Archer-Daniels-Midland Co 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial Statements Page No. Consolidated Statements of Earnings 45 Consolidated Statements of Comprehensive Income (Loss) 46 Consolidated Balance Sheets 47 Consolidated Statements of Cash Flows 48 Consolidated Statements of Shareholders’ Equity 49 Notes to Consolidated Financial Statements 50 Reports of Independent Registered Public Accounting Firm PCAOB ID: 42 102 44 Archer-Daniels-Midland Company Consolidated Statements of Earnings Year Ended (In millions, except per share amounts) December 31 2022 2021 2020 Revenues $ 101,556 $ 85,249 $ 64,355 Cost of products sold 93,986 79,262 59,902 Gross Profit 7,570 5,987 4,453 Selling, general and administrative expenses 3,358 2,994 2,687 Asset impairment, exit, and restructuring costs 66 164 80 Equity in earnings of unconsolidated affiliates ( 832 ) ( 595 ) ( 579 ) Loss on debt extinguishment — 36 409 Interest and investment income ( 293 ) ( 96 ) ( 111 ) Interest expense 396 265 339 Other (income) expense - net ( 358 ) ( 94 ) ( 255 ) Earnings Before Income Taxes 5,233 3,313 1,883 Income tax expense 868 578 101 Net Earnings Including Noncontrolling Interests 4,365 2,735 1,782 Less: Net earnings (losses) attributable to noncontrolling interests 25 26 10 Net Earnings Attributable to Controlling Interests $ 4,340 $ 2,709 $ 1,772 Average number of shares outstanding – basic 562 564 561 Average number of shares outstanding – diluted 563 566 565 Basic earnings per common share $ 7.72 $ 4.80 $ 3.16 Diluted earnings per common share $ 7.71 $ 4.79 $ 3.15 See notes to consolidated financial statements. 45 Archer-Daniels-Midland Company Consolidated Statements of Comprehensive Income (Loss) Year Ended (In millions) December 31 2022 2021 2020 Net earnings including noncontrolling interests $ 4,365 $ 2,735 $ 1,782 Other comprehensive income (loss): Foreign currency translation adjustment ( 301 ) 279 ( 362 ) Tax effect ( 93 ) ( 103 ) 97 Net of tax amount ( 394 ) 176 ( 265 ) Pension and other postretirement benefit liabilities adjustment 140 289 ( 113 ) Tax effect ( 15 ) ( 71 ) 16 Net of tax amount 125 218 ( 97 ) Deferred gain (loss) on hedging activities ( 84 ) 33 254 Tax effect 7 7 ( 57 ) Net of tax effect ( 77 ) 40 197 Unrealized gain (loss) on investments ( 12 ) ( 2 ) ( 27 ) Tax effect 1 — — Net of tax effect ( 11 ) ( 2 ) ( 27 ) Other comprehensive income (loss) ( 357 ) 432 ( 192 ) Comprehensive income (loss) 4,008 3,167 1,590 Less: Comprehensive income (loss) attributable to noncontrolling interests 5 26 17 Comprehensive income (loss) attributable to controlling interests $ 4,003 $ 3,141 $ 1,573 See notes to consolidated financial statements. 46 Archer-Daniels-Midland Company Consolidated Balance Sheets (In millions) December 31, 2022 December 31, 2021 Assets Current Assets Cash and cash equivalents $ 1,037 $ 943 Segregated cash and investments 9,010 8,016 Trade receivables - net 4,926 3,311 Inventories 14,771 14,481 Other current assets 5,666 5,158 Total Current Assets 35,410 31,909 Investments and Other Assets Investments in and advances to affiliates 5,467 5,285 Goodwill and other intangible assets 6,544 6,747 Right-of-use assets 1,088 1,023 Other assets 1,332 1,369 Total Investments and Other Assets 14,431 14,424 Property, Plant, and Equipment Land and land improvements 502 554 Buildings 5,639 5,597 Machinery and equipment 19,194 19,112 Construction in progress 1,440 960 26,775 26,223 Accumulated depreciation ( 16,842 ) ( 16,420 ) Net Property, Plant, and Equipment 9,933 9,803 Total Assets $ 59,774 $ 56,136 Liabilities, Temporary Equity, and Shareholders’ Equity Current Liabilities Short-term debt $ 503 $ 958 Trade payables 7,803 6,388 Payables to brokerage customers 9,856 8,965 Current lease liabilities 292 277 Accrued expenses and other payables 4,795 4,790 Current maturities of long-term debt 942 570 Total Current Liabilities 24,191 21,948 Long-Term Liabilities Long-term debt 7,735 8,011 Deferred income taxes 1,402 1,412 Non-current lease liabilities 816 765 Other 1,014 1,233 Total Long-Term Liabilities 10,967 11,421 Temporary Equity - Redeemable noncontrolling interest 299 259 Shareholders’ Equity Common stock 3,147 2,994 Reinvested earnings 23,646 21,655 Accumulated other comprehensive income (loss) ( 2,509 ) ( 2,172 ) Noncontrolling interests 33 31 Total Shareholders’ Equity 24,317 22,508 Total Liabilities, Temporary Equity, and Shareholders’ Equity $ 59,774 $ 56,136 See notes to consolidated financial statements. 47 Archer-Daniels-Midland Company Consolidated Statements of Cash Flows (In millions) Year Ended December 31 2022 2021 2020 Operating Activities Net earnings including noncontrolling interests $ 4,365 $ 2,735 $ 1,782 Adjustments to reconcile net earnings to net cash provided by (used in) operating results Depreciation and amortization 1,028 996 976 Asset impairment charges 37 125 54 Deferred income taxes ( 89 ) ( 129 ) 75 Equity in earnings of affiliates, net of dividends ( 457 ) ( 177 ) ( 298 ) Stock compensation expense 147 161 151 Deferred cash flow hedges ( 84 ) 34 254 Loss on debt extinguishment — 36 409 (Gain) loss on sales of assets and businesses/investment revaluation ( 115 ) ( 149 ) ( 161 ) Other – net 178 309 ( 113 ) Changes in operating assets and liabilities, net of acquisitions and dispositions Segregated investments ( 1,512 ) 400 408 Trade receivables ( 1,682 ) ( 578 ) ( 149 ) Inventories ( 295 ) ( 2,839 ) ( 2,426 ) Deferred consideration in securitized receivables — — ( 4,603 ) Other current assets ( 279 ) 1,298 ( 2,126 ) Trade payables 1,389 1,919 694 Payables to brokerage customers 891 2,527 1,400 Accrued expenses and other payables ( 44 ) ( 73 ) 1,287 Total Operating Activities 3,478 6,595 ( 2,386 ) Investing Activities Capital expenditures ( 1,319 ) ( 1,169 ) ( 823 ) Net assets of businesses acquired ( 22 ) ( 1,564 ) ( 15 ) Proceeds from sales of assets and businesses 131 245 728 Investments in affiliates ( 77 ) ( 34 ) ( 5 ) Investments in retained interest in securitized receivables — — ( 2,121 ) Proceeds from retained interest in securitized receivables — — 6,724 Cost method investments ( 155 ) ( 69 ) ( 30 ) Other – net 42 ( 78 ) 7 Total Investing Activities ( 1,400 ) ( 2,669 ) 4,465 Financing Activities Long-term debt borrowings 752 1,329 1,791 Long-term debt payments ( 482 ) ( 534 ) ( 2,136 ) Net borrowings (payments) under lines of credit agreements ( 428 ) ( 1,085 ) 837 Share repurchases ( 1,450 ) — ( 133 ) Cash dividends ( 899 ) ( 834 ) ( 809 ) Other – net 8 6 27 Total Financing Activities ( 2,499 ) ( 1,118 ) ( 423 ) Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 421 ) 2,808 1,656 Cash, cash equivalents, restricted cash, and restricted cash equivalents – beginning of year 7,454 4,646 2,990 Cash, cash equivalents, restricted cash, and restricted cash equivalents – end of year $ 7,033 $ 7,454 $ 4,646 Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets Cash and cash equivalents $ 1,037 $ 943 $ 666 Restricted cash and restricted cash equivalents included in segregated cash and investments 5,996 6,511 3,980 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 7,033 $ 7,454 $ 4,646 Cash paid for interest and income taxes were as follows: Interest $ 409 $ 276 $ 345 Income taxes $ 708 $ 553 $ 195 Supplemental Disclosure of Noncash Investing Activity: Retained interest in securitized receivables $ — $ — $ 4,656 See notes to consolidated financial statements. 48 Archer-Daniels-Midland Company Consolidated Statements of Shareholders’ Equity Accumulated Other Total Common Stock Reinvested Comprehensive Noncontrolling Shareholders’ Shares Amount Earnings Income (Loss) Interests Equity (In millions) Balance, December 31, 2019 557 $ 2,655 $ 18,958 $ ( 2,405 ) $ 17 $ 19,225 Impact of ASC 326 (see Note 1) ( 8 ) ( 8 ) Balance, January 1, 2020 557 $ 2,655 $ 18,950 $ ( 2,405 ) $ 17 $ 19,217 Comprehensive income Net earnings 1,772 10 Other comprehensive income (loss) ( 199 ) 7 Total comprehensive income 1,590 Cash dividends paid-$ 1.44 per share ( 809 ) ( 809 ) Share repurchases ( 4 ) ( 133 ) ( 133 ) Stock compensation expense 2 151 151 Stock option exercises net of taxes 1 20 20 Other — ( 2 ) — ( 12 ) ( 14 ) Balance, December 31, 2020 556 $ 2,824 $ 19,780 $ ( 2,604 ) $ 22 $ 20,022 Comprehensive income Net earnings 2,709 26 Other comprehensive income (loss) 432 — Total comprehensive income 3,167 Cash dividends paid-$ 1.48 per share ( 834 ) ( 834 ) Stock compensation expense 3 161 161 Stock option exercises net of taxes 1 4 4 Other — 5 — ( 17 ) ( 12 ) Balance, December 31, 2021 560 $ 2,994 $ 21,655 $ ( 2,172 ) $ 31 $ 22,508 Comprehensive income Net earnings 4,340 25 Other comprehensive income (loss) ( 337 ) ( 20 ) Total comprehensive income 4,008 Cash dividends paid-$ 1.60 per share ( 899 ) ( 899 ) Share repurchases ( 17 ) ( 1,450 ) ( 1,450 ) Stock compensation expense 3 147 147 Stock option exercises net of taxes 1 4 4 Other — 2 — ( 3 ) ( 1 ) Balance, December 31, 2022 547 $ 3,147 $ 23,646 $ ( 2,509 ) $ 33 $ 24,317 See notes to consolidated financial statements. 49 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies Nature of Business ADM unlocks the power of nature to enrich the quality of life. The Company is an indispensable global agricultural supply chain manager and processor; a premier human and animal nutrition provider; a trailblazer in groundbreaking solutions to support healthier living; an industry-leading innovator in replacing petroleum-based products; and a leader in sustainability. ADM’s breadth, depth, insights, facilities and logistical expertise give the Company unparalleled capabilities to meet demand driven by global trends related to food security, health and well-being, and sustainability of the agriculture and food value chains. From the seed of the idea to the outcome of the solution, ADM gives customers an edge in solving the nutritional and sustainability challenges of today and tomorrow. The Company is one of the world’s leading producers of ingredients for sustainable nutrition. From staple foods, such as flour, oils, and sweeteners, to innovative alternatives like plant-based meat and dairy, ADM offers the industry’s broadest portfolio of food and beverage solutions. The Company is also a leader in animal nutrition. Today, more and more people want to feed their pets with the same kind of clean, simple, and healthy products that they eat themselves, and consumers expect livestock and poultry to be fed and raised naturally, humanely, and sustainably. ADM offers a range of ingredients, flavors, and solutions from nature to meet every animal’s needs. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company consolidates all entities, including variable interest entities (VIEs), in which it has a controlling financial interest. For VIEs, the Company assesses whether it is the primary beneficiary as defined under the applicable accounting standard. Investments in affiliates, including VIEs through which the Company exercises significant influence but does not control the investee and is not the primary beneficiary of the investee’s activities, are carried at cost plus equity in undistributed earnings since acquisition and are adjusted, where appropriate, for basis differences between the investment balance and the underlying net assets of the investee. The Company’s portion of the results of certain affiliates and results of certain VIEs are included using the most recent available financial statements. In each case, the financial statements are within 93 days of the Company’s year-end and are consistent from period to period. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents The Company considers all non-segregated, highly-liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Segregated Cash and Investments The Company segregates certain cash, cash equivalents, and investment balances in accordance with regulatory requirements, commodity exchange requirements, and insurance arrangements. These balances represent deposits received from customers of the Company’s registered futures commission merchant and commodity brokerage services, cash margins and securities pledged to commodity exchange clearinghouses, and cash pledged as security under certain insurance arrangements. Segregated cash and investments also include restricted cash collateral for the various insurance programs of the Company’s captive insurance business. To the degree these segregated balances are comprised of cash and cash equivalents, they are considered restricted cash and cash equivalents on the statement of cash flows. 50 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) Receivables The Company records accounts receivable at net realizable value. This value includes an allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances including any accrued interest receivables thereon. The Company estimates uncollectible accounts by pooling receivables according to type, region, credit risk rating, and age. Each pool is assigned an expected loss co-efficient to arrive at a general reserve based on historical write-offs adjusted, as needed, for regional, economic, and other forward-looking factors. The Company minimizes credit risk due to the large and diversified nature of its worldwide customer base. ADM manages its exposure to counter-party credit risk through credit analysis and approvals, credit limits, and monitoring procedures. Long-term receivables recorded in other assets were not material to the Company’s overall receivables portfolio. The Company recorded bad debt expense in selling, general, and administrative expenses of $ 88 million, $ 32 million, and $ 47 million in the years ended December 31, 2022, 2021, and 2020, respectively. Changes to the allowance for estimated uncollectible accounts are as follows: Year Ended December 31 2022 2021 Beginning, January 1 $ 122 $ 100 Current year provisions 88 32 Recoveries 2 5 Write-offs against allowance ( 12 ) ( 28 ) Foreign exchange translation adjustment ( 2 ) ( 1 ) Other 1 14 Ending, December 31 $ 199 $ 122 Effective January 1, 2020, the Company adopted Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses (Topic 326), and recorded a cumulative effect adjustment to retained earnings at January 1, 2020 of $ 8 million as a result of the adoption of Topic 326. Inventories Certain merchandisable agricultural commodity inventories, which include inventories acquired under deferred pricing contracts, are stated at market value. In addition, the Company values certain inventories using the first-in, first-out (FIFO) method at the lower of cost or net realizable value. Prior to January 1, 2020, the Company also valued certain of its agricultural commodity inventories using the last-in, first-out (LIFO) method at the lower of cost or net realizable value. Effective January 1, 2020, the Company changed the method of accounting for certain of its agricultural commodity inventories from the LIFO method to market value in the Ag Services and Oilseeds segment. The Company concluded that the accounting change did not have a material effect on prior periods’ financial statements and elected not to apply the change on a retrospective basis. As a result, the Company recorded a reduction in cost of products sold of $ 91 million ($ 69 million after tax, equal to $ 0.12 per diluted share) for the cumulative effect of the change in the year ended December 31, 2020 with no impact to the statement of cash flows. The change did not have a material impact on the Company’s results for the year ended December 31, 2020. If the Company had not made the accounting change, the effect of LIFO valuation on ADM’s operating results would have been an increase in cost of goods sold of $ 147 million ($ 113 million after tax, equal to $ 0.20 per diluted share) in the year ended December 31, 2020, with no impact to the consolidated statement of cash flows. 51 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) The following table sets forth the Company’s inventories as of December 31, 2022 and 2021. December 31, 2022 December 31, 2021 (In millions) Raw materials and supplies $ 6,975 $ 7,331 Finished goods 7,796 7,150 Total inventories $ 14,771 $ 14,481 Included in raw materials and supplies are work in process inventories which were not material as of December 31, 2022 and 2021. Fair Value Measurements The Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the market approach valuation technique to measure the majority of its assets and liabilities carried at fair value. Three levels are established within the fair value hierarchy that may be used to report fair value: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. 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 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. 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 measurement in Level 3. 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, and 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. 52 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) Derivatives The Company recognizes all of its derivative instruments as either assets or liabilities at fair value in its consolidated balance sheet. Unrealized gains are reported as other current assets and unrealized losses are reported as accrued expenses and other payables. 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 on the type of hedging relationship. The majority of the Company’s derivatives have not been designated as hedging instruments, and as such, changes in fair value of these derivatives are recognized in earnings immediately. For those derivative instruments that are designated and qualify as hedging instruments, the Company designates the hedging instrument, based upon the exposure being hedged, as a cash flow hedge or a net investment hedge. For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) (AOCI) and as an operating activity in the statement of cash flows 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. 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. For derivative instruments that are designated and qualify as net investment hedges, foreign exchange gains and losses related to changes in foreign currency exchange rates are deferred in AOCI until the underlying investment is divested. Cost Method Investments Cost method investments of $ 488 million and $ 297 million as of December 31, 2022 and 2021, respectively, are included in Other Assets in the Company’s consolidated balance sheets. Revaluation gains of $ 37 million, $ 49 million, and $ 23 million for the years ended December 31, 2022, 2021, and 2020, respectively, in connection with observable third-party transactions, are recorded in interest and investment income in the Company’s consolidated statements of earnings. As of December 31, 2022, the cumulative amount of upward adjustments is $ 113 million. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. Repair and maintenance costs are expensed as incurred. The Company uses the straight-line method in computing depreciation for financial reporting purposes and generally uses accelerated methods for income tax purposes. The annual provisions for depreciation have been computed principally in accordance with the following ranges of asset lives: buildings - 15 to 40 years; machinery and equipment - 3 to 40 years. The Company capitalized interest on major construction projects in progress of $ 20 million, $ 17 million, and $ 14 million for the years ended December 31, 2022, 2021, and 2020, respectively. Income Taxes The Company accounts for income taxes in accordance with the liability method. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and reported amounts in the consolidated financial statements using statutory rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recorded in the results of operations in the period that includes the enactment date under the law. Applicable accounting standards prescribe a minimum threshold a tax position is required to meet before being recognized in the consolidated financial statements. The Company recognizes in its consolidated financial statements tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the position. The Company classifies interest on income tax-related balances as interest expense and classifies tax-related penalties as selling, general, and administrative expenses. Income tax effects from AOCI are released when the individual units of account are sold, terminated, or extinguished. 53 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) Goodwill and other intangible assets Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. Definite-lived intangible assets, including capitalized expenses related to the Company’s 1ADM program such as third-party configuration costs and internal labor, are amortized over their estimated useful lives of 1 to 50 years and are reviewed for impairment whenever there are indicators that the carrying value of the assets may not be fully recoverable. The Company’s accounting policy is to evaluate goodwill and other intangible assets with indefinite lives for impairment on October 1 of each fiscal year or whenever there are indicators that the carrying value of the assets may not be fully recoverable. The Company recorded impairment charges totaling $ 2 million related to customer lists, $ 52 million related to goodwill and other intangibles, and $ 26 million related to customer lists during the years ended December 31, 2022, 2021, and 2020, respectively (see Note 9 for additional information). Asset Abandonments and Write-Downs The Company evaluates long-lived assets for impairment whenever indicators of impairment exist. In addition, assets are written down to fair value after consideration of the Company’s ability to utilize the assets for their intended purpose, employ the assets in alternative uses, or sell the assets to recover the carrying value. Fair value is generally based on discounted cash flow analysis which relies on management’s estimate of market participant assumptions or estimated selling price for assets considered held for sale (a Level 3 measurement under applicable accounting standards). During 2022 and 2021, the Company temporarily idled certain assets which were not material. During 2020, the Company temporarily idled certain of its corn processing assets where ethanol is produced and performed a quantitative impairment assessment of those assets, resulting in no impairment charges. The Company restarted the 2020 idled facilities in April 2021. During the years ended December 31, 2022, 2021, and 2020, asset abandonment and impairment charges were $ 35 million, $ 73 million, and $ 28 million, respectively. Payables to Brokerage Customers Payables to brokerage customers represent the total of customer accounts at the Company’s futures commission merchant with credit or positive balances. Customer accounts are used primarily in connection with commodity transactions and include gains and losses on open commodity trades as well as securities and other deposits made for margins or other purposes as required by the Company or the exchange-clearing organizations or counterparties. Payables to brokerage customers have a corresponding balance in segregated cash and investments and customer omnibus receivable in other current assets. Revenues The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. For transportation service contracts, the Company recognizes revenue over time as the mode of transportation moves towards its destination in accordance with the transfer of control guidance of ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“Topic 610-20”). Stock Compensation The Company recognizes expense for its stock compensation based on the fair value of the awards that are granted. The Company’s stock compensation plans provide for the granting of restricted stock, restricted stock units, performance stock units, and stock options. The fair values of stock options and performance stock units are estimated at the date of grant using the Black-Scholes option valuation model and a lattice valuation model, respectively. These valuation models require the input of subjective assumptions. Measured compensation cost, net of forfeitures, is recognized ratably over the vesting period of the related stock compensation award. 54 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) Research and Development Costs associated with research and development are expensed as incurred and recorded within selling, general, and administrative expenses. Such costs incurred, net of expenditures subsequently reimbursed by government grants, were $ 216 million, $ 171 million, and $ 160 million for the years ended December 31, 2022, 2021, and 2020, respectively. Per Share Data Basic earnings per common share are determined by dividing net earnings attributable to controlling interests by the weighted average number of common shares outstanding. In computing diluted earnings per share, average number of common shares outstanding is increased by common stock options outstanding with exercise prices lower than the average market price of common shares using the treasury share method. Business Combinations The Company’s acquisitions are accounted for in accordance with ASC Topic 805, Business Combinations, as amended . The consideration transferred is allocated to various assets acquired and liabilities assumed at their estimated fair values as of the acquisition date with the residual allocated to goodwill. Fair values allocated to assets acquired and liabilities assumed in business combinations require management to make significant judgments, estimates, and assumptions, especially with respect to intangible assets. Management makes estimates of fair values based upon assumptions it believes to be reasonable. These estimates are based upon historical experience and information obtained from the management of the acquired companies and are inherently uncertain. The estimated fair values related to intangible assets primarily consist of customer relationships, trademarks, and developed technology which are determined primarily using discounted cash flow models. Estimates in the discounted cash flow models include, but are not limited to, certain assumptions that form the basis of the forecasted results (e.g. revenue growth rates, customer attrition rates, and royalty rates). These significant assumptions are forward looking and could be affected by future economic and market conditions. During the measurement period, which may take up to one year from the acquisition date, adjustments due to changes in the estimated fair value of assets acquired and liabilities assumed may be recorded as adjustments to the consideration transferred and the related allocations. Upon the conclusion of the measurement period or the final determination of the values of assets acquired and liabilities assumed, whichever comes first, any such adjustments are charged to the consolidated statements of earnings. Redeemable Noncontrolling Interest The Company accounts for any redeemable noncontrolling interest in temporary equity - redeemable noncontrolling interest at redemption value with periodic changes recorded in retained earnings. Operations in Ukraine and Russia ADM employs approximately 640 people in Ukraine and operates an oilseeds crushing plant, a grain port terminal, inland and river silos, and a trading office. Most of the facilities have been temporarily idled since February 24, 2022, some of which were brought back online during the quarter ended September 30, 2022, due in part to the opening of the Black Sea grain export corridor. The Company’s footprint in Russia is limited to operations related to the production and transport of essential food commodities and ingredients. As a result of the ongoing conflict in Ukraine, the Company reviewed the valuation of its assets and recorded immaterial charges in the year ended December 31, 2022 related to receivables and inventories. As of December 31, 2022, ADM concluded that 1) receivables, net of allowances, are deemed collectible; and 2) commodity inventories are valued appropriately. The temporarily idled property, plant, and equipment, which is immaterial, are not considered impaired. The Company also evaluated the impact of Russia’s recent announcement of its purported annexation of four Ukrainian regions on the valuation of ADM’s assets in those regions and concluded that the assets are appropriately valued. As the conflict in Ukraine evolves, the Company will continue to review the valuation of these assets and make any required adjustments, which are not expected to be material to the Company’s consolidated financial statements. 55 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) Pending Accounting Standards Through December 31, 2024, the Company has the option to adopt the amended guidance of ASC Topic 848, Reference Rate Reform , which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The expedients and exceptions provided by the amended guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for hedging relationships existing as of December 31, 2024, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company plans to adopt the expedients and exceptions provided by the amended guidance before the December 31, 2024 expiry date and does not expect the adoption of the amended guidance to have an impact on the consolidated financial statements. Effective January 1, 2023, the Company will be required to adopt the amended guidance of ASC Topic 805, Business Combinations , which improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The amended guidance requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The Company does not expect the adoption of this amended guidance to have a significant impact on its consolidated financial statements. Effective January 1, 2023, the Company will be required to adopt the amended guidance of ASC Subtopic 405-50, Liabilities - Supplier Finance Programs , which enhances the transparency of supplier finance programs. The amended guidance requires an entity (buyer) in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The adoption of this amended guidance will require the Company to provide disclosures about its supplier finance programs, if material, but is not expected to have an impact on its consolidated financial statements. Note 2. Revenues Revenue Recognition The Company principally generates revenue from merchandising and transporting agricultural commodities, and manufacturing products for use in food, beverages, feed, energy, and industrial applications, and ingredients and solutions for human and animal nutrition. Revenue is measured based on the consideration specified in the contract with a customer. The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The Company applies the practical expedient in paragraph 10-50-14 of Topic 606 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. For transportation service contracts, the Company recognizes revenue over time as the mode of transportation moves towards its destination in accordance with the transfer of control guidance of Topic 606. The Company recognized revenue from transportation service contracts of $ 818 million, $ 606 million, and $ 423 million for the years ended December 31, 2022, 2021, and 2020, respectively. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by ASC 610-20. Shipping and Handling Costs Shipping and handling costs related to contracts with customers for the sale of goods are accounted for as a fulfillment activity and are included in cost of products sold. Accordingly, amounts billed to customers for such costs are included as a component of revenues. 56 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 2. Revenues (Continued) Taxes Collected from Customers and Remitted to Governmental Authorities The Company does not include taxes assessed by governmental authorities that are (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers, in the measurement of transactions prices or as a component of revenues and cost of products sold. Contract Liabilities Contract liabilities relate to advance payments from customers for goods and services that the Company has yet to provide. Contract liabilities of $ 694 million and $ 581 million as of December 31, 2022 and 2021, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheet. Contract liabilities recognized as revenues for the years ended December 31, 2022 and 2021 were $ 581 million and $ 626 million, respectively. Disaggregation of Revenues The following tables present revenue disaggregated by timing of recognition and major product lines for the years ended December 31, 2022, 2021, and 2020. Year Ended December 31, 2022 Topic 606 Revenue Topic 815 (1) Total Point in Time Over Time Total Revenue Revenues (In millions) Ag Services and Oilseeds Ag Services $ 4,053 $ 818 $ 4,871 $ 48,310 $ 53,181 Crushing 573 — 573 12,566 13,139 Refined Products and Other 2,724 — 2,724 10,519 13,243 Total Ag Services and Oilseeds 7,350 818 8,168 71,395 79,563 Carbohydrate Solutions Starches and Sweeteners 7,696 — 7,696 2,555 10,251 Vantage Corn Processors 3,710 — 3,710 — 3,710 Total Carbohydrate Solutions 11,406 — 11,406 2,555 13,961 Nutrition Human Nutrition 3,769 — 3,769 — 3,769 Animal Nutrition 3,867 — 3,867 — 3,867 Total Nutrition 7,636 — 7,636 — 7,636 Other Business 396 — 396 — 396 Total Revenues $ 26,788 $ 818 $ 27,606 $ 73,950 $ 101,556 57 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 2. Revenues (Continued) Year Ended December 31, 2021 Topic 606 Revenue Topic 815 (1) Total Point in Time Over Time Total Revenue Revenues (In millions) Ag Services and Oilseeds Ag Services $ 2,831 $ 606 $ 3,437 $ 41,580 $ 45,017 Crushing 441 — 441 10,927 11,368 Refined Products and Other 2,458 — 2,458 8,204 10,662 Total Ag Services and Oilseeds 5,730 606 6,336 60,711 67,047 Carbohydrate Solutions Starches and Sweeteners 5,866 — 5,866 1,745 7,611 Vantage Corn Processors 3,499 — 3,499 — 3,499 Total Carbohydrate Solutions 9,365 — 9,365 1,745 11,110 Nutrition Human Nutrition 3,189 — 3,189 — 3,189 Animal Nutrition 3,523 — 3,523 — 3,523 Total Nutrition 6,712 — 6,712 — 6,712 Other Business 380 — 380 — 380 Total Revenues $ 22,187 $ 606 $ 22,793 $ 62,456 $ 85,249 Year Ended December 31, 2020 Topic 606 Revenue Topic 815 (1) Total Point in Time Over Time Total Revenue Revenues (In millions) Ag Services and Oilseeds Ag Services $ 3,108 $ 423 $ 3,531 $ 29,195 $ 32,726 Crushing 467 — 467 9,126 9,593 Refined Products and Other 2,095 — 2,095 5,302 7,397 Total Ag Services and Oilseeds 5,670 423 6,093 43,623 49,716 Carbohydrate Solutions Starches and Sweeteners 4,756 — 4,756 1,631 6,387 Vantage Corn Processors 2,085 — 2,085 — 2,085 Total Carbohydrate Solutions 6,841 — 6,841 1,631 8,472 Nutrition Human Nutrition 2,812 — 2,812 — 2,812 Animal Nutrition 2,988 — 2,988 — 2,988 Total Nutrition 5,800 — 5,800 — 5,800 Other Business 367 — 367 — 367 Total Revenues $ 18,678 $ 423 $ 19,101 $ 45,254 $ 64,355 (1) Topic 815 revenue relates to the physical delivery or the settlement of the Company’s sales contracts that are accounted for as derivatives and are outside the scope of Topic 606. 58 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 2. Revenues (Continued) Ag Services and Oilseeds The Ag Services and Oilseeds segment generates revenue from the sale of commodities, from service fees for the transportation of goods, from the sale of products manufactured in its global processing facilities, and from its structured trade finance activities. Revenue is measured based on the consideration specified in the contract. Revenue is recognized when a performance obligation is satisfied by transferring control over a product or providing service to a customer. For transportation service contracts, the Company recognizes revenue over time as the mode of transportation moves towards its destination in accordance with the transfer of control guidance of Topic 606. The amount of revenue recognized follows the contractually specified price which may include freight or other contractually specified cost components. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20. The Company engages in various structured trade finance activities to leverage its global trade flows whereby the Company obtains letters of credit (LCs) to guarantee payments on both global purchases and sales of grain. LCs guaranteeing payment on grain sales are sold on a non-recourse basis with no continuing involvement. The Company earns returns from the difference in interest rates between the LCs that guarantee payment on the underlying purchases and sales of grain given the differing risk profiles of the underlying transactions. The net return related to structured trade finance activities is included in revenue and is not significant for the years ended December 31, 2022, 2021, and 2020. Carbohydrate Solutions The Carbohydrate Solutions segment generates revenue from the sale of products manufactured at the Company’s global corn and wheat milling facilities around the world. Revenue is recognized when control over products is transferred to the customer. Products are shipped to customers from the Company’s various facilities and from its network of storage terminals. The amount of revenue recognized is based on the consideration specified in the contract which could include freight and other costs depending on the specific shipping terms of each contract. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20. Nutrition The Nutrition segment sells ingredients and solutions including plant-based proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, enzymes, botanical extracts, edible beans, formula feeds, animal health and nutrition products, pet food and treats, and other specialty food and feed ingredients. Revenue is recognized when control over products is transferred to the customer. The amount of revenue recognized follows the contracted price or the mutually agreed price of the product. Freight and shipping are recognized as a component of revenue at the same time control transfers to the customer. Other Business Other Business includes the Company’s futures commission business whose primary sources of revenue are commissions and brokerage income generated from executing orders and clearing futures contracts and options on futures contracts on behalf of its customers. Commissions and brokerage revenue are recognized on the date the transaction is executed. Other Business also includes the Company’s captive insurance business which generates third party revenue through its proportionate share of premiums from third-party reinsurance pools. Reinsurance premiums are recognized on a straight-line basis over the period underlying the policy. 59 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 3. Acquisitions Fiscal year 2022 acquisitions During the year ended December 31, 2022, the Company acquired Kansas Protein Foods LLC for cash consideration of $ 23 million. The cash consideration of this acquisition, net of $ 1 million in cash acquired, was allocated as follows: (In millions) Property, plant, and equipment $ 9 Goodwill 13 Cash consideration $ 22 Fiscal year 2021 acquisitions During the year ended December 31, 2021, the Company’s Nutrition segment acquired five businesses including, a 75 % majority stake in U.S.-based PetDine, Pedigree Ovens, The Pound Bakery, and NutraDine (collectively, “P4”), premier providers of private label pet treats and supplements; Deerland Probiotics & Enzymes (“Deerland”), a leader in probiotic, prebiotic, and enzyme technology; and Sojaprotein, a leading European provider of non-GMO soy ingredients, for an aggregate consideration of $ 1.6 billion using cash on hand. The aggregate cash consideration of these acquisitions, net of $ 21 million in cash acquired, was allocated as follows. In 2022, the Company made immaterial adjustments to the purchase price allocations related to these acquisitions. These adjustments have been reflected in the table below. (In millions) P4 Deerland Sojaprotein Others Total Working capital $ 11 $ 27 $ 35 $ 7 $ 80 Property, plant, and equipment 73 43 85 6 207 Goodwill 317 396 192 35 940 Other intangible assets 245 252 42 18 557 Other long-term assets — — 12 2 14 Long-term liabilities — ( 74 ) ( 10 ) — ( 84 ) Temporary equity - redeemable noncontrolling interest ( 150 ) — — — ( 150 ) Aggregate cash consideration $ 496 $ 644 $ 356 $ 68 $ 1,564 The Company has the option to acquire the remaining 25 % interest in P4 from December 31, 2023 to March 31, 2025, based on a fixed multiple of earnings before interest, taxes, depreciation, and amortization for the twelve months prior to the exercise of this option. The noncontrolling interest holders also have the option to put the 25% interest to the Company on the same terms. The Company records the 25 % remaining interest in temporary equity - redeemable noncontrolling interest. Of the $ 940 million allocated to goodwill, $ 313 million is expected to be deductible for tax purposes. The 2021 acquisitions advance ADM’s growth strategy by expanding the Company’s capabilities in pet treat and supplements and the fast-growing global demand for plant-based proteins as well as capabilities in the high-value flavor segment and the fast growing demand for food, beverages, and supplements. The post-acquisition financial results of these acquisitions are reported in the Nutrition segment. 60 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 3. Acquisitions (Continued) The following table sets forth the fair values and the useful lives of the other intangible assets acquired. Useful Lives P4 Deerland Sojaprotein Others Total (In years) (In millions) Intangible assets with finite lives: Trademarks/brands 7 to 15 $ 9 $ 18 $ 5 $ 1 $ 33 Customer lists 15 to 20 220 176 37 14 447 Recipes and others 7 16 58 — 3 77 Total other intangible assets acquired $ 245 $ 252 $ 42 $ 18 $ 557 Fiscal year 2020 acquisitions During the year ended December 31, 2020, the Company acquired Yerbalatina and the remaining 70 % interest in Anco Animal Nutrition Competence GmbH (“Anco”) for an aggregate cash consideration of $ 15 million. The aggregate cash consideration of these acquisitions plus the $ 3 million acquisition-date value of the Company’s previously held equity interest in Anco, were allocated as follows: (In millions) Working capital $ 16 Property, plant, and equipment 1 Goodwill 2 Long-term liabilities ( 1 ) Aggregate cash consideration plus acquisition-date fair value of previously held equity interest $ 18 The Company recognized a pre-tax gain of $ 2 million on the Anco transaction, representing the difference between the carrying value and acquisition-date fair value of the Company’s previously held equity interest. The acquisition-date fair value was determined based on a discounted cash flow analysis using market participant assumptions (a Level 3 measurement under applicable accounting standards). . 61 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 4. Fair Value Measurements 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 December 31, 2022 and 2021. Fair Value Measurements at December 31, 2022 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 $ — $ 6,281 $ 2,760 $ 9,041 Unrealized derivative gains: Commodity contracts — 796 541 1,337 Foreign exchange contracts — 258 — 258 Interest rate contracts — 109 — 109 Cash equivalents 405 — — 405 Segregated investments 1,453 — — 1,453 Total Assets $ 1,858 $ 7,444 $ 3,301 $ 12,603 Liabilities: Unrealized derivative losses: Commodity contracts $ — $ 665 $ 603 $ 1,268 Foreign exchange contracts — 275 — 275 Debt conversion option — — 6 6 Inventory-related payables — 1,181 89 1,270 Total Liabilities $ — $ 2,121 $ 698 $ 2,819 62 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 4. Fair Value Measurements (Continued) Fair Value Measurements at December 31, 2021 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 $ — $ 6,765 $ 3,004 $ 9,769 Unrealized derivative gains: Commodity contracts — 902 460 1,362 Foreign currency contracts — 238 — 238 Interest rate contracts — 46 — 46 Cash equivalents 448 — — 448 Segregated investments 1,338 — — 1,338 Total Assets $ 1,786 $ 7,951 $ 3,464 $ 13,201 Liabilities: Unrealized derivative losses: Commodity contracts $ — $ 944 $ 815 $ 1,759 Foreign currency contracts — 191 — 191 Debt conversion option — — 15 15 Inventory-related payables — 859 106 965 Total Liabilities $ — $ 1,994 $ 936 $ 2,930 Estimated fair values of inventories and inventory-related payables stated at market are based on exchange-quoted prices, adjusted for differences in local markets and quality, referred to as basis. Market valuations for the Company’s inventories are adjusted for location and quality (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using inputs from competitor and broker quotations or market transactions and are considered observable. Basis adjustments are impacted 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 also impact the movement of these basis adjustments. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. When unobservable inputs have a significant impact (more than 10%) on the measurement of fair value, the inventory is classified in Level 3. Changes in the fair value of inventories and inventory-related payables are recognized in the consolidated statements of earnings as a component of cost of products sold. 63 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 4. Fair Value Measurements (Continued) Derivative contracts include exchange-traded commodity futures and options contracts, forward commodity purchase and sale contracts, and OTC instruments related primarily to agricultural commodities, 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 these tables. Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets. Market valuations for the Company’s forward commodity purchase and sale contracts are adjusted for location (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using inputs from competitor and broker quotations or market transactions and are considered observable. Basis adjustments are impacted 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 also impact the movement of these basis adjustments. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. 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 (more than 10%) on the measurement of fair value, the contract is classified 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 revenues, cost of products sold, and other (income) expense - net, depending upon the purpose of the contract. The changes in the fair value of derivatives designated as effective cash flow hedges are recognized in the consolidated balance sheets as a component of AOCI until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur. The Company’s cash equivalents are comprised of money market funds valued using quoted market prices and are classified as Level 1. The Company’s segregated investments are comprised of U.S. Treasury securities. U.S. Treasury securities are valued using quoted market prices and are classified in Level 1. The debt conversion option is the equity linked embedded derivative related to the exchangeable bonds described in Note 10. The fair value of the embedded derivative is included in long-term debt, with changes in fair value recognized as interest, and is valued with the assistance of a third-party pricing service (a level 3 measurement). 64 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 4. Fair Value Measurements (Continued) The following tables present a rollforward of the activity of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2022 and 2021. Level 3 Fair Value Assets Measurements at December 31, 2022 Inventories Carried at Market Commodity Derivative Contracts Gains Total (In millions) Balance, December 31, 2021 $ 3,004 $ 460 $ 3,464 Total increase (decrease) in net realized/unrealized gains included in cost of products sold 867 1,648 2,515 Purchases 49,735 — 49,735 Sales ( 50,414 ) — ( 50,414 ) Settlements — ( 1,672 ) ( 1,672 ) Transfers into Level 3 1,088 400 1,488 Transfers out of Level 3 ( 1,520 ) ( 295 ) ( 1,815 ) Ending balance, December 31, 2022 (1) $ 2,760 $ 541 $ 3,301 (1) Includes increase in unrealized gains of $ 2.7 billion relating to Level 3 assets still held at December 31, 2022. Level 3 Fair Value Liabilities Measurements at December 31, 2022 Inventory- related Payables Commodity Derivative Contracts Losses Debt Conversion Option Total (In millions) Balance, December 31, 2021 $ 106 $ 815 $ 15 $ 936 Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense 3 2,483 ( 9 ) 2,477 Purchases 183 — — 183 Sales ( 203 ) — — ( 203 ) Settlements — ( 2,844 ) — ( 2,844 ) Transfers into Level 3 — 401 — 401 Transfers out of Level 3 — ( 252 ) — ( 252 ) Ending balance, December 31, 2022 (1) $ 89 $ 603 $ 6 $ 698 (1) Includes increase in unrealized losses of $ 2.5 billion relating to Level 3 liabilities still held at December 31, 2022. 65 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 4. Fair Value Measurements (Continued) Level 3 Fair Value Assets Measurements at December 31, 2021 Inventories Carried at Market Commodity Derivative Contracts Gains Total (In millions) Balance, December 31, 2020 $ 2,183 $ 859 $ 3,042 Total increase (decrease) in net realized/unrealized gains included in cost of products sold 1,131 1,071 2,202 Purchases 30,357 — 30,357 Sales ( 30,471 ) — ( 30,471 ) Settlements — ( 1,437 ) ( 1,437 ) Transfers into Level 3 1,200 103 1,303 Transfers out of Level 3 ( 1,396 ) ( 136 ) ( 1,532 ) Ending balance, December 31, 2021 (1) $ 3,004 $ 460 $ 3,464 (1) Includes increase in unrealized gains of $ 2.2 billion relating to Level 3 assets still held at December 31, 2021. Level 3 Fair Value Liabilities Measurements at December 31, 2021 Inventory- related Payables Commodity Derivative Contracts Losses Debt Conversion Option Total (In millions) Balance, December 31, 2020 $ 11 $ 918 $ 34 $ 963 Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense 2 1,992 ( 19 ) 1,975 Purchases 123 — — 123 Sales ( 30 ) — — ( 30 ) Settlements — ( 2,191 ) — ( 2,191 ) Transfers into Level 3 — 324 — 324 Transfers out of Level 3 — ( 228 ) — ( 228 ) Ending balance, December 31, 2021 (1) $ 106 $ 815 $ 15 $ 936 (1) Includes increase in unrealized losses of $ 2.0 billion relating to Level 3 liabilities still held at December 31, 2021. 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. 66 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 4. Fair Value Measurements (Continued) In some cases, the price components that result in differences between exchange-traded prices and local prices for inventories and commodity purchase and sale contracts 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 are referred to as basis. The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of December 31, 2022 and 2021. The Company’s Level 3 measurements may include basis only, transportation cost only, or both price components. As an example, for Level 3 inventories with basis, the unobservable component as of December 31, 2022 is a weighted average 19.4 % of the total price for assets and 15.2 % of the total price for liabilities. Weighted Average % of Total Price December 31, 2022 December 31, 2021 Component Type Assets Liabilities Assets Liabilities Inventories and Related Payables Basis 19.4 % 15.2 % 28.7 % 13.1 % Transportation cost 10.5 % — % 13.0 % — % Commodity Derivative Contracts Basis 22.7 % 26.5 % 30.0 % 27.1 % Transportation cost 13.5 % 3.7 % 8.1 % 0.7 % In certain of the Company’s 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, absent other corroborating evidence, the Company considers these price quotes as 100% unobservable and, therefore, the fair value of these items is reported in Level 3. Note 5. Derivative Instruments & Hedging Activities Derivatives Not Designated as Hedging Instruments The majority of the Company’s derivative instruments have not been designated as hedging instruments. The Company uses exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural product 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 correlation between the value of exchange-traded commodities futures contracts and the value of the underlying commodities, counterparty contract defaults, and volatility of freight markets. Derivatives, including exchange traded contracts and forward commodity purchase or sale contracts, and inventories of certain merchandisable agricultural products, which include amounts acquired under deferred pricing contracts, are stated at fair value or market value. Inventory is not a derivative and therefore fair values of and changes in fair values of inventories are not included in the tables below. 67 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 5. Derivative Instruments & Hedging Activities (Continued) The following table sets forth the fair value of derivatives not designated as hedging instruments as of December 31, 2022 and 2021. December 31, 2022 December 31, 2021 Assets Liabilities Assets Liabilities (In millions) Foreign Currency Contracts $ 154 $ 275 $ 217 $ 116 Commodity Contracts 1,337 1,248 1,276 1,759 Debt Conversion Option — 6 — 15 Total $ 1,491 $ 1,529 $ 1,493 $ 1,890 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 years ended December 31, 2022, 2021, and 2020. Cost of Other expense (income) - net products Interest (In millions) Revenues sold Expense For the Year Ended December 31, 2022 Consolidated Statement of Earnings $ 101,556 $ 93,986 $ 396 $ ( 358 ) Pre-tax gains (losses) on: Foreign Currency Contracts $ ( 42 ) $ 367 $ — $ 194 Commodity Contracts — ( 120 ) — — Debt Conversion Option — — 9 — Total gain (loss) recognized in earnings $ ( 42 ) $ 247 $ 9 $ 194 $ 408 For the Year Ended December 31, 2021 Consolidated Statement of Earnings $ 85,249 $ 79,262 $ 265 $ ( 94 ) Pre-tax gains (losses) on: Foreign Currency Contracts $ 3 $ ( 140 ) $ — $ 189 Commodity Contracts — ( 1,606 ) — — Debt Conversion Option — — 19 — Total gain (loss) recognized in earnings $ 3 $ ( 1,746 ) $ 19 $ 189 $ ( 1,535 ) For the Year Ended December 31, 2020 Consolidated Statement of Earnings $ 64,355 $ 59,902 $ 339 $ ( 255 ) Pre-tax gains (losses) on: Foreign Currency Contracts $ 28 $ ( 496 ) $ — $ ( 153 ) Commodity Contracts — ( 68 ) — — Debt Conversion Option — — ( 17 ) — Total gain (loss) recognized in earnings $ 28 $ ( 564 ) $ ( 17 ) $ ( 153 ) $ ( 706 ) 68 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 5. Derivative Instruments & Hedging Activities (Continued) Changes in the market value of inventories of certain merchandisable agricultural commodities, inventory-related payables, forward cash purchase and sales contracts, exchange-traded futures, and exchange-traded and OTC options contracts are recognized in earnings immediately 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 revenues, cost of products sold, and other (income) expense - net depending on the purpose of the contract. Derivatives Designated as Cash Flow or Net Investment Hedging Instruments The Company had certain derivatives designated as cash flow and net investment hedges as of December 31, 2022 and 2021. For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flow that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of AOCI and as an operating activity in the statement of cash flows 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. 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. Commodity Contracts For each of the 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 and losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable. The Company uses futures or options contracts to hedge 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 normally grind approximately 65 million bushels per month. During the past 12 months, the Company hedged between 17 % and 33 % of its monthly grind. At December 31, 2022, the Company had designated hedges representing between 14 % to 28 % of its anticipated monthly grind of corn for the next 12 months. The Company, from time to time, also uses futures, options, and swaps to hedge the sales price of certain ethanol sales contracts. The Company has established hedging programs for ethanol sales contracts that are indexed to unleaded gasoline prices and to various exchange-traded ethanol contracts. The objective of these hedging programs is to reduce the variability of cash flows associated with the Company’s sales of ethanol. During the past 12 months and as of December 31, 2022, the Company had no hedges related to ethanol sales. The Company uses futures and options contracts to hedge the purchase price of anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities, subject to certain program limits. The Company also uses futures or options contracts to hedge the sales prices of anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities, subject to certain program limits. During the past 12 months, the Company hedged between 85 % and 100 % of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. At December 31, 2022, the Company had designated hedges representing between 0 % and 100 % of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities over the next 12 months. The Company uses futures and OTC swaps to hedge the purchase price of anticipated volumes of natural gas consumption in a future month for certain of its facilities in North America and Europe, subject to certain program limits. During the past 12 months, the Company hedged between 73 % and 93 % of the anticipated monthly natural gas consumption at the designated facilities. At December 31, 2022, the Company had designated hedges representing between 53 % and 83 % of the anticipated monthly natural gas consumption over the next 12 months. 69 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 5. Derivative Instruments & Hedging Activities (Continued) As of December 31, 2022 and 2021, the Company had after-tax losses of $ 17 million and after-tax gains of $ 161 million in AOCI, respectively, related to gains and losses from these programs. The Company expects to recognize $ 17 million of the 2022 after-tax losses in its consolidated statement of earnings during the next 12 months. Interest Rate Contracts The Company’s structured trade finance programs use interest rate swaps designated as cash flow hedges to hedge the forecasted interest payments on certain letters of credit from banks. The terms of the interest rate swaps match the terms of the forecasted interest payments. The deferred gains and losses are recognized in revenues over the period in which the related interest payments are paid to the banks. The amounts are recorded in revenues as the related results are also recorded in revenues. The Company had interest rate swaps maturing on various dates with aggregate notional amount of $ 1.0 billion as of December 31, 2021 and none as of December 31, 2022. The Company also uses swap locks designated as cash flow hedges to hedge the changes in the forecasted interest payments due to changes in the benchmark rate leading up to future bond issuance dates. The terms of the swap locks match the terms of the forecasted interest payments. The deferred gains and losses will be recognized in interest expense over the period in which the related interest payments will be paid. As of December 31, 2022 and 2021, the Company executed swap locks maturing on various dates with an aggregate notional amount of $ 400 million. As of December 31, 2022 and 2021, the Company had after-tax gains of $ 82 million and $ 35 million in AOCI, respectively, related to the interest rate swaps and swap locks. The Company expects to recognize amounts deferred in AOCI in its consolidated statement of earnings during the life of the instruments. Foreign Currency Contracts The Company uses cross-currency swaps and foreign exchange forwards designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. The Company executed USD-fixed to Euro-fixed cross-currency swaps with an aggregate notional amount of $ 0.8 billion and $ 1.2 billion as of December 31, 2022 and 2021, respectively, and foreign exchange forwards with an aggregate notional amount of $ 2.5 billion and $ 2.6 billion as of December 31, 2022 and 2021, respectively. Amounts excluded from the assessment of hedge effectiveness are immaterial for all periods presented. As of December 31, 2022 and 2021, the Company had after-tax gains of $ 79 million and after-tax losses of $ 44 million in AOCI, respectively, related to foreign exchange gains and losses from net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested. The following table sets forth the fair value of derivatives designated as hedging instruments as of December 31, 2022 and 2021. December 31, 2022 December 31, 2021 Assets Liabilities Assets Liabilities (In millions) Commodity Contracts $ — $ 20 $ 86 $ — Interest Rate Contracts 109 — 46 — Foreign Currency Contracts 104 — 21 75 Total $ 213 $ 20 $ 153 $ 75 70 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 5. Derivative Instruments & Hedging Activities (Continued) The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statement of earnings for the years ended December 31, 2022, 2021, and 2020. Cost of products sold Interest expense Other expense (income) - net (In millions) Revenues For the Year Ended December 31, 2022 Consolidated Statement of Earnings $ 101,556 $ 93,986 $ 396 $ ( 358 ) Effective amounts recognized in earnings Pre-tax gains (losses) on: Commodity Contracts — 351 — — Interest Contracts 1 — — — Total gain (loss) recognized in earnings $ 1 $ 351 $ — $ — $ 352 For the Year Ended December 31, 2021 Consolidated Statement of Earnings $ 85,249 $ 79,262 265 $ ( 94 ) Effective amounts recognized in earnings Pre-tax gains (losses) on: Commodity Contracts $ — $ 490 $ — $ — Interest Rate Contracts ( 16 ) — — — Total gain (loss) recognized in earnings $ ( 16 ) $ 490 $ — $ — $ 474 For the Year Ended December 31, 2020 Consolidated Statement of Earnings $ 64,355 $ 59,902 $ 339 $ ( 255 ) Effective amounts recognized in earnings Pre-tax gains (losses) on: Commodity Contracts $ 7 $ 27 $ — $ ( 2 ) Interest Rate Contracts ( 75 ) — ( 2 ) — Total gain (loss) recognized in earnings $ ( 68 ) $ 27 $ ( 2 ) $ ( 2 ) $ ( 45 ) Other Net Investment Hedging Strategies The Company has designated € 1.3 billion and € 1.8 billion of its outstanding long-term debt and commercial paper borrowings at December 31, 2022 and 2021, respectively, as hedges of its net investment in a foreign subsidiary. As of December 31, 2022 and 2021, the Company had after-tax gains of $ 228 million and $ 55 million in AOCI, respectively, related to foreign exchange gains and losses from the net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested. 71 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 6. Other Current Assets The following table sets forth the items in other current assets: December 31, 2022 December 31, 2021 (In millions) Unrealized gains on derivative contracts $ 1,704 $ 1,646 Margin deposits and grain accounts 723 600 Customer omnibus receivable 1,309 1,179 Financing receivables - net (1) 235 189 Insurance premiums receivable 54 20 Prepaid expenses 443 370 Biodiesel tax credit 68 79 Tax receivables 616 708 Non-trade receivables (2) 361 285 Other current assets 153 82 $ 5,666 $ 5,158 (1) The Company provides financing to suppliers, primarily Brazilian farmers, to finance a portion of the suppliers’ production costs. The amounts are reported net of allowances of $ 3 million and $ 4 million at December 31, 2022 and 2021, respectively. Interest earned on financing receivables of $ 15 million, $ 11 million, and $ 20 million for the years ended December 31, 2022, 2021, and 2020, respectively, is included in interest and investment income in the consolidated statements of earnings. (2) Non-trade receivables included $ 18 million and $ 27 million of reinsurance recoverables as of December 31, 2022 and 2021, respectively. Note 7. Accrued Expenses and Other Payables The following table sets forth the items in accrued expenses and other payables: December 31, 2022 December 31, 2021 (In millions) Unrealized losses on derivative contracts $ 1,543 $ 1,950 Accrued compensation 475 445 Income tax payable 248 132 Other taxes payable 136 168 Insurance claims payable 223 220 Contract liability 694 581 Other accruals and payables 1,476 1,294 $ 4,795 $ 4,790 72 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 8. Investments in and Advances to Affiliates The Company applies the equity method of accounting for investments in investees over which ADM has the ability to exercise significant influence, including the Company’s 22.5 % and 22.3 % share ownership in Wilmar as of December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company also holds equity method investments in Pacificor ( 32.2 %), Stratas Foods LLC ( 50.0 %), Edible Oils Limited ( 50.0 %), Olenex ( 37.5 %), SoyVen ( 50.0 %), Hungrana Ltd ( 50.0 %), Almidones Mexicanos S.A. ( 50.0 %), Aston Foods and Food Ingredients ( 50.0 %), and Vimison S.A. de C.V. ( 45.3 %). The Company had 67 and 63 unconsolidated domestic and foreign affiliates as of December 31, 2022 and 2021, respectively. The following table summarizes the combined balance sheets as of December 31, 2022 and 2021, and the combined statements of earnings of the Company’s unconsolidated affiliates for the years ended December 31, 2022, 2021, and 2020. December 31 (In millions) 2022 2021 Current assets $ 41,407 $ 34,955 Non-current assets 30,589 27,938 Current liabilities ( 36,091 ) ( 30,002 ) Non-current liabilities ( 9,300 ) ( 8,362 ) Noncontrolling interests ( 2,641 ) ( 2,630 ) Net assets $ 23,964 $ 21,899 Year Ended December 31 (In millions) 2022 2021 2020 Revenues $ 109,448 $ 87,528 $ 59,195 Gross profit 8,946 7,719 5,070 Net income 3,140 2,315 2,093 The Company’s share of the undistributed earnings of its unconsolidated affiliates as of December 31, 2022 is $ 3.2 billion. The Company’s investment in Wilmar has a carrying value of $ 4.1 billion as of December 31, 2022, and a market value of $ 4.4 billion based on quoted market price converted to U.S. dollars at the applicable exchange rate at December 31, 2022. The Company provides credit facilities totaling $ 116 million to five unconsolidated affiliates. There was no outstanding balance on these facilities as of December 31, 2022. Net sales to unconsolidated affiliates during the years ended December 31, 2022, 2021, and 2020 were $ 7.8 billion, $ 6.6 billion, and $ 4.7 billion, respectively. Accounts receivable due from unconsolidated affiliates as of December 31, 2022 and 2021 was $ 286 million and $ 274 million, respectively. 73 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 9. Goodwill and Other Intangible Assets Goodwill balances attributable to consolidated businesses, by segment, are set forth in the following table. December 31, 2022 December 31, 2021 (In millions) Ag Services and Oilseeds $ 193 $ 204 Carbohydrate Solutions 224 240 Nutrition 3,731 3,734 Other Business 14 4 Total $ 4,162 $ 4,182 The changes in goodwill during the year ended December 31, 2022 were related to foreign currency translation losses of $ 123 million, partially offset by 2022 acquisitions and adjustments to purchase price allocations related to 2021 acquisitions (see Note 3). The following table sets forth the other intangible assets: December 31, 2022 December 31, 2021 Useful Gross Accumulated Gross Accumulated Life Amount Amortization Net Amount Amortization Net (In years) (In millions) Intangible assets with indefinite lives: Trademarks/brands $ 397 $ — $ 397 $ 409 $ — $ 409 Intangible assets with definite lives: Trademarks/brands 5 to 20 70 ( 28 ) 42 105 ( 20 ) 85 Customer lists 1 to 30 1,544 ( 542 ) 1,002 1,580 ( 454 ) 1,126 Capitalized software and related costs 5 721 ( 449 ) 272 714 ( 383 ) 331 Land rights 2 to 50 109 ( 25 ) 84 122 ( 28 ) 94 Other intellectual property 6 to 20 228 ( 112 ) 116 276 ( 100 ) 176 Recipes and other 3 to 35 547 ( 274 ) 273 487 ( 230 ) 257 Intangible assets in process 196 — 196 87 — 87 Total $ 3,812 $ ( 1,430 ) $ 2,382 $ 3,780 $ ( 1,215 ) $ 2,565 The changes in the gross amounts during the year ended December 31, 2022 were primarily related to additions to intangible assets in process, partially offset by decreases related to foreign currency translation of $ 89 million. The changes in accumulated amortization during the year ended December 31, 2022 were related to amortization expense, partially offset by decreases related to foreign currency translation of $ 30 million. Aggregate amortization expense was $ 235 million, $ 177 million, and $ 173 million for the years ended December 31, 2022, 2021, and 2020, respectively, of which $ 69 million, $ 33 million, and $ 45 million, respectively, were for amortization of capitalized software and related costs. The estimated future aggregate amortization expense for the next five years is $ 246 million, $ 273 million, $ 255 million, $ 251 million, and $ 245 million, respectively. 74 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 10. Debt Financing Arrangements The Company’s long-term debt consisted of the following: Debt Instrument Interest Rate Face Amount Due Date December 31, 2022 December 31, 2021 (In millions) 2.5 % Notes $ 1 billion 2026 $ 997 $ 996 3.25 % Notes $ 1 billion 2030 989 988 2.900 % Notes $ 750 million 2032 744 — 2.700 % Notes $ 750 million 2051 731 730 1 % Notes € 650 million 2025 691 735 1.75 % Notes € 600 million 2023 641 681 4.5 % Notes $ 600 million 2049 589 588 5.375 % Debentures $ 432 million 2035 425 425 3.75 % Notes $ 408 million 2047 403 402 5.935 % Debentures $ 336 million 2032 334 333 0 % Bonds $ 300 million 2023 304 310 5.765 % Debentures $ 297 million 2041 297 297 4.535 % Debentures $ 383 million 2042 286 283 4.016 % Debentures $ 371 million 2043 260 258 7 % Debentures $ 160 million 2031 159 159 6.95 % Debentures $ 157 million 2097 154 154 7.5 % Debentures $ 147 million 2027 147 147 6.625 % Debentures $ 144 million 2029 144 144 6.75 % Debentures $ 103 million 2027 103 103 6.45 % Debentures $ 103 million 2038 102 102 Fixed to Floating Rate Notes € 500 million 2022 — 569 Other 177 177 Total long-term debt including current maturities 8,677 8,581 Current maturities ( 942 ) ( 570 ) Total long-term debt $ 7,735 $ 8,011 On February 28, 2022 , the Company issued its first sustainability bond of $ 750 million aggregate principal amount of 2.900 % notes due March 1, 2032 . Net proceeds before expenses were $ 748 million. The Company expects to apply an amount equal to the net proceeds to finance or refinance eligible green projects and/or eligible social projects. In September 2022, the Company redeemed € 500 million aggregate principal amount of Fixed-to-Floating Rate Senior Notes due 2022 issued in a private placement on March 25, 2021. On September 29, 2022, Archer Daniels Midland Singapore, Pte. Ltd., a wholly-owned subsidiary of the Company, closed on a $ 500 million revolving credit facility at an interest rate of Secured Overnight Financing Rate plus a fixed spread . The facility will be used to finance working capital requirements of ADM entities in the Asia Pacific region and general corporate purposes. 75 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 10. Debt Financing Arrangements (Continued) On September 10, 2021 , the Company issued $ 750 million aggregate principal amount of 2.700 % Notes due September 15, 2051 (the “Notes”). Net proceeds before expenses were $ 732 million. In September 2021, the Company used the proceeds of the Notes to redeem $ 500 million aggregate principal amount of 2.750 % notes due March 27, 2025 and recognized a debt extinguishment charge of $ 36 million in the year ended December 31, 2021. Discount amortization expense, net of premium amortization, of $ 6 million, $ 10 million, and $ 13 million for the years ended December 31, 2022, 2021, and 2020, respectively, are included in interest expense related to the Company’s long-term debt. At December 31, 2022, the fair value of the Company’s long-term debt was below the carrying value by $ 0.2 billion, as estimated using quoted market prices (a Level 2 measurement under applicable accounting standards). The aggregate maturities of long-term debt for the five years after December 31, 2022, are $ 942 million, $ 6 million, $ 693 million, $ 998 million, and $ 250 million, respectively. At December 31, 2022, the Company had lines of credit, including the accounts receivable securitization programs described below, totaling $ 12.4 billion, of which $ 9.3 billion was unused. The weighted average interest rates on short-term borrowings outstanding at December 31, 2022 and 2021, were 6.21 % and 1.23 %, respectively. Of the Company’s total lines of credit, $ 5.0 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was $ 0.3 billion of commercial paper outstanding at December 31, 2022. The Company’s credit facilities and certain debentures require the Company to comply with specified financial and non-financial covenants including maintenance of minimum tangible net worth as well as limitations related to incurring liens, secured debt, and certain other financing arrangements. The Company is in compliance with these covenants as of December 31, 2022. The Company had outstanding standby letters of credit and surety bonds at December 31, 2022 and 2021, totaling $ 1.6 billion and $ 1.2 billion, respectively. The Company has accounts receivable securitization programs (the “Programs”). The Programs provide the Company with up to $ 2.6 billion in funding resulting from the sale of accounts receivable. As of December 31, 2022, the Company utilized $ 2.6 billion of its facility under the Programs (see Note 19 for more information on the Programs). Note 11. Stock Compensation The Company’s employee stock compensation plans provide for the granting of options to employees to purchase common stock of the Company pursuant to the Company’s 2020 Incentive Compensation Plan. These options are issued at market value on the date of grant, vest incrementally over one year to five years , and expire ten years after the date of grant. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes single option pricing model. The volatility assumption used in the Black-Scholes single option pricing model is based on the historical volatility of the Company’s stock. The volatility of the Company’s stock was calculated based upon the monthly closing price of the Company’s stock for the period immediately prior to the date of grant corresponding to the average expected life of the grant. The average expected life represents the period of time that option grants are expected to be outstanding. The risk-free rate is based on the rate of U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of option grants. No options were granted in 2022, 2021, and 2020. 76 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 11. Stock Compensation (Continued) A summary of option activity during 2022 is presented below: Shares Weighted-Average Exercise Price (In thousands, except per share amounts) Shares under option at December 31, 2021 4,584 $ 37.20 Exercised ( 2,484 ) 36.30 Forfeited or expired ( 3 ) 26.25 Shares under option at December 31, 2022 2,097 $ 38.27 Exercisable at December 31, 2022 2,097 $ 38.27 The weighted-average remaining contractual term of options outstanding and exercisable at December 31, 2022, is 3 years and 3 years, respectively. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2022, is $ 115 million and $ 115 million, respectively. The total intrinsic values of options exercised during the years ended December 31, 2022, 2021, and 2020, were $ 117 million, $ 37 million, and $ 32 million, respectively. Cash proceeds received from options exercised during the years ended December 31, 2022, 2021, and 2020, were $ 90 million, $ 64 million, and $ 49 million, respectively. At December 31, 2022, unrecognized compensation expense related to option grants to be recognized as compensation expense during the next year was immaterial. The Company’s 2020 Incentive Compensation Plan provides for the granting of restricted stock and restricted stock units (Restricted Stock Awards) at no cost to certain officers and key employees. In addition, the Company’s 2020 Incentive Compensation Plan also provides for the granting of performance stock units (PSUs) at no cost to certain officers and key employees. Restricted Stock Awards are made in common stock or stock units with equivalent rights and vest at the end of a restriction period of three years . In 2022, the awards for PSUs are made in common stock units and vest at the end of a vesting period of three years subject to the attainment of certain future service and performance criteria based on the Company’s adjusted return on invested capital (ROIC) and adjusted earnings per share (EPS) with a modifier for gender parity and greenhouse gas emissions. During the years ended December 31, 2022, 2021, and 2020, 2.3 million, 2.7 million, and 2.7 million common stock or stock units, respectively, were granted as Restricted Stock Awards and PSUs. At December 31, 2022, there were 14.7 million shares available for future grants pursuant to the 2020 plan. The fair value of Restricted Stock Awards is determined based on the market value of the Company’s shares on the grant date. In 2022, the fair value of PSUs issued was based on the weighted-average values of adjusted ROIC and adjusted EPS determined based on the market value of the Company’s shares on the grant date. In 2021 and 2020, the fair value of PSUs issued was based on the weighted-average values of adjusted ROIC and compound average growth rate of Nutrition’s segment operating profit determined based on the market value of the Company’s shares on the grant date. The weighted-average grant-date fair values of awards granted during the years ended December 31, 2022, 2021, and 2020 were $ 70.13 , $ 53.28 , and $ 45.59 , respectively. 77 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 11. Stock Compensation (Continued) A summary of Restricted Stock Awards and PSUs activity during 2022 is presented below: Restricted Stock Awards and PSUs Weighted Average Grant-Date Fair Value (In thousands, except per share amounts) Non-vested at December 31, 2021 7,135 $ 47.27 Granted 2,267 70.13 Vested ( 2,794 ) 42.02 Forfeited ( 200 ) 63.15 Non-vested at December 31, 2022 6,408 $ 57.22 At December 31, 2022, there was $ 95 million of total unrecognized compensation expense related to Restricted Stock Awards and PSUs. Amounts to be recognized as compensation expense during the next three years are $ 61 million, $ 31 million, and $ 3 million, respectively. The total grant-date fair value of Restricted Stock Awards that vested during the year ended December 31, 2022 was $ 117 million. Compensation expense for option grants, Restricted Stock Awards, and PSUs granted to employees is generally recognized on a straight-line basis during the service period of the respective grant. Certain of the Company’s option grants, Restricted Stock Awards, and PSUs continue to vest upon the recipient’s retirement from the Company and compensation expense related to option grants and Restricted Stock Awards granted to retirement-eligible employees is recognized in earnings on the date of grant. Compensation expense for PSUs is based on the probability of meeting the performance criteria. The Company recognizes forfeitures as they occur. Total compensation expense for option grants, Restricted Stock Awards, and PSUs recognized during the years ended December 31, 2022, 2021, and 2020 was $ 147 million, $ 161 million, and $ 151 million, respectively. Changes in incentive compensation expense are primarily caused by the level of attainment of the PSU performance criteria described above. Note 12. Other (Income) Expense – Net The following table sets forth the items in other (income) expense: (In millions) Year Ended December 31 2022 2021 2020 Gains on sale of assets $ ( 78 ) $ ( 100 ) $ ( 138 ) Pension settlement — 83 — Other – net ( 280 ) ( 77 ) ( 117 ) $ ( 358 ) $ ( 94 ) $ ( 255 ) Individually significant items included in the table above are: Gains on sale of assets for the year ended December 31, 2022 consisted of gains on sales of certain assets and disposals of individually insignificant assets in the ordinary course of business. Gains on sale of assets for the year ended December 31, 2021 consisted of gains on the sale of the Company’s ethanol production complex in Peoria, Illinois of $ 22 million, the sale of certain other assets, and disposals of individually insignificant assets in the ordinary course of business. Gains on sale of assets for the year ended December 31, 2020 included a gain on the sale of a portion of the Company’s shares in Wilmar and net gains on the sale of certain other assets and disposals of individually insignificant assets in the ordinary course of business. 78 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 12. Other (Income) Expense – Net (Continued) Pension settlement for the year ended December 31, 2021 was 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 Plan and ADM Pension Plan for Hourly-Wage Employees to independent third parties. Other - net for the year ended December 31, 2022 included a legal recovery related to the 2019 and 2020 closure of the Company’s Reserve, Louisiana, export facility of $ 110 million, net foreign exchange gains of $ 105 million, a $ 50 million one-time payment from the USDA Biofuel Producer Recovery Program, and the non-service components of net pension benefit income of $ 25 million, partially offset by other net expense. Other - net for the year ended December 31, 2021 included the non-service components of net pension benefit income of $ 16 million, net foreign exchange gains of $ 24 million, and other income. Other - net for the year ended December 31, 2020 included the non-service components of net pension benefit income of $ 33 million, foreign exchange gains, and other income. Note 13. Income Taxes The following table sets forth the geographic split of earnings before income taxes: Year Ended (In millions) December 31 2022 2021 2020 United States $ 2,725 $ 2,140 $ 442 Foreign 2,508 1,173 1,441 $ 5,233 $ 3,313 $ 1,883 Significant components of income taxes are as follows: (In millions) Year Ended December 31 2022 2021 2020 Current Federal $ 379 $ 404 $ ( 164 ) State 97 79 4 Foreign 481 224 186 Deferred Federal 23 ( 59 ) 41 State 7 ( 12 ) ( 10 ) Foreign ( 119 ) ( 58 ) 44 $ 868 $ 578 $ 101 79 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 13. Income Taxes (Continued) Significant components of deferred tax liabilities and assets are as follows: December 31, 2022 December 31, 2021 (In millions) Deferred tax liabilities Property, plant, and equipment $ 811 $ 875 Intangibles 417 403 Right of use assets 237 214 Equity in earnings of affiliates 191 153 Inventory reserves 11 29 Debt exchange 52 53 Reserves and other accruals 86 65 Other 108 185 $ 1,913 $ 1,977 Deferred tax assets Pension and postretirement benefits $ 104 $ 137 Lease liabilities 244 220 Stock compensation 51 53 Foreign tax loss carryforwards 496 465 Capital loss carryforwards 42 74 State tax attributes 21 21 Reserves and other accruals 22 158 Other 77 44 Gross deferred tax assets 1,057 1,172 Valuation allowances ( 209 ) ( 281 ) Net deferred tax assets $ 848 $ 891 Net deferred tax liabilities $ 1,065 $ 1,086 The net deferred tax liabilities are classified as follows: Noncurrent assets $ — $ 27 Noncurrent assets (foreign) 337 299 Noncurrent liabilities ( 1,183 ) ( 1,079 ) Noncurrent liabilities (foreign) ( 219 ) ( 333 ) $ ( 1,065 ) $ ( 1,086 ) During 2022, the Company decreased valuation allowances by $68 million primarily related to net operating loss and foreign capital loss carryforwards. 80 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 13. Income Taxes (Continued) Reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate on earnings is as follows: Year Ended December 31 2022 2021 2020 Statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit 1.4 1.5 ( 0.3 ) Foreign earnings taxed at rates other than the U.S. statutory rate ( 3.8 ) ( 2.8 ) ( 2.3 ) Foreign currency effects/remeasurement 0.6 — ( 1.1 ) Income tax adjustment to filed returns ( 0.1 ) 0.7 ( 0.4 ) Tax benefit on U.S. biodiesel credits ( 1.2 ) ( 1.9 ) ( 3.3 ) Tax benefit on U.S. railroad credits ( 1.2 ) ( 2.0 ) ( 8.0 ) U.S. tax on foreign earnings 0.2 — 0.6 Valuation allowances — 0.7 0.2 Other ( 0.3 ) 0.2 ( 1.0 ) Effective income tax rate 16.6 % 17.4 % 5.4 % The effective tax rate for 2022 was impacted by the geographic mix of earnings and discrete tax items. The effective tax rates for 2021 and 2020 were impacted by the geographic mix of earnings and U.S. tax credits, including the biodiesel tax credit and the railroad maintenance tax credit. ADM’s operations in foreign jurisdictions accounted for 48 %, 35 %, and 77 % of the Company’s total pre-tax earnings in fiscal years 2022, 2021, and 2020, respectively. The foreign rate differential was primarily due to lower tax rates applicable to the income earned from the Company’s operations in Switzerland, Asia, and the Caribbean. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (“Inflation Act”), which includes, among other provisions, changes to the U.S. corporate income tax system, including a 15 % minimum tax based on “adjusted financial statement income,” and a one percent excise tax on net repurchases of stock for tax years beginning after December 31, 2022. While the Inflation Act has no immediate impact and is not expected to have a material adverse effect on ADM’s results of operations going forward, the Company will continue to evaluate its impact as further information becomes available. Undistributed earnings of the Company’s foreign subsidiaries and corporate joint ventures were approximately $ 15.5 billion at December 31, 2022. Because these undistributed earnings continue to be indefinitely reinvested in foreign operations, no income taxes, other than the transition tax, the U.S. tax on undistributed Subpart F, and the minimum tax on Global Intangible Low Taxed Income (GILTI), have been provided after the Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. It is not practicable to determine the amount of unrecognized deferred tax liability related to any remaining undistributed earnings of foreign subsidiaries and corporate joint ventures not subject to the transition tax. The Company has elected to pay the one-time transition tax on accumulated foreign earnings over eight years. As of December 31, 2022, the Company’s remaining transition tax liability was $ 122 million, which will be paid in installments through 2025. The Company incurred U.S. taxable income of $ 684 million, $ 244 million, and $ 259 million related to GILTI and deducted $ 67 million, $ 87 million, and $ 12 million related to FDII in fiscal years 2022, 2021, and 2020 respectively. The Company made an accounting policy election to treat GILTI as a period cost. The Company has recorded and will continue to record the impact of tax reform items as U.S. tax authorities issue Treasury Regulations and other guidance addressing tax reform-related changes. The additional guidance, along with the potential for additional global tax legislation changes, may affect significant deductions and income inclusions and could have a material adverse effect on the Company’s net income or cash flow. 81 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 13. Income Taxes (Continued) The Company had $ 496 million and $ 465 million of tax assets related to net operating loss carryforwards of certain international subsidiaries at December 31, 2022 and 2021, respectively. As of December 31, 2022, approximately $ 399 million of these assets have no expiration date, and the remaining $ 97 million expire at various times through fiscal 2032. The annual usage of certain of these assets is limited to a percentage of taxable income of the respective foreign subsidiary for the year. The Company has recorded a valuation allowance of $ 142 million and $ 200 million against these tax assets at December 31, 2022 and 2021, respectively, due to the uncertainty of their realization. The Company had $ 42 million and $ 74 million of tax assets related to foreign capital loss carryforwards at December 31, 2022 and 2021, respectively. The Company has recorded a valuation allowance of $ 42 million and $ 74 million against these tax assets at December 31, 2022 and 2021, respectively, due to the uncertainty of their realization. The Company had $ 21 million of tax assets related to state income tax attributes (incentive credits and net operating loss carryforwards), net of federal tax benefit, at December 31, 2022 and 2021, a majority of which will expire between 2023 and 2027. Due to the uncertainty of realization, the Company recorded a valuation allowance of $ 15 million and $ 13 million related to state income tax assets net of federal tax benefit as of December 31, 2022 and 2021, respectively. The change in the valuation allowance was related to the expiration of certain state income tax attributes which were fully reserved in prior years. The Company remains subject to federal examination in the U.S. for the calendar tax years 2016 through 2022. The following table sets forth a rollforward of activity of unrecognized tax benefits for the year ended December 31, 2022 and 2021 as follows: Unrecognized Tax Benefits December 31, 2022 December 31, 2021 (In millions) Beginning balance $ 157 $ 151 Additions related to current year’s tax positions 6 7 Additions related to prior years’ tax positions 26 15 Additions (adjustments) related to acquisitions 11 — Reductions related to lapse of statute of limitations ( 6 ) ( 9 ) Settlements with tax authorities ( 43 ) ( 7 ) Ending balance $ 151 $ 157 The additions and reductions in unrecognized tax benefits shown in the table included effects related to net income and shareholders’ equity. The changes in unrecognized tax benefits did not have a material effect on the Company’s net income or cash flow. At December 31, 2022 and 2021, the Company had accrued interest and penalties on unrecognized tax benefits of $ 39 million. The Company is subject to income taxation and routine examinations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due. These challenges include positions taken by the Company related to the timing, nature, and amount of deductions and the allocation of income among various jurisdictions. In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential tax owed by the Company in accordance with applicable accounting standards. Resolution of the related tax positions, through negotiations with relevant tax authorities or through litigation, may take years to complete. Therefore, it is difficult to predict the timing for resolution of tax positions and the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations. However, the Company does not anticipate that the total amount of unrecognized tax benefits will increase or decrease significantly in the next twelve months. Given the long periods of time involved in resolving tax positions, the Company does not expect that the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income tax rate in any given period. If the total amount of unrecognized tax benefits were recognized by the Company at one time, there would be a reduction of $ 148 million on the tax expense for that period. 82 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 13. Income Taxes (Continued) The Company’s subsidiary in Argentina, ADM Agro SRL (formerly ADM Argentina SA and Alfred C. Toepfer Argentina SRL), received tax assessments challenging transfer prices used to price grain exports for the tax years 1999 through 2011 and 2015. As of December 31, 2022, these assessments totaled $ 5 million in tax and up to $ 25 million in interest (adjusted for variation in currency exchange rates). The Argentine tax authorities conducted a review of income and other taxes paid by large exporters and processors of cereals and other agricultural commodities resulting in allegations of income tax evasion. The Company strongly believes that it has complied with all Argentine tax laws. Currently the Company is under audit for fiscal years 2016 and 2017. While the statute of limitations has expired for tax years 2012 and 2013, the Company cannot rule out receiving additional assessments challenging transfer prices used to price grain exports for years subsequent to 2015. The Company believes that it has appropriately evaluated the transactions underlying these assessments, and has concluded, based on Argentine tax law, that its tax position is more likely than not to be sustained based upon its technical merits, and accordingly, has not recorded a tax liability for these assessments. The Company intends to vigorously defend its position against any assessments. In 2014, the Company’s wholly-owned subsidiary in the Netherlands, ADM Europe B.V., received a tax assessment from the Netherlands tax authority challenging the transfer pricing aspects of a 2009 business reorganization, which involved two of its subsidiary companies in the Netherlands. As of December 31, 2022, this assessment was $ 87 million in tax and $ 31 million in interest (adjusted for variation in currency exchange rates). On April 23, 2020, the court issued an unfavorable ruling and in October 2020, assigned a third party expert to establish a valuation. During the second quarter of 2021, the third party expert issued a final valuation. On September 30, 2022, the court issued a ruling consistent with the valuation report, and the Dutch tax authorities have filed an appeal. ADM intends to file a cross-appeal in the first quarter of 2023. As of December 31, 2022, the Company has accrued its best estimate of what it believes will be the likely outcome of the litigation. Note 14. Leases Lessee Accounting The Company leases certain transportation equipment, plant equipment, office equipment, land, buildings, and storage facilities. Most leases include options to renew, with renewal terms that can extend the lease term from 6 months to 49 years. The renewal options are not included in the measurement of the right of use assets and lease liabilities unless the Company is reasonably certain to exercise the optional renewal periods. Certain leases also include index and non-index escalation clauses and options to purchase the leased property. Leases accounted for as finance leases were immaterial at December 31, 2022. As an accounting policy election, the Company does not apply the recognition requirements of Topic 842 to short-term leases in all of its underlying asset categories. The Company recognizes short-term lease payments in earnings on a straight-line basis over the lease term, and variable lease payments in the period in which the obligation for those payments is incurred. The Company also combines lease and non-lease contract components in all of its underlying asset categories as an accounting policy election. 83 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 14. Leases (Continued) The following table sets forth the amounts relating to the Company’s total lease cost and other information. Year Ended December 31 2022 2021 2020 (In millions) Lease cost: Operating lease cost $ 356 $ 336 $ 315 Short-term lease cost 127 117 101 Total lease cost $ 483 $ 453 $ 416 Other information: Operating lease liability principal payments $ 339 $ 325 $ 302 Right-of-use assets obtained in exchange for new operating lease liabilities $ 357 $ 197 $ 314 December 31 2022 2021 Weighted-average remaining lease term - operating leases (in years) 7 6 Weighted average discount rate - operating leases 3.7 % 3.8 % Below is a tabular disclosure of the future annual undiscounted cash flows for operating lease liabilities as of December 31, 2022. Undiscounted Cash Flows (In millions) 2023 $ 325 2024 259 2025 186 2026 124 2027 94 Thereafter 268 Total 1,256 Less interest (1) ( 148 ) Lease liability $ 1,108 (1) Calculated using the implicit rate of the lease, if available, or the incremental borrowing rate that is appropriate for the tenor and geography of the lease. 84 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 15. Employee Benefit Plans The Company provides substantially all U.S. employees and employees at certain foreign subsidiaries with retirement benefits including defined benefit pension plans and defined contribution plans. The Company also provides certain eligible U.S. employees who retire under qualifying conditions with subsidized postretirement health care coverage or Health Care Reimbursement Accounts. In 2021, the Company amended the ADM Retirement Plan and the ADM Pension Plan for Hourly-Wage Employees (collectively, the “Plans”) and entered into two binding agreements to purchase: (1) a group annuity contract from Principal Life Insurance Company (“Principal”) and (2) two group annuity contracts, separately from American General Life Insurance Company (“AGL”) and from AGL’s affiliate, The United States Life Insurance Company in the City of New York (“USL”), irrevocably transferring the future benefit obligations and annuity administration for approximately 6,000 retirees and terminated vested participants from the Plans to Principal, AGL, and USL. The purchase of the group annuity contracts was funded directly by the Plans’ assets and reduced the Company’s pension obligations by approximately $ 0.7 billion. As a result of the transactions, the Company recognized a non-cash pretax pension settlement charge of $ 83 million for the year ended December 31, 2021. On July 31, 2017, the Company announced that all participants in the Company’s U.S. salaried pension plan and the Supplemental Executive Retirement Plan (SERP) began accruing benefits under the cash balance formula effective January 1, 2022. Benefits for participants who were accruing under the final average pay formula were frozen as of December 31, 2021, including pay and service through that date. The Company maintains 401(k) plans covering substantially all U.S. employees. The Company contributes cash to the plans to match qualifying employee contributions, and also provides a non-matching employer contribution of 1 % of pay to eligible participants. Under an employee stock ownership component of the 401(k) plans, employees may choose to invest in the Company’s stock as part of their own investment elections. Assets of the Company’s 401(k) plans consist primarily of listed common stocks and pooled funds. The Company’s 401(k) plans held 5.9 million shares of Company common stock at December 31, 2022, with a market value of $ 550 million. Cash dividends received on shares of Company common stock by these plans during the year ended December 31, 2022 were $ 10 million. The following table sets forth the components of retirement plan expense for the years ended December 31, 2022, 2021, and 2020: Pension Benefits Postretirement Benefits (In millions) Year Ended December 31 Year Ended December 31 2022 2021 2020 2022 2021 2020 Retirement plan expense Defined benefit plans: Service cost (benefits earned during the period) $ 48 $ 64 $ 61 $ 1 $ 1 $ 1 Interest cost 48 48 70 3 2 4 Expected return on plan assets ( 79 ) ( 95 ) ( 126 ) — — — Settlement charges — 83 — — — — Curtailments ( 2 ) — — — — — Amortization of actuarial loss 17 33 38 5 6 6 Amortization of prior service cost (credit) ( 20 ) ( 20 ) ( 19 ) — ( 2 ) ( 13 ) Net periodic defined benefit plan expense 12 113 24 9 7 ( 2 ) Defined contribution plans 67 61 54 — — — Total retirement plan expense $ 79 $ 174 $ 78 $ 9 $ 7 $ ( 2 ) 85 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 15. Employee Benefit Plans (Continued) The following tables set forth changes in the defined benefit obligation and the fair value of defined benefit plan assets for the years ended December 31, 2022 and 2021: Pension Benefits Postretirement Benefits December 31 2022 December 31 2021 December 31 2022 December 31 2021 (In millions) (In millions) Benefit obligation, beginning $ 2,178 $ 3,014 $ 154 $ 173 Service cost 48 64 1 1 Interest cost 48 48 3 2 Actuarial loss (gain) ( 575 ) ( 152 ) ( 24 ) ( 5 ) Employee contributions 3 2 — — Curtailments ( 2 ) — — — Settlements ( 1 ) ( 715 ) — — Benefits paid ( 47 ) ( 51 ) ( 16 ) ( 17 ) Foreign currency effects ( 65 ) ( 32 ) — — Benefit obligation, ending $ 1,587 $ 2,178 $ 118 $ 154 Fair value of plan assets, beginning $ 1,742 $ 2,337 $ — $ — Actual return on plan assets ( 438 ) 146 — — Employer contributions 60 30 16 17 Employee contributions 3 2 — — Settlements ( 1 ) ( 715 ) — — Benefits paid ( 47 ) ( 51 ) ( 16 ) ( 17 ) Foreign currency effects ( 50 ) ( 7 ) — — Fair value of plan assets, ending $ 1,269 $ 1,742 $ — $ — Funded status $ ( 318 ) $ ( 436 ) $ ( 118 ) $ ( 154 ) Prepaid benefit cost $ 60 $ 121 $ — $ — Accrued benefit liability – current ( 18 ) ( 18 ) ( 14 ) ( 15 ) Accrued benefit liability – long-term ( 360 ) ( 539 ) ( 104 ) ( 139 ) Net amount recognized in the balance sheet $ ( 318 ) $ ( 436 ) $ ( 118 ) $ ( 154 ) In 2022, the actuarial gain in the pension plans was primarily due to increases in the global bond yields while actual return on plan assets was related to unfavorable asset performance in countries with material assets including the U.S., Canada, and Switzerland. The Company uses the corridor approach when amortizing actuarial losses. Under the corridor approach, net unrecognized actuarial losses in excess of 10% of the greater of the projected benefit obligation or the market related value of plan assets are amortized over future periods. For plans with little to no active participants, the amortization period is the remaining average life expectancy of the participants. For plans with active participants, the amortization period is the remaining average service period of the active participants. The amortization periods range from 2 to 28 years for the Company’s defined benefit pension plans and from 5 to 19 years for the Company’s postretirement benefit plans. Included in AOCI for pension benefits at December 31, 2022, are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized prior service credit of $ 75 million and unrecognized actuarial loss of $ 226 million. 86 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 15. Employee Benefit Plans (Continued) Included in AOCI for postretirement benefits at December 31, 2022, are the following amounts that have not yet been recognized in net periodic postretirement benefit cost: unrecognized prior service cost of $ 1 million and unrecognized actuarial loss of $ 16 million. The following table sets forth the principal assumptions used in developing net periodic benefit cost: Pension Benefits Postretirement Benefits December 31 2022 December 31 2021 December 31 2022 December 31 2021 Discount rate 2.5 % 2.3 % 2.7 % 2.3 % Expected return on plan assets 5.0 % 6.0 % N/A N/A Rate of compensation increase 4.2 % 4.8 % N/A N/A Interest crediting rate 1.9 % 2.0 % N/A N/A The following table sets forth the principal assumptions used in developing the year-end actuarial present value of the projected benefit obligations: Pension Benefits Postretirement Benefits December 31 2022 December 31 2021 December 31 2022 December 31 2021 Discount rate 4.8 % 2.5 % 5.1 % 2.7 % Rate of compensation increase 4.3 % 4.2 % N/A N/A Interest crediting rate 3.9 % 1.9 % N/A N/A The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets were $ 1.3 billion, $ 1.3 billion, and $ 0.9 billion, respectively, as of December 31, 2022, and $ 1.7 billion, $ 1.6 billion, and $ 1.2 billion, respectively, as of December 31, 2021. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $ 1.2 billion, $ 1.2 billion, and $ 0.8 billion, respectively, as of December 31, 2022 and $ 1.7 billion, $ 1.6 billion, and $ 1.2 billion, respectively, as of December 31, 2021. The accumulated benefit obligation for all pension plans as of December 31, 2022 and 2021, was $ 1.6 billion and $ 2.1 billion, respectively. For postretirement benefit measurement purposes, a 6.9 % annual rate of increase in the per capita cost of covered health care benefits was assumed for the year ended December 31, 2022. The rate was assumed to decrease gradually to 4.5 % by 2031 and remain at that level thereafter. Plan Assets The Company’s employee benefit plan assets are principally comprised of the following types of investments: Common stock: Equity securities are valued based on quoted exchange prices and are classified within Level 1 of the valuation hierarchy. Mutual funds: Mutual funds are valued at the closing price reported on the active market on which they are traded and are classified within Level 1 of the valuation hierarchy. 87 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 15. Employee Benefit Plans (Continued) Common collective trust (CCT) funds: The fair values of the CCTs are valued using net asset value (NAV). The investments in CCTs are comprised of U.S. and international equity, fixed income, and other securities. The investments are valued at NAV provided by administrators of the funds. Corporate debt instruments: Corporate debt instruments are valued using third-party pricing services and are classified within Level 2 of the valuation hierarchy. U.S. Treasury instruments: U.S. Treasury instruments are valued at the closing price reported on the active market on which they are traded and are classified within Level 1 of the valuation hierarchy. U.S. government agency, state, and local government bonds: U.S. government agency obligations and state and municipal debt securities are valued using third-party pricing services and are classified within Level 2 of the valuation hierarchy. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants’ methods, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following tables set forth, by level within the fair value hierarchy, the fair value of plan assets as of December 31, 2022 and 2021. Fair Value Measurements at December 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (In millions) Common stock $ 68 $ — $ — $ 68 Mutual funds 245 — — 245 Corporate bonds — 318 — 318 U.S. Treasury instruments 173 — — 173 U.S. government agency, state and local government bonds — 5 — 5 Other — 9 — 9 Total assets $ 486 $ 332 $ — $ 818 Common collective trust funds at NAV U.S. equity 23 International equity 76 Fixed income 247 Other 105 Total assets at fair value $ 1,269 88 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 15. Employee Benefit Plans (Continued) Fair Value Measurements at December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total (In millions) Common stock $ 135 $ — $ — $ 135 Mutual funds 426 — — 426 Corporate bonds — 304 — 304 U.S. Treasury instruments 226 — — 226 U.S. government agency, state and local government bonds — 3 — 3 Other — 8 — 8 Total assets $ 787 $ 315 $ — $ 1,102 Common collective trust funds at NAV U.S. equity 34 International equity 193 Fixed income 285 Other 128 Total assets at fair value $ 1,742 Level 3 Gains and Losses: There are no Plan assets classified as Level 3 in the fair value hierarchy; therefore there are no gains or losses associated with Level 3 assets. The following table sets forth the actual asset allocation for the Company’s global pension plan assets as of the measurement date: December 31 2022 (1)(2) December 31 2021 (2) Equity securities 33 % 47 % Debt securities 62 % 44 % Other 5 % 9 % Total 100 % 100 % (1) The Company’s U.S. pension plans contain approximately 66 % of the Company’s global pension plan assets. The actual asset allocation for the Company’s U.S. pension plans as of the measurement date consists of 37 % equity securities and 63 % debt securities. The target asset allocation for the Company’s U.S. pension plans is approximately the same as the actual asset allocation. The actual asset allocation for the Company’s foreign pension plans as of the measurement date consists of 24 % equity securities, 62 % debt securities, and 14 % other. The target asset allocation for the Company’s foreign pension plans is approximately the same as the actual asset allocation. (2) The Company’s pension plans did not directly hold any shares of Company common stock as of the December 31, 2022 and 2021 measurement dates. 89 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 15. Employee Benefit Plans (Continued) Investment objectives for the Company’s plan assets are to: • Optimize the long-term return on plan assets at an acceptable level of risk. • Maintain a broad diversification across asset classes and among investment managers. • Maintain careful control of the risk level within each asset class. Asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the pension plans. Selection of the targeted asset allocation for plan assets was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. The U.S. pension plans target asset allocation is also based on an asset and liability study that is updated periodically. Investment guidelines are established with each investment manager. These guidelines provide the parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements, and credit quality standards, where applicable. In some countries, derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of underlying investments. The Company uses external consultants to assist in monitoring 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. Contributions and Expected Future Benefit Payments Based on actuarial calculations, the Company expects to contribute $ 25 million to the pension plans and $ 14 million to the postretirement benefit plan during 2023. The Company may elect to make additional discretionary contributions during this period. The following benefit payments, which reflect expected future service, are expected to be paid by the benefit plans: Pension Benefits Postretirement Benefits (In millions) 2023 $ 64 $ 14 2024 70 13 2025 76 12 2026 82 11 2027 85 10 2028-2032 524 44 Note 16. Shareholders’ Equity The Company has authorized one billion shares of common stock and 500,000 shares of preferred stock, each with zero par value. No preferred stock has been issued. At December 31, 2022 and 2021, the Company had approximately 169.0 million shares and 156.6 million shares, respectively, of its common shares in treasury. Treasury stock of $ 4.9 billion and $ 5.1 billion at December 31, 2022 and 2021, respectively, is recorded at cost as a reduction of common stock, and treasury stock of $ 1.7 billion and $ 0.3 billion at December 31, 2022 and 2021, respectively, is recorded at cost as a reduction of retained earnings. 90 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 16. Shareholders’ Equity (Continued) The following tables set forth the changes in AOCI by component and the reclassifications out of AOCI for the years ended December 31, 2022 and 2021: Foreign Currency Translation Adjustment Deferred Gain (Loss) on Hedging Activities Pension and Other Postretirement Benefit Liabilities Adjustment Unrealized Gain (Loss) on Investments Accumulated Other Comprehensive Income (Loss) (In millions) Balance at December 31, 2020 $ ( 2,424 ) $ 185 $ ( 365 ) $ — $ ( 2,604 ) Other comprehensive income before reclassifications ( 119 ) 507 190 ( 2 ) 576 Gain (loss) on net investment hedges 398 — — — 398 Amounts reclassified from AOCI — ( 474 ) 99 — ( 375 ) Tax effect ( 103 ) 7 ( 71 ) — ( 167 ) Net of tax amount 176 40 218 ( 2 ) 432 Balance at December 31, 2021 $ ( 2,248 ) $ 225 $ ( 147 ) $ ( 2 ) $ ( 2,172 ) Other comprehensive income before reclassifications ( 609 ) 268 117 ( 12 ) ( 236 ) Gain (loss) on net investment hedges 328 — — — 328 Amounts reclassified from AOCI — ( 352 ) 23 — ( 329 ) Tax effect ( 93 ) 7 ( 15 ) 1 ( 100 ) Net of tax amount ( 374 ) ( 77 ) 125 ( 11 ) ( 337 ) Balance at December 31, 2022 $ ( 2,622 ) $ 148 $ ( 22 ) $ ( 13 ) $ ( 2,509 ) The change in foreign currency translation adjustment in 2022 is due to the U.S. dollar appreciation impacting the equity value of the Company’s foreign subsidiaries, partially offset by net investment hedges as discussed in Note 5, while the change in foreign currency translation adjustment in 2021 is primarily due to net investment hedges. 91 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 16. Shareholders’ Equity (Continued) Amounts reclassified from AOCI Year Ended December 31 Affected line item in the consolidated statement of Details about AOCI components 2022 2021 2020 earnings (In millions) Deferred loss (gain) on hedging activities $ ( 1 ) $ 16 $ 68 Revenues ( 351 ) ( 490 ) ( 27 ) Cost of products sold — — 2 Interest expense — — 2 Other (income) expense - net ( 352 ) ( 474 ) 45 Earnings before income taxes 62 118 7 Income tax expense $ ( 290 ) $ ( 356 ) $ 52 Net earnings Pension liability adjustment Amortization of defined benefit pension items: Prior service losses (credit) $ ( 119 ) $ ( 77 ) $ ( 32 ) Other (income) expense - net Actuarial losses 142 176 39 Other (income) expense - net 23 99 7 Earnings before income taxes ( 4 ) ( 26 ) ( 11 ) Income tax expense $ 19 $ 73 $ ( 4 ) Net earnings Note 17. Segment and Geographic Information The Company’s operations are organized, managed, and classified into three reportable business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable segments, as defined by the applicable accounting standard , and are classified as Other Business. The Ag Services and Oilseeds segment includes global activities related to the origination, merchandising, transportation, and storage of agricultural raw materials, and the crushing and further processing of oilseeds such as soybeans and soft seeds (cottonseed, sunflower seed, canola, rapeseed, and flaxseed) into vegetable oils and protein meals. Oilseeds products produced and marketed by the segment include ingredients for food, feed, energy, and industrial customers. Crude vegetable oils produced by the segment’s crushing activities are sold “as is” to manufacturers of renewable green diesel and other customers or are further processed by refining, blending, bleaching, and deodorizing into salad oils. Salad oils are sold “as is” or are further processed by hydrogenating and/or interesterifying into margarine, shortening, and other food products. Partially refined oils are used to produce biodiesel and glycols or are sold to other manufacturers for use in chemicals, paints, and other industrial products. Oilseed protein meals are principally sold to third parties to be used as ingredients in commercial livestock and poultry feeds. The Ag Services and Oilseeds segment is also a major supplier of peanuts and peanut-derived ingredients to both the U.S. and export markets. In North America, cotton cellulose pulp is manufactured and sold to the chemical, paper, and other industrial markets. The Ag Services and Oilseeds segment’s grain sourcing, handling, and transportation network (including barge, ocean-going vessel, truck, rail, and container freight services) provides reliable and efficient services to the Company’s customers and agricultural processing operations. The Ag Services and Oilseeds segment also includes agricultural commodity and feed product import, export, and global distribution, and structured trade finance activities. The Company engages in various structured trade finance activities to leverage its global trade flows. This segment also includes the Company’s share of the results of its equity investment in Wilmar and its share of the results of its Pacificor, Stratas Foods LLC, Edible Oils Limited, Olenex, and SoyVen joint ventures. 92 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 17. Segment and Geographic Information (Continued) The Carbohydrate Solutions segment is engaged in corn and wheat wet and dry milling and other activities. The Carbohydrate Solutions segment converts corn and wheat into products and ingredients used in the food and beverage industry including sweeteners, corn and wheat starches, syrup, glucose, wheat flour, and dextrose. Dextrose and starch are used by the Carbohydrate Solutions segment as feedstocks in other downstream processes. By fermentation of dextrose, the Carbohydrate Solutions segment produces alcohol and other food and animal feed ingredients. Ethyl alcohol is produced by the Company for industrial use in products such as hand sanitizers and ethanol for use in gasoline due to its ability to increase octane as an extender and oxygenate. Corn gluten feed and meal, as well as distillers’ grains, are produced for use as animal feed ingredients. Corn germ, a by-product of the wet milling process, is further processed into vegetable oil and protein meal. Other Carbohydrate Solutions products include citric acids which are used in various food and industrial products. The Carbohydrate Solutions segment has announced various memorandums of understanding with potential strategic partners leveraging our core production capabilities and carbon sequestration experience to facilitate the production of low carbon, bio-based products such as sustainable aviation fuel and innovative renewable chemicals. This segment also includes the Company’s share of the results of its equity investments in Hungrana Ltd., Almidones Mexicanos S.A., and Aston Foods and Food Ingredients. In November 2021, the Company sold its ethanol production complex in Peoria, Illinois. In August 2022, the Company launched two joint ventures, GreenWise Lactic and LG Chem Illinois Biochem, with LG Chem, a leading global diversified chemical company, for the U.S. production of lactic acid and polylactic acid to meet growing demand for a wide variety of plant-based products. The Nutrition segment serves various end markets including food, beverages, nutritional supplements, and feed and premix for livestock, aquaculture, and pet food. The segment engages in the manufacturing, sale, and distribution of a wide array of ingredients and solutions including plant-based proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, enzymes, botanical extracts, and other specialty food and feed ingredients. The Nutrition segment includes the activities related to the procurement, processing, and distribution of edible beans. The segment also includes activities related to the processing and distribution of formula feeds and animal health and nutrition products and the manufacture of contract and private label pet treats and foods. This segment also includes the Company’s share of the results of its equity investment in Vimison S.A. de C.V. Other Business includes the Company’s financial business units related to futures commission and insurance activities. Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less identifiable operating expenses. Also included in operating profit for each segment is equity in earnings of affiliates based on the equity method of accounting. Specified items included in total segment operating profit and certain corporate items are not allocated to the Company’s individual business segments because operating performance of each business segment is evaluated by management exclusive of these items. Corporate results principally include the impact of LIFO-related adjustments, unallocated corporate expenses, interest cost net of interest income, and revaluation gains and losses on cost method investments and the share of the results of equity investments in early-stage start-up companies that ADM Ventures has investments in. 93 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 17. Segment and Geographic Information (Continued) Segment Information Year Ended (In millions) December 31 2022 2021 2020 Gross revenues Ag Services and Oilseeds $ 83,686 $ 70,455 $ 55,667 Carbohydrate Solutions 16,336 12,672 9,423 Nutrition 7,836 6,933 5,959 Other 396 380 367 Intersegment elimination ( 6,698 ) ( 5,191 ) ( 7,061 ) Total $ 101,556 $ 85,249 $ 64,355 Intersegment revenues Ag Services and Oilseeds $ 4,123 $ 3,408 $ 5,951 Carbohydrate Solutions 2,375 1,562 951 Nutrition 200 221 159 Total $ 6,698 $ 5,191 $ 7,061 Revenues from external customers Ag Services and Oilseeds Ag Services $ 53,181 $ 45,017 $ 32,726 Crushing 13,139 11,368 9,593 Refined Products and Other 13,243 10,662 7,397 Total Ag Services and Oilseeds 79,563 67,047 49,716 Carbohydrate Solutions Starches and Sweeteners 10,251 7,611 6,387 Vantage Corn Processors 3,710 3,499 2,085 Total Carbohydrate Solutions 13,961 11,110 8,472 Nutrition Human Nutrition 3,769 3,189 2,812 Animal Nutrition 3,867 3,523 2,988 Total Nutrition 7,636 6,712 5,800 Other 396 380 367 Total $ 101,556 $ 85,249 $ 64,355 94 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 17. Segment and Geographic Information (Continued) Year Ended (In millions) December 31 2022 2021 2020 Depreciation Ag Services and Oilseeds $ 334 $ 349 $ 351 Carbohydrate Solutions 307 322 305 Nutrition 120 101 114 Other 9 8 6 Corporate 24 27 24 Total $ 794 $ 807 $ 800 Long-lived asset impairments (1) Ag Services and Oilseeds $ — $ 10 $ 8 Carbohydrate Solutions 14 13 — Nutrition 21 50 13 Corporate — — 7 Total $ 35 $ 73 $ 28 Interest and investment income Ag Services and Oilseeds $ 52 $ 27 $ 39 Nutrition 2 1 2 Other 185 16 40 Corporate 54 52 30 Total $ 293 $ 96 $ 111 Equity in earnings of affiliates Ag Services and Oilseeds $ 714 $ 500 $ 475 Carbohydrate Solutions 94 70 81 Nutrition 23 24 22 Corporate 1 1 1 Total $ 832 $ 595 $ 579 (1) See Note 18 for total asset impairment, exit, and restructuring costs. 95 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 17. Segment and Geographic Information (Continued) Year Ended (In millions) December 31 2022 2021 2020 Segment Operating Profit Ag Services and Oilseeds $ 4,386 $ 2,775 $ 2,105 Carbohydrate Solutions 1,360 1,283 717 Nutrition 736 691 574 Other 167 25 52 Specified Items: Gains on sales of assets and businesses (1) 47 77 83 Impairment, restructuring, and settlement charges (2) ( 147 ) ( 213 ) ( 76 ) Total segment operating profit 6,549 4,638 3,455 Corporate ( 1,316 ) ( 1,325 ) ( 1,572 ) Earnings before income taxes $ 5,233 $ 3,313 $ 1,883 (1) The gains in 2022 were related to the sale of certain assets. The gains in 2021 were related to the sale of ethanol and certain other assets. The gains in 2020 were related to the sale of a portion of the Company’s shares in Wilmar and certain other assets. (2) The charges in 2022 were related to the impairment of certain assets, restructuring, and settlement contingencies. The charges in 2021 were related to the impairment of certain long-lived assets, goodwill, and other intangibles, restructuring, and a legal settlement. The charges in 2020 were related to the impairment of certain assets, restructuring, and settlement. 96 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 17. Segment and Geographic Information (Continued) (In millions) December 31 2022 2021 Investments in and advances to affiliates Ag Services and Oilseeds $ 4,863 $ 4,826 Carbohydrate Solutions 365 358 Nutrition 111 56 Corporate 128 45 Total $ 5,467 $ 5,285 Identifiable assets Ag Services and Oilseeds $ 28,657 $ 25,976 Carbohydrate Solutions 6,801 6,238 Nutrition 10,615 10,142 Other 10,569 9,235 Corporate 3,132 4,545 Total $ 59,774 $ 56,136 (In millions) Year Ended December 31 2022 2021 Gross additions to property, plant, and equipment Ag Services and Oilseeds $ 568 $ 451 Carbohydrate Solutions 261 260 Nutrition 314 242 Other 15 7 Corporate 53 45 Total $ 1,211 $ 1,005 97 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 17. Segment and Geographic Information (Continued) Geographic information: The following geographic data include revenues attributed to the countries based on the location of the subsidiary making the sale and long-lived assets based on physical location. Long-lived assets represent the net book value of property, plant, and equipment. Year Ended (In millions) December 31 2022 2021 2020 Revenues United States $ 43,272 $ 35,396 $ 25,986 Switzerland 21,821 18,453 13,819 Cayman Islands 5,883 5,515 3,958 Brazil 4,004 3,213 2,357 Mexico 3,709 2,934 2,244 Canada 2,272 1,818 1,280 United Kingdom 2,231 1,848 1,519 Other Foreign 18,364 16,072 13,192 $ 101,556 $ 85,249 $ 64,355 (In millions) December 31 2022 2021 Long-lived assets United States $ 6,322 $ 6,098 Brazil 801 760 Other Foreign 2,810 2,945 $ 9,933 $ 9,803 Note 18. Asset Impairment, Exit, and Restructuring Costs The following table sets forth the charges included in asset impairment, exit, and restructuring costs. (In millions) Year Ended December 31 2022 2021 2020 Restructuring and exit costs (1) $ 29 $ 39 $ 26 Impairment charge - goodwill and other intangible assets (2) 2 52 26 Impairment charge - other long-lived assets (3) 35 73 28 Total asset impairment, exit, and restructuring costs $ 66 $ 164 $ 80 98 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 18. Asset Impairment, Exit, and Restructuring Costs (Continued) (1) Restructuring and exist costs for the year ended December 31, 2022 consisted of several individually insignificant restructuring charges totaling $ 28 million presented as specified items within segment operating profit and restructuring charges of $ 1 million in Corporate. Restructuring and exit costs for the year ended December 31, 2021 consisted of several individually insignificant restructuring charges totaling $ 35 million presented as specified items within segment operating profit and $ 4 million in Corporate. Restructuring and exit costs for the year ended December 31, 2020 consisted of several individually insignificant restructuring charges totaling $ 17 million presented as specified items within segment operating profit and $ 9 million in Corporate. (2) Impairment charge - goodwill and other intangible assets for the year ended December 31, 2022 consisted of customer list impairment of $ 2 million in Nutrition presented as specified items within segment operating profit. Impairment charge - goodwill and other intangible assets for the year ended December 31, 2021 consisted of goodwill impairment of $ 5 million and land rights impairment of $ 42 million in Ag Services and Oilseeds, and goodwill impairment of $ 1 million and customer list impairment of $ 4 million in Nutrition, presented as specified items within segment operating profit. Impairment charge - goodwill and other intangible assets for the year ended December 31, 2020 consisted of other intangible asset impairments presented as specified items within segment operating profit. (3) Impairment charge - other long-lived assets for the year ended December 31, 2022 consisted of impairments related to certain long-lived assets in Carbohydrate Solutions and Nutrition of $ 15 million and $ 20 million, respectively, presented as specified items within segment operating profit. Impairment charge - other long-lived assets for the year ended December 31, 2021 consisted of impairments related to certain long-lived assets in Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition of $ 10 million, $ 13 million, and $ 50 million, respectively, presented as specified items within segment operating profit. Impairment charge - other long-lived assets for the year ended December 31, 2020 consisted of impairments related to certain long-lived assets in Ag Services and Oilseeds and Nutrition of $ 8 million and $ 13 million, respectively, presented as specified items within segment operating profit, and $ 7 million of impairments related to certain assets in Corporate. Note 19. Sale of Accounts Receivable The Company has an accounts receivable securitization program (the “Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “First Purchasers”). Under the Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC (“ADM Receivables”). Prior to October 1, 2020, ADM Receivables transferred such purchased accounts receivable in their entirety to the First Purchasers pursuant to a receivables purchase agreement. In exchange for the transfer of the accounts receivable, ADM Receivables received a cash payment up to a certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On October 1, 2020, the Company restructured the First Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Receivables transfers certain of the purchased accounts receivable to each of the First Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Receivables receives a cash payment of up to $ 1.8 billion for the accounts receivable transferred. The First Program terminates on May 18, 2023, unless extended. The Company also has an accounts receivable securitization program (the “Second Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Second Purchasers”). Under the Second Program, certain non-U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Ireland Receivables Company (ADM Ireland Receivables). Prior to April 1, 2020, ADM Ireland Receivables transferred such purchased accounts receivable in their entirety to the Second Purchasers pursuant to a receivables purchase agreement. In exchange for the transfer of the accounts receivable, ADM Ireland Receivables received a cash payment up to a certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On April 1, 2020, the Company restructured the Second Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Ireland Receivables transfers certain of the purchased accounts receivable to each of the Second Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Ireland Receivables receives a cash payment of up to $ 0.8 billion (€ 0.8 billion) for the accounts receivables transferred. The Second Program terminates on March 16, 2023, unless extended. 99 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 19. Sale of Accounts Receivable (Continued) Under the First and Second Programs (collectively, the “Programs”), ADM Receivables and ADM Ireland Receivables use the cash proceeds from the transfer of receivables to the First Purchasers and Second Purchasers (collectively, the “Purchasers”) and other consideration, as applicable, to finance the purchase of receivables from the Company and the ADM subsidiaries originating the receivables. The Company accounts for these transfers as sales. The Company acts as a servicer for the transferred receivables. At December 31, 2022 and 2021, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions, and its cost of servicing the receivables sold. As of December 31, 2022 and 2021, the fair value of trade receivables transferred to the Purchasers under the Programs and derecognized from the Company’s consolidated balance sheet was $ 2.6 billion and $ 2.2 billion, respectively. Total receivables sold were $ 59.0 billion, $ 50.3 billion, and $ 35.0 billion for the years ended December 31, 2022, 2021, and 2020, respectively. Cash collections from customers on receivables sold were $ 56.9 billion, $ 47.3 billion, and $ 34.2 billion for the years ended December 31, 2022, 2021, and 2020, respectively. Of the 2020 amount, $ 6.7 billion was cash collections on the deferred consideration reflected as cash inflows from investing activities for the years ended December 31, 2020. Receivables pledged as collateral to the Purchasers were $ 0.6 billion and $ 0.5 billion as of December 31, 2022 and 2021, respectively. Transfers of receivables under the Programs during the years ended December 31, 2022, 2021, and 2020 resulted in an expense for the loss on sale of $ 21 million, $ 11 million, and $ 9 million, respectively, which is classified as selling, general, and administrative expenses in the consolidated statements of earnings. In accordance with the amended guidance of Topic 230, the Company reflects cash flows related to the deferred receivables consideration as investing activities in its consolidated statements of cash flows. All other cash flows are classified as operating activities because the cash received from the Purchasers upon both the sale and collection of the receivables is not subject to significant interest rate risk given the short-term nature of the Company’s trade receivables. Note 20. Legal Proceedings The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability (see Note 13 for information on income tax matters), and class actions. The Company also routinely receives inquiries from regulators and other government authorities relating to various aspects of our business, and at any given time, the Company has matters at various stages of resolution. The outcomes of these matters are not within our complete control and may not be known for prolonged periods of time. In some actions, claimants seek damages, as well as other relief including injunctive relief, that could require significant expenditures or result in lost revenues. In accordance with applicable accounting standards, the Company records a liability in its consolidated financial statements for material loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a material loss contingency is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, disgorgement, or punitive damages; or could result in a change in business practice. 100 Archer-Daniels-Midland Company Notes to Consolidated Financial Statements (Continued) Note 20. Legal Proceedings (Continued) On September 4, 2019, AOT Holding AG (“AOT”) filed a putative class action under the U.S. Commodities Exchange Act in federal district court in Urbana, Illinois, alleging that the Company sought to manipulate the benchmark price used to price and settle ethanol derivatives traded on futures exchanges. On March 16, 2021, AOT filed an amended complaint adding a second named plaintiff Maize Capital Group, LLC (“Maize”). AOT and Maize allege that members of the putative class collectively suffered damages calculated to be between approximately $500 million to over $2.0 billion as a result of the Company’s alleged actions. On July 14, 2020, Green Plains Inc. and its related entities (“GP”) filed a putative class action lawsuit, alleging substantially the same operative facts, in federal court in Nebraska, seeking to represent sellers of ethanol. On July 23, 2020, Midwest Renewable Energy, LLC (“MRE”) filed a putative class action in federal court in Illinois alleging substantially the same operative facts and asserting claims under the Sherman Act. On November 11, 2020, United Wisconsin Grain Producers LLC (“UWGP”) and five other ethanol producers filed a lawsuit in federal court in Illinois alleging substantially the same facts and asserting claims under the Sherman Act and Illinois, Iowa, and Wisconsin law. The court granted ADM’s motion to dismiss the MRE and UWGP complaints without prejudice on August 9, 2021 and September 28, 2021, respectively. On August 16, 2021, the court granted ADM’s motion to dismiss the GP complaint, dismissing one claim with prejudice and declining jurisdiction over the remaining state law claim. MRE filed an amended complaint on August 30, 2021, which ADM moved to dismiss on September 27, 2021. UWGP filed an amended complaint on October 19, 2021, which the court dismissed on July 12, 2022. UWGP has appealed the dismissal to the United States Court of Appeals for the Seventh Circuit. On October 26, 2021, GP filed a new complaint in Nebraska federal district court, alleging substantially the same facts and asserting a claim for tortious interference with contractual relations. On March 18, 2022, the Nebraska federal district court granted ADM’s motion to transfer the GP case back to the Central District of Illinois for further proceedings. ADM moved to dismiss the complaint on May 20, 2022 and on December 30, 2022, the court dismissed GP’s complaint with prejudice. GP has appealed the dismissal. The Company denies liability, and is vigorously defending itself in these actions. As these actions are in pretrial proceedings, the Company is unable at this time to predict the final outcome with any reasonable degree of certainty, but believes the outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows. 101 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders Archer-Daniels-Midland Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Archer-Daniels-Midland Company (the Company) as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive income (loss), cash flows, and shareholders’ equity for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 14, 2023 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 102 Market or Fair Values of Certain Merchandisable Agricultural Commodity Inventories, Inventory-Related Payables, and Forward Commodity Purchase and Sales Contracts Description of the Matter As explained in Notes 1 and 4 to the consolidated financial statements, certain merchandisable agricultural commodity inventory and inventory-related payables are stated at market or fair value. Forward commodity purchase and sales contracts that qualify as derivative contracts are also stated at market or fair value. The merchandisable agricultural commodity inventory, inventory-related payables, and forward commodity purchase and sales contracts are considered level 2 and 3 fair value instruments. As of December 31, 2022, the market or fair values of certain merchandisable agricultural commodity inventories, inventory-related payables, forward commodity contracts in an asset position, and forward commodity contracts in a liability position were $9,041 million, $1,270 million, $1,337 million, and $1,268 million, respectively. Auditing the estimated market or fair values of merchandisable agricultural commodity inventories, inventory-related payables, and forward commodity purchase and sale contracts is complex due to the judgment involved in determining market or fair value, specifically related to determining the estimated basis adjustments, which represent the adjustment made to exchange quoted prices to arrive at the market or fair values of certain merchandisable agricultural commodity inventories, inventory-related payables, and forward commodity purchase and sales contracts. The basis adjustments are generally determined using inputs from competitor or broker quotations or market transactions and are impacted 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 also impact these basis adjustments. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s determination of the estimated market or fair values of certain merchandisable agricultural commodity inventories, inventory-related payables, and forward commodity purchase and sale contracts. Our tests included controls over the estimation process supporting the basis adjustments. To test the estimated market or fair values of certain merchandisable agricultural commodity inventories, inventory-related payables, and forward commodity purchase and sale contracts, our audit procedures included, among others, evaluating (i) the Company’s selection of the principal market, (ii) the inputs for the basis adjustments, and (iii) the completeness and accuracy of the underlying data supporting the basis adjustments. For example, we evaluated management’s methodology for determining the basis adjustment including assessing the principal market identified and sources utilized by management to support the basis adjustment. Specifically, we compared the basis adjustments used by management to competitor and broker quotations, trade publications, and/or recently executed transactions. Further, we investigated, to the extent necessary, basis adjustments that were inconsistent with third party available information. Finally, we evaluated the adequacy of the Company’s financial statement disclosures related to the estimated market or fair values of certain merchandisable agricultural inventories, inventory-related payables, and forward commodity purchase and sale contracts. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1930. Saint Louis, Missouri February 14, 2023 103 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders Archer-Daniels-Midland Company Opinion on Internal Control over Financial Reporting We have audited Archer-Daniels-Midland Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Archer-Daniels-Midland Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Archer-Daniels-Midland Company as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive income (loss), cash flows, and shareholders’ equity for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2), and our report dated February 14, 2023 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Saint Louis, Missouri February 14, 2023 104 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.