Adjusted Operating Earnings
Cargill reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). We also report adjusted operating earnings, a non-GAAP measure that provides additional insight into the underlying financial performance of the company’s ongoing operations.
In calculating adjusted operating earnings, Cargill includes earnings and losses attributable to non-controlling interests in consolidated companies, with the exception of those from its asset management business prior to its sale in October 2019. Mark-to-market gains and losses on intercompany contracts between the Origination & Processing and the Food Ingredients & Applications segments also are included. Cargill excludes the following six items:
Timing differences - inventory, derivatives and hedging
U.S. GAAP accounting for inventory, derivatives and hedging causes fluctuations in earnings from quarter to quarter as a result of timing. The adjustment removes these noneconomic fluctuations. The timing differences include:
- Mark-to-market adjustments for inventory and contracts that are not marked to market under U.S. GAAP in Cargill’s Food Ingredients & Applications segment.
- Adjustments for the timing effect of hedges that are marked to market in Cargill's animal protein businesses.
Last-in, first-out (LIFO) inventory adjustments
Cargill uses the LIFO method to calculate inventory for certain product lines. The adjustment presents U.S. GAAP earnings as if LIFO inventories had been accounted for on a first-in, first-out (FIFO) basis.
Amortization of intangible assets
Intangible assets include items such as patents and trademarks. U.S. GAAP requires many intangible assets to be expensed or amortized over a specific life, similar to physical assets. Unlike physical assets, intangible assets do not necessarily deteriorate in value over time. The adjustment removes the non-cash amortization expense.
Gains and losses on changes in investment structures
The adjustment removes gains and losses resulting from changes in the consolidated or nonconsolidated classification of an entity as required by U.S. GAAP.
Asset impairment and restructuring charges
Asset impairments occur when circumstances indicate the carrying amount of an asset may not be recoverable and restructuring charges are incurred as the result of strategic actions taken by the company that result in the closure of a facility or a reduction in its workforce. These adjustments remove the one-time costs associated with such transactions.
Gains and losses on disposal of businesses and other long-term assets
The adjustment removes one-time gains and losses on sales of businesses and other long-term assets, including selling costs.