Archer Daniels Midland 2006 Annual Report Download - page 55

2006 Annual Report 53
External consultants monitor the investment strategy and asset mix
for the Company’s plan assets. To develop the Company’s expected
long-term rate of return assumption on plan assets, the Company
generally uses long-term historical return information for the
targeted asset mix identified in asset and liability studies. Adjustments
are made to the expected long-term rate of return assumption
when deemed necessary based upon revised expectations of future
investment performance of the overall investment markets. The
expected long-term rate of return assumption used in computing
2006 net periodic pension cost for the pension plans was 7.3%.
Contributions and Expected Future Benefit Payments
The Company expects to contribute $31 million to the pension plans
and $6 million to the postretirement benefit plan during 2007.
The following benefit payments, which reflect expected future service,
are expected to be paid:
Pension Postretirement
Benefits Benefits
(In thousands)
2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,538 $ 5,909
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,189 6,567
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,489 7,442
2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,118 8,456
2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,527 9,550
2012 – 2016 ....................................... 485,483 59,418
Note 13-Segment and Geographic Information
The Company is principally engaged in procuring, transporting,
storing, processing, and merchandising agricultural commodities
and products. The Company’s operations are classified into three
reportable business segments: Oilseeds Processing, Corn Processing,
and Agricultural Services. Each of these segments is organized based
upon the nature of products and services offered. The Company’s
remaining operations are aggregated and classified as Other.
The Oilseeds Processing segment includes activities related to
processing oilseeds such as soybeans, cottonseed, sunflower seeds,
canola, peanuts, and flaxseed into vegetable oils and meals
principally for the food and feed industries. In addition, oilseeds may
be resold into the marketplace as a raw material for other processors.
Crude vegetable oil is sold “as is” or is further processed by refining,
bleaching, and deodorizing into salad oils. Salad oils can be further
processed by hydrogenating and/or interesterifying into margarine,
shortening, and other food products. Partially refined oil is sold
for use in chemicals, paints, and other industrial products. Refined
oil can be further processed for use in the production of biodiesel.
Oilseed meals are primary ingredients used in the manufacture of
commercial livestock and poultry feeds.
The Corn Processing segment includes activities related to the
production of sweeteners, starches, dextrose, and syrups for the food
and beverage industry as well as activities related to the production,
by fermentation, of bioproducts such as alcohol, amino acids, and
other specialty food and feed ingredients.
The Agricultural Services segment utilizes the Company’s extensive
grain elevator and transportation network to buy, store, clean, and
transport agricultural commodities, such as oilseeds, corn, wheat,
milo, oats, and barley, and resells these commodities primarily as
feed ingredients and as raw materials for the agricultural processing
industry. Agricultural Services’ grain sourcing and transportation
network provides reliable and efficient services to the Company’s
agricultural processing operations. Also included in Agricultural
Services are the activities of A.C. Toepfer International, a global
merchandiser of agricultural commodities and processed products.
Other includes the Company’s remaining operations, consisting
principally of food and feed ingredient businesses and financial
activities. Food and feed ingredient businesses include Wheat
Processing with activities related to the production of wheat flour;
Cocoa Processing with activities related to the production of
chocolate and cocoa products; the production of natural health
and nutrition products; and the production of other specialty food
and feed ingredients. Financial activities include banking, captive
insurance, private equity fund investments, and futures commission
merchant activities.
Intersegment sales have been recorded at amounts approximating
market. Operating profit for each segment is based on net sales less
identifiable operating expenses, including an interest charge related
to working capital usage. Also included in operating profit are the
related equity in earnings of affiliates based on the equity method
of accounting. General corporate expenses, investment income,
unallocated interest expense, marketable securities transactions,
and FIFO to LIFO inventory adjustments have been excluded from
segment operations and classified as Corporate. Gross additions
to property, plant, and equipment represent purchases of property,
plant, and equipment plus amounts allocated to property, plant, and
equipment related to acquired businesses.