10-QPeriod: Q1 FY2001

Archer-Daniels-Midland Co Quarterly Report for Q1 Ended Mar 31, 2001

Filed May 9, 2001For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported its financial results for the quarter and nine months ended March 31, 2001. For the third quarter, net sales increased by 15% to $5.1 billion, driven by higher average selling prices and increased volumes in grain merchandising and corn products. However, net earnings for the quarter decreased by 9.6% to $93.1 million, or $0.15 per diluted share, compared to $103.0 million, or $0.16 per diluted share, in the prior year. This decline was largely influenced by a significant increase in "Other income (expense)" due to lower equity in earnings of unconsolidated affiliates and increased interest expense. For the nine months ended March 31, 2001, ADM demonstrated strong top-line growth with net sales up 7% to $14.7 billion. More significantly, net earnings surged by 35.6% to $327.2 million, or $0.52 per diluted share, compared to $241.3 million, or $0.38 per diluted share, in the comparable period of fiscal 2000. This robust earnings growth was bolstered by improved operational performance and a substantial gain from the sale of an affiliate's interests in CIP. Investors should note the company's ongoing engagement in significant antitrust litigation, with no provisions made for potential liabilities in these matters.

Key Highlights

  • 1Net sales for the three months ended March 31, 2001, increased 15% to $5.1 billion, while net earnings decreased 9.6% to $93.1 million ($0.15/share).
  • 2For the nine months ended March 31, 2001, net sales increased 7% to $14.7 billion, and net earnings increased 35.6% to $327.2 million ($0.52/share).
  • 3The increase in sales was driven by higher average selling prices and increased volumes, particularly in grain merchandising and corn products.
  • 4Operating earnings increased for both the quarter and nine-month periods, indicating improved core business performance.
  • 5"Other income (expense)" significantly impacted the current quarter's results, turning from a gain of $4.8 million in the prior year to an expense of $44.9 million, primarily due to lower equity in earnings of affiliates.
  • 6ADM has adopted SFAS 133 (Accounting for Derivative Instruments and Hedging Activities) and EITF 99-19 (Reporting Revenue Gross vs. Net), impacting comparability with prior periods.
  • 7The company continues to be involved in extensive antitrust litigation, with no provisions made in the financial statements for potential liabilities from these ongoing proceedings.

Frequently Asked Questions

While net sales increased by 15% to $5.1 billion for the quarter ended March 31, 2001, net earnings decreased by 9.6% to $93.1 million. This decline was primarily due to a significant swing in 'Other income (expense)', which went from a net gain of $4.8 million in the prior year to a net expense of $44.9 million in the current quarter. This was largely driven by lower equity in earnings of unconsolidated affiliates and increased interest expenses.

ADM adopted SFAS 133, 'Accounting for Derivative Instruments and Hedging Activities,' effective July 1, 2000, which led to a cumulative effect adjustment to other comprehensive income. They also adopted EITF 99-19, 'Reporting Revenue Gross as a Principal Versus Net as an Agent,' which changed how they report 'Net sales and other operating income' for grain merchandising. Prior year amounts have been reclassified to conform to this change, which impacts comparability of revenue figures but not gross profit.

ADM is involved in numerous ongoing antitrust lawsuits and governmental investigations related to the sale of products like lysine, citric acid, high-fructose corn syrup, and monosodium glutamate. While the company has made provisions for certain costs related to some of these proceedings, the ultimate outcome and materiality of many others, particularly those involving high-fructose corn syrup, cannot currently be determined. Consequently, no provision for potential liabilities from these undetermined matters has been made in the consolidated financial statements.

For the nine months ended March 31, 2001, ADM reported significant increases in sales for grain merchandised (up 23%) and corn products (up 21%), driven by higher volumes and prices. Oilseed product sales decreased 3% overall due to lower volumes from facility closures, though protein meal demand was strong. Wheat and other milled products sales decreased 5% due to flat demand and industry overcapacity. Despite these segment-specific variations, the overall net sales increased 7%, and net earnings saw a substantial rise of 35.6% for the nine-month period.