processing segment includes activities related to the production of sweeteners,
starches, dextrose, and syrups for the food and beverage industry as well as
activities related to the production, by fermentation, of bioproducts such
as
alcohol, amino acids, and other specialty food and feed ingredients.
The
Agricultural Services segment utilizes the Company’s extensive grain elevator
and transportation network to buy, store, clean, and transport agricultural
commodities, such as oilseeds, corn, wheat, milo, oats, and barley, and resells
these commodities primarily as feed ingredients and as raw materials for the
agricultural processing industry. Agricultural Services’ grain sourcing and
transportation network provides reliable and efficient services to the Company’s
agricultural processing operations. Also included in Agricultural Services
are
the activities of A.C. Toepfer International, a global merchandiser of
agricultural commodities and processed products.
Other
includes the Company’s remaining operations, consisting principally of food and
feed ingredient businesses, industrial businesses, and financial activities.
Food and feed ingredient businesses include Wheat Processing with activities
related to the production of wheat flour; Cocoa Processing with activities
related to the production of chocolate and cocoa products; the production of
natural health and nutrition products; and the production of other specialty
food and feed ingredients. Financial activities include banking, captive
insurance, private equity fund investments, and futures commission merchant
activities.
Intersegment
sales have been recorded at amounts approximating market. Operating profit
for
each segment is based on net sales less identifiable operating expenses,
including an interest charge related to working capital usage. Also included
in
operating profit are the related equity in earnings of affiliates based on
the
equity method of accounting. General corporate expenses, investment income,
unallocated interest expense, marketable securities transactions, and FIFO
to
LIFO inventory adjustments have been excluded from segment operations and
classified as Corporate.
For
detailed information regarding the Company’s reportable segments, see Note 13 to
the consolidated financial statements included in the Company’s annual report on
Form 10-K for the year ended June 30, 2006.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Archer-Daniels-Midland
Company
Note
8.
Segment Information (Continued)
|
|
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
|
|
MARCH
31,
|
MARCH
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to external customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilseeds
Processing
|
|
$
|
3,219,289
|
|
$
|
2,808,375
|
|
$
|
9,802,528
|
|
$
|
8,730,503
|
|
Corn
Processing
|
|
|
1,400,164
|
|
|
1,111,734
|
|
|
3,985,778
|
|
|
3,414,335
|
|
Agricultural
Services
|
|
|
5,512,171
|
|
|
4,114,818
|
|
|
14,348,396
|
|
|
11,535,958
|
|
Other
|
|
|
1,249,526
|
|
|
1,087,914
|
|
|
3,667,409
|
|
|
3,367,979
|
|
Total
|
|
$
|
11,381,150
|
|
$
|
9,122,841
|
|
$
|
31,804,111
|
|
$
|
27,048,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilseeds
Processing
|
|
$
|
96,646
|
|
$
|
36,388
|
|
$
|
314,737
|
|
$
|
117,567
|
|
Corn
Processing
|
|
|
98,539
|
|
|
91,199
|
|
|
264,712
|
|
|
283,313
|
|
Agricultural
Services
|
|
|
554,379
|
|
|
352,206
|
|
|
1,420,227
|
|
|
945,980
|
|
Other
|
|
|
31,690
|
|
|
28,991
|
|
|
92,483
|
|
|
85,920
|
|
Total
|
|
$
|
781,254
|
|
$
|
508,784
|
|
$
|
2,092,159
|
|
$
|
1,432,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilseeds
Processing
|
|
$
|
3,315,936
|
|
$
|
2,844,763
|
|
$
|
10,117,265
|
|
$
|
8,848,070
|
|
Corn
Processing
|
|
|
1,498,703
|
|
|
1,202,933
|
|
|
4,250,490
|
|
|
3,697,648
|
|
Agricultural
Services
|
|
|
6,066,550
|
|
|
4,467,024
|
|
|
15,768,623
|
|
|
12,481,938
|
|
Other
|
|
|
1,281,215
|
|
|
1,116,905
|
|
|
3,759,892
|
|
|
3,453,899
|
|
Intersegment
elimination
|
|
|
(781,254
|
)
|
|
(508,784
|
)
|
|
(2,092,159
|
)
|
|
(1,432,780
|
)
|
Total
|
|
$
|
11,381,150
|
|
$
|
9,122,841
|
|
$
|
31,804,111
|
|
$
|
27,048,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
operating profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilseeds
Processing
|
|
$
|
168,516
|
|
$
|
176,550
|
|
$
|
530,166
|
|
$
|
403,742
|
|
Corn
Processing
|
|
|
251,812
|
|
|
218,692
|
|
|
877,770
|
|
|
591,482
|
|
Agricultural
Services
|
|
|
40,540
|
|
|
78,601
|
|
|
274,675
|
|
|
192,216
|
|
Other
|
|
|
132,267
|
|
|
75,649
|
|
|
325,495
|
|
|
236,465
|
|
Total
segment operating profit
|
|
|
593,135
|
|
|
549,492
|
|
|
2,008,106
|
|
|
1,423,905
|
|
Corporate
|
|
|
(36,931
|
)
|
|
(56,529
|
)
|
|
(247,922
|
)
|
|
(150,506
|
)
|
Earnings
before income taxes
|
|
$
|
556,204
|
|
$
|
492,963
|
|
$
|
1,760,184
|
|
$
|
1,273,399
|
|
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
COMPANY
OVERVIEW
The
Company is principally engaged in procuring, transporting, storing, processing,
and merchandising agricultural commodities and products. The Company’s
operations are classified into three reportable business segments: Oilseeds
Processing, Corn Processing, and Agricultural Services. Each of these segments
is organized based upon the nature of products and services offered. The
Company’s remaining operations are aggregated and classified as
Other.
The
Oilseeds Processing segment includes activities related to processing oilseeds
such as soybeans, cottonseed, sunflower seeds, canola, peanuts, and flaxseed
into vegetable oils and meals principally for the food and feed industries.
In
addition, oilseeds may be resold into the marketplace as a raw material for
other processors. Crude vegetable oil is sold "as is" or is further processed
by
refining, bleaching, and deodorizing into salad oils. Salad oils can be further
processed by hydrogenating and/or interesterifying into margarine, shortening,
and other food products. Partially refined oil is sold for use in chemicals,
paints, and other industrial products. Refined oil can be further processed
for
use in the production of biodiesel. Oilseed meals are primary ingredients used
in the manufacture of commercial livestock and poultry feeds.
The
Corn
Processing segment includes activities related to the production of sweeteners,
starches, dextrose, and syrups for the food and beverage industry as well as
activities related to the production, by fermentation, of bioproducts such
as
alcohol, amino acids, and other specialty food and feed ingredients.
The
Agricultural Services segment utilizes the Company’s extensive grain elevator
and transportation network to buy, store, clean, and transport agricultural
commodities, such as oilseeds, corn, wheat, milo, oats, and barley, and resells
these commodities primarily as feed ingredients and as raw materials for the
agricultural processing industry. Agricultural Services’ grain sourcing and
transportation network provides reliable and efficient services to the Company’s
agricultural processing operations. Also included in Agricultural Services
are
the activities of A.C. Toepfer International, a global merchandiser of
agricultural commodities and processed products.
Other
includes the Company’s remaining operations, consisting principally of food and
feed ingredient businesses, industrial businesses, and financial activities.
Food and feed ingredient businesses include Wheat Processing with activities
related to the production of wheat flour; Cocoa Processing with activities
related to the production of chocolate and cocoa products; the production of
natural health and nutrition products; and the production of other specialty
food and feed ingredients. Financial activities include banking, captive
insurance, private equity fund investments, and futures commission merchant
activities.
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 June 30,
2006.
The
Company’s Oilseeds Processing, Agricultural Services, and Wheat Processing
operations are principally agricultural commodity-based businesses where changes
in segment selling prices move in relationship to changes in prices of the
commodity-based agricultural raw materials. Therefore, changes in agricultural
commodity prices have relatively equal impacts on both net sales and cost of
products sold and minimal impact on the gross profit of underlying transactions.
As a result, changes in net sales amounts of these business segments do not
necessarily correspond to the changes in gross profit realized by these
businesses.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
The
Company’s Corn Processing operations and certain other food and feed processing
operations also utilize agricultural commodities (or products derived from
agricultural commodities) as raw materials. In these operations, agricultural
commodity price changes can result in significant fluctuations in cost of
products sold and such price changes cannot necessarily be passed directly
through to the selling price of the finished products. For products such as
ethanol, selling prices bear no direct relationship to the raw material cost
of
the agricultural commodity from which it is produced.
The
Company conducts its business in many countries. For the majority of the
Company’s subsidiaries located outside the United States, the local currency is
the functional currency. Revenues and expenses denominated in foreign currencies
are translated into U.S. dollars at the weighted average exchange rates for
the
applicable periods. Fluctuations in the exchange rates of foreign currencies,
primarily the Euro and British pound, as compared to the U.S. dollar will result
in corresponding fluctuations in the relative U.S. dollar value of the Company’s
revenues and expenses. The impact of these currency exchange rate changes was
not significant during the quarter and nine months ended March 31,
2007.
The
Company measures the performance of its business segments using key operating
statistics such as segment operating profit and return on fixed capital
investment and net assets. The Company’s operating results can vary
significantly due to changes in unpredictable factors such as fluctuations
in
energy prices, weather conditions, plantings, global government farm programs
and policies, changes in global demand resulting from population growth and
changes in standards of living, and global production of similar and competitive
crops. Due to these unpredictable factors, the Company does not provide
forward-looking information in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” Additionally, the Company’s
operating results for the current quarter are not necessarily indicative of
the
results that may be expected for the year ending June 30, 2007.
THREE
MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31,
2006
As
an
agricultural-based commodity business, the Company is subject to a variety
of
market factors which affect the Company’s operating results. Biodiesel margins
in Europe declined due to higher vegetable oil prices and lower diesel fuel
prices. Softseed crushing margins also declined as a result of increased
softseed commodity prices. Abundant soybean supplies, improved vegetable oil
values, and strong protein meal demand positively impacted soybean crushing
margins. Increased ethanol contracted selling prices and continuing strong
ethanol demand led to improved corn processing results. Increased selling prices
as a result of solid demand for sweetener and starch products also improved
corn
processing results. However, corn processing results were negatively impacted
by
increasing net corn costs. North American origination operations were negatively
impacted by reduced grain storage and handling operating results. North American
river transportation operations were negatively impacted by lower barge freight
rates and increased operating costs. The above mentioned factors resulted in
a
decline in operating results during the quarter for Oilseeds Processing and
Agricultural Services while Corn Processing and Other operating results improved
for the quarter. Other operating results include a $53 million gain on the
sale
of the Company’s Arkady food ingredient business. Increasing commodity price
levels negatively affected LIFO inventory valuations partially offsetting the
improvements in operating results.
ANALYSIS
OF STATEMENTS OF EARNINGS
Net
sales
and other operating income increased 25% to $11.4 billion for the quarter due
primarily to increased selling prices of agricultural commodities and of corn
processing products and, to a lesser extent, increased sales volumes of
agricultural commodities.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
Net
sales
and other operating income by segment for the quarter are as
follows:
|
|
THREE
MONTHS ENDED
|
|
|
|
|
|
MARCH
31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
(In
thousands)
|
Oilseeds
Processing
|
|
$
|
3,219,289
|
|
$
|
2,808,375
|
|
$
|
410,914
|
|
Corn
Processing
|
|
|
|
|
|
|
|
|
|
|
Sweeteners
and Starches
|
|
|
627,821
|
|
|
500,712
|
|
|
127,109
|
|
Bioproducts
|
|
|
772,343
|
|
|
611,022
|
|
|
161,321
|
|
Total
Corn Processing
|
|
|
1,400,164
|
|
|
1,111,734
|
|
|
288,430
|
|
Agricultural
Services
|
|
|
5,512,171
|
|
|
4,114,818
|
|
|
1,397,353
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Food,
Feed and Industrial
|
|
|
1,224,724
|
|
|
1,068,926
|
|
|
155,798
|
|
Financial
|
|
|
24,802
|
|
|
18,988
|
|
|
5,814
|
|
Total
Other
|
|
|
1,249,526
|
|
|
1,087,914
|
|
|
161,612
|
|
Total
|
|
$
|
11,381,150
|
|
$
|
9,122,841
|
|
$
|
2,258,309
|
|
Oilseeds
Processing sales increased 15% to $3.2 billion for the quarter due principally
to increased average selling prices of vegetable oil and protein meal and
increased sales volumes of vegetable oil and biodiesel. Vegetable oil selling
prices and volumes improved as the markets anticipate new demand from the
developing U.S. biodiesel industry. Protein meal average selling prices
increased as a result of higher oilseed commodity prices. Corn Processing
sales
increased 26% to $1.4 billion for the quarter principally due to Bioproducts
sales increases and, to a lesser extent, increased sales of Sweeteners and
Starches. Bioproducts sales increased due to increased average selling prices
and, to a lesser extent, increased sales volumes of ethanol. Ethanol average
sales prices and volumes improved principally due to strong demand from gasoline
refiners and higher gasoline prices. Sweeteners and Starches sales increased
primarily due to higher average selling prices resulting from solid demand
for
sweetener and starch products. Agricultural Services sales increased 34%
to $5.5
billion for the quarter primarily due to increased sales volumes and increased
agricultural commodity prices. The increase in commodity prices is primarily
due
to higher average market prices for corn in North America which increased
approximately 60% from the prior year quarter. Increased sales volumes of
global
grain merchandising activities also contributed to the increase in Agricultural
Services sales. Other sales increased 15% to $1.2 billion for the quarter
primarily due to higher average selling prices of wheat flour and to a lesser
extent, increased volumes and selling prices of cocoa
products.
Cost
of
products sold increased 27% to $10.6 billion for the quarter primarily due
to
higher average prices of agricultural commodities and increased sales volumes.
Manufacturing costs decreased $9 million primarily due to decreased energy
costs
partially offset by higher plant depreciation costs and increased
employee-related costs.
Selling,
general, and administrative expenses decreased 1% to $294 million for the
quarter due principally to decreased employee-related costs partially offset
by
currency exchange rate fluctuations.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
Other
income increased $85 million for the quarter due principally to a $53 million
gain on the sale of the Company’s Arkady food ingredient business, increased
equity in earnings of unconsolidated affiliates, increased investment income,
and a $14 million increase in realized securities gains. These increases were
partially offset by an increase in interest expense. Equity in earnings of
unconsolidated affiliates improved principally due to improved operating results
of the Company’s oilseed crushing, corn processing, and corn flour ventures and
higher valuations of the Company’s private equity fund investments. Investment
income increased due to higher average investment levels and interest rates.
Interest expense increased primarily due to higher average borrowing levels
and,
to a lesser extent, higher interest rates.
Operating
profit by segment for the quarter is as follows:
|
|
THREE
MONTHS ENDED
|
|
|
|
|
|
MARCH
31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
(In
thousands)
|
Oilseeds
Processing
|
|
$
|
168,516
|
|
$
|
176,550
|
|
$
|
(8,034
|
)
|
Corn
Processing
|
|
|
|
|
|
|
|
|
|
|
Sweeteners
and Starches
|
|
|
126,636
|
|
|
113,223
|
|
|
13,413
|
|
Bioproducts
|
|
|
125,176
|
|
|
105,469
|
|
|
19,707
|
|
Total
Corn Processing
|
|
|
251,812
|
|
|
218,692
|
|
|
33,120
|
|
Agricultural
Services
|
|
|
40,540
|
|
|
78,601
|
|
|
(38,061
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
Food,
Feed and Industrial
|
|
|
97,328
|
|
|
34,764
|
|
|
62,564
|
|
Financial
|
|
|
34,939
|
|
|
40,885
|
|
|
(5,946
|
)
|
Total
Other
|
|
|
132,267
|
|
|
75,649
|
|
|
56,618
|
|
Total
Segment Operating Profit
|
|
|
593,135
|
|
|
549,492
|
|
|
43,643
|
|
Corporate
|
|
|
(36,931
|
)
|
|
(56,529
|
)
|
|
19,598
|
|
Earnings
Before Income Taxes
|
|
$
|
556,204
|
|
$
|
492,963
|
|
$
|
63,241
|
|
Oilseeds
Processing operating profits decreased 5% to $169 million for the quarter
principally due to decreased operating results in North America and Europe.
North American oilseeds processing results decreased principally due to lower
softseed crushing margins resulting from increased softseed commodity prices.
This decrease was partially offset by improved soybean crushing margins
principally due to abundant soybean supplies in the U.S. and good demand for
soybean meal. In addition, vegetable oil values improved as the markets
anticipate new demand from the developing U.S. biodiesel industry. European
oilseeds processing results decreased principally due to biodiesel operating
profits decreasing as a result of higher vegetable oil prices and lower diesel
fuel prices. These decreases were partially offset by improved operating results
in South America and Asia. Last year’s operating profits included a $4 million
charge for abandonment and write-down of long-lived assets.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
Corn
Processing operating profits increased 15% to $252 million for the quarter
primarily due to higher average selling prices, higher ethanol sales volumes,
and lower energy costs. These increases were partially offset by higher net
corn
costs. Sweeteners and Starches operating profits increased $13 million due
primarily to higher average sales prices. Sales volumes and prices have
increased principally due to good demand for sweetener and starch products.
These increases were partially offset by increased net corn costs. Bioproducts
operating profits increased $20 million primarily due to higher ethanol average
selling prices and volumes and, to a lesser extent, lower energy costs. These
increases were partially offset by increased net corn costs. Ethanol average
sales prices and volumes increased principally due to strong demand from
gasoline refiners and higher gasoline prices.
Agricultural
Services operating profits decreased 48% to $41 million for the quarter due
to
decreases in North American origination, transportation, and global grain
merchandising operating results. North American origination operating results
declined due to reduced grain storage and handling operating results and an
increase in inventory carrying costs. North American river transportation
operating results decreased primarily due to decreased barge freight rates
and
increased operating costs. Barge freight rates declined due to lower demand
compared to the prior year quarter and, to a lesser extent, poor weather
conditions in the Midwestern United States. Agricultural Services operating
profits for the quarter include a $12 million trade disruption insurance
recovery related to Hurricane Katrina.
Other
operating profits increased $57 million to $132 million for the quarter. Other
-
Food, Feed and Industrial operating profits increased $63 million primarily
due
to a $53 million gain on the sale of the Company’s Arkady food ingredient
business. Last year’s operating profits included a $15 million charge related to
exiting the European animal feed business. Excluding the gain on the sale of
the
Arkady food ingredient business and last year’s charge to exit the European
animal feed business, Other - Food Feed, and Industrial operating profits
decreased $6 million primarily due to a decline in cocoa processing operating
results due to increased industry capacity which caused downward pressure on
cocoa processing margins. This decrease was partially offset by improved
operating results of wheat processing and formula feed operations. Other -
Financial operating profits declined principally due to lower results of the
Company’s captive insurance operations, partially offset by increased valuations
of the Company’s private equity fund investments and improvements in the
Company’s futures commission merchant business. The results of the Company’s
captive insurance operations for the quarter include a $12 million charge
related to a Hurricane Katrina trade disruption insurance
settlement.
Corporate
expense decreased $20 million primarily due to an increase in realized
securities gains and a $28 million reduction in unallocated interest expense.
The reduction in unallocated interest expense is principally due to higher
levels of invested funds and higher interest rates. These increases were
partially offset by a $23 million charge, compared to a $1 million credit in
the
prior year, related to the effect of changing commodity prices on LIFO inventory
valuations.
Income
taxes increased due to an increase in the Company’s effective tax rate and, to a
lesser extent, higher pretax earnings. The Company’s effective tax rate during
the quarter was 34.8% as compared to 29.4% for the prior year quarter. The
increase in the Company’s effective tax rate is primarily due to changes in the
geographic mix of pretax earnings.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
NINE
MONTHS ENDED MARCH 31, 2007 COMPARED TO NINE MONTHS ENDED MARCH 31,
2006
As
an
agricultural-based commodity business, the Company is subject to a variety
of
market factors which affect the Company’s operating results. Strong biodiesel
demand in Europe continued to create increased vegetable oil demand and
positively impacted rapeseed crushing margins in Europe. Abundant oilseed
supplies, improved vegetable oil values, and strong protein meal demand have
positively impacted oilseed crushing margins in North America. Increased ethanol
contracted selling prices and continuing strong ethanol demand led to improved
corn processing results. Increased selling prices as a result of solid demand
for sweetener and starch products also improved corn processing results. North
American river transportation operations were favorably impacted by strong
demand for river transportation services which increased barge freight rates.
The above mentioned factors resulted in improved operating results during the
nine months for Oilseeds Processing, Corn Processing, and Agricultural Services.
Increasing commodity price levels negatively affected LIFO inventory valuations
partially offsetting the improvements in operating results.
ANALYSIS
OF STATEMENTS OF EARNINGS
Net
sales
and other operating income increased 18% to $31.8 billion for the nine months
due primarily to increased selling prices of agricultural commodities and of
corn processing products and, to a lesser extent, increased sales volumes of
oilseed processing products and agricultural commodities.
Net
sales
and other operating income by segment for the nine months are as
follows:
|
|
NINE
MONTHS ENDED
|
|
|
|
|
|
MARCH
31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
(In
thousands)
|
Oilseeds
Processing
|
|
$
|
9,802,528
|
|
$
|
8,730,503
|
|
$
|
1,072,025
|
|
Corn
Processing
|
|
|
|
|
|
|
|
|
|
|
Sweeteners
and Starches
|
|
|
1,698,636
|
|
|
1,485,631
|
|
|
213,005
|
|
Bioproducts
|
|
|
2,287,142
|
|
|
1,928,704
|
|
|
358,438
|
|
Total
Corn Processing
|
|
|
3,985,778
|
|
|
3,414,335
|
|
|
571,443
|
|
Agricultural
Services
|
|
|
14,348,396
|
|
|
11,535,958
|
|
|
2,812,438
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Food,
Feed and Industrial
|
|
|
3,597,386
|
|
|
3,316,151
|
|
|
281,235
|
|
Financial
|
|
|
70,023
|
|
|
51,828
|
|
|
18,195
|
|
Total
Other
|
|
|
3,667,409
|
|
|
3,367,979
|
|
|
299,430
|
|
Total
|
|
$
|
31,804,111
|
|
$
|
27,048,775
|
|
$
|
4,755,336
|
|
Oilseeds
Processing sales increased 12% to $9.8 billion for the nine months due
principally to increased average selling prices of vegetable oil and increased
sales volumes of vegetable oil and biodiesel. Vegetable oil selling prices
and
volumes improved as the markets anticipate new demand from the developing U.S.
biodiesel industry. Biodiesel sales volumes increased due to additional
production capacity. Corn Processing sales increased 17% to $4.0 billion for
the
nine months principally due to increased sales of Bioproducts and, to a lesser
extent, increased sales of Sweeteners and Starches. Bioproducts sales increased
primarily due to higher average selling prices of ethanol, partially offset
by
lower sales volumes of ethanol. Ethanol average
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
selling
prices increased principally due to strong demand from gasoline refiners
and
higher gasoline prices. Ethanol sales volumes declined as last year’s sales
volumes exceeded production due to the release of inventories built up in
anticipation of gasoline refiners replacing MTBE with ethanol. Sweeteners
and
Starches sales increased primarily due to higher average selling prices
resulting from solid demand for sweetener and starch products. Agricultural
Services sales increased 24% to $14.3 billion for the nine months principally
due to increased agricultural commodity prices and increased sales volumes.
The
increase in commodity prices is primarily due to higher average market prices
of
corn in North America which have more than doubled from the prior year.
Increased sales volumes of global grain merchandising activities also
contributed to the increase in Agricultural Services sales. Other sales
increased 9% to $3.7 billion for the nine months primarily due to higher
average
selling prices of wheat flour products and to a lesser extent, increased
sales
volumes and higher average selling prices of cocoa products. These increases
were partially offset by decreased sales volumes of wheat flour
products.
Cost
of
products sold increased 18% to $29.3 billion for the nine months primarily
due
to higher average prices of agricultural commodities, increased sales volumes
and increased manufacturing costs. Manufacturing costs increased $109 million
primarily due to higher plant maintenance and depreciation costs and increased
employee-related costs. Last year’s manufacturing costs included a $23 million
charge for abandonment and write-down of long-lived assets.
Selling,
general, and administrative expenses increased 1% to $902 million for the
nine
months principally due to increased employee-related costs. During the nine
months ended March 31, 2007 and 2006, the Company issued option grants and
restricted stock awards to officers and key employees pursuant to the Company’s
Long-term Management Incentive Program. Certain officers and key employees
of
the Company receiving option grants and restricted stock awards are eligible
for
retirement. Compensation expense related to option grants and restricted
stock
awards issued to these retirement-eligible employees is recognized in earnings
on the date of grant. Selling, general, and administrative expense for the
nine
months ended March 31, 2007 and 2006 includes compensation expense related
to
option grants and restricted stock awards granted to retirement-eligible
employees of $30 million and $31 million, respectively. Last year’s selling,
general, and administrative expenses included $20 million of severance costs
associated with the closure of a citric acid plant during the nine months
ended
March 31, 2006.
Other
income increased $110 million for the nine months primarily due to a $94 million
increase in equity in earnings of unconsolidated affiliates, a $53 million
gain
on the sale of the Company’s Arkady food ingredient business, and a $46 million
increase in investment income, partially offset by a $60 million increase in
interest expense. The increase in equity in earnings of unconsolidated
affiliates is primarily due to higher valuations of the Company’s private equity
fund investments and improved operating results of the Company’s oilseed
crushing and corn processing ventures. Interest expense and investment income
increased primarily due to increased average borrowing and investment
levels.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
Operating
profit by segment for the nine months is as follows:
|
|
NINE
MONTHS ENDED
|
|
|
|
|
|
MARCH
31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
(In
thousands)
|
Oilseeds
Processing
|
|
$
|
530,166
|
|
$
|
403,742
|
|
$
|
126,424
|
|
Corn
Processing
|
|
|
|
|
|
|
|
|
|
|
Sweeteners
and Starches
|
|
|
385,738
|
|
|
319,747
|
|
|
65,991
|
|
Bioproducts
|
|
|
492,032
|
|
|
271,735
|
|
|
220,297
|
|
Total
Corn Processing
|
|
|
877,770
|
|
|
591,482
|
|
|
286,288
|
|
Agricultural
Services
|
|
|
274,675
|
|
|
192,216
|
|
|
82,459
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Food,
Feed and Industrial
|
|
|
188,706
|
|
|
138,895
|
|
|
49,811
|
|
Financial
|
|
|
136,789
|
|
|
97,570
|
|
|
39,219
|
|
Total
Other
|
|
|
325,495
|
|
|
236,465
|
|
|
89,030
|
|
Total
Segment Operating Profit
|
|
|
2,008,106
|
|
|
1,423,905
|
|
|
584,201
|
|
Corporate
|
|
|
(247,922
|
)
|
|
(150,506
|
)
|
|
(97,416
|
)
|
Earnings
Before Income Taxes
|
|
$
|
1,760,184
|
|
$
|
1,273,399
|
|
$
|
486,785
|
|
Oilseeds
Processing operating profits increased $126 million to $530 million for the
nine
months due to improved market conditions in all geographic regions. North
American processing results improved principally due to abundant oilseed
supplies in the U.S. and good demand for soybean meal. Vegetable oil values
improved as the markets anticipate new demand from the developing U.S. biodiesel
industry. European processing results improved principally due to abundant
oilseed supplies in Europe and strong demand for vegetable oil. The strong
demand for vegetable oil is the result of strong biodiesel demand. These
increases were partially offset by decreased biodiesel operating profits
resulting from higher vegetable oil prices and lower diesel fuel prices.
Improved operating results in South America and Asia also contributed to the
increase in operating profits.
Corn
Processing operating profits increased $286 million to $878 million for the
nine
months principally due to higher average selling prices and lower energy costs,
partially offset by lower ethanol sales volumes and higher net corn costs.
Sweeteners and Starches operating profits increased $66 million due primarily
to
higher average sales prices and lower energy costs. Sales prices have increased
principally due to good demand for sweetener and starch products. These
increases were partially offset by increased net corn costs. Bioproducts
operating profits increased $220 million primarily due to higher ethanol average
selling prices and lower energy costs, partially offset by increased net corn
costs. Ethanol average sales prices increased principally due to strong demand
from gasoline refiners and higher gasoline prices. Last year’s Bioproducts
operating results included $20 million of severance costs related to the closure
of a citric acid plant.
Agricultural
Services operating profits increased $82 million to $275 million for the nine
months principally due to improved transportation and global grain merchandising
operating results partially offset by lower operating results of North American
origination activities. North American river transportation operating results
increased primarily due to increased barge freight rates created by strong
demand for barge capacity. Global grain merchandising results improved as
regional production imbalances allowed the Company to capitalize on its
merchandising capabilities. North American origination operating results
declined due to reduced grain storage and handling operating results and an
increase in inventory carrying costs. Agricultural Services operating profits
for the nine months include a $12 million trade disruption insurance recovery
related to Hurricane Katrina.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
Other
operating profits increased 38% to $325 million for the nine months. Other
-
Food, Feed and Industrial operating profits increased $50 million and include
a
$53 million gain on the sale of the Company’s Arkady food ingredient business.
Last year’s operating results included a $23 million charge for abandonment and
write-down of long-lived assets, a $9 million charge representing the Company’s
share of a charge for abandonment and write-down of long-lived assets reported
by an unconsolidated affiliate of the Company, and a $15 million charge related
to exiting the European animal feed business. Excluding the effect of these
items, Other - Food, Feed and Industrial operating profits declined $50 million
due primarily to cocoa processing operating results declining from prior year
levels. Cocoa processing operating results declined primarily due to increased
industry capacity which caused downward pressure on cocoa processing margins.
Other - Financial operating profits increased $39 million principally due to
increased valuations of the Company’s private equity fund investments and higher
operating results of the Company’s futures commission merchant business,
partially offset by lower operating results of the Company’s captive insurance
operations. The results of the Company’s captive insurance operations for the
nine months include a $12 million charge related to a Hurricane Katrina trade
disruption insurance settlement.
Corporate
expense increased $97 million to $248 million for the nine months principally
due to a $146 million charge, compared to a $13 million credit in the prior
year, related to the effect of changing commodity prices on LIFO inventory
valuations. In addition, a $17 million reduction in realized securities gains
also contributed to the increase in Corporate expense. These increases were
partially offset by a $74 million reduction in unallocated interest expense
due
principally to higher levels of invested funds and higher interest
rates.
Income
taxes increased due principally to higher pretax earnings and the absence of
last year’s $36 million income tax credit related to the recognition of federal
and state income tax credits and adjustments resulting from the reconciliation
of filed tax returns to the previously estimated tax provision. The Company’s
effective tax rate during the nine months was 31.4% and, after excluding the
effect of last year’s $36 million tax credit, was 32.0% for the prior year. The
decrease in the Company’s effective tax rate is primarily due to changes in the
geographic mix of pretax earnings.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company’s objective is to have sufficient liquidity, balance sheet strength, and
financial flexibility to fund the operating and capital requirements of a
capital intensive agricultural-based commodity business.
At
March
31, 2007, the Company continued to show substantial liquidity with working
capital of $6.9 billion and a current ratio, defined as current assets divided
by current liabilities, of 1.8 to 1. Included in working capital is $1.1 billion
of cash, cash equivalents, and short-term marketable securities as well as
$4.8
billion of readily marketable commodity inventories. Working capital increased
$1.3 billion during the nine months principally due to increased prices and
quantities of agricultural commodity inventories. Capital resources remained
strong as reflected by the increase in the Company’s net worth from $9.8 billion
to $10.7 billion. The Company’s ratio of long-term debt to total capital (the
sum of the Company’s long-term debt and shareholders’ equity) was 33% at March
31, 2007 compared to 29% at June 30, 2006. This ratio is a measure of the
Company’s long-term liquidity and is an indicator of financial flexibility. The
increase in the ratio of long-term debt to total capital is due to the issuance
of $1.2 billion of 0.875% convertible senior notes due in 2014 which is
further described below.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
In
February 2007, the Company issued $1.2 billion principal amount of convertible
senior notes due in 2014 (the Notes) in a private placement. The Notes were
issued at par and bear interest at a rate of 0.875% per year, payable
semiannually. The Notes may be convertible based on an initial conversion
rate
of 22.8343 shares per $1,000 principal amount of Notes (which is equal to
an
initial conversion price of approximately $43.79 per share). The Notes may
be
converted, subject to adjustment, only under the following circumstances:
1)
during any calendar quarter beginning after March 31, 2007, if the closing
price
of the Company’s common stock for at least 20 trading days in the 30 consecutive
trading days ending on the last trading day of the immediately preceding
quarter
is more than 140% of the applicable conversion price per share, which is
$1,000
divided by the then applicable conversion rate, 2) during the five consecutive
business day period immediately after any five consecutive trading day period
(the note measurement period) in which the average of the trading price per
$1,000 principal amount of Notes was equal to or less than 98% of the average
product of the closing price of the Company’s common stock and the conversion
rate of each date during the note measurement period, 3) if the Company makes
specified distributions to its common stockholders or specified corporate
transactions occur, or 4) at any time on or after January 15, 2014, through
the
business day preceding the maturity date. Upon conversion, a holder would
receive an amount in cash equal to the lesser of 1) $1,000 and 2) the conversion
value, as defined. If the conversion value exceeds $1,000, the Company will
deliver, at the Company’s election, cash or common stock or a combination of
cash and common stock for the conversion value in excess of $1,000. If the
Notes
are converted in connection with a change in control, as defined, the Company
may be required to provide a make-whole premium in the form of an increase
in
the conversion rate, subject to a stated maximum amount. In addition, in
the
event of a change in control, the holders may require the Company to purchase
all or a portion of their Notes at a purchase price equal to 100% of the
principal amount of the Notes, plus accrued and unpaid interest, if
any.
Concurrent
with the issuance of the Notes, the Company purchased call options in private
transactions at a cost of $299 million. The purchased call options allow
the
Company to receive shares of its common stock and/or cash from the
counterparties equal to the amounts of common stock and/or cash related to
the
excess of the current market price of the Company’s common stock over the
exercise price of the purchased call options. In addition, the Company sold
warrants in private transactions to acquire, subject to customary anti-dilution
adjustments, 26.3 million shares of its common stock at an exercise price
of
$62.56 per share and received proceeds of $170 million. If the average price
of
the Company’s common stock during a defined period ending on or about the
respective settlement dates exceeds the exercise price of the warrants, the
warrants will be settled, at the Company’s option, in cash or shares of common
stock. The purchased call options and warrants are intended to reduce the
potential dilution upon future conversions of the Notes by effectively
increasing the initial conversion price to $62.56 per share.
As
of
March 31, 2007, none of the conditions permitting conversion of the Notes
had
been satisfied. In addition, as of March 31, 2007, the market price of the
Company’s common stock was not greater than the exercise price of the purchased
call options or warrants.
Upon
closing of the sale of the Notes, $370 million of the net proceeds from the
Note
issuance and the proceeds from the warrant transactions were used to repurchase
10.3 million shares of the Company’s common stock under the Company’s stock
repurchase program.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
|
Contractual
Obligations and Commercial Commitments
During
the
nine months ended March 31, 2007, the Company’s inventory purchase obligations
increased $3.6 billion to $11.1 billion. This increase was principally related
to increased obligations to purchase agricultural commodities. As of March
31,
2007, the Company expects to make payments related to inventory purchase
obligations of $10.8 billion within the next twelve months. In addition,
the
Company’s long-term debt obligations increased due to the issuance of the
aforementioned Notes due in 2014. There were no other material changes in
the
Company’s contractual obligations and off balance sheet arrangements during the
nine months ended March 31, 2007.
Critical
Accounting Policies
There
were
no material changes in the Company’s critical accounting policies during the
nine months ended March 31, 2007.
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 prices as
they
relate to the Company’s net commodity position; marketable equity security
prices; market prices of limited partnerships’ investments; foreign currency
exchange rates; and interest rates. Significant changes in market risk sensitive
instruments and positions for the nine months ended March 31, 2007 are described
below. There were no material changes during the nine months in the Company’s
potential loss arising from changes in market prices of limited partnerships’
investments, marketable equity securities, foreign currency exchange rates,
and
interest rates.
For
detailed information regarding the Company’s market risk sensitive instruments
and positions, see the “Market Risk Sensitive Instruments and Positions” section
of “Management’s Discussion of Operations and Financial Condition” in the
Company’s annual report on Form 10-K for the year ended June 30,
2006.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Continued)
|
Commodities
The
availability and price of agricultural commodities are subject to wide
fluctuations due to unpredictable factors such as weather, plantings, global
government farm programs and policies, changes in global demand resulting
from
population growth and changes in standards of living, and global production
of
similar and competitive crops. A sensitivity analysis has been prepared to
estimate the Company’s exposure to market risk of its commodity position. The
Company’s daily net commodity position consists of inventories, related purchase
and sale contracts, and exchange-traded futures contracts, including those
to
hedge portions of production requirements. The fair value of such position
is a
summation of the fair values calculated for each commodity by valuing each
net
position at quoted futures prices. Market risk is estimated as the potential
loss in fair value resulting from a hypothetical 10 percent adverse change
in
such prices. Actual results may differ.
|
|
MARCH
31, 2007
|
JUNE
30, 2006
|
|
|
|
Fair
Value
|
|
|
Market
Risk
|
|
|
Fair
Value
|
|
|
Market
Risk
|
|
|
|
(in
millions)
|
Highest
long position
|
|
$
|
682
|
|
$
|
68
|
|
$
|
510
|
|
$
|
51
|
|
Highest
short position
|
|
|
565
|
|
|
56
|
|
|
574
|
|
|
57
|
|
Average
position - long (short)
|
|
|
88
|
|
|
9
|
|
|
(203)
|
|
|
(20)
|
|
The
increase in fair value of the average position was principally the result
of an
increase in the daily net commodity position.
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
As
of
March 31, 2007, 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 (a) recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms and (b) 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.
PART
II - OTHER INFORMATION
ITEM
1.
|
LEGAL
PROCEEDINGS
|
ENVIRONMENTAL
MATTERS
The
Company is involved in approximately twenty administrative and judicial
proceedings in which it has been identified as a potentially responsible party
(“PRP”) under the federal Superfund law and its state analogs for the study and
clean-up of sites contaminated by material discharged into the environment.
In
all of these matters there are numerous PRPs. Due to various factors such as
the
required level of remediation and participation in the clean-up effort by
others, the Company’s future clean-up costs at these sites cannot be reasonably
estimated. In management’s opinion, these proceedings will not, either
individually or in the aggregate, have a material adverse affect on the
Company’s financial condition or results of operations.
There
were
no significant changes in the Company’s risk factors during the three months
ended
March
31,
2007.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
ISSUER
PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
Total
Number of
|
|
Number
of Shares
|
|
|
|
Total
Number
|
|
|
Average
|
|
|
Shares
Purchased as
|
|
Remaining
that May be
|
|
|
|
of
Shares
|
|
|
Price
Paid
|
|
|
Part
of Publicly
|
|
Purchased
Under the
|
Period
|
|
|
Purchased
(1)
|
|
|
per
Share
|
|
|
Announced
Program (2)
|
|
Program
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1, 2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
31, 2007
|
|
|
863,317
|
|
$
|
30.97
|
|
|
863,317
|
|
|
87,855,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
1, 2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
28, 2007
|
|
|
10,361,981
|
|
|
35.75
|
|
|
10,352,977
|
|
|
77,502,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
1, 2007 to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2007
|
|
|
13,110
|
|
|
35.47
|
|
|
235
|
|
|
77,502,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,238,408
|
|
$
|
35.38
|
|
|
11,216,529
|
|
|
77,502,078
|
|
(1) |
Total
shares purchased represents those shares purchased as part of the
Company’s publicly announced share repurchase program described below,
shares received as payment of the exercise price for stock option
exercises, and shares received as payment of the withholding taxes
on
vested restricted stock grants. |
|
|
(2) |
On
November 4, 2004, the Company’s Board of Directors approved a stock
repurchase program authorizing the Company to repurchase up to 100,000,000
shares of the Company’s common stock during the period commencing January
1, 2005 and ending December 31,
2009.
|
|
(3)(i) |
Composite Certificate of Incorporation, as amended,
filed
on November 13, 2001 as Exhibit 3(i) to Form 10-Q for the quarter ended
September 30, 2001 (File
No. 1-44),
is
incorporated herein by reference. |
|
(ii)
|
Bylaws,
as amended, filed on February 6, 2007 as Exhibit 3(ii) to Form 8-K
(File
No. 1-44), are incorporated herein by reference.
|
|
(4.1)
|
Indenture,
dated February 22, 2007, between the Company and The Bank of New
York, as
trustee (including form of 0.875% Convertible Senior Notes due 2014),
filed on February 22, 2007 as Exhibit 4.1 to Form 8-K (File No.
1-44), is incorporated herein by
reference.
|
|
(4.2)
|
Registration
Rights Agreement, dated February 22, 2007, among the Company, Citigroup
Global Markets Inc., J.P. Morgan Securities Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America
Securities LLC, Barclays Capital Inc., BNP Paribas Securities Corp.,
Deutsche Bank Securities Inc., Goldman, Sachs & Co. and HSBC
Securities (USA) Inc., filed on February 22, 2007 as Exhibit 4.2 to
Form 8-K (File No. 1-44), is incorporated herein by
reference.
|
|
(10.1)
|
Purchase
Agreement, dated February 15, 2007, among the Company, Citigroup
Global
Markets Inc., J.P. Morgan Securities Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America
Securities LLC, Barclays Capital Inc., BNP Paribas Securities Corp.,
Deutsche Bank Securities Inc., Goldman, Sachs & Co. and HSBC
Securities (USA) Inc., filed on February 22, 2007 as Exhibit 10.1 to
Form 8-K (File No. 1-44), is incorporated herein by
reference.
|
|
(31.1)
|
Certification
of Chief Executive Officer pursuant to Rule 13a - 14(a) and Rule
15d-14(a)
of the Securities Exchange Act, as
amended.
|
|
(31.2)
|
Certification
of Chief Financial Officer pursuant to Rule 13a - 14(a) and Rule
15d-14(a)
of the Securities Exchange Act, as
amended.
|
|
(32.1)
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
(32.2)
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
ARCHER-DANIELS-MIDLAND
COMPANY
|
|
|
|
|
|
/s/
D. J. Schmalz
|
|
|
D.
J. Schmalz
|
|
|
Senior
Vice President
|
|
|
and
Chief Financial Officer
|
|
|
|
|
|
/s/
D. J. Smith
|
|
|
D.
J. Smith
|
|
|
Executive
Vice President, Secretary and
|
|
|
General
Counsel
|
Dated:
May
8, 2007