Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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. Facilities have been temporarily idled since February 24, 2022, most of which were brought back online by March 31, 2023, 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.
While the Company’s Ukraine and Russian operations have historically represented less than 1.0% of consolidated revenues, the direct and indirect impacts of the ongoing military action could negatively affect ADM’s future operating results. The conflict in Ukraine has created disruptions in global supply chains and has created dislocations of key agricultural commodities. The indirect impact of these dislocations on the Company’s operating results will be a function of a number of variables including supply and demand responses from the rest of the world as well as the length of the conflict and the condition of the agricultural industry and export infrastructure after the conflict ends. For more information, refer to Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
As of March 31, 2023, ADM’s assets in Ukraine consisted primarily of current assets that were less than 1% of the Company’s total current assets and an immaterial amount of non-current assets. Of the total current assets in Ukraine, the majority related to inventories that represented less than 1% of ADM’s total inventories.
Market Factors Influencing Operations or Results in the Three Months Ended March 31, 2023
The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, supply has been impacted by market dislocations such as the Russian-Ukraine war, a record harvest in Brazil, and extreme weather conditions in Argentina. Inflationary pressures impacted the entire value chain. Crushing was impacted by renewable fuel demand and protein consumption around the globe. In Refined Products and Other, margins were driven by strong oil demand, elevated oil values that were supported by the release of renewable volume obligations towards the end of 2022, and favorable blend economics due to historically low distillate cost. In Carbohydrate Solutions, demand for starches and sweeteners remained solid with margins remaining steady across the entire portfolio. Industry ethanol stocks remained elevated. Solid export demand for ethanol helped minimize the imbalance between supply and demand. In Nutrition, demand was softer in a few food and beverage product categories. Human Nutrition was impacted by inflation which drove lower demand especially in higher priced product categories in the food, beverage, and dietary supplement segment and impacted volumes in flavors, flavor systems, emulsifiers, and alternative proteins. In Animal Nutrition, amino acids margins were pressured due to competition returning to market and production cost inflation. Results were also adversely affected by weak demand in other product lines due to decreased market for feed, particularly in North America and Europe, Middle East, and Africa (EMEA), and animal disease impacts on farm, and some premix and additives customers cutting products out of formulation due to increased ingredient, freight, and energy costs. Increased competition in Latin America also contributed to the weak demand in that region.
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Net earnings attributable to controlling interests increased $0.1 billion from $1.1 billion to $1.2 billion. Segment operating profit increased $0.2 billion from $1.5 billion to $1.7 billion and included a net charge of $6 million consisting of charges totaling $7 million related to asset impairment and restructuring, partially offset by a gain on the sale of certain assets of $1 million. Included in segment operating profit in the prior-year quarter was a net charge of $17 million consisting of asset impairment, restructuring, and settlement charges of $18 million, partially offset by a gain on the sale of certain assets of $1 million. Adjusted segment operating profit (a non-GAAP measure) increased $0.2 billion to $1.7 billion due primarily to higher results in Ag Services, Refined Products and Other, and Other Business, partially offset by lower results in the rest of the businesses. Corporate results in the current quarter were a net charge of $322 million and included a mark-to-market gain of $5 million on the conversion option of the exchangeable bonds issued in August 2020. Corporate results in the prior-year quarter were a net charge of $268 million and included a mark-to-market loss of $15 million on the conversion option of the exchangeable bonds issued in August 2020, acquisition-related expenses of $2 million, a loss on sale of assets of $3 million, and restructuring adjustment of $1 million.
Income tax expense increased $18 million to $225 million. The effective tax rate for the quarter ended March 31, 2023 was 16.1% compared to 16.3% for the quarter ended March 31, 2022. The change in the rate was driven primarily by the impact of discrete tax items, partially offset by changes in the geographic mix of forecasted earnings.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Analysis of Statements of Earnings
Processed volumes by product for the quarter are as follows (in metric tons):
Three Months Ended
March 31,
(In thousands) 2023 2022 Change
Oilseeds 8,627 8,491 136
Corn 4,394 4,812 (418)
Total 13,021 13,303 (282)
The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall increase in oilseeds processed volumes was primarily related to improved crush rates in the current quarter compared to lower crush rates in the prior-year quarter resulting from unplanned downtime due to logistics and staffing issues. The overall decrease in corn processed volumes was related to downtime due in part to a fire at the Cedar Rapids, Iowa dry mill facility.
Revenues by segment for the quarter are as follows:
Three Months Ended
March 31,
2023 2022 Change
(In millions)
Ag Services and Oilseeds
Ag Services $ 11,695 $ 11,847 $ (152)
Crushing 3,683 3,222 461
Refined Products and Other 3,201 3,184 17
Total Ag Services and Oilseeds 18,579 18,253 326
Carbohydrate Solutions
Starches and Sweeteners 2,737 2,498 239
Vantage Corn Processors 800 868 (68)
Total Carbohydrate Solutions 3,537 3,366 171
Nutrition
Human Nutrition 936 958 (22)
Animal Nutrition 917 966 (49)
Total Nutrition 1,853 1,924 (71)
Other Business 103 107 (4)
Total $ 24,072 $ 23,650 $ 422
Revenues and cost of products sold in a commodity merchandising and processing business are significantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins because both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from market price changes, which generally result in an insignificant impact to gross profit.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Revenues increased $0.4 billion to $24.1 billion due to higher sales prices ($1.3 billion), partially offset by lower sales volumes ($0.9 billion). Higher sales prices of biodiesel, oils, and soybeans and higher sales volumes of corn and corn by-products, meal, and sweeteners were partially offset by lower sales prices of corn and wheat and lower sales volumes of oils and biodiesel. Ag Services and Oilseeds revenues increased 2% to $18.6 billion due to higher sales prices ($0.4 billion), partially offset by lower sales volumes ($0.1 billion). Carbohydrate Solutions revenues increased 5% to $3.5 billion due to higher sales prices ($0.8 billion), partially offset by lower sales volumes ($0.6 billion). Nutrition revenues decreased 4% to $1.9 billion due to lower sales volumes ($0.2 billion), partially offset by higher sales prices ($0.1 million).
Cost of products sold increased $0.2 billion to $22.0 billion due principally to higher average commodity costs and higher manufacturing expenses. Manufacturing expenses increased $0.3 billion to $1.9 billion due principally to increases in energy costs, maintenance expenses, salaries and benefit costs, commercial service fees, and operating supplies.
Foreign currency translation decreased revenues and cost of products sold by $0.3 billion.
Gross profit increased $0.2 billion or 10%, to $2.1 billion due principally to higher results in Ag Services and Oilseeds ($257 million) and Starches and Sweeteners ($13 million), partially offset by lower results in Nutrition ($54 million) and Vantage Corn Processors ($34 million). These factors are explained in the segment operating profit discussion on page 37.
Selling, general, and administrative expenses increased $52 million to $881 million due primarily to higher salaries and benefit costs and higher financing fees, partially offset by decreased provisions for bad debt.
Asset impairment, exit, and restructuring costs increased $6 million to $7 million. Charges in the current quarter consisted of $3 million of impairments related to certain long-lived assets and $4 million of restructuring charges, presented as specified items within segment operating profit. Charges in the prior-year quarter consisted of immaterial charges.
Equity in earnings of unconsolidated affiliates decreased $30 million to $174 million due primarily to lower earnings from the Company’s investments in Wilmar and Almidones Mexicanos S.A., partially offset by higher earnings from the Company’s investment in Stratas Foods LLC.
Interest and investment income increased $75 million to $134 million due primarily to higher interest income, partially offset by revaluation gains of $34 million in the prior-year quarter.
Interest expense increased $55 million to $147 million due primarily to increased short-term rates on the Company’s commercial paper borrowing programs and customer deposit balances at ADM Investor Services. Interest expense in the current quarter also included a $5 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020, compared to a $15 million mark-to-market loss adjustment in the prior-year quarter.
Other income-net increased $11 million to $44 million. Income in the current quarter included gains on disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, net foreign exchange gains, and other net income. Income in the prior-year quarter included the non-service components of net pension benefit income, net foreign exchange gains, and other net income.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Segment operating profit (loss), adjusted segment operating profit (a non-GAAP measure), and earnings before income taxes for the quarter are as follows:
Three Months Ended
March 31,
Segment Operating Profit (Loss) 2023 2022 Change
(In millions)
Ag Services and Oilseeds
Ag Services $ 348 $ 258 $ 90
Crushing 426 428 (2)
Refined Products and Other 327 198 129
Wilmar 109 124 (15)
Total Ag Services and Oilseeds 1,210 1,008 202
Carbohydrate Solutions
Starches and Sweeteners 307 316 (9)
Vantage Corn Processors (34) 1 (35)
Total Carbohydrate Solutions 273 317 (44)
Nutrition
Human Nutrition 138 141 (3)
Animal Nutrition 7 48 (41)
Total Nutrition 145 189 (44)
Other Business 97 42 55
Specified Items:
Gains on sales of assets and businesses 1 1 —
Asset impairment, restructuring, and settlement charges (7) (18) 11
Total Specified Items (6) (17) 11
Total Segment Operating Profit $ 1,719 $ 1,539 $ 180
Adjusted Segment Operating Profit (1)
$ 1,725 $ 1,556 $ 169
Segment Operating Profit $ 1,719 $ 1,539 $ 180
Corporate (322) (268) (54)
Earnings Before Income Taxes $ 1,397 $ 1,271 $ 126
(1) Adjusted segment operating profit is segment operating profit excluding the above specified items.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Ag Services and Oilseeds operating profit increased 20%. Ag Services results were higher than the first quarter of 2022. In South American origination, effective risk management and higher export demand due to the record Brazilian soybean crop drove significantly higher year-over-year results. Results for North America origination were also higher, driven by stronger soybean exports. In Global Trade, solid margins and efficient execution led to strong results. Crushing results were in-line with the prior-year quarter. In North America, the crushing business capitalized on historically strong soybean and softseed crush margins that were supported by robust demand for renewable fuels. In EMEA, crush margins were lower year-over-year as trade flows adjusted from the dislocations caused last year by the war in Ukraine. Additionally, positive timing effects, including positive impacts from declining crush margins, contributed to the results in the current quarter. Refined Products and Other results were higher than the prior-year quarter. North America biodiesel results were higher with record volumes and strong margins, supported by favorable blend economics and tight diesel stocks. In EMEA, domestic demand for food oil and export demand for biodiesel drove strong margins. Equity earnings from Wilmar were lower versus the first quarter of 2022.
Carbohydrate Solutions operating profit decreased 14%. Starches and Sweeteners capitalized on solid demand in the current quarter. North America starches and sweeteners delivered strong volumes and margins. Ethanol margins, pressured by high industry stock levels, were down relative to the prior-year quarter. In EMEA, the business effectively managed margins in a dynamic operating environment to deliver improved results. The global wheat milling business posted much higher margins driven by solid customer demand. Vantage Corn Processors results were significantly lower due to weaker ethanol margins.
Nutrition operating profit decreased 23%. Human Nutrition results were in-line with the first quarter of 2022, as the business continued to manage demand fulfillment challenges and destocking in certain categories. Flavors results were slightly lower than the prior-year quarter as strong results in EMEA were offset by lower results in North America. Specialty Ingredients results were higher year-over-year driven by healthy margins. Health and Wellness results were lower year-over-year. Animal Nutrition results were significantly lower compared to the prior-year quarter, primarily due to lower margins in amino acids.
Other Business operating profit increased $55 million. Higher interest income drove improved earnings in ADM Investor Services. Captive insurance results were in line with the prior-year quarter .
Corporate results for the quarter are as follows:
Three Months Ended
March 31,
2023 2022 Change
(In millions)
Interest expense-net $ (103) $ (76) $ (27)
Unallocated corporate costs (248) (209) (39)
Loss on sale of assets — (3) 3
Expenses related to acquisitions — (2) 2
Gain (loss) on debt conversion option 5 (15) 20
Restructuring adjustment — 1 (1)
Other income 24 36 (12)
Total Corporate $ (322) $ (268) $ (54)
Corporate results were a net charge of $322 million in the current quarter compared to a net charge of $268 million in the prior-year quarter. Interest expense-net increased $27 million due primarily to increased short-term rates on the Company’s commercial paper borrowing programs. Unallocated corporate costs increased $39 million due primarily to higher financing and centers of excellence costs. Gain (loss) on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Other income in the current quarter included the non-service components of net pension benefit income of $4 million and foreign currency transaction gains of $22 million. Other income in the prior-year quarter included the non-service components of net pension benefit income of $6 million and an investment revaluation gain of $34 million, partially offset by foreign exchange losses.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Non-GAAP Financial Measures
The Company uses adjusted EPS, adjusted EBITDA, and adjusted segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.
Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of specified items. Adjusted EBITDA is defined as earnings before interest on borrowings, taxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense on borrowings and depreciation and amortization to earnings before income taxes. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.
Management believes that adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are not intended to replace or be an alternative to diluted EPS, earnings before income taxes, and segment operating profit, respectively, the most directly comparable amounts reported under GAAP.
The table below provides a reconciliation of diluted EPS to adjusted EPS for the three months ended March 31, 2023 and 2022.
Three months ended March 31,
2023 2022
In millions Per share In millions Per share
Average number of shares outstanding - diluted 551 568
Net earnings and reported EPS (fully diluted) $ 1,170 $ 2.12 $ 1,054 $ 1.86
Adjustments:
Loss (gain) on sales of assets and businesses - net of tax of $0 million (1)
(1) — 2 —
Loss (gain) on debt conversion option - net of tax of $0 (1)
(5) (0.01) 15 0.03
Asset impairment, restructuring, and settlement charges - net of tax of $2 million in 2023 and $3 million in 2022 (1)
5 0.01 14 0.02
Expenses related to acquisitions - net of tax of $1 million in 2022 (1)
— — 1 —
Certain discrete tax adjustments (18) (0.03) (4) (0.01)
Total adjustments (19) (0.03) 28 0.04
Adjusted net earnings and adjusted EPS $ 1,151 $ 2.09 $ 1,082 $ 1.90
(1) Tax effected using the U.S. and other applicable tax rates.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the three months ended March 31, 2023 and 2022.
Three months ended
March 31,
(In millions) 2023 2022 Change
Earnings before income taxes $ 1,397 $ 1,271 $ 126
Interest expense 100 92 8
Depreciation and amortization 259 257 2
Gains (losses) on sales of assets and businesses (1) 2 (3)
Expenses related to acquisitions — 2 (2)
Asset impairment, restructuring, and settlement charges 7 17 (10)
Adjusted EBITDA $ 1,762 $ 1,641 $ 121
Three months ended
March 31,
(In millions) 2023 2022 Change
Ag Services and Oilseeds $ 1,300 $ 1,096 $ 204
Carbohydrate Solutions 352 396 (44)
Nutrition 210 254 (44)
Other Business 97 44 53
Corporate (197) (149) (48)
Adjusted EBITDA $ 1,762 $ 1,641 $ 121
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital-intensive agricultural commodity-based business. The Company depends on access to credit markets, which can be impacted by its credit rating and factors outside of ADM’s control, to fund its working capital needs and capital expenditures. The primary source of funds to finance ADM’s operations, capital expenditures, and advancement of its growth strategy is cash generated by operations and lines of credit, including a commercial paper borrowing facility and accounts receivable securitization programs. In addition, the Company believes it has access to funds from public and private equity and debt capital markets in both U.S. and international markets.
Cash used in operating activities was $1.6 billion for the three months ended March 31, 2023 compared to a use of $1.2 billion for the same period last year. Working capital changes decreased cash by $2.9 billion for the three months ended March 31, 2023 compared to a decrease of $2.8 billion for the same period last year. Segregated investments increased approximately $0.9 billion driven by higher interest rates. Trade receivables decreased $0.5 billion due to lower revenues in the current quarter compared to the prior year fourth quarter. Inventories decreased approximately $0.1 billion due to lower inventory volumes, partially offset by higher inventory prices. Other current assets decreased $0.3 billion primarily due to decreases in margin deposits and grain accounts, customer omnibus receivable, and tax receivables. Trade payables decreased $1.6 billion due to lower payables related to grain purchases. Brokerage payables decreased approximately $0.5 billion due to decreased trading activity in the Company’s futures commission and brokerage business. Accrued expenses and other payables decreased $0.8 billion primarily due to decreases in contracts and futures losses, contract liability, and compensation accruals.
Cash used in investing activities was $0.3 billion for the three months ended March 31, 2023 compared to $0.3 billion for the same period last year. Capital expenditures for the three months ended March 31, 2023 were $0.3 billion compared to $0.2 billion for the same period last year. There were no additional cost method investments for the three months ended March 31, 2023 compared to $0.1 billion for the same period last year.
Cash provided by financing activities was $0.6 billion for the three months ended March 31, 2023 compared to cash provided of $3.3 billion for the same period last year. Long-term debt borrowings for the three months ended March 31, 2023 were immaterial compared to long-term debt borrowings for the same period last year of $0.8 billion which consisted of the $750 million aggregate principal amount of 2.900% Notes due 2032. Proceeds from the borrowings in the prior period were used to finance investments and expenditures in eligible green projects that contribute to environmental objectives and/or eligible social projects that aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes. Long-term debt payments were $2 million for the three months ended March 31, 2023 compared to an immaterial amount for the same period last year. Net borrowings on short-term credit agreements for the three months ended March 31, 2023 were $1.3 billion compared to $2.8 billion for the same period last year. Share repurchases for the three months ended March 31, 2023 were $0.4 billion compared to none for the same period last year. Dividends for the three months ended March 31, 2023 of $0.2 billion comparable to the same period last year.
At March 31, 2023, the Company had $0.9 billion of cash and cash equivalents and a current ratio, defined as current assets divided by current liabilities, of 1.5 to 1. Included in working capital was $9.2 billion of readily marketable commodity inventories. At March 31, 2023, the Company’s capital resources included shareholders’ equity of $24.9 billion and lines of credit, including the accounts receivable securitization programs described below, totaling $13.3 billion, of which $8.9 billion was unused. The Company’s ratio of long-term debt to total capital (the sum of the Company’s long-term debt and shareholders’ equity) was 24% at March 31, 2023 and December 31, 2022. The Company uses this ratio as a measure of the Company’s long-term indebtedness and an indicator of financial flexibility. The Company’s ratio of net debt (the sum of short-term debt, current maturities of long-term debt, and long-term debt less the sum of cash and cash equivalents and short-term marketable securities) to capital (the sum of net debt and shareholders’ equity) was 28% and 25% at March 31, 2023 and December 31, 2022, 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 $0.8 billion commercial paper outstanding at March 31, 2023.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
As of March 31, 2023, the Company had $0.9 billion of cash and cash equivalents, $0.5 billion of which was cash held by foreign subsidiaries whose undistributed earnings are considered indefinitely reinvested. Based on the Company’s historical ability to generate sufficient cash flows from its U.S. operations and unused and available U.S. credit capacity of $5.2 billion, the Company has asserted that these funds are indefinitely reinvested outside the U.S.
The Company has accounts receivable securitization programs (the “Programs”) with certain commercial paper conduit purchasers and committed purchasers. The Programs provide the Company with up to $2.9 billion in funding against accounts receivable transferred into the Programs and expands the Company’s access to liquidity through efficient use of its balance sheet assets (see Note 14 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures on the Programs). As of March 31, 2023, the Company had $0.3 billion unused capacity of its facility under the Programs.
As of March 31, 2023, the Company has total available liquidity of $9.8 billion comprised of cash and cash equivalents and unused lines of credit with a well-diversified group of primarily investment-grade institutions.
For the three months ended March 31, 2023, the Company spent approximately $0.3 billion in capital expenditures, $0.2 billion in dividends, and $0.4 billion in share repurchases. The Company has a stock repurchase program. Under the program, the Company has 83.4 million shares remaining as of March 31, 2023 that may be repurchased until December 31, 2024.
On April 3, 2023, the Company issued $500 million aggregate principal amount of 4.500% Notes due in August 15, 2033. Net proceeds before expenses were $493 million. Proceeds of the borrowings will be used for general corporate purposes which may include repayment of commercial paper borrowings.
In 2023, the Company expects total capital expenditures of approximately $1.3 billion and additional cash outlays of approximately $1.0 billion in dividends and $1.0 billion in opportunistic share repurchases, subject to other strategic uses of capital and the evolution of operating cash flows and the working capital position throughout the year.
Contractual Obligations and Commercial Commitments
The Company’s purchase obligations as of March 31, 2023 and December 31, 2022 were $14.5 billion and $15.8 billion, respectively. The decrease is primarily related to obligations to purchase lower quantities of agricultural commodity inventories. As of March 31, 2023, the Company expects to make payments related to purchase obligations of $13.7 billion within the next twelve months. There were no other material changes in the Company’s contractual obligations during the quarter ended March 31, 2023.
Off Balance Sheet Arrangements
In March 2023, the Company amended its Second Program with certain commercial and conduit purchasers and committed purchasers and increased its facility from €0.8 billion ($0.9 billion) to €1.0 billion ($1.1 billion). The Second Program terminates on February 20, 2024 unless extended. There were no other material changes in the Company’s off balance sheet arrangements during the quarter ended March 31, 2023.
Critical Accounting Policies and Estimates
There were no material changes in the Company’s critical accounting policies and estimates during the quarter ended March 31, 2023. For a description of the Company’s critical accounting policies, estimates, and assumptions used in the preparation of the Company’s financial statements, see Part II, Item 7 and Note 1 of “Notes to Consolidated Financial Statements” included in Part II, Item 8, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in the Company’s market risk sensitive instruments and positions is the potential loss arising from adverse changes in: commodity market prices as they relate to the Company’s net commodity position, foreign currency exchange rates, and interest rates. Significant changes in market risk sensitive instruments and positions for the quarter ended March 31, 2023 are described below. There were no material changes during the period in the Company’s potential loss arising from changes in foreign currency exchange rates and interest rates.
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