Archer Daniels Midland 2006 Annual Report Download - page 31

2006 Annual Report 29
Net earnings for fiscal 2005 increased principally due to the absence
of last year’s fructose litigation settlement expense of $400 million,
$114 million of income in the current year as compared to a
$119 million charge in the prior year from the effect of commodity
price changes on LIFO inventory valuations, the CIP Gain, and
$114 million of realized securities gains from the sale of the
Company’s interest in Tate & Lyle PLC shares. Improved operating
results of Oilseeds Processing, Agricultural Services, and Other
– Financial also contributed to the improvement in net earnings.
These increases were partially offset by decreased Corn Processing
operating results. Corn Processing operating results declined as a
result of higher net corn costs, higher energy costs, and lower lysine
average selling prices. Net earnings include a $42 million and
$51 million charge for abandonment and write-down of long-lived
assets in 2005 and 2004, respectively, which principally represents the
write-down of abandoned idle assets to their estimated salvage values.
Last year’s results include a $21 million gain from an insurance-
related lawsuit pertaining to the flood of 1993.
Analysis of Statements of Earnings
Net sales and other operating income decreased slightly to
$35.9 billion principally due to lower average selling prices of
agricultural commodities. This decrease was partially offset by
currency exchange rate increases of $962 million, increased sales
volumes of agricultural commodities, and increased average selling
prices of ethanol and corn sweeteners.
Net sales and other operating income by segment are as follows:
2005 2004 Change
(In thousands)
Oilseeds Processing . . . . . . . . . . . . . . . . . . . . $11,803,309 $12,049,250 $(245,941)
Corn Processing
Sweeteners and Starches . . . . . . . . . . . . . 1,905,218 1,736,526 168,692
Bioproducts . . . . . . . . . . . . . . . . . . . . . . . 2,458,706 2,268,655 190,051
Total Corn Processing . . . . . . . . . . . . 4,363,924 4,005,181 358,743
Agricultural Services . . . . . . . . . . . . . . . . . . . 15,198,831 15,638,341 (439,510)
Other
Food and Feed Ingredients . . . . . . . . . . . 4,505,788 4,386,246 119,542
Financial . . . . . . . . . . . . . . . . . . . . . . . . . 71,958 72,376 (418)
Total Other . . . . . . . . . . . . . . . . . . . . . 4,577,746 4,458,622 119,124
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,943,810 $36,151,394 $(207,584)
Oilseeds Processing sales decreased 2% to $11.8 billion primarily due
to decreased sales volumes and lower average selling prices of oilseed
exports and lower average selling prices of protein meal. These
decreases were partially offset by increased sales volumes and higher
average selling prices of vegetable oil. Corn Processing sales increased
9% to $4.4 billion primarily due to increased Bioproducts sales
and, to a lesser extent, increased sales of Sweeteners and Starches.
Bioproducts sales increased primarily due to increased average
selling prices of ethanol, which was partially offset by lower ethanol
sales volumes and lower average selling prices of lysine. The increase
in ethanol selling prices was primarily due to higher gasoline prices.
Ethanol sales volumes declined as last year’s volume increases to
meet new market introductions in the northeastern United States
were not repeated in the current year. Sweeteners and Starches
sales increased primarily due to higher average selling prices and,
to a lesser extent, increased sales volumes. Agricultural Services
sales decreased 3% to $15.2 billion principally due to lower average
commodity prices in North America, decreased sales volumes of
global grain merchandising activities, and decreased sales volumes
of North American wheat and corn. These decreases were partially
offset by increased sales volumes of North American soybeans. Other
sales increased 3% to $4.6 billion primarily due to increased average
selling prices of wheat flour products.
Cost of products sold decreased 1% to $33.5 billion primarily due to
lower average prices of agricultural commodities, partially offset by
currency exchange rate increases of $916 million and higher sales
volumes of agricultural commodities. Manufacturing costs increased
$383 million primarily due to increased energy and personnel-
related costs. Manufacturing costs for 2005 and 2004 include a
$42 million and $51 million charge, respectively, for abandonment
and write-down of long-lived assets.
Selling, general, and administrative expenses decreased
$321 million to $1.1 billion principally due to the absence of
last year’s fructose litigation settlement expense of $400 million.
Excluding the effect of the fructose litigation expense, selling,
general, and administrative expenses increased $79 million
principally due to increased employee-related costs, including
pensions, and auditing fees. These increases were partially offset by
reduced legal expenses and provisions for doubtful accounts.
Other income increased $194 million due primarily to $114 million
of realized securities gains from the sale of the Company’s interest
in Tate & Lyle PLC shares and a $48 million increase in equity in
earnings of unconsolidated affiliates. The increase in equity in
earnings of unconsolidated affiliates is primarily due to the CIP
Gain. Interest expense decreased $15 million due principally to lower
average borrowing levels. Investment income increased $19 million
primarily due to increased average investment levels.