XLON:0JQQ Archer-Daniels Midland Company Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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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, 2012
OR

o
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
ADM Logo
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 has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x  No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  x                                                      Accelerated Filer  o
Non-accelerated Filer     o                                                      Smaller reporting Company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o  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 – 658,525,757 shares
(April 30, 2012)
 

 


PART I - FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

Archer-Daniels-Midland Company

Consolidated Statements of Earnings
(Unaudited)


   
Three Months Ended
 
   
March 31,
 
   
2012
   
2011
 
   
(In millions, except
 
   
per share amounts)
 
             
Net sales and other operating income
  $ 21,155     $ 20,077  
Cost of products sold
    20,147       18,917  
Gross Profit
    1,008       1,160  
                 
Selling, general, and administrative expenses
    402       395  
Asset impairment, exit, and restructuring costs
    85        
Interest expense
    116       121  
Equity in earnings of unconsolidated affiliates
    (115 )     (71 )
Interest income
    (26 )     (32 )
Other (income) expense – net
    (22 )     (44 )
Earnings Before Income Taxes
    568       791  
                 
Income taxes
    163       223  
Net Earnings Including Noncontrolling Interests
    405       568  
                 
Less: Net earnings (losses) attributable to noncontrolling interests
    6       (10 )
                 
Net Earnings Attributable to Controlling Interests
  $ 399     $ 578  
                 
 
Average number of shares outstanding – basic
    662       638  
                 
Average number of shares outstanding – diluted
    663       684  
                 
Basic earnings per common share
  $ 0.60     $ 0.91  
                 
Diluted earnings per common share
  $ 0.60     $ 0.86  
                 
Dividends per common share
  $ 0.175     $ 0.160  


See notes to consolidated financial statements.


 
 

 


Archer-Daniels-Midland Company

Consolidated Statements of Earnings
(Unaudited)


   
Nine Months Ended
 
   
March 31,
 
   
2012
   
2011
 
   
(In millions, except
 
   
per share amounts)
 
             
Net sales and other operating income
  $ 66,363     $ 57,806  
Cost of products sold
    63,508       54,604  
Gross Profit
    2,855       3,202  
                 
Selling, general, and administrative expenses
    1,232       1,188  
Asset impairment, exit, and restructuring costs
    437        
Interest expense
    325       353  
Equity in earnings of unconsolidated affiliates
    (366 )     (334 )
Interest income
    (88 )     (97 )
Other (income) expense – net
    (34 )     (159 )
Earnings Before Income Taxes
    1,349       2,251  
                 
Income taxes
    400       612  
Net Earnings Including Noncontrolling Interests
    949       1,639  
                 
Less: Net earnings (losses) attributable to noncontrolling interests
    10       (16 )
                 
Net Earnings Attributable to Controlling Interests
  $ 939     $ 1,655  
                 
 
Average number of shares outstanding – basic
    667       639  
                 
Average number of shares outstanding – diluted
    668       655  
                 
Basic earnings per common share
  $ 1.41     $ 2.59  
                 
Diluted earnings per common share
  $ 1.41     $ 2.55  
                 
Dividends per common share
  $ 0.51     $ 0.46  


See notes to consolidated financial statements.


 
 

 

Archer-Daniels-Midland Company

Consolidated Balance Sheets
 
   
(Unaudited)
   
   
March 31,
June 30,
 
   
2012
2011
 
   
(In millions)
 
             
Assets
           
Current Assets
           
Cash and cash equivalents
  $ 818     $ 615  
Short-term marketable securities
    428       739  
Segregated cash and investments
    3,542       3,396  
Trade receivables
    3,078       4,808  
Inventories
    13,232       12,055  
Other current assets
    6,117       5,891  
Total Current Assets
    27,215       27,504  
                 
Investments and Other Assets
               
Investments in and advances to affiliates
    3,385       3,240  
Long-term marketable securities
    320       666  
Goodwill
    596       602  
Other assets
    542       681  
Total Investments and Other Assets
    4,843       5,189  
                 
Property, Plant, and Equipment
               
Land
    325       305  
Buildings
    4,597       4,413  
Machinery and equipment
    16,705       16,245  
Construction in progress
    1,012       765  
      22,639       21,728  
Accumulated depreciation
    (12,839 )     (12,228 )
Net Property, Plant, and Equipment
    9,800       9,500  
Total Assets
  $ 41,858     $ 42,193  
                 
Liabilities and Shareholders’ Equity
               
Current Liabilities
               
Short-term debt
  $ 1,987     $ 1,875  
Trade payables
    3,122       2,581  
Accrued expenses and other payables
    7,885       8,584  
Current maturities of long-term debt
    1,800       178  
Total Current Liabilities
    14,794       13,218  
                 
Long-Term Liabilities
               
Long-term debt
    6,543       8,266  
Deferred income taxes
    873       859  
Other
    1,097       1,012  
Total Long-Term Liabilities
    8,513       10,137  
                 
Shareholders’ Equity
               
Common stock
    6,170       6,636  
Reinvested earnings
    12,606       11,996  
Accumulated other comprehensive income (loss)
    (423 )     176  
Noncontrolling interests
    198       30  
Total Shareholders’ Equity
    18,551       18,838  
Total Liabilities and Shareholders’ Equity
  $ 41,858     $ 42,193  

See notes to consolidated financial statements.
 
 

 

Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows
(Unaudited)
   
Nine Months Ended
 
   
March 31,
 
   
2012
   
2011
 
   
(In millions)
 
Operating Activities
           
Net earnings including noncontrolling interests
  $ 949     $ 1,639  
Adjustments to reconcile net earnings to net cash provided by
               
(used in) operating activities
               
Depreciation and amortization
    628       665  
Asset impairment charges
    366        
Deferred income taxes
    48       185  
Equity in earnings of affiliates, net of dividends
    (208 )     (222 )
Gain on Golden Peanut revaluation
          (71 )
Stock compensation expense
    41       41  
Pension and postretirement accruals, net
    125       69  
Deferred cash flow hedges
    (33 )     (13 )
Other – net
    13       (72 )
Changes in operating assets and liabilities, net of businesses
   acquired
               
Segregated cash and investments
    (145 )     (691 )
Trade receivables
    1,429       (876 )
Inventories
    (1,109 )     (5,121 )
Other current assets
    (396 )     (2,914 )
Trade payables
    474       1,102  
Accrued expenses and other payables
    76       1,530  
Total Operating Activities
    2,258       (4,749 )
                 
Investing Activities
               
Purchases of property, plant, and equipment
    (1,193 )     (913 )
Proceeds from sales of property, plant, and equipment
    39       52  
Net assets of businesses acquired
    (239 )     (206 )
Cash divested from deconsolidation
    (130 )      
Purchases of marketable securities
    (1,130 )     (1,874 )
Proceeds from sales of marketable securities
    1,526       1,370  
Other – net
    30       (16 )
Total Investing Activities
    (1,097 )     (1,587 )
                 
Financing Activities
               
Long-term debt borrowings
    95       1,563  
Long-term debt payments
    (224 )     (306 )
Net borrowings (payments) under lines of credit agreements
    36       5,259  
Debt exchange premiums
    (32 )      
Purchases of treasury stock
    (483 )     (94 )
Cash dividends
    (339 )     (293 )
Acquisition of noncontrolling interest
    (19 )      
Other – net
    8       19  
Total Financing Activities
    (958 )     6,148  
                 
Increase (decrease) in cash and cash equivalents
    203       (188 )
Cash and cash equivalents beginning of period
    615       1,046  
                 
Cash and cash equivalents end of period
  $ 818     $ 858  
                 
See notes to consolidated financial statements.

 
 

 


Archer-Daniels-Midland-Company

Consolidated Statement of Shareholders’ Equity
(Unaudited)


               
Accumulated
             
               
Other
         
Total
 
   
Common Stock
   
Reinvested
   
Comprehensive
   
Noncontrolling
   
Shareholders’
 
   
Shares
   
Amount
   
Earnings
   
Income (Loss)
   
Interests
   
Equity
 
                     
(In millions)
             
                                     
Balance June 30, 2011
    676     $ 6,636     $ 11,996     $ 176     $ 30     $ 18,838  
                                                 
Comprehensive income
                                               
   Net earnings
                    939               10          
   Other comprehensive
     income
                            (599 )     2          
      Total comprehensive
        income
                                            352  
Cash dividends paid-
   $0.51 per share
                    (339 )                     (339 )
Treasury stock purchases
    (17 )     (483 )                             (483 )
Stock compensation
   expense
            41                               41  
Noncontrolling interests
   previously associated
   with mandatorily
   redeemable
   instruments
                    10                 174       184  
Acquisition of
   noncontrolling
   interests
            (5 )                     (14 )     (19 )
Other
    1       (19 )                     (4 )     (23 )
Balance March 31, 2012
    660     $ 6,170     $ 12,606     $ (423 )   $ 198     $ 18,551  
                                                 

See notes to consolidated financial statements.




 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements
(Unaudited)


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 ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending June 30, 2012.  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, 2011.

Principles of Consolidation

On September 30, 2011, the Company finalized the sale of the majority ownership interest of Hickory Point Bank and Trust Company, fsb (Bank), a previously wholly-owned subsidiary.  As a result, the accounts of the Bank were deconsolidated with no material effect to after-tax earnings for the nine months ended March 31, 2012.  The Company accounts for its remaining ownership interest in the Bank under the equity method.

Prior to December 31, 2011, the Company consolidated certain less than wholly-owned subsidiaries for which the minority interest was subject to a put option and considered mandatorily redeemable.  On December 31, 2011, the put option expired and as a result, the Company reclassified $174 million of minority interest from other long-term liabilities to noncontrolling interests in shareholders’ equity at that date.

Adoption of New Accounting Standards

Effective July 1, 2011, the Company adopted the second phase of the amended guidance in Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, which requires the Company to disclose information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis, separate for assets and liabilities.  The adoption of this amended guidance requires expanded disclosure in the notes to the Company’s consolidated financial statements but does not impact financial results (see Note 4 for the disclosures required by this guidance).

Effective March 31, 2012, the Company adopted the amended guidance of ASC Topic 820, Fair Value Measurements and Disclosures, which clarifies or changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements.  The adoption of this amended guidance requires expanded disclosure in the notes to the Company’s consolidated financial statements but does not impact financial results (see Note 4 for the disclosures required by this guidance).

Reclassifications

Other (income) expense – net in prior year’s consolidated statement of earnings has been reclassified to conform to the current year’s presentation with corresponding changes to certain prior year items in Notes 5 and 13.  These reclassifications had no impact to net earnings attributable to controlling interests.  In addition, receivables and accounts payable in the prior year consolidated balance sheet have been reclassified to conform to the current year’s presentation where trade receivables and trade payables are now shown separately from other receivables and other payables, respectively.  Other receivables and other payables are now included in other current assets and accrued expenses and other payables, respectively.  These changes are also reflected in the prior year consolidated statement of cash flows with no impact to total cash provided by (used in) operating, investing, or financing activities.



 
 

 

 
 
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 1.
Basis of Presentation (Continued)

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.

Note 2.
Pending Accounting Standards

Effective July 1, 2012, the Company will be required to adopt the amended guidance of ASC Topic 220, Comprehensive Income, which requires the Company to present total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The amended guidance eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity.  The Company will be required to apply the presentation and disclosure requirements of the amended guidance retrospectively.  The adoption of this amended guidance will change financial statement presentation and require expanded disclosures in the Company’s consolidated financial statements but will not impact financial results.

Effective July 1, 2012, the Company will be required to adopt the amended guidance of ASC Topic 350, Intangibles – Goodwill and Other, which changes the process for how entities test goodwill for impairment.  The amended guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350.  Early adoption of this amended guidance is permitted.  The Company does not expect any impact on its financial results as a result of the adoption of this amended guidance.

Note 3.
Acquisitions

During the nine months ended March 31, 2012, the Company acquired eight businesses for a total cost of $239 million and recorded a preliminary allocation of the purchase price related to these acquisitions.
 
The net cash purchase price for the eight acquisitions of $239 million was allocated to working capital, property, plant, and equipment, goodwill, other long-term assets, and long-term liabilities for $(12) million, $201 million, $40 million, $13 million and $3 million, respectively.


 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 4.
Fair Value Measurements

The Company determines the fair value of certain of its inventories of agricultural commodities, derivative contracts, and marketable securities based on the fair value definition and hierarchy levels established in the guidance of ASC Topic 820, Fair Value Measurements and Disclosures.  Three levels are established within the hierarchy that may be used to measure fair value:

Level 1:  Quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 1 assets and liabilities include exchange-traded derivative contracts, U.S. treasury securities and certain publicly traded equity securities.

Level 2:  Observable inputs, including Level 1 prices that have been adjusted; quoted prices for similar assets or liabilities; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be substantially corroborated by observable market data.

Level 3:  Unobservable inputs that are supported by little or no market activity or a limited number of third- party quotes and that are a significant component of the fair value of the assets or liabilities.  In evaluating the significance of fair value inputs, the Company generally classifies assets or liabilities as Level 3 when their fair value is determined using unobservable inputs that individually or when aggregated with other unobservable inputs, represent more than 10% of the fair value of the assets or liabilities.  Judgment is required in evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification.  Level 3 amounts can include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation.

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurement determines the placement of the entire fair value measurement in the hierarchy.  The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment that may affect the classification of fair value assets and liabilities within the fair value hierarchy levels.

The Company’s policy regarding the timing of transfers between levels, including both transfers into and transfers out of Level 3, is to measure and record the transfers at the end of the reporting period. For the period ended March 31, 2012, the Company had no transfers between Levels 1 and 2.  Transfers into Level 3 of assets and liabilities previously classified in Level 2 were due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts rising above the 10% threshold.   Transfers out of Level 3 were primarily due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts falling below the 10% threshold and thus permitting reclassification to Level 2.


 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 4.
Fair Value Measurements (Continued)
 
The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2012 and June 30, 2011.
 
   
Fair Value Measurements at March 31, 2012
 
   
 
Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)
   
Significant
 Other
 Observable
 Inputs
 (Level 2)
   
 
Significant 
Unobservable
Inputs
(Level 3)
   
 
 
 
 Total
 
   
(In millions)
 
                         
Assets:
                       
Inventories carried at market
  $     $ 5,604     $ 1,725     $ 7,329  
Unrealized derivative gains:
                               
  Commodity contracts
    1,270       1,006       232       2,508  
  Foreign exchange contracts
          180             180  
Marketable securities
    1,936       50             1,986  
Deferred receivables consideration
          710             710  
Total Assets
  $ 3,206     $ 7,550     $ 1,957     $ 12,713  
                                 
Liabilities:
                               
Unrealized derivative losses:
                               
  Commodity contracts
  $ 1,511     $ 845     $ 184     $ 2,540  
  Foreign exchange contracts
          188             188  
Inventory-related payables
          311       137       448  
Total Liabilities
  $ 1,511     $ 1,344     $ 321     $ 3,176  


 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 4.
Fair Value Measurements (Continued)

   
Fair Value Measurements at June 30, 2011
 
   
 
Quoted Prices in
 Active Markets
 for Identical
 Assets
 (Level 1)
   
Significant
 Other
 Observable
 Inputs
 (Level 2)
   
 
Significant 
Unobservable
Inputs
(Level 3)
   
 
 
 
 Total
 
   
(In millions)
 
                         
Assets:
                       
Inventories carried at market
  $     $ 5,153     $ 762     $ 5,915  
Unrealized derivative gains:
                               
  Commodity contracts
    1,198       1,457       112       2,767  
  Foreign exchange contracts
          237             237  
  Interest rate contracts
          3             3  
Marketable securities
    1,628       328             1,956  
Total Assets
  $ 2,826     $ 7,178     $ 874     $ 10,878  
                                 
Liabilities:
                               
Unrealized derivative losses:
                               
  Commodity contracts
  $ 1,317     $ 1,193     $ 44     $ 2,554  
  Foreign exchange contracts
          178             178  
Inventory-related payables
          278       45       323  
Total Liabilities
  $ 1,317     $ 1,649     $ 89     $ 3,055  


The Company uses the market approach valuation technique to measure the majority of its assets and liabilities carried at fair value.  Estimated fair values for inventories carried at market are based on exchange-quoted prices, adjusted for differences in local markets, broker or dealer quotations or market transactions in either listed or over-the-counter (OTC) markets.  Market valuations for the Company’s inventories are adjusted for location and quality because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade.  Generally, the valuations are based on price information that is observable by market participants, or rely only on insignificant unobservable information.  In such cases, the inventory is classified in Level 2.  Certain inventories may require management judgment or estimation for a more significant component of the fair value amount.  For these inventories, the availability of sufficient third-party information is limited.  In such cases, the inventory is classified as Level 3. Changes in the fair value of inventories are recognized in the consolidated statements of earnings as a component of cost of products sold.

 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 4.
Fair Value Measurements (Continued)
 
The Company’s derivative contracts that are measured at fair value include forward commodity purchase and sale contracts, exchange-traded commodity futures and option contracts, and OTC instruments related primarily to agricultural commodities, ocean freight, energy, interest rates, and foreign currencies.  Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1.  The majority of the Company’s exchange-traded futures and options contracts are cash-settled on a daily basis and, therefore, are not included in the fair value tables.  Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets.  These differences are generally determined using inputs from broker or dealer quotations or market transactions in either the listed or OTC markets.  When observable inputs are available for substantially the full term of the contract, it is classified in Level 2.  When unobservable inputs have a significant impact on the measurement of fair value, the contract is classified in Level 3. Based on historical experience with the Company’s suppliers and customers, the Company’s own credit risk and knowledge of current market conditions, the Company does not view nonperformance risk to be a significant input to fair value for the majority of its forward commodity purchase and sale contracts.  However, in certain cases, if the Company believes the nonperformance risk to be a significant input, the Company records estimated fair value adjustments, and classifies the contract in Level 3. Except for certain derivatives designated as cash flow hedges, changes in the fair value of commodity-related derivatives are recognized in the consolidated statements of earnings as a component of cost of products sold.  Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of net sales and other operating income, cost of products sold, and other (income) expense – net.  The effective portions of changes in the fair value of derivatives designated as cash flow hedges are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) (AOCI) until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur.

The Company’s marketable securities are comprised of U.S. Treasury securities, obligations of U.S. government agencies, corporate and municipal debt securities, and equity investments.  U.S. Treasury securities and certain publicly traded equity investments are valued using quoted market prices and are classified in Level 1.  U.S. government agency obligations, corporate and municipal debt securities and certain equity investments are valued using third-party pricing services and substantially all are classified in Level 2.  Security values that are determined using pricing models are classified in Level 3.  Unrealized changes in the fair value of available-for-sale marketable securities are recognized in the consolidated balance sheets as a component of AOCI unless a decline in value is deemed to be other-than-temporary at which point the decline is recorded in earnings.

The Company has deferred consideration under its accounts receivable securitization program (the “Program”) which represents a note receivable from the purchasers under the Program.  This amount is reflected in other current assets on the consolidated balance sheet (see Note 16).  The Company carries the deferred consideration at fair value determined by calculating the expected amount of cash to be received.  The fair value is principally based on observable inputs (a Level 2 measurement) consisting mainly of the face amount of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate.  Payment of deferred consideration is not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred under the program which have historically been insignificant.
 
 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 4.
Fair Value Measurements (Continued)
 
The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2012.

   
Level 3 Fair Value Asset Measurements at
March 31, 2012
 
   
Inventories
Carried
at
Market
   
Commodity
Derivative
Contracts
Gains
   
Total
Assets
 
    (In millions)  
                   
Balance, December 31, 2011
  $ 1,624     $ 198     $ 1,822  
   Total increase (decrease) in
      unrealized gains included in
      cost of products sold
    41       165       206  
   Purchases
    1,286             1,286  
   Sales
    (285 )           (285 )
   Settlements
          (100 )     (100 )
   Transfers into Level 3
    72       19       91  
   Transfers out of Level 3
    (1,013 )     (50 )     (1,063 )
Ending balance, March 31, 2012
  $ 1,725     $ 232     $ 1,957  

The following table presents a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2012.

   
Level 3 Fair Value Liability Measurements at
March 31, 2012
 
   
Inventory-
 related
 Payables
   
Commodity
Derivative
Contracts
Losses
   
Total 
Liabilities
 
   
(In millions)
 
                   
Balance, December 31, 2011
  $ 196     $ 192     $ 388  
   Total increase (decrease) in unrealized losses
      included in cost of products sold
          159       159  
   Purchases
    (1 )           (1 )
   Sales
    82             82  
   Settlements
          (141 )     (141 )
   Transfers into Level 3
          12       12  
   Transfers out of Level 3
    (140 )     (38 )     (178 )
Ending balance, March 31, 2012
  $ 137     $ 184     $ 321  


 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 4.
Fair Value Measurements (Continued)
 
The following table presents a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2011.
 
   
Level 3 Fair Value Measurements at
March 31, 2011
 
   
Inventories
 Carried at
 Market, Net
   
Commodity
Derivative
Contracts,
Net
   
 
 Total
 
   
(In millions)
 
                   
Balance, December 31, 2010
  $ 306     $ 92     $ 398  
   Total gains (losses), realized or
      unrealized, included in earnings
      before income taxes*
    236       4       240  
   Purchases, issuances and settlements
    (46 )     (4 )     (50 )
   Transfers into Level 3
    142       13       155  
   Transfers out of Level 3
          (10 )     (10 )
Ending balance, March 31, 2011
  $ 638     $ 95     $ 733  

*Includes gains of $79 million that are attributable to the change in unrealized gains or losses relating to Level 3 assets and liabilities still held at March 31, 2011.

The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended March 31, 2012.

   
Level 3 Fair Value Asset Measurements at
March 31, 2012
 
   
Inventories 
Carried at
 Market
   
Commodity
Derivative
Contracts
Gains
   
 
Total Assets
 
    (In millions)  
                   
Balance, June 30, 2011
  $ 762     $ 112     $ 874  
   Total increase (decrease) in unrealized gains
      included in cost of products sold
    23       500       523  
   Purchases
    2,381       4       2,385  
   Sales
    (1,509 )           (1,509 )
   Settlements
          (344 )     (344 )
   Transfers into Level 3
    1,145       103       1,248  
   Transfers out of Level 3
    (1,077 )     (143 )     (1,220 )
Ending balance, March 31, 2012
  $ 1,725     $ 232     $ 1,957  



 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 4.
Fair Value Measurements (Continued)

The following table presents a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended March 31, 2012.

   
Level 3 Fair Value Liability Measurements at
March 31, 2012
 
   
Inventory-
 related
 Payables
   
Commodity
Derivative
Contracts
Losses
   
 
Total 
Liabilities
 
   
(In millions)
 
                   
Balance, June 30, 2011
  $ 45     $ 44     $ 89  
   Total increase (decrease) in unrealized losses
      included in cost of products sold
    4       465       469  
   Purchases
    (3 )     1       (2 )
   Sales
    78             78  
   Settlements
          (280 )     (280 )
   Transfers into Level 3
    153       31       184  
   Transfers out of Level 3
    (140 )     (77 )     (217 )
Ending balance, March 31, 2012
  $ 137     $ 184     $ 321  

The following table presents a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended March 31, 2011.

   
Level 3 Fair Value Measurements at
March 31, 2011
 
   
Inventories
 Carried at
 Market, Net
   
Derivative
Contracts,
Net
   
 
 Total
 
   
(In millions)
 
                   
Balance, June 30, 2010
  $ 427     $ 13     $ 440  
   Total gains (losses), realized or
      unrealized, included in earnings
      before income taxes*
    240       102       342  
   Purchases, issuances and settlements
    68       (1 )     67  
   Transfers into Level 3
    150       13       163  
   Transfers out of Level 3
    (247 )     (32 )     (279 )
Ending balance, March 31, 2011
  $ 638     $ 95     $ 733  


* Includes gains of $248 million that are attributable to the change in unrealized gains or losses relating to Level 3 assets and liabilities still held at March 31, 2011.

 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.
Fair Value Measurements (Continued)

Fair values for inventories and commodity purchase and sale contracts are generally estimated based on observable, exchange-quoted futures prices adjusted as needed to arrive at prices in local markets.  Exchange-quoted futures prices represent quotes for contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade.  In some cases, the price components that result in differences between the exchange-traded prices and the local prices are observable based upon available quotations for these pricing components, and in some cases, the differences are unobservable.  These price components primarily include transportation costs and other adjustments required due to location, quality, or other contract terms.  In the table below, these other adjustments will be referred to as Basis.

The changes in unobservable price components are determined by specific local supply and demand characteristics at each facility and the overall market.  Factors such as substitute products, weather, fuel costs, contract terms, and futures prices will also impact the movement of these unobservable price components.

The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of March 31, 2012.  The Company’s Level 3 measurements may include Basis only, transportation cost only, or both price components.  As an example, for Level 3 commodity derivative contracts with Basis, the unobservable component is a weighted average 15.1% of the total price for assets and 24.1% for liabilities.

   
Weighted Average
% of Total Price
 
Component Type
 
Assets
   
Liabilities
 
             
Commodity Derivative Contracts
           
   Basis
    15.1 %     24.1 %
   Transportation cost
    9.7 %     12.1 %
                 
Inventories
               
   Basis
    10.5 %     4.8 %
   Transportation cost
    6.2 %     9.1 %
                 

In certain of the Company’ principal markets, the Company relies on price quotes from third parties to value its inventories and physical commodity purchase and sale contracts.  These price quotes are generally not further adjusted by the Company in determining the applicable market price.  In some cases, availability of third-party quotes is limited to only one or two independent sources.  In these situations, the Company considers these price quotes as 100 percent unobservable and, therefore, the fair value of these items is reported in Level 3.
 
 
 

 

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.
Derivative Instruments and Hedging Activities

The Company recognizes all of its derivative instruments as either assets or liabilities at fair value in its consolidated balance sheets.  The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.  The majority of the Company’s derivatives have not been designated as hedging instruments.  For those derivative instruments that are designated and qualify as hedging instruments, a reporting entity must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, a cash flow hedge, or a hedge of a net investment in a foreign operation.  As of March 31, 2012 and June 30, 2011, the Company has certain derivatives designated as cash flow hedges.  Within the Note 5 tables, zeros represent minimal amounts.

Derivatives Not Designated as Hedging Instruments

The Company generally follows a policy of using exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts to reduce price risk caused by market fluctuations in agricultural commodities and foreign currencies.  The Company also uses exchange-traded futures and exchange-traded and OTC options contracts as components of merchandising strategies designed to enhance margins.  The results of these strategies can be significantly impacted by factors such as the volatility of the relationship between the value of exchange-traded commodities futures contracts and the cash prices of the underlying commodities, counterparty contract defaults, and volatility of freight markets.  Exchange-traded futures, exchange-traded and OTC options contracts, and forward cash purchase and sales contracts of certain merchandisable agricultural commodities accounted for as derivatives are stated at fair value.  Inventories of certain merchandisable agricultural commodities, which include amounts acquired under deferred pricing contracts, are stated at market value.  Inventory is not a derivative and therefore is not included in the tables below.  Changes in the market value of inventories of certain merchandisable agricultural commodities, forward cash purchase and sales contracts, exchange-traded futures, and exchange-traded and OTC options contracts are recognized in earnings immediately.  Unrealized gains and unrealized losses on forward cash purchase contracts, forward foreign currency exchange (FX) contracts, forward cash sales contracts, and exchange-traded and OTC options contracts represent the fair value of such instruments and are classified on the Company’s consolidated balance sheets as other current assets and accrued expenses and other payables, respectively.

At March 31, 2010, the Company de-designated and discontinued hedge accounting treatment for certain interest rate swaps, which were related to the anticipated remarketing of certain long-term debt.  At the date of de-designation of these hedges, $21 million of after-tax gains were deferred in AOCI.  In March 2011, these interest rate swaps were terminated upon the remarketing of the long-term debt.  The $21 million gains deferred in AOCI are being amortized over 30 years.  The Company recognized in earnings pre-tax gains from these interest rate swaps of $6 million and $30 million during the quarter and nine months ended March 31, 2011, respectively.

The following table sets forth the fair value of derivatives not designated as hedging instruments as of  March 31, 2012 and June 30, 2011.

   
March 31, 2012
   
June 30, 2011
 
   
Assets
   
Liabilities
   
Assets
   
Liabilities
 
   
(In millions)
   
(In millions)
 
                         
FX Contracts
  $ 180     $ 188     $ 237     $ 178  
Interest Contracts
                3        
Commodity Contracts
    2,508       2,540       2,766       2,553  
Total
  $ 2,688     $ 2,728     $ 3,006     $ 2,731  
 
 
 

 
 
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 5.
Derivative Instruments and Hedging Activities (Continued)

The following table sets forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended March 31, 2012 and 2011.

   
Three months ended March 31,
 
   
2012
   
2011
 
   
(In millions)
 
Interest Contracts
           
    Interest expense
  $ 0     $ 0  
    Other income (expense) – net
          6  
                 
FX Contracts
               
    Net sales and other operating income
  $ 9     $ (11 )
    Cost of products sold
    30       41  
    Other income (expense) – net
    141       35  
                 
Commodity Contracts
               
    Cost of products sold
  $ (232 )   $ (104 )
        Total gain (loss) recognized in earnings
  $ (52 )   $ (33 )

   
Nine months ended March 31,
 
   
2012
   
2011
 
   
(In millions)
 
Interest Contracts
           
    Interest expense
  $ 0     $ 0  
    Other income (expense) – net
          30  
                 
FX Contracts
               
    Net sales and other operating income
  $ 42     $ (18 )
    Cost of products sold
    (86 )     105  
    Other income (expense) – net
    72       67  
                 
Commodity Contracts
               
    Cost of products sold
  $ (236 )   $ (1,911 )
        Total gain (loss) recognized in earnings
  $ (208 )   $ (1,727 )

Derivatives Designated as Cash Flow Hedging Strategies

For derivative instruments that are designated and qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into earnings in the same line item affected by the hedged transaction and in the same period or periods during which the hedged transaction affects earnings.  The remaining gain or loss on the derivative instrument that is in excess of the cumulative change in the cash flows of the hedged item, if any (i.e., the ineffective portion), hedge components excluded from the assessment of effectiveness, and gains and losses related to discontinued hedges are recognized in the consolidated statement of earnings during the current period.

 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 5.
Derivative Instruments and Hedging Activities (Continued)

For each of the commodity hedge programs described below, the derivatives are designated as cash flow hedges.  The changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item.  Once the hedged item is recognized in earnings, the gains/losses arising from the hedge will be reclassified from AOCI to either net sales and other operating income, cost of products sold, interest expense or other income (expense) – net, as applicable.  As of March 31, 2012, the Company has $20 million of after-tax losses in AOCI related to gains and losses from commodity cash flow hedge transactions.  The Company expects to recognize $19 million of these after-tax losses in its consolidated statement of earnings during the next 12 months.

The Company, from time to time, uses futures or options contracts to fix the purchase price of anticipated volumes of corn to be purchased and processed in a future month.  The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn.  The Company’s corn processing plants currently grind approximately 76 million bushels of corn per month.  During the past 12 months, the Company hedged between 1% and 100% of its monthly anticipated grind.  At March 31, 2012, the Company has designated hedges representing between 1% and 26% of its anticipated monthly grind of corn for the next 21 months.

The Company, from time to time, also uses futures, options, and swaps to fix the purchase price of the Company’s anticipated natural gas requirements for certain production facilities.  The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of natural gas.  These production facilities use approximately 3.75 million MMbtus of natural gas per month.  During the past 12 months, the Company hedged between 21% and 50% of the quantity of its anticipated monthly natural gas purchases.  At March 31, 2012, the Company has designated hedges representing between 5% and 19% of its anticipated monthly natural gas purchases for the next 9 months.

The Company, from time to time, also uses futures, options, and swaps to fix the sales price of certain ethanol sales contracts.  The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s sales of ethanol under sales contracts that are indexed to unleaded gasoline prices.  During the past 12 months, the Company hedged between 10 million to 19 million gallons of ethanol per month under this program.  At March 31, 2012, the Company has designated hedges representing between 3 million to 16 million gallons of contracted ethanol sales per month over the next 9 months.

To protect against fluctuations in cash flows due to foreign currency exchange rates, the Company from time to time will use forward foreign exchange contracts as cash flow hedges.  Certain production facilities have manufacturing expenses and equipment purchases denominated in non-functional currencies.  To reduce the risk of fluctuations in cash flows due to changes in the exchange rate between functional versus non-functional currencies, the Company will hedge some portion of the forecasted foreign currency expenditures.  At March 31, 2012, the Company has $1 million of after-tax losses in AOCI related to foreign exchange contracts designated as cash flow hedging instruments.  The Company will recognize the $1 million of losses in its consolidated statement of earnings over the life of the hedged transactions.

The Company, from time to time, uses treasury-lock agreements and interest rate swaps in order to lock in the Company’s interest rate prior to the issuance or remarketing of its long-term debt.  Both the treasury-lock agreements and interest rate swaps were designated as cash flow hedges of the risk of changes in the future interest payments attributable to changes in the benchmark interest rate.  The objective of the treasury-lock agreements and interest rate swaps was to protect the Company from changes in the benchmark rate from the date of hedge designation to the date when the debt was actually issued.  At March 31, 2012, AOCI included $22 million of after-tax gains related to treasury-lock agreements and interest rate swaps, of which, $20 million relates to the interest swaps that were de-designated at March 31, 2010 as discussed earlier in Note 5.

 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 5.
Derivative Instruments and Hedging Activities (Continued)

The Company will recognize the $22 million of gains in its consolidated statement of earnings over the terms of the hedged items, which range from 10 to 30 years.
  
The following tables set forth the fair value of derivatives designated as hedging instruments as of March 31, 2012 and June 30, 2011.

   
March 31, 2012
   
June 30, 2011
 
   
Assets
   
Liabilities
   
Assets
   
Liabilities
 
   
(In millions)
   
(In millions)
 
                         
Commodity Contracts
  $ 0     $ 0     $ 1     $ 1  
        Total
  $ 0     $ 0     $ 1     $ 1  

The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended March 31, 2012 and 2011.
 
 
     
Three months ended
 
 
Consolidated Statement of
 
March 31,
 
 
Earnings Locations
 
2012
   
2011
 
     
(In millions)
 
Effective amounts recognized in earnings
             
FX Contracts
Other income/expense – net
  $ 0     $ 0  
   Interest Contracts
Interest expense
    0       0  
Commodity Contracts
Cost of products sold
    (3 )     112  
 
Net sales and other operating income
    (10 )     (12 )
Ineffective amount recognized in earnings
                 
   Interest Contracts
Other income/expense – net
          1  
   Commodity Contracts
Cost of products sold
    (27 )     8  
Total amount recognized in earnings
    $ (40 )   $ 109  


     
Nine months ended
 
 
Consolidated Statement of
 
March 31,
 
 
Earnings Locations
 
2012
   
2011
 
     
(In millions)
 
Effective amounts recognized in earnings
             
FX Contracts
Other income/expense – net
  $ (1 )   $ 0  
   Interest Contracts
Interest expense
    1       0  
Commodity Contracts
Cost of products sold
    8       333  
 
Net sales and other operating income
    (2 )     (8 )
Ineffective amount recognized in earnings
                 
   Interest Contracts
Other income/expense – net
          1  
   Commodity Contracts
Cost of products sold
    12       41  
Total amount recognized in earnings
    $ 18     $ 367  


 
 

 

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 5.
Derivative Instruments and Hedging Activities (Continued)

The following tables set forth the changes in AOCI related to derivatives gains (losses) for the three and nine months ended March 31, 2012 and 2011.

   
Three months ended
 
   
March 31,
 
   
2012
   
2011
 
   
(In millions)
 
Balance at December 31, 2011 and 2010
  $ 30     $ 43  
Unrealized gains (losses)
    (54 )     61  
Losses (gains) reclassified to earnings
    13       (101 )
Tax effect
    15       16  
Balance at March 31, 2012 and 2011
  $ 4     $ 19  

   
Nine months ended
 
   
March 31
 
   
2012
   
2011
 
   
(In millions)
 
Balance at June 30, 2011 and 2010
  $ 29     $ 30  
Unrealized gains (losses)
    (32 )     308  
Losses (gains) reclassified to earnings
    (6 )     (326 )
Tax effect
    13       7  
Balance at March 31, 2012 and 2011
  $ 4     $ 19  
 
 


 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.
Marketable Securities and Cash Equivalents

       
Unrealized
   
Unrealized
 
Fair
 
 
Cost
   
Gains
   
Losses
 
Value
 
 
(In millions)
 
March 31, 2012
                       
                         
  United States government obligations
                       
Maturity less than 1 year
  $ 438     $     $     $ 438  
Maturity 1 to 5 years
    91                   91  
  Government–sponsored enterprise obligations
                               
     Maturity 1 to 5 years
    1                   1  
  Corporate debt securities
                               
Maturity 1 to 5 years
    48                   48  
  Other debt securities
                               
Maturity less than 1 year
    422                   422  
Maturity 1 to 5 years
    3                   3  
  Equity securities
                               
Available-for-sale
    136       19       (4 )     151  
Trading
    26                   26  
    $ 1,165     $ 19     $ (4 )   $ 1,180  

       
Unrealized
   
Unrealized
   
Fair
 
 
Cost
   
Gains
   
Losses
   
Value
 
   
(In millions)
 
June 30, 2011
                       
                         
  United States government obligations
                       
Maturity less than 1 year
  $ 753     $     $     $ 753  
Maturity 1 to 5 years
    72       1             73  
  Government–sponsored enterprise obligations
                               
Maturity less than 1 year
    20                   20  
Maturity 1 to 5 years
    54                   54  
Maturity 5 to 10 years
    5                   5  
Maturity greater than 10 years
    218       8             226  
  Corporate debt securities
                               
Maturity less than 1 year
    1                   1  
Maturity 1 to 5 years
    35       1             36  
  Other debt securities
                               
Maturity less than 1 year
    215                   215  
Maturity 1 to 5 years
    3                   3  
Maturity 5 to 10 years
    7                   7  
  Equity securities
                               
Available-for-sale
    159       83       (4 )     238  
Trading
    24                   24  
    $ 1,566     $ 93     $ (4 )   $ 1,655  



 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 6.
Marketable Securities and Cash Equivalents (Continued)

All of the $4 million in unrealized losses at March 31, 2012 arose within the last 12 months and are related to the Company’s investment in one security.  The market value of the available-for-sale equity security that has been in an unrealized loss position for less than 12 months is $30 million.  The Company evaluated the near-term prospects of the issuer in relation to the severity and duration of the impairment.  Based on that evaluation and the Company’s ability and intent to hold this investment for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider this investment to be other-than-temporarily impaired at March 31, 2012.

In December 2011, the Company recorded a $13 million other-than-temporary impairment related to its available-for-sale equity security investment in Metabolix, Inc. (see Note 15 for additional information).  The impairment charge is included in asset impairment, exit, and restructuring costs in the consolidated statements of earnings.

Note 7.
Other Current Assets

The following table sets forth the items in other current assets:

   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(In millions)
             
Unrealized gains on derivative contracts
  $ 2,688     $ 3,007  
Deferred receivables consideration
    710        
Other current assets
    2,719       2,884  
    $ 6,117     $ 5,891  


Note 8.
Accrued Expenses and Other Payables

The following table sets forth the items in accrued expenses and other payables:

   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(In millions)
             
Unrealized losses on derivative contracts
  $ 2,728     $ 2,732  
Accrued expenses and other payables
    5,157       5,852  
    $ 7,885     $ 8,584  


 
 

 


Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)


Note 9.
Debt and Financing Arrangements

The Company has outstanding $1.15 billion principal amount of convertible senior notes (the Notes) due in 2014. As of March 31, 2012, none of the conditions permitting conversion of the Notes had been satisfied.  Therefore, no share amounts related to the conversion of the Notes or exercise of the warrants sold in connection with the issuance of the Notes were included in diluted average shares outstanding.  For further information on the Notes, refer to Note 8 “Debt and Financing Arrangements” in the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended June 30, 2011.

The Company also has outstanding $1.4 billion principal amount of floating rate notes due on August 13, 2012.  Interest on the notes accrues at a floating rate three-month LIBOR reset quarterly plus 0.16% and is paid quarterly.  As of March 31, 2012, the interest rate on the notes was 0.67%.

On September 26, 2011, the Company issued $528 million of 4.535% senior Debentures due in 2042 (the New Debentures) in exchange for $404 million of its previously issued and outstanding 6.45%, 6.625%, 6.75%, 6.95%, 7% and 7.5% debentures.  The Company paid $32 million of debt premium to certain bondholders associated with these exchanges.  The discount on the New Debentures is being amortized over the life of the New Debentures using the effective interest method.

At March 31, 2012, the fair value of the Company’s long-term debt exceeded the carrying value by $1.3 billion, as estimated using quoted market prices or discounted future cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

At March 31, 2012, the Company had lines of credit totaling $6.7 billion, of which $4.7 billion was unused.  Of the Company’s total lines of credit, $4.3 billion support a commercial paper borrowing facility, against which $1.2 billion of commercial paper was outstanding at March 31, 2012.
 
On March 27, 2012, the Company entered into an amendment of its accounts receivable securitization program (the “Program”).  The Program provides the Company with up to $1.0 billion in funding resulting from the sale of accounts receivable.  As of March 31, 2012, the Company utilized all of its $1.0 billion facility under the Program (see Note 16 for more information on the Program).


 
 

 

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 10.
Earnings Per Share

The computation of basic and diluted earnings per share is as follows:
 
   
Three months ended
   
Nine months ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(In millions, except per share amounts)
 
                         
Net earnings attributable to controlling interests
  $ 399     $ 578     $ 939     $ 1,655  
Average shares outstanding
    662       638       667       639  
 
                               
   Basic earnings per share
  $ 0.60     $ 0.91     $ 1.41     $ 2.59