Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company has consolidated subsidiaries in more than 70 countries. For the majority of the Company’s subsidiaries located outside the United States, the local currency is the functional currency except certain significant subsidiaries in Switzerland where Euro is the functional currency, and Brazil and Argentina where U.S. dollar 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. For the majority of the Company’s business activities in Brazil and Argentina, the functional currency is the U.S. dollar; however, certain transactions, including taxes, occur in local currency and require remeasurement to the functional currency. Changes in revenues are expected to be correlated to changes in expenses reported by the Company caused by fluctuations in the exchange rates of foreign currencies, primarily the Euro, British pound, Canadian dollar, and Brazilian real, as compared to the U.S. dollar.

The Company measures its performance using key financial metrics including net earnings, gross margins, segment operating profit, return on invested capital, EBITDA, economic value added, manufacturing expenses, and selling, general, and administrative expenses. The Company’s financial results can vary significantly due to changes in factors such as fluctuations in energy prices, weather conditions, crop plantings, government programs and policies, trade policies, changes in global demand, general global economic conditions, changes in standards of living, and global production of similar and competitive crops. Due to these unpredictable factors, the Company undertakes no responsibility for updating any forward-looking information contained within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Market Factors Influencing Operations or Results in the Three Months Ended September 30, 2021

The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, North America origination was impacted by widening elevation margins and Hurricane Ida impacting export execution. South American origination volumes were negatively impacted by low farmer selling activity. Ocean freight rates remain high due to increased global demand and supply chain bottlenecks. Crushing margins benefited from strong demand and tight soybean and canola/rapeseed stocks. Refined oil margins were driven by strong demand, declining global oil stocks, and increased biofuels consumption. In Carbohydrate Solutions, margins in starches and sweeteners were negatively impacted by higher corn basis cost while demand remained steady. Ethanol demand and margins were negatively impacted early in the quarter due to the limited availability of affordable corn but improved when the North American corn harvest started. Increased corn prices drove ethanol industry production volumes lower causing stocks on hand to decline. Domestic ethanol demand remained steady in the quarter, but slightly below pre-pandemic levels. Nutrition benefited from overall strong demand in various product categories. In Human Nutrition, demand for flavors, flavor systems, specialty proteins, bioactives, and fibers were strong. In Animal Nutrition, weak demand and higher input costs as a result of COVID-19 in South America were partially offset by the growing demand in complete food for petfood. Amino acids pricing and margins improved due to a tighter global supply environment.

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Net earnings attributable to controlling interests increased $301 million from $225 million to $526 million. Segment operating profit increased $96 million from $904 million to $1.0 billion. Included in segment operating profit in the current quarter were restructuring charges of $2 million. Included in segment operating profit in the prior year quarter was net income of $55 million consisting of gains related to the sale of a portion of the Company’s shares in Wilmar and certain other assets of $57 million, partially offset by asset impairment, restructuring, and settlement charges of $2 million. Adjusted segment operating profit increased $153 million to $1.0 billion due primarily to higher results in Crushing, Refined Products and Other, Vantage Corn Processors, and Human and Animal Nutrition, partially offset by lower results in Ag Services, Starches and Sweeteners, and Other Business, and lower equity earnings from the Wilmar investment. Corporate results were a net charge of $347 million in the current quarter compared to a net charge of $704 million in the prior year quarter. Corporate results in the current quarter included early debt retirement charges of $36 million, a mark-to-market gain of $7 million on the conversion option of the exchangeable bonds issued in August 2020, expenses related to an acquisition of $3 million, and a pension settlement charge of $1 million. Corporate results in the prior year quarter included early debt retirement charges of $396 million, a mark-to-market loss of $15 million on the conversion option of the exchangeable bonds issued in August 2020, and an impairment charge of $6 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Income tax expense increased $146 million to $120 million. The Company’s effective tax rate for the quarter ended September 30, 2021 was an expense of 18.4% compared to a benefit of 13.0% for the quarter ended September 30, 2020. The low prior year quarter rate included the effects of the significant early debt retirement, the sale of a portion of the Company’s shares in Wilmar, and changes in the forecasted geographical mix of pretax earnings on the 2020 annual effective tax rate in that period.

Analysis of Statements of Earnings

Processed volumes by product for the quarter are as follows (in metric tons):

Three Months Ended
September 30,
(In thousands)20212020Change
Oilseeds8,5098,970(461)
Corn5,0514,084967
Total13,56013,054506

The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall decrease in oilseeds processed volumes is primarily related to scheduled downtime at multiple facilities in North America during the quarter. The overall increase in corn is primarily related to the idling of two dry mill facilities in the second quarter of 2020 in response to the challenging operating environment. The Company restarted these idled facilities in April 2021.

Revenues by segment for the quarter are as follows:

Three Months Ended
September 30,
20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$9,899$7,352$2,547
Crushing2,8422,317525
Refined Products and Other2,9481,8581,090
Total Ag Services and Oilseeds15,68911,5274,162
Carbohydrate Solutions
Starches and Sweeteners1,9721,574398
Vantage Corn Processors894490404
Total Carbohydrate Solutions2,8662,064802
Nutrition
Human Nutrition80871989
Animal Nutrition889732157
Total Nutrition1,6971,451246
Other Business88844
Total$20,340$15,126$5,214

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Revenues and cost of products sold in a commodity merchandising and processing business are significantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins because both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from commodity price changes which generally result in an insignificant impact to gross profit.

Revenues increased $5.2 billion to $20.3 billion due to higher sales prices ($5.6 billion) partially offset by lower sales volumes ($0.4 billion). Higher sales prices of animal feeds, alcohol, biodiesel, meal, oils, corn, soybeans, and wheat, and higher volumes of wheat and cotton, were partially offset by lower sales volumes of soybeans. Ag Services and Oilseeds revenues increased 36% to $15.7 billion due to higher sales prices ($4.8 billion) partially offset by lower sales volumes ($0.6 billion). Carbohydrate Solutions revenues increased 39% to $2.9 billion due to higher sales prices ($0.7 billion) and higher sales volumes ($0.1 billion). Nutrition revenues increased 17% to $1.7 billion due to higher sales prices ($0.1 billion) and higher sales volumes ($0.1 billion).

Cost of products sold increased $4.9 billion to $19.0 billion due principally to higher average commodity costs. Manufacturing expenses increased $0.2 billion to $1.6 billion due principally to higher energy costs, maintenance, operating supplies, storage and warehousing, and salaries and benefits.

Foreign currency translation increased revenues and cost of products sold by $0.2 billion.

Gross profit increased $0.3 billion or 27%, to $1.3 billion due principally to higher results in Crushing ($223 million), Refined Products and Other ($103 million), and Nutrition ($56 million), partially offset by lower results in Ag Services ($53 million), Carbohydrate Solutions ($35 million) and Other ($7 million). These factors are explained in the segment operating profit discussion on page 44.

Selling, general, and administrative expenses increased $84 million to $720 million due primarily to higher salaries and benefits and IT expenses.

Asset impairment, exit, and restructuring costs decreased $2 million to $2 million. Charges in the current quarter consisted of $2 million of restructuring charges, presented as specified items within segment operating profit. Charges in the prior year quarter consisted of individually insignificant long-lived asset impairments of $3 million and restructuring charges of $1 million.

Equity in earnings of unconsolidated affiliates decreased $50 million to $110 million due primarily to lower earnings from the Company’s investments in Wilmar, Almidones Mexicanos S.A., Olenex Sarl, SoyVen, and Hungrana Ltd., partially offset by higher earnings from the Company’s investment in Stratas Foods LLC.

Investment income of $20 million was comparable to the prior period.

Interest expense decreased $39 million to $61 million due to lower interest rates and the favorable liability management actions taken in the prior year. Interest expense in the current quarter also included a $7 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020 compared to a $15 million mark-to-market loss adjustment in the prior year quarter.

Other expense - net decreased $262 million to $20 million. Expense in the current quarter included charges of $36 million related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025 and other expense, partially offset by gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and foreign exchange gains. Expense in the prior year quarter included charges of $396 million related to multiple early debt redemptions, partially offset by a $58 million gain on the sale of a portion of the Company’s shares in Wilmar, gains on the sales of certain other assets, the non-service components of net pension benefit income, and other income.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Segment operating profit (loss), adjusted segment operating profit (a non-GAAP measure), and earnings before income taxes for the quarter are as follows:

Three Months Ended
September 30,
Segment Operating Profit (Loss)20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$36$147$(111)
Crushing28066214
Refined Products and Other236127109
Wilmar6696(30)
Total Ag Services and Oilseeds618436182
Carbohydrate Solutions
Starches and Sweeteners178257(79)
Vantage Corn Processors35(11)46
Total Carbohydrate Solutions213246(33)
Nutrition
Human Nutrition13912811
Animal Nutrition371918
Total Nutrition17614729
Other Business(5)20(25)
Specified Items:
Gains (losses) on sales of assets and businesses—57(57)
Asset impairment and restructuring charges(2)(2)—
Total Specified Items(2)55(57)
Total Segment Operating Profit$1,000$904$96
Adjusted Segment Operating Profit(1)$1,002$849$153
Segment Operating Profit$1,000$904$96
Corporate(347)(704)357
Earnings Before Income Taxes$653$200$453

(1) Adjusted segment operating profit is segment operating profit excluding the above specified items.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Ag Services and Oilseeds operating profit increased 42%. Ag Services executed well in a challenging environment, including a rapid return to operation after Hurricane Ida. Overall results were significantly lower versus the prior-year quarter driven by net negative timing effects that should reverse in coming quarters and a $54 million insurance settlement recorded in the prior-year quarter and lower export volumes caused by Hurricane Ida. Global trade continued its strong performance. Crushing had substantially higher year-over-year results. The business executed well, delivering stronger margins in a dynamic environment that included strong demand for vegetable oil to support existing food customers as well as increasing production of renewable diesel. Results were also driven by net positive timing effects in the current quarter. Refined Products and Other results were significantly higher than the prior-year period, driven by positive timing effects that are expected to reverse in future quarters, along with strong execution in Europe, Middle East, and Africa (EMEA) and North American biodiesel and strong refining premiums due to demand for renewable diesel and foodservice recovery in North America. Equity earnings from Wilmar were lower versus the third quarter of 2020.

Carbohydrate Solutions operating profit decreased 13%. Starches and Sweeteners, including ethanol production from the wet mills, managed through dynamic market conditions, optimizing mix between sweeteners and ethanol production through the quarter. Year-over-year results were significantly lower primarily due to higher input costs. Vantage Corn Processors results were much higher versus the third quarter of 2020, supported by the resumption of production at the two dry mills and improved fuel ethanol margins, particularly late in the quarter.

Nutrition operating profit increased 20%. Human Nutrition results were higher than the prior-year quarter. Higher volume and improved product mix, with particular strength in beverage, drove support strong flavor results in EMEA and North America, partially offset by lower results in Asia Pacific (APAC). Specialty ingredients continued to benefit from strong demand for alternative proteins, offset by some higher costs. Health and wellness results were higher on robust sales growth in bioactives and fiber. Animal Nutrition results were higher year-over-year, driven primarily by strength in amino acids as well as feed additives and ingredients, partially offset by higher costs in Latin America and slower demand recovery in APAC.

Other Business operating profit decreased 125% driven primarily by captive insurance underwriting losses, most of which were offset by corresponding recoveries in other business segments.

Corporate results for the quarter are as follows:

Three Months Ended
September 30,
20212020Change
(In millions)
Interest expense-net$(66)$(83)$17
Unallocated corporate costs(231)(196)(35)
Expenses related to acquisitions(3)—(3)
Debt extinguishment charges(36)(396)360
Gain (loss) on debt conversion option7(15)22
Asset impairment, restructuring, and settlement charges(1)(6)5
Other income (charges)(17)(8)(9)
Total Corporate$(347)$(704)$357

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Corporate results were a net charge of $347 million in the current quarter compared to a net charge of $704 million in the prior year quarter. Interest expense-net decreased $17 million due to lower interest rates and the favorable liability management actions taken in the prior year. Unallocated corporate costs increased $35 million due primarily to higher IT operating and project-related costs and the continued cost centralization in procurement, supply chain, and operations. Acquisition expenses were related to the P4 acquisition. Debt extinguishment charges in the current quarter were related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the prior year quarter were related to multiple early debt redemptions. Gain (loss) on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Other charges in the current quarter included railroad repairs and maintenance expenses of $31 million, partially offset by an investment revaluation gain of $9 million, the non-service components of net pension benefit income of $1 million, and other income. Other charges in the prior year quarter included railroad maintenance expenses of $28 million, partially offset by an investment revaluation gain of $4 million, the non-service components of net pension benefit income of $7 million, and other income.

Non-GAAP Financial Measures

The Company uses adjusted earnings per share (EPS), adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and adjusted segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.

Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of specified items. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.

Management believes that adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are not intended to replace or be an alternative to diluted EPS, earnings before income taxes, and segment operating profit, respectively, the most directly comparable amounts reported under GAAP.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The table below provides a reconciliation of diluted EPS to adjusted EPS for the three months ended September 30, 2021 and 2020.

Three months ended September 30,
20212020
In millionsPer shareIn millionsPer share
Average number of shares outstanding - diluted566562
Net earnings and reported EPS (fully diluted)$526$0.93$225$0.40
Adjustments:
(Gains) losses on sales of assets and businesses - net of tax of $3 million in 2020 (1)——(54)(0.10)
Debt extinguishment charges - net of tax of $9 million in 2021 and $96 million in 2020 (1)270.053000.53
(Gain) loss on debt conversion option - net of tax of $0 (1)(7)(0.01)150.03
Asset impairment, restructuring, and settlement charges - net of tax of $0 million in 2021 and $3 million in 2020 (1)30.0150.01
Expenses related to acquisitions - net of tax of $1 million in 20212———
Certain discrete tax adjustments(3)(0.01)80.02
Total adjustments220.042740.49
Adjusted net earnings and adjusted EPS$548$0.97$499$0.89

(1) Tax effected using the U.S. and other applicable tax rates.

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the three months ended September 30, 2021 and 2020.

Three months ended
September 30,
(In millions)20212020Change
Earnings before income taxes$653$200$453
Interest expense61100(39)
Depreciation and amortization2472389
(Gains) losses on sales of assets and businesses—(57)57
Debt extinguishment charges36396(360)
Expenses related to acquisitions3—3
Railroad maintenance expenses31283
Asset impairment, restructuring, and settlement charges38(5)
Adjusted EBITDA$1,034$913$121
Three months ended
September 30,
(In millions)20212020Change
Ag Services and Oilseeds$711$527$184
Carbohydrate Solutions297323(26)
Nutrition23020129
Other Business(3)21(24)
Corporate(201)(159)(42)
Adjusted EBITDA$1,034$913$121

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Market Factors Influencing Operations or Results in the Nine Months Ended September 30, 2021

The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, North American origination volumes benefited from strong export demand early in the year while South American origination volumes were impacted by the delayed harvest and low farmer selling activity. Crushing margins benefited from strong demand and tight soybean and canola/rapeseed stocks. Demand for refined oils was strong, driven by the regional lifting of COVID-19 restrictions in the U.S. and demand for renewable green diesel. In Carbohydrate Solutions, margins in starches and sweeteners were solid despite softer sweetener demand early in the year due to continued COVID-19 restrictions. Starch demand continued to be robust. Co-product prices were strong. Ethanol demand remained steady as COVID-19 restrictions were lifted regionally. Ethanol margins were volatile initially supported by improving domestic demand, then challenged in the summer months prior to harvest due to limited availability of corn. Nutrition benefited from overall strong demand in various product categories. In Human Nutrition, demand for flavors, flavor systems, specialty proteins, bioactives, and fibers were strong. In Animal Nutrition, weak demand and higher input costs as a result of COVID-19 in South America were partially offset by the growing demand in complete food for petfood. Amino acids pricing and margins improved due to a tighter global supply environment.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net earnings attributable to controlling interests increased $0.8 billion to $1.9 billion. Segment operating profit increased $0.9 billion to $3.3 billion. Included in segment operating profit in the current period was a net charge of $111 million consisting of asset impairment, restructuring, and settlement charges of $133 million, partially offset by gains on the sale of certain assets of $22 million. Included in segment operating profit in the prior period was net income of $20 million consisting of gains on the sale of a portion of the Company’s shares in Wilmar and certain other assets of $80 million, partially offset by asset impairment, restructuring, and settlement charges of $60 million. Adjusted segment operating profit increased $1.1 billion to $3.4 billion due primarily to higher results in Crushing, Refined Products and Other, Carbohydrate Solutions, and Human and Animal Nutrition, partially offset by lower results in Ag Services and Other Business, and lower equity earnings from the Wilmar investment. Corporate results were a net charge of $0.9 billion in the current period compared to $1.2 billion in the prior period. Corporate results in the current period included a pension settlement charge of $83 million, early debt retirement charges of $36 million, a mark-to-market gain of $17 million on the conversion option of the exchangeable bonds issued in August 2020, expenses related to an acquisition of $3 million, and a restructuring charge of $4 million. Corporate results in the prior period included a credit of $91 million from the elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020 and early debt retirement charges of $410 million, a mark-to-market loss of $15 million on the conversion option of the exchangeable bonds issued in August 2020, and an impairment charge of $5 million.

Income taxes of $364 million increased $326 million. The Company’s effective tax rate for the nine months ended September 30, 2021 was 15.8% compared to 3.4% for the nine months ended September 30, 2020. The favorable 2020 tax rate was due to the impact of U.S. tax credits signed into law in December 2019, including a $73 million discrete tax benefit related to 45G railroad tax credits recognized in the quarter ended March 31, 2020, and changes in the forecasted geographical mix of pretax earnings. The 45G railroad tax credits have an offsetting impact in cost of products sold.

Analysis of Statements of Earnings

Processed volumes by product for the nine months are as follows (in metric tons):

Nine Months Ended
September 30,
(In thousands)20212020Change
Oilseeds26,24727,236(989)
Corn13,74313,71726
Total39,99040,953(963)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall decrease in oilseeds processed volumes was due to cold weather and natural gas curtailments in North America and delays in soybean harvest in South America. The overall increase in corn processed volumes was primarily related to the idling of two dry mill facilities in the second quarter of 2020. The Company restarted these idled facilities in April 2021.

Revenues by segment for the nine months are as follows:

Nine Months Ended
September 30,
20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$32,860$22,930$9,930
Crushing8,4117,0351,376
Refined Products and Other7,6965,3822,314
Total Ag Services and Oilseeds48,96735,34713,620
Carbohydrate Solutions
Starches and Sweeteners5,5634,769794
Vantage Corn Processors2,3461,625721
Total Carbohydrate Solutions7,9096,3941,515
Nutrition
Human Nutrition2,4102,161249
Animal Nutrition2,5832,198385
Total Nutrition4,9934,359634
Other Business29027713
Total$62,159$46,377$15,782

Revenues and cost of products sold in a commodity merchandising and processing business are significantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins because both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from commodity price changes which generally result in an insignificant impact to gross profit.

Revenues increased $15.8 billion to $62.2 billion due to higher sales prices ($16.0 billion) partially offset by lower sales volumes ($0.2 billion). Higher sales prices of animal feed, alcohol, biodiesel, meal, oils, corn, soybeans, wheat, and corn by products and higher sales volumes of wheat, cotton, and barley, were partially offset by lower sales volumes of meal, oils, and soybeans. Ag Services and Oilseeds revenues increased 39% to $49.0 billion due to higher sales prices ($13.5 billion) and higher sales volumes ($0.1 billion). Carbohydrate Solutions revenues increased 24% to $7.9 billion due to higher sales prices ($1.8 billion), partially offset by lower sales volumes ($0.3 billion). Nutrition revenues increased 15% to $5.0 billion due to higher sales prices ($0.7 billion).

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Cost of products sold increased $14.5 billion to $57.8 billion due principally to higher average commodity costs. Included in cost of products sold in the prior period was a credit of $91 million from the effect of the elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020. Manufacturing expenses increased $0.3 billion to $4.5 billion due principally to higher energy costs, maintenance, storage and warehousing, operating supplies, salaries and benefits, and contracted labor, partially offset by lower railroad maintenance expenses.

Foreign currency translation impacts increased revenues and cost of goods sold by $1.0 billion.

Gross profit increased $1.2 billion or 40% to $4.3 billion due to higher results in Ag Services and Oilseeds ($746 million), Carbohydrate Solutions ($333 million), Nutrition ($148 million), and Other ($49 million). These factors are explained in the segment operating profit discussion on page 51. In Corporate, the elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020 had a positive impact on gross profit of $91 million in the prior period.

Selling, general, and administrative expenses increased $0.3 billion to $2.2 billion due principally to higher salaries and benefits, performance-based compensation accruals, IT expenses, and a legal settlement.

Asset impairment, exit, and restructuring costs increased $23 million to $84 million. Charges in the current period consisted of $54 million of impairments related to certain long-lived assets and $26 million of restructuring charges, presented as specified items within segment operating profit, and $4 million of restructuring charges in Corporate. Charges in the prior period consisted of $50 million of impairments related to certain intangible and other long-lived assets and $11 million of restructuring charges.

Equity in earnings of unconsolidated affiliates decreased $5 million to $398 million due to lower earnings from the Company’s investments in Wilmar, Olenex Sarl, SoyVen, and Hungrana Ltd., partially offset by higher earnings from the Company’s investment in Stratas Foods LLC.

Investment income decreased $11 million to $83 million due to lower interest rates on segregated funds in the Company’s futures commission and brokerage business, partially offset by a $49 million investment revaluation gain in the current period compared to a $23 million investment revaluation gain in the prior period.

Interest expense decreased $82 million to $188 million due to lower interest rates and the favorable liability management actions taken in the prior year. Interest expense in the current period also included a $17 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020 compared to a $15 million mark-to-market loss adjustment in the prior period.

Other expense - net decreased $166 million to $36 million. Expense in the current quarter included a non-cash pension settlement charge of $83 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s ADM Retirement Plant and ADM Pension Plan for Hourly-Wage Employees, charges of $36 million related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025, and other expense, partially offset by gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and foreign exchange gains. Expense in the prior period included charges of $410 million related to multiple early debt redemptions and loss provisions related to the Company’s futures commission and brokerage business, partially offset by gains related to the sale of a portion of the Company’s shares in Wilmar and certain other assets, the non-service components of net pension benefit income, foreign exchange gains, and other income.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Segment operating profit, adjusted segment operating profit (a non-GAAP measure), and earnings before income taxes for the nine months are as follows:

Nine Months Ended
September 30,
Segment Operating Profit (Loss)20212020Change
(In millions)
Ag Services and Oilseeds
Ag Services$435$482$(47)
Crushing812249563
Refined Products and Other467286181
Wilmar251254(3)
Total Ag Services and Oilseeds1,9651,271694
Carbohydrate Solutions
Starches and Sweeteners706533173
Vantage Corn Processors149(24)173
Total Carbohydrate Solutions855509346
Nutrition
Human Nutrition42937257
Animal Nutrition1027527
Total Nutrition53144784
Other Business1069(59)
Specified Items:
Gains (losses) on sales of assets and businesses2280(58)
Asset impairment, restructuring, and settlement charges(133)(60)(73)
Total Specified Items(111)20(131)
Total Segment Operating Profit$3,250$2,316$934
Adjusted Segment Operating Profit(1)$3,361$2,296$1,065
Segment Operating Profit$3,250$2,316$934
Corporate(948)(1,189)241
Earnings Before Income Taxes$2,302$1,127$1,175

(1) Adjusted segment operating profit is segment operating profit excluding the above specified items.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Ag Services and Oilseeds operating profit increased 55%. Ag Services results were lower than the prior year period. In North America, strong Chinese demand and favorable positions in a dynamic pricing environment delivered significantly higher results. South American origination results were significantly lower due to decreased farmer selling activity versus the prior year period and the effects from the slightly delayed harvest and higher freight costs. Global Trade results were impacted by negative timing effects related to ocean freight positions which are expected to reverse in the coming quarters. Crushing results were significantly higher due to strong softseed crush margins driven by tight supplies and negative timing impacts in the prior year period. Refined Products and Other results were higher year-over-year on stronger margins in North America and Europe, Middle East, Africa, and India (EMEAI), partially offset by impacts related to the reduction in Brazilian biodiesel mandates. Equity earnings from Wilmar were lower versus the prior year period.

Carbohydrate Solutions operating profit increased 68%. Starches and Sweeteners results, including ethanol production from the wet mills, were significantly higher than the prior year period. The business managed risk well, capitalizing on rising prices in the ethanol complex and favorable co-product values in an industry environment of improving margins, falling inventories, and higher input costs. Corn oil results significantly improved from the prior year period, which had been impacted by significant mark-to-market effects. Demand for flour by the foodservice sector remained below the prior year period. Vantage Corn Processors results were substantially higher, driven by improved margins on the distribution of fuel ethanol and strong performance in USP-grade alcohol and the resumption of production at the two dry mills.

Nutrition operating profit increased 19%. Human Nutrition results were higher than the prior year period. Flavors results were up, driven by strong sales across various market segments. In North America and EMEAI, the flavors business delivered strong volumes and improved product mix, particularly in the beverage segment. Specialty Ingredients delivered strong sales growth in specialty proteins, though results were negatively impacted by the effects of pantry loading in the prior year period, normalization of prices in the wholesale ingredients business, COVID-related shifts in demand across the portfolio, and higher costs. Health and Wellness results were strong, with robust demand driving strong results in probiotics and fibers. Animal Nutrition results were higher on favorable results in amino acids, driven by improved margins and product mix, partially offset by lower demand and higher input costs as a result of pandemic effects in South America.

Other Business operating profit decreased 86% primarily due to lower underwriting results from the captive insurance operations, most of which were offset by corresponding recoveries in other business segments.

Corporate results for the nine months are as follows:

Nine Months Ended
September 30,
20212020Change
(In millions)
LIFO credit (charge)$—$91$(91)
Interest expense-net(200)(246)46
Unallocated corporate costs(681)(579)(102)
Expenses related to acquisitions(3)—(3)
Debt extinguishment charges(36)(410)374
Gain (loss) on debt conversion option17(15)32
Impairment, restructuring, and settlement charges(87)(5)(82)
Other income (charges)42(25)67
Total Corporate$(948)$(1,189)$241

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Corporate results were a net charge of $0.9 billion in the current period compared to $1.2 billion in the prior period. The elimination of the LIFO reserve in connection with the accounting change effective January 1, 2020 resulted in a credit of $91 million in the prior period. Interest expense-net decreased $46 million due principally to lower interest rates and the favorable liability management actions taken in the prior year. Unallocated corporate costs increased $102 million due primarily to higher variable performance-related compensation expense accruals, the continued cost centralization in procurement, supply chain, and operations, and additional investments in IT and related projects. Acquisition expenses were related to the P4 acquisition. Debt extinguishment charges in the current period were related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the prior period were related to multiple early debt redemptions. Gain (loss) on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Impairment, restructuring, and settlement charges in the current period included a non-cash pension settlement charge of $83 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s ADM Retirement Plant and ADM Pension Plan for Hourly-Wage Employees to independent third parties, and restructuring charges. Other income in the current period included the non-service components of net pension benefit income of $12 million, an investment revaluation gain of $49 million, and other income, partially offset by railroad maintenance expenses of $34 million. Other charges in the prior period included railroad maintenance expenses of $101 million that had an offsetting benefit in income tax expense, partially offset by an investment revaluation gain of $23 million, and the non-service components of net pension benefit income of $28 million, and other income.

Non-GAAP Financial Measures

The Company uses adjusted EPS, adjusted EBITDA, and adjusted segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.

Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of specified items. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.

Management believes that adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are not intended to replace or be an alternative to diluted EPS, earnings before income taxes, and segment operating profit, respectively, the most directly comparable amounts reported under GAAP.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The table below provides a reconciliation of diluted EPS to adjusted EPS for the nine months ended September 30, 2021 and 2020.

Nine months ended September 30,
20212020
In millionsPer shareIn millionsPer share
Average number of shares outstanding - diluted566563
Net earnings and reported EPS (fully diluted)$1,927$3.41$1,085$1.93
Adjustments:
LIFO charge (credit) - net of tax of $22 million (1)——(69)(0.12)
(Gains) losses on sales of assets and businesses - net of tax of $5 million in 2021 and $8 million in 2020 (2)(17)(0.03)(72)(0.13)
Asset impairment, restructuring, and settlement charges - net of tax of $53 million in 2021 and $16 million in 2020 (2)1670.30490.09
Expenses related to acquisitions - net of tax of $1 million (2)2———
Debt extinguishment charges - net of tax of $9 million in 2021 and $99 million in 2020 (2)270.053110.55
Gain (loss) on debt conversion option - net of tax of $0 (2)(17)(0.03)150.03
Certain discrete tax adjustments(4)(0.01)160.03
Total adjustments1580.282500.45
Adjusted net earnings and adjusted EPS$2,085$3.69$1,335$2.38

(1) Tax effected using the Company’s U.S. tax rate. LIFO accounting was discontinued effective January 1, 2020.

(2) Tax effected using the U.S. and other applicable tax rates.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the nine months ended September 30, 2021 and 2020.

Nine months ended
September 30,
(In millions)20212020Change
Earnings before income taxes$2,302$1,127$1,175
Interest expense188270(82)
Depreciation and amortization73972712
LIFO—(91)91
(Gains) losses on sales of assets and businesses(22)(80)58
Debt extinguishment charges36410(374)
Expenses related to acquisitions3—3
Railroad maintenance expenses34101(67)
Asset impairment, restructuring, and settlement charges22065155
Adjusted EBITDA$3,500$2,529$971
Nine months ended
September 30,
(In millions)20212020Change
Ag Services and Oilseeds$2,243$1,543$700
Carbohydrate Solutions1,106745361
Nutrition69261775
Other Business1575(60)
Corporate(556)(451)(105)
Adjusted EBITDA$3,500$2,529$971

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources

A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital-intensive agricultural commodity-based business. The Company depends on access to credit markets, which can be impacted by its credit rating and factors outside of ADM’s control, to fund its working capital needs and capital expenditures. The primary source of funds to finance ADM’s operations, capital expenditures, and advancement of its growth strategy is cash generated by operations and lines of credit, including a commercial paper borrowing facility and accounts receivable securitization programs. In addition, the Company believes it has access to funds from public and private equity and debt capital markets in both U.S. and international markets.

Cash provided by operating activities was $5.9 billion for the nine months ended September 30, 2021 compared to a use of $1.5 billion for the same period last year. Working capital changes as described below increased cash by $2.8 billion for the nine months ended September 30, 2021 compared to a decrease of $3.8 billion for the same period last year which included the impact of deferred consideration. During 2020, the Company restructured its accounts receivable securitization programs from a deferred purchase price to a pledge structure. As a result, operating cash flows in the current period no longer include the impact of deferred consideration which decreased operating cash flows in previous years.

Inventories decreased approximately $0.4 billion due to lower inventory volumes partially offset by higher inventory prices. Brokerage payables increased approximately $2.2 billion due to increased customer segregated trading activity. Trade payables increased approximately $0.2 billion principally reflecting seasonal cash payments for North American harvest-related grain purchases.

Deferred consideration in securitized receivables of $4.6 billion for the nine months ended September 30, 2020 was offset by the same amount of net consideration received for beneficial interest obtained for selling trade receivables.

Cash used in investing activities was $1.3 billion for the nine months ended September 30, 2021 compared to cash provided of $4.7 billion for the same period last year. Capital expenditures for the nine months ended September 30, 2021 were $0.7 billion compared to $0.6 billion for the same period last year. Net assets of businesses acquired were $0.5 billion for the nine months ended September 30, 2021 compared to $3 million for the same period last year primarily due to the P4 acquisition in September 2021. Proceeds from sales of business and assets for the nine months ended September 30, 2021 were $0.1 billion compared to $0.7 billion for the same period last year which related to the sale of a portion of the Company’s shares in Wilmar and certain other assets. Net consideration received for beneficial interest obtained related to selling trade receivables was $4.6 billion for the nine months ended September 30, 2020.

Cash used in financing activities was $1.6 billion for the nine months ended September 30, 2021 compared to $1.9 billion for the same period last year. Long-term debt borrowings for the nine months ended September 30, 2021 of $1.3 billion consisted of the $750 million aggregate principal amount of 2.700% Notes due 2051 issued on September 10, 2021 and the €0.5 billion aggregate principal amount of Fixed-to-Floating Rate Senior Notes due 2022 issued in a private placement on March 25, 2021, compared to long-term debt borrowings for the same period last year of $1.8 billion which consisted of the $0.5 billion and $1.0 billion aggregate principal amounts of 2.75% Notes due in 2025 and 3.25% Notes due in 2030, respectively, issued on March 27, 2020 and the $0.3 billion aggregate principal amount of zero coupon exchangeable bonds due in 2023 issued on August 26, 2020. Proceeds from the borrowings in the current period were used to redeem debt and for general corporate purposes. Proceeds from the borrowings in the prior period were used to reduce short-term debt. Commercial paper net payments for the nine months ended September 30, 2021 were $1.7 billion compared to $1.0 billion for the same period last year. Long-term debt payments of $0.5 billion for the nine months ended September 30, 2021 consisted of the early redemption of the $500 million aggregate principal amount of 2.750% notes due 2025 in September 2021, compared to $2.0 billion for the same period last year which consisted of the early redemption of the $0.5 billion and $0.4 billion aggregate principal amounts of 4.479% debentures due in 2021 and 3.375% debentures due in 2022, respectively, the repurchase of $0.7 billion aggregate principal amount of debentures, and the redemption of $0.1 billion aggregate principal amount of private placement notes due in 2021 and 2024. Share repurchases for the nine months ended September 30, 2021 were insignificant compared to $0.1 billion for the same period last year. Dividends of $0.6 billion for the nine months ended September 30, 2021were comparable to the same period last year.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

At September 30, 2021, the Company had $1.1 billion of cash and cash equivalents and a current ratio, defined as current assets divided by current liabilities, of 1.6 to 1. Included in working capital was $7.4 billion of readily marketable commodity inventories. At September 30, 2021, the Company’s capital resources included shareholders’ equity of $22.0 billion and lines of credit, including the accounts receivable securitization programs described below, totaling $12.4 billion, of which $10.5 billion was unused. The Company’s ratio of long-term debt to total capital (the sum of the Company’s long-term debt and shareholders’ equity) was 27% and 28% at September 30, 2021 and December 31, 2020, respectively. The Company uses this ratio as a measure of the Company’s long-term indebtedness and an indicator of financial flexibility. The Company’s ratio of net debt (the sum of short-term debt, current maturities of long-term debt, and long-term debt less the sum of cash and cash equivalents and short-term marketable securities) to capital (the sum of net debt and shareholders’ equity) was 26% and 32% at September 30, 2021 and December 31, 2020, respectively. Of the Company’s total lines of credit, $6.5 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was no commercial paper outstanding at September 30, 2021.

As of September 30, 2021, the Company had $1.1 billion of cash and cash equivalents, $0.5 billion of which was cash held by foreign subsidiaries whose undistributed earnings are considered indefinitely reinvested. Based on the Company’s historical ability to generate sufficient cash flows from its U.S. operations and unused and available U.S. credit capacity of $8.1 billion, the Company has asserted that these funds are indefinitely reinvested outside the U.S.

The Company has accounts receivable securitization programs (the “Programs”) with certain commercial paper conduit purchasers and committed purchasers. The Programs provide the Company with up to $2.1 billion, an increase from $1.8 billion as of December 31, 2020, in funding against accounts receivable transferred into the Programs and expands the Company’s access to liquidity through efficient use of its balance sheet assets (see Note 16 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures on the Programs). As of September 30, 2021, the Company utilized $1.5 billion of its facility under the Programs.

For the nine months ended September 30, 2021, the Company spent approximately $0.7 billion in capital expenditures and $0.6 billion in dividends. The Company has a stock repurchase program. Under the program, the Company acquired an insignificant number of shares for the nine months ended September 30, 2021, and has 104.5 million shares remaining that may be repurchased until December 31, 2024.

In 2021, the Company expects total capital expenditures of approximately $0.9 billion to $1.0 billion, approximately $0.8 billion in dividends, and up to $0.5 billion in share repurchases, subject to other strategic uses of capital.

In October 2021, the Company executed acquisition and investment agreements with a total aggregate consideration of approximately $0.7 billion. In addition, the Company executed an agreement to sell its ethanol production complex in Peoria, Illinois with a book value of approximately $0.1 billion, which will have an immaterial impact to operating results. These transactions are expected to close before December 31, 2021, subject to the satisfaction of closing conditions and regulatory approval. In addition, the previously announced Sojaprotein acquisition of $0.4 billion is also expected to close before December 31, 2021.

Contractual Obligations and Commercial Commitments

The Company’s purchase obligations as of September 30, 2021 and December 31, 2020 were $16.9 billion and $19.7 billion, respectively. The decrease is primarily related to obligations to purchase lower quantities of agricultural commodity inventories. As of September 30, 2021, the Company expects to make payments related to purchase obligations of $12.9 billion within the next twelve months. There were no other material changes in the Company’s contractual obligations during the quarter ended September 30, 2021.

Off Balance Sheet Arrangements

On September 24, 2021, the Company amended the First Program and increased the facility from $1.4 billion as of March 31, 2021 to $1.5 billion. See Note 16 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information about the First Program. There were no other material changes in the Company’s off balance sheet arrangements during the quarter ended September 30, 2021.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies

There were no material changes in the Company’s critical accounting policies during the quarter ended September 30, 2021.

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