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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/07/22 Ingredion Inc. 10-Q 9/30/22 86:13M Toppan Merrill Bridge/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 2.63M
2: EX-3.2 Articles of Incorporation/Organization or Bylaws HTML 421K
3: EX-31.1 Certification -- §302 - SOA'02 HTML 29K
4: EX-31.2 Certification -- §302 - SOA'02 HTML 29K
5: EX-32.1 Certification -- §906 - SOA'02 HTML 24K
6: EX-32.2 Certification -- §906 - SOA'02 HTML 24K
12: R1 Document and Entity Information HTML 75K
13: R2 Condensed Consolidated Statements of Income HTML 109K
14: R3 Condensed Consolidated Statements of Comprehensive HTML 60K
(Loss) Income
15: R4 Condensed Consolidated Statements of Comprehensive HTML 28K
(Loss) Income (Parenthetical)
16: R5 Condensed Consolidated Balance Sheets HTML 134K
17: R6 Condensed Consolidated Balance Sheets HTML 43K
(Parenthetical)
18: R7 Condensed Consolidated Statements of Equity HTML 81K
19: R8 Condensed Consolidated Statement of Redeemable HTML 60K
Equity
20: R9 Condensed Consolidated Statements of Cash Flows HTML 103K
21: R10 Condensed Consolidated Statements of Cash Flows HTML 24K
(Parenthetical)
22: R11 Interim Financial Statements HTML 27K
23: R12 Summary of Significant Accounting Standards and HTML 37K
Policies
24: R13 Acquisitions HTML 28K
25: R14 Intangible Assets HTML 75K
26: R15 Investments HTML 42K
27: R16 Restructuring and Impairment Charges HTML 38K
28: R17 Derivative Instruments and Hedging Activities HTML 197K
29: R18 Fair Value Measurements HTML 67K
30: R19 Financing Arrangements HTML 59K
31: R20 Commitments and Contingencies HTML 27K
32: R21 Income Taxes HTML 28K
33: R22 Pension and Other Postretirement Benefits HTML 102K
34: R23 Equity HTML 719K
35: R24 Segment Information HTML 124K
36: R25 Supplementary Information HTML 55K
37: R26 Summary of Significant Accounting Standards and HTML 26K
Policies (Policies)
38: R27 Intangible Assets (Tables) HTML 71K
39: R28 Investments (Tables) HTML 37K
40: R29 Restructuring and Impairment Charges (Tables) HTML 31K
41: R30 Derivative Instruments and Hedging Activities HTML 189K
(Tables)
42: R31 Fair Value Measurements (Tables) HTML 63K
43: R32 Financing Arrangements (Tables) HTML 52K
44: R33 Net Periodic Pension and Postretirement Benefit HTML 101K
Costs (Tables)
45: R34 Equity (Tables) HTML 722K
46: R35 Segment Information (Tables) HTML 120K
47: R36 Supplementary Information (Tables) HTML 56K
48: R37 Acquisitions - PureCircle Non-Controlling HTML 31K
Interests (Details)
49: R38 Acquisitions - Other (Details) HTML 39K
50: R39 Intangible Assets - Goodwill (Details) HTML 55K
51: R40 Intangible Assets - Indefinite-lived intangible HTML 30K
assets (Details)
52: R41 Investments (Details) HTML 31K
53: R42 Investments - Amyris & Argentina joint venture HTML 55K
(Details)
54: R43 Restructuring and Impairment Charges - Charges HTML 28K
(Details)
55: R44 Restructuring and Impairment Charges - HTML 37K
Restructuring Charges (Details)
56: R45 Restructuring and Impairment Charges - HTML 33K
Employee-related severance (Details)
57: R46 Restructuring and Impairment Charges - Impairment HTML 36K
Charges (Details)
58: R47 Derivative Instruments and Hedging Activities - HTML 47K
Commodity price hedging (Details)
59: R48 Derivative Instruments and Hedging Activities - HTML 35K
Foreign currency hedging (Details)
60: R49 Derivative Instruments and Hedging Activities - CF HTML 39K
Hedges in AOCI (Details)
61: R50 Derivative Instruments and Hedging Activities - HTML 74K
Balance Sheet Location (Details)
62: R51 Derivative Instruments and Hedging Activities - HTML 41K
Additional information - CF hedges (Details)
63: R52 Derivative Instruments and Hedging Activities - HTML 27K
Gain (Losses) Recognized in Income (Details)
64: R53 Fair Value Measurements (Details) HTML 46K
65: R54 Financing Arrangements - Carrying amount (Details) HTML 49K
66: R55 Financing Arrangements - Commercial paper HTML 44K
(Details)
67: R56 Commitments and Contingencies (Details) HTML 40K
68: R57 Net Periodic Pension and Postretirement Benefit HTML 77K
Costs (Details)
69: R58 Equity - Treasury stock (Details) HTML 41K
70: R59 Equity - Share-based payments (Details) HTML 38K
71: R60 Equity - Stock options (Details) HTML 99K
72: R61 Equity - Restricted stock units (Details) HTML 68K
73: R62 Equity - Performance shares (Details) HTML 80K
74: R63 Equity - AOCL (Details) HTML 51K
75: R64 Equity - Statements of Equity with dividends per HTML 72K
share (Details)
76: R65 Equity - Statements of Redeemable Equity (Details) HTML 44K
77: R66 Equity - EPS (Details) HTML 62K
78: R67 Segment Information - Net sales (Details) HTML 60K
79: R68 Segment Information - Assets (Details) HTML 40K
80: R69 Supplementary Information - Accounts Receivable, HTML 31K
Net (Details)
81: R70 Supplementary Information - Inventories (Details) HTML 33K
84: XML IDEA XML File -- Filing Summary XML 154K
82: XML XBRL Instance -- ingr-20220930x10q_htm XML 4.10M
83: EXCEL IDEA Workbook of Financial Reports XLSX 142K
8: EX-101.CAL XBRL Calculations -- ingr-20220930_cal XML 180K
9: EX-101.DEF XBRL Definitions -- ingr-20220930_def XML 674K
10: EX-101.LAB XBRL Labels -- ingr-20220930_lab XML 1.33M
11: EX-101.PRE XBRL Presentations -- ingr-20220930_pre XML 991K
7: EX-101.SCH XBRL Schema -- ingr-20220930 XSD 172K
85: JSON XBRL Instance as JSON Data -- MetaLinks 431± 655K
86: ZIP XBRL Zipped Folder -- 0001558370-22-016605-xbrl Zip 427K
| UNITED STATES |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form i 10-Q
(Mark One)
| |
i ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended i September 30, 2022
or
| |
i ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to
Commission File Number i 1-13397
i Ingredion Incorporated
(Exact name of registrant as specified in its charter)
i Delaware
(State or other jurisdiction of incorporation or organization)
i 22-3514823
(I.R.S. Employer Identification Number)
| | |
i 5 Westbrook Corporate Center i Westchester, i Illinois | | i 60154 |
(Address of principal executive offices) | | (Zip Code) |
( i 708) i 551-2600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
i Common Stock, $.01 par value per share | i INGR | i New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | |
| | |
| | |
i Large accelerated filer ☒ | | Accelerated filer ☐ |
| | |
Non-accelerated filer ☐ | | Smaller reporting company i ☐ |
| | |
| | Emerging growth company i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| | |
Class | | Outstanding at November 3, 2022 |
Common Stock, $.01 par value | | i 65,555,317 shares |
INGREDION INCORPORATED
FORM 10-Q
2
Ingredion Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
(in millions, except per share amounts) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
Net sales | | $ | i 2,023 | | $ | i 1,763 | | $ | i 5,959 | | $ | i 5,139 | |
Cost of sales | | | i 1,649 | | | i 1,440 | | | i 4,816 | | | i 4,098 | |
Gross profit | | | i 374 | | | i 323 | | | i 1,143 | | | i 1,041 | |
| | | | | | | | | | | | | |
Operating expenses | | | i 180 | | | i 164 | | | i 528 | | | i 484 | |
Other operating expense (income) | | | i 10 | | | ( i 1) | | | i 4 | | | ( i 29) | |
Restructuring/impairment charges and related adjustments | | | i 2 | | | ( i 12) | | | i 6 | | | i 362 | |
| | | | | | | | | | | | | |
Operating income | | | i 182 | | | i 172 | | | i 605 | | | i 224 | |
| | | | | | | | | | | | | |
Financing costs | | | i 24 | | | i 20 | | | i 65 | | | i 58 | |
Other non-operating (income) | | | ( i 3) | | | ( i 1) | | | ( i 4) | | | ( i 4) | |
| | | | | | | | | | | | | |
Income before income taxes | | | i 161 | | | i 153 | | | i 544 | | | i 170 | |
Provision for income taxes | | | i 52 | | | i 34 | | | i 157 | | | i 113 | |
Net income | | | i 109 | | | i 119 | | | i 387 | | | i 57 | |
Less: Net income attributable to non-controlling interests | | | i 3 | | | i 1 | | | i 9 | | | i 7 | |
Net income attributable to Ingredion | | $ | i 106 | | $ | i 118 | | $ | i 378 | | $ | i 50 | |
| | | | | | | | | | | | | |
Weighted average common shares outstanding: | | | | | | | | | | | | | |
Basic | | | i 65.8 | | | i 67.0 | | | i 66.4 | | | i 67.2 | |
Diluted | | | i 66.6 | | | i 67.6 | | | i 67.1 | | | i 67.8 | |
| | | | | | | | | | | | | |
Earnings per common share of Ingredion: | | | | | | | | | | | | | |
Basic | | $ | i 1.61 | | $ | i 1.76 | | $ | i 5.69 | | $ | i 0.74 | |
Diluted | | $ | i 1.59 | | $ | i 1.75 | | $ | i 5.63 | | $ | i 0.74 | |
See Notes to Condensed Consolidated Financial Statements
3
Ingredion Incorporated
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
Net income |
| $ | i 109 |
| $ | i 119 |
| $ | i 387 | | $ | i 57 | |
Other comprehensive income: | | | | | | | | | | | | | |
Gains on cash flow hedges, net of income tax effect of $ i 19, $ i 9, $ i 66 and $ i 56, respectively | | | i 56 | | | i 26 | | | i 188 | | | i 155 | |
(Gains) on cash flow hedges reclassified to earnings, net of income tax effect of $ i 18, $ i 15, $ i 52 and $ i 45, respectively | | | ( i 55) | | | ( i 45) | | | ( i 149) | | | ( i 125) | |
Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect of $ — | | | i 1 | | | — | | | i 1 | | | — | |
Currency translation adjustment | | | ( i 114) | | | i 248 | | | ( i 195) | | | i 226 | |
Comprehensive (loss) income | | | ( i 3) | | | i 348 | | | i 232 | | | i 313 | |
Less: Comprehensive (loss) income attributable to non-controlling interests | | | ( i 2) | | | ( i 2) | | | ( i 4) | | | i 6 | |
Comprehensive (loss) income attributable to Ingredion | | $ | ( i 1) | | $ | i 350 | | $ | i 236 | | $ | i 307 | |
See Notes to Condensed Consolidated Financial Statements
4
Ingredion Incorporated
Condensed Consolidated Balance Sheets
| | | | | | | |
|
| September 30, | | December 31, | | ||
(in millions, except share and per share amounts) |
| 2022 |
| 2021 |
| ||
| | (Unaudited) | | | | | |
Assets |
| | |
| | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | i 294 | | $ | i 328 | |
Short-term investments | | | i 4 | | | i 4 | |
Accounts receivable, net | | | i 1,406 | | | i 1,130 | |
Inventories | | | i 1,500 | | | i 1,172 | |
Prepaid expenses | | | i 64 | | | i 63 | |
Total current assets | | | i 3,268 | | | i 2,697 | |
| | | | | | | |
Property, plant and equipment, net of accumulated depreciation of $ i 3,256 and $ i 3,232, respectively | | | i 2,308 | | | i 2,423 | |
Intangible assets, net of accumulated amortization of $ i 264 and $ i 253, respectively | | | i 1,286 | | | i 1,348 | |
Other assets | | | i 541 | | | i 531 | |
Total assets | | $ | i 7,403 | | $ | i 6,999 | |
| | | | | | | |
Liabilities and equity | | | | | | | |
Current liabilities: | | | | | | | |
Short-term borrowings | | $ | i 709 | | $ | i 308 | |
Accounts payable and accrued liabilities | | | i 1,240 | | | i 1,204 | |
Total current liabilities | | | i 1,949 | | | i 1,512 | |
| | | | | | | |
Long-term debt | | | i 1,739 | | | i 1,738 | |
Other non-current liabilities | | | i 536 | | | i 524 | |
Total liabilities | | | i 4,224 | | | i 3,774 | |
| | | | | | | |
Share-based payments subject to redemption | | | i 43 | | | i 36 | |
Redeemable non-controlling interests | | | i 56 | | | i 71 | |
| | | | | | | |
Ingredion stockholders’ equity: | | | | | | | |
Preferred stock — authorized i i 25,000,000 / shares — $ i i 0.01 / par value, i i none / issued | | | — | | | — | |
Common stock — authorized i i 200,000,000 / shares — $ i i 0.01 / par value, i i 77,810,875 / issued at September 30, 2022 and December 31, 2021 | | | i 1 | | | i 1 | |
Additional paid-in capital | | | i 1,133 | | | i 1,158 | |
Less: Treasury stock (common stock: i 12,258,900 and i 11,154,203 shares at September 30, 2022 and December 31, 2021, respectively) at cost | | | ( i 1,159) | | | ( i 1,061) | |
Accumulated other comprehensive loss | | | ( i 1,052) | | | ( i 897) | |
Retained earnings | | | i 4,143 | | | i 3,899 | |
Total Ingredion stockholders’ equity | | | i 3,066 | | | i 3,100 | |
Non-redeemable non-controlling interests | | | i 14 | | | i 18 | |
Total equity | | | i 3,080 | | | i 3,118 | |
Total liabilities and equity | | $ | i 7,403 | | $ | i 6,999 | |
See Notes to Condensed Consolidated Financial Statements
5
Ingredion Incorporated
Condensed Consolidated Statements of Equity and Redeemable Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Equity | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | Non- | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Redeemable | | Share-based | | Redeemable | | |||
| | | | | | | | Additional | | | | | Accumulated Other | | | | | Non- | | Payments | | Non- | | |||||
| | Preferred | | Common | | Paid-In | | Treasury | | Comprehensive | | Retained | | Controlling | | Subject to | | Controlling | | |||||||||
(in millions) |
| Stock | | Stock |
| Capital |
| Stock |
| Loss |
| Earnings |
| Interests |
| Redemption |
| Interests |
| |||||||||
Balance, December 31, 2021 | | $ | — | | $ | i 1 | | $ | i 1,158 | | $ | ( i 1,061) | | $ | ( i 897) | | $ | i 3,899 | | $ | i 18 | | $ | i 36 | | $ | i 71 | |
Net income attributable to Ingredion | | | | | | | | | | | | | | | | | | i 378 | | | | | | | | | | |
Net income attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 7 | | | | | | i 2 | |
Dividends declared | | | | | | | | | | | | | | | | | | ( i 134) | | | ( i 4) | | | | | | | |
Repurchases of common stock, net | | | | | | | | | | | | ( i 112) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | i 4 | | | i 14 | | | | | | | | | | | | i 7 | | | | |
Fair market value adjustment to non-controlling interests | | | | | | | | | ( i 29) | | | | | | | | | | | | | | | | | | i 29 | |
Non-controlling interest purchases | | | | | | | | | | | | | | | | | | | | | | | | | | | ( i 40) | |
Other comprehensive (loss) | | | | | | | | | | | | | | | ( i 155) | | | | | | ( i 7) | | | | | | ( i 6) | |
Balance, September 30, 2022 | | $ | — | | $ | i 1 | | $ | i 1,133 | | $ | ( i 1,159) | | $ | ( i 1,052) | | $ | i 4,143 | | $ | i 14 | | $ | i 43 | | $ | i 56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Equity | | | | |
| |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | Non- | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Redeemable | | Share-based | | Redeemable | | |||
| | | | | | | | Additional | | | | | Accumulated Other | | | | | Non- | | Payments | | Non- |
| |||||
| | Preferred | | Common | | Paid-In | | Treasury | | Comprehensive | | Retained | | Controlling | | Subject to | | Controlling |
| |||||||||
(in millions) |
| Stock | | Stock |
| Capital |
| Stock |
| Loss |
| Earnings |
| Interests |
| Redemption |
| Interests |
| |||||||||
Balance, December 31, 2020 |
| $ | — | | $ | i 1 | | $ | i 1,150 | | $ | ( i 1,024) | | $ | ( i 1,133) | | $ | i 3,957 | | $ | i 21 | | $ | i 30 | | $ | i 70 | |
Net income attributable to Ingredion | | | | | | | | | | | | | | | | | | i 50 | | | | | | | | | | |
Net income (loss) attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 10 | | | | | | ( i 3) | |
Dividends declared | | | | | | | | | | | | | | | | | | ( i 130) | | | ( i 10) | | | | | | | |
Repurchases of common stock, net | | | | | | | | | | | | ( i 68) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | i 5 | | | i 20 | | | | | | | | | | | | i 2 | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | i 256 | | | | | | ( i 2) | | | | | | i 1 | |
Balance, September 30, 2021 | | $ | — | | $ | i 1 |
| $ | i 1,155 |
| $ | ( i 1,072) |
| $ | ( i 877) |
| $ | i 3,877 |
| $ | i 19 |
| $ | i 32 |
| $ | i 68 | |
See Notes to Condensed Consolidated Financial Statements
6
Ingredion Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | |
| | Nine Months Ended | | ||||
| | September 30, | | ||||
(in millions) |
| 2022 |
| 2021 | | ||
Cash provided by operating activities | | | | | | | |
Net income | | $ | i 387 | | $ | i 57 | |
Non-cash charges to net income: | | | | | | | |
Depreciation and amortization | | | i 160 | | | i 155 | |
Mechanical stores expense | | | i 42 | | | i 40 | |
Impairment on disposition of assets | | | — | | | i 340 | |
Deferred income taxes | | | ( i 3) | | | ( i 25) | |
Other non-cash charges | | | i 41 | | | i 4 | |
Changes in working capital: | | | | | | | |
Accounts receivable and prepaid expenses | | | ( i 276) | | | ( i 126) | |
Inventories | | | ( i 401) | | | ( i 226) | |
Accounts payable and accrued liabilities | | | i 99 | | | i 94 | |
Margin accounts | | | ( i 11) | | | ( i 34) | |
Other | | | i 42 | | | ( i 20) | |
Cash provided by operating activities | | | i 80 | | | i 259 | |
| | | | | | | |
Cash used for investing activities | | | | | | | |
Capital expenditures and mechanical stores purchases | | | ( i 203) | | | ( i 203) | |
Proceeds from disposal of manufacturing facilities and properties | | | i 7 | | | i 17 | |
Payments for acquisitions, net of cash acquired of $ - and $ i 2, respectively | | | ( i 7) | | | ( i 40) | |
Other | | | i 1 | | | ( i 12) | |
Cash used for investing activities | | | ( i 202) | | | ( i 238) | |
| | | | | | | |
Cash provided by (used for) financing activities | | | | | | | |
Proceeds from borrowings | | | i 376 | | | i 804 | |
Payments on debt | | | ( i 342) | | | ( i 1,194) | |
Commercial paper borrowings, net | | | i 372 | | | i 350 | |
Repurchases of common stock, net | | | ( i 112) | | | ( i 68) | |
Purchases of non-controlling interests | | | ( i 40) | | | — | |
Issuances of common stock for share-based compensation, net of settlements | | | i 1 | | | i 10 | |
Dividends paid, including to non-controlling interests |
| | ( i 133) |
| | ( i 138) | |
Cash provided by (used for) financing activities | | | i 122 | | | ( i 236) | |
| | | | | | | |
Effects of foreign exchange rate changes on cash | | | ( i 34) | | | ( i 16) | |
| | | | | | | |
Decrease in cash and cash equivalents | | | ( i 34) | | | ( i 231) | |
| | | | | | | |
Cash and cash equivalents, beginning of period | | | i 328 | | | i 665 | |
| | | | | | | |
Cash and cash equivalents, end of period | | $ | i 294 | | $ | i 434 | |
See Notes to Condensed Consolidated Financial Statements
7
Ingredion Incorporated
Notes to Condensed Consolidated Financial Statements
i1. Interim Financial Statements
References to the “Company,” “Ingredion,” “we,” “us,” and “our” shall mean Ingredion Incorporated (“Ingredion”) individually and together with its consolidated subsidiaries. These statements should be read in conjunction with the consolidated financial statements and the related notes to those statements contained in Ingredion’s Annual Report on Form 10-K for the year ended December 31, 2021.
The unaudited Condensed Consolidated Financial Statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 included herein were prepared by management on the same basis as Ingredion’s audited Consolidated Financial Statements for the year ended December 31, 2021 and reflect all adjustments (consisting solely of normal recurring items unless otherwise noted) that are, in the opinion of management, necessary for the fair presentation of the Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive (Loss) Income, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Equity and Redeemable Equity, and Condensed Consolidated Statements of Cash Flows. The results for the interim period are not necessarily indicative of the results expected for the full year or any other future period.
i2. Summary of Significant Accounting Standards and Policies
For detailed information about Ingredion’s significant accounting standards and policies, see Note 1 of the Notes to the Consolidated Financial Statements included in Ingredion’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our significant accounting standards and policies for the three and nine months ended September 30, 2022.
iNew Accounting Standards
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. This update is not expected to have a material impact on Ingredion’s Condensed Consolidated Financial Statements.
In September 2022, the FASB issued ASU No. 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The amendments require buyers to disclose information about supplier finance programs that is sufficient to allow financial statement users to understand their nature, activity during the period, changes from period to period and potential magnitude. The amendments in this update are effective for annual periods beginning after December 15, 2022. We are currently evaluating the impact of this update to our Condensed Consolidated Financial Statements.
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i3. Acquisitions
PureCircle Non-Controlling Interests
During the three and nine months ended September 30, 2022, Ingredion purchased shares from minority shareholders in PureCircle Limited (“PureCircle”) for $ i 13 million and $ i 40 million, respectively. These purchases increased our ownership percentage in PureCircle from i 75 percent as of December 31, 2021, to i 85 percent as of September 30, 2022.
Other Acquisitions
On August 1, 2022, Ingredion acquired Amishi Drugs and Chemicals Private Limited (“Amishi”) for $ i 7 million, which added $ i 2 million of goodwill and intangible assets to our Condensed Consolidated Financial Statements. Amishi is an Indian manufacturer of chemically modified starch-based pharmaceutical excipients. Beginning at the
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acquisition date, our Condensed Consolidated Financial Statements reflect the preliminary effects of the acquisition and Amishi’s financial results, which we report in our Asia-Pacific reportable business segment.
On April 1, 2021, Ingredion acquired KaTech, a privately held company headquartered in Germany. KaTech provides advanced texture and stabilization solutions to the food and beverage industry. To complete the closing, Ingredion made a total cash payment of $ i 40 million, net of cash acquired, which we funded from cash on hand. The acquisition added $ i 26 million of goodwill and intangible assets, as well as $ i 14 million of tangible assets, to our Condensed Consolidated Financial Statements. Beginning at the acquisition date, our Condensed Consolidated Financial Statements reflect the effects of the acquisition and KaTech’s financial results, which we report in our Europe, Middle East and Africa (“EMEA”) reportable business segment.
i4. Intangible Assets
Goodwill ($ i 883 million and $ i 914 million at September 30, 2022, and December 31, 2021, respectively) represents the excess of the cost of an acquired entity over the fair value assigned to identifiable assets acquired and liabilities assumed. Ingredion also had indefinite-lived intangible assets of $ i i 143 / million at each of September 30, 2022, and December 31, 2021.
The original carrying value of goodwill and accumulated impairment charges by reportable business segment at September 30, 2022, are as follows:
i
| | | | | | | | | | | | | | | | |
| | North | | South | | Asia- | | | | | | | | |||
(in millions) |
| America |
| America |
| Pacific |
| EMEA |
| Total |
| |||||
Goodwill before impairment charges | | $ | i 624 | | $ | i 48 | | $ | i 323 | | $ | i 74 | | $ | i 1,069 | |
Accumulated impairment charges | | | ( i 1) | | | ( i 33) | | | ( i 121) | | | — | | | ( i 155) | |
Balance at January 1, 2022 | | | i 623 | | | i 15 | | | i 202 | | | i 74 | | | i 914 | |
Acquisitions | | | — | | | — | | | i 2 | | | i 4 | | | i 6 | |
Currency translation | | | ( i 1) | | | i 1 | | | ( i 25) | | | ( i 12) | | | ( i 37) | |
Balance at September 30, 2022 | | $ | i 622 | | $ | i 16 | | $ | i 179 | | $ | i 66 | | $ | i 883 | |
| | | | | | | | | | | | | | | | |
The following table summarizes the balances of Ingredion’s indefinite-lived intangible assets at the dates presented:
i
| | | | | | | |
(in millions) | | As of September 30, 2022 |
| As of December 31, 2021 | | ||
Trademarks/tradenames (indefinite-lived) | | $ | i 143 |
| $ | i 143 | |
Ingredion assesses goodwill and indefinite-lived intangible assets for impairment annually (or more frequently if impairment indicators arise). Based on the results of our assessment as of July 1, 2022, there were i no impairments in our goodwill or indefinite-lived intangible assets.
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i5. Investments
Investments consisted of the following as of the dates indicated:
i
| | | | | | |
| | | | | ||
(in millions) | | | ||||
Equity investments | | $ | i 23 | | $ | i 16 |
Equity method investments | | | i 109 | | | i 104 |
Marketable securities | | | i 4 | | | i 12 |
Total investments | | $ | i 136 | | $ | i 132 |
Amyris Joint Venture
On June 1, 2021, Ingredion entered into an agreement with Amyris, Inc. (“Amyris”) for certain exclusive commercialization rights to Amyris’s rebaudioside M by fermentation product, the exclusive licensing of the product’s manufacturing technology and a i 31 percent ownership stake in a joint venture for the products (the “Amyris joint venture”). In exchange, we contributed $ i 28 million of total consideration, which included $ i 10 million of cash, as well as non-exclusive intellectual property licenses and other consideration valued at $ i 18 million. The transaction resulted in an
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$ i 8 million gain recorded in Other operating (income) during the nine months ended September 30, 2021, which included $ i 18 million related to the non-exclusive intellectual property licenses, partly offset by the $ i 10 million cash payment. Beginning on June 1, 2021, Ingredion began accounting for the investment under the equity method.
Argentina Joint Venture
On February 12, 2021, Ingredion entered into an agreement with an affiliate of Grupo Arcor, an Argentine food company, to establish Ingrear Holding S.A. (the “Argentina joint venture”), a joint venture to operate i five manufacturing facilities in Argentina to sell value-added ingredients to customers in the food, beverage, pharmaceutical and other industries in Argentina, Chile and Uruguay. On August 2, 2021, Ingredion and Grupo Arcor completed all closing conditions, pending customary antitrust review, to combine the manufacturing facilities, finalize the transaction and formally establish the Argentina joint venture, which is managed by a jointly appointed team of executives and is accounted for under the equity method.
We exchanged certain assets and liabilities with a fair value of $ i 71 million from our Argentina, Chile and Uruguay operations for i 49 percent of the outstanding shares of the Argentina joint venture valued at $ i 64 million, as well as $ i 7 million of other consideration, including cash, from Grupo Arcor as of August 2, 2021. The transaction also resulted in an impairment charge for the transferred assets and liabilities more fully described in Note 5.
Beginning on the dates Ingredion entered into the agreements for equity method investees, our share of income from them is included in Other operating (income). Ingredion incurred an insignificant amount of pre-tax acquisition and integration costs during the three and nine months ended September 30, 2022, related to our investments in the Amyris and Argentina joint ventures. Ingredion incurred $ i 3 million of pre-tax acquisition costs to acquire the Argentina joint venture investment during the three months ended September 30, 2021, and $ i 4 million of pre-tax gains, consisting of the $ i 8 million gain related to the Amyris joint venture, partially offset by $ i 4 million of acquisition costs to acquire the Argentina and Amyris joint ventures during the nine months ended September 30, 2021.
i6. Restructuring and Impairment Charges
For the three and nine months ended September 30, 2022, Ingredion recorded an insignificant amount and $ i 4 million of pre-tax restructuring-related charges, respectively. For the three and nine months ended September 30, 2021, Ingredion recorded $ i 12 million of net pre-tax restructuring and impairment income and $ i 362 million of pre-tax restructuring and impairment charges, respectively.
Restructuring Charges
For the three months ended September 30, 2022, we recorded an insignificant amount of pre-tax restructuring-related charges. For the nine months ended
September 30, 2022, we recorded $ i 4 million of pre-tax restructuring-related charges, which included $ i 3 million of costs associated with our Cost Smart selling, general and administrative expense (“SG&A”) program and $ i 1 million of costs as part of our Cost Smart Cost of sales program.
For the three months ended September 30, 2021, we recorded $ i 8 million of pre-tax restructuring-related charges. These costs included $ i 4 million of costs associated with our Cost Smart SG&A program and $ i 3 million of restructuring-related charges as a part of our Cost Smart Cost of sales program. We also recorded $ i 1 million of restructuring charges related to disposition of the assets contributed to the Argentina joint venture.
For the nine months ended September 30, 2021, we recorded $ i 22 million of pre-tax net restructuring-related charges, consisting of $ i 13 million of costs associated with our Cost Smart SG&A program and $ i 11 million of costs as part of our Cost Smart Cost of sales program. The Cost Smart Cost of sales program charges were partly offset by a $ i 5 million gain on the sale of the Stockton, California land and building. We also recorded $ i 3 million of restructuring charges related to disposition of the assets contributed to the Argentina joint venture.
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A summary of Ingredion’s severance accrual at September 30, 2022, which we expect to fully pay in 2022, is as follows (in millions):
| | | | |
Balance in severance accrual as of December 31, 2021 |
| $ | i 3 | |
Payments made to terminated employees | | | ( i 2) | |
Balance in severance accrual as of September 30, 2022 |
| $ | i 1 | |
Impairment Charges
At the announcement of our agreement to invest in the Argentina joint venture during the three months ended March 31, 2021, we reclassified assets and liabilities we expected to contribute to the joint venture as held for sale in Other assets in the Condensed Consolidated Balance Sheets and recorded an impairment charge of $ i 360 million based on our preliminary estimates of their fair value. Upon completion of the transaction, we disposed of the assets and liabilities from our Argentina, Chile and Uruguay operations, which were previously accounted for as held for sale, and transferred them to the Argentina joint venture in exchange for an equity share in the venture. We accounted for our share of the venture as an equity method investment as discussed in Note 5. Upon disposal, we valued the assets and liabilities transferred at fair value. This resulted in a $ i 20 million favorable adjustment to the estimated impairment charge during the three months ended September 30, 2021. The total net impairment charge was $ i 340 million for the nine months ended September 30, 2021, of which $ i 311 million was related to the write-off of the cumulative translation losses associated with the contributed net assets and $ i 29 million was related to the write-down of the contributed net assets to fair value. We recorded the impairment within Restructuring/impairment charges and related adjustments in the Condensed Consolidated Statements of Income during the nine months ended September 30, 2021.
i7. Derivative Instruments and Hedging Activities
Ingredion is exposed to market risk stemming from changes in commodity prices (primarily corn and natural gas), foreign currency exchange rates and interest rates. In the normal course of business, we actively manage our exposure to these market risks by entering various hedging transactions authorized under established policies that place controls on these activities. These transactions utilize exchange-traded derivatives or over-the-counter derivatives with investment grade counterparties. We have no collateral to counterparties under collateral funding arrangements as of September 30, 2022. Derivative financial instruments used by Ingredion consist primarily of commodity-related futures, options and swap contracts, foreign currency-related forward contracts, interest rate swaps and treasury locks (“T-Locks”).
Commodity price hedging: Ingredion’s principal use of derivative financial instruments is to manage commodity price risk relating to anticipated purchases of corn and natural gas to be used in the manufacturing process, generally over the next 12 to i 24 months. We maintain a commodity-price risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by commodity-price volatility. To manage price risk related to corn purchases, primarily in North America, we use corn futures and option contracts that trade on regulated commodity exchanges to lock in corn costs associated with fixed-priced customer sales contracts. Ingredion also uses over-the-counter natural gas swaps in North America to hedge a portion of its natural gas usage. These derivative financial instruments limit the impact that volatility resulting from fluctuations in market prices will have on corn and natural gas purchases. Ingredion’s natural gas derivatives and the majority of its corn derivatives have been designated as cash flow hedging instruments for accounting purposes.
For certain corn derivative instruments that are not designated as cash flow hedging instruments for accounting purposes, all realized and unrealized gains and losses from these instruments are recognized in cost of sales during each accounting period. We enter these derivative instruments to further mitigate commodity and basis price risks related to anticipated purchases of corn. During the three and nine months ended September 30, 2022, Ingredion recognized a $ i 3 million gain and $ i 2 million gain, respectively, on non-designated commodity contracts. During the three and nine months ended September 30, 2021, Ingredion recognized an insignificant gain and a $ i 1 million loss, respectively, on non-designated commodity contracts.
For commodity hedges designated as cash flow hedges for accounting purposes, unrealized gains and losses associated with marking the commodity hedging contracts to market (fair value) are recorded as a component of Other comprehensive loss (“OCL”) and included in the equity section of the Condensed Consolidated Balance Sheets as part of Accumulated other comprehensive loss (“AOCL”). These amounts, as well as their related tax effects, are subsequently
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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, or in the period a hedge is determined to be ineffective. Ingredion assesses the effectiveness of a commodity hedge contract based on changes in the contract’s fair value. The changes in the market value of such contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in the price of the hedged items. Gains and losses from cash flow hedging instruments reclassified from AOCL to earnings are reported as Cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.
Ingredion had outstanding futures and option contracts that hedged the forecasted purchase of approximately i 76 million and i 135 million bushels of corn as of September 30, 2022 and December 31. 2021, respectively. Ingredion also had outstanding swap contracts that hedged the forecasted purchase of approximately i 30 million and i 35 million mmbtus of natural gas as of September 30, 2022 and December 31, 2021, respectively.
Foreign currency hedging: Due to our global operations, including operations in many emerging markets, Ingredion is exposed to fluctuations in foreign currency exchange rates. As a result, Ingredion has exposure to translational foreign-exchange risk when the results of its foreign operations are translated to U.S. dollars and to transactional foreign-exchange risk when transactions not denominated in the functional currency are revalued. Ingredion’s foreign-exchange risk management strategy uses derivative financial instruments such as foreign currency forward contracts, swaps and options to manage its transactional foreign exchange risk. Ingredion enters into foreign currency derivative instruments that are designated as cash flow hedging instruments as well as instruments not designated as hedging instruments for accounting purposes in order to mitigate transactional foreign-exchange risk. Gains and losses from derivative financial instruments not designated as hedging instruments for accounting purposes are marked to market in earnings during each accounting period.
Ingredion hedges certain assets using foreign currency derivatives not designated as hedging instruments for accounting purposes, which had a notional value of $ i 441 million and $ i 360 million as of September 30, 2022 and December 31, 2021, respectively. Ingredion also hedges certain liabilities using foreign currency derivatives not designated as hedging instruments for accounting purposes, which had a notional value of $ i 282 million and $ i 205 million as of September 30, 2022 and December 31 2021, respectively.
Ingredion hedges certain assets using foreign currency derivative instruments that are designated as cash flow hedging instruments for accounting purposes, which had a notional value of $ i 782 million and $ i 505 million as of September 30, 2022 and December 31, 2021, respectively. Ingredion also hedges certain liability positions using foreign currency derivative instruments that are designated as cash flow hedging instruments for accounting purposes, which had a notional value of $ i 914 million and $ i 708 million as of September 30, 2022 and December 31, 2021, respectively.
Interest rate hedging: Ingredion assesses its exposure to variability in interest rates by identifying and monitoring changes in interest rates that may adversely impact future cash flows and the fair value of existing debt instruments and by evaluating hedging opportunities. Ingredion’s risk management strategy is to monitor interest rate risk attributable to both Ingredion’s outstanding and forecasted debt obligations as well as Ingredion’s offsetting hedge positions. Derivative financial instruments that have been used by Ingredion to manage its interest rate risk consist of interest rate swaps and T-Locks.
Ingredion periodically enters into interest rate swaps to hedge its exposure to interest rate changes under its senior notes. The changes in fair value of interest rate swaps designated as hedging instruments that effectively offset the variability in the fair value of outstanding debt obligations are reported in earnings. These amounts offset the gains or losses (the changes in fair value) of the hedged debt instruments that are attributable to changes in interest rates (the hedged risk), which are also recognized in earnings. Ingredion did not have any outstanding interest rate swaps as of September 30, 2022 or December 31, 2021.
Ingredion periodically enters into T-Locks to hedge its exposure to interest rate changes. The T-Locks are designated as hedges of the variability in cash flows associated with future interest payments caused by market fluctuations in the benchmark interest rate until the fixed interest rate is established and are accounted for as cash flow hedges. Accordingly, changes in the fair value of the T-Locks are recorded to AOCL until the consummation of the underlying debt offering, at which time any realized gain (loss) is amortized to earnings over the life of the debt. During 2020, Ingredion entered into and settled T-Locks associated with the issuance of senior notes due in 2030 and 2050. The
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realized loss upon settlement of the T-Locks was recorded in AOCL and is amortized into earnings over the term of the senior notes. Ingredion did not have outstanding T-Locks as of September 30, 2022 and December 31, 2021.
The derivative instruments designated as cash flow hedges included in AOCL as of September 30, 2022 and December 31, 2021 are reflected below:
i
| | | | | | | |
| | Amount of Gains | | ||||
Derivatives in Cash Flow Hedging Relationships | | (Losses) included in AOCL | | ||||
(in millions) | | | | ||||
Commodity contracts, net of income tax effect of $ i 29 and $ i 19, respectively | | $ | i 84 | | $ | i 51 | |
Foreign currency contracts, net of income tax effect of $ i 4 and $ -, respectively | | | i 6 | | | — | |
Interest rate contracts, net of income tax effect of $ i i 1 / | | | ( i 3) | | | ( i 3) | |
Total | | $ | i 87 | | $ | i 48 | |
The fair value and balance sheet location of the Ingredion’s derivative instruments, presented gross in the Condensed Consolidated Balance Sheets, are reflected below:
i
| | | | | | | | | | | | | | | | | | | |
| | Fair Value of Hedging Instruments as of September 30, 2022 (in millions) | | ||||||||||||||||
| | Designated Hedging Instruments | | Non-Designated Hedging Instruments | | ||||||||||||||
Balance Sheet Location | | | Commodity Contracts | | | Foreign Currency Contracts | | Total | | | Commodity Contracts | | | Foreign Currency Contracts | | Total | | ||
Accounts receivable, net | | $ | i 82 | | $ | i 27 | | $ | i 109 | | $ | i 3 | | $ | i 30 | | $ | i 33 | |
Other assets | | | i 7 | | | i 19 | | | i 26 | | | — | | | — | | | — | |
Assets | | | i 89 | | | i 46 | | | i 135 | | | i 3 | | | i 30 | | | i 33 | |
Accounts payable and accrued liabilities | | | i 13 | | | i 20 | | | i 33 | | | i 1 | | | i 10 | | | i 11 | |
Non-current liabilities | | | i 1 | | | i 18 | | | i 19 | | | — | | | — | | | — | |
Liabilities | | | i 14 | | | i 38 | | | i 52 | | | i 1 | | | i 10 | | | i 11 | |
Net Assets/(Liabilities) | | $ | i 75 | | $ | i 8 | | $ | i 83 | | $ | i 2 | | $ | i 20 | | $ | i 22 | |
| | | | | | | | | | | | | | | | | | | |
| | Fair Value of Hedging Instruments as of December 31, 2021 (in millions) | | ||||||||||||||||
| | Designated Hedging Instruments | | Non-Designated Hedging Instruments | | ||||||||||||||
Balance Sheet Location | | | Commodity Contracts | | | Foreign Currency Contracts | | Total | | | Commodity Contracts | | | Foreign Currency Contracts | | Total | | ||
Accounts receivable, net | | $ | i 45 | | $ | i 9 | | $ | i 54 | | $ | i 4 | | $ | i 3 | | $ | i 7 | |
Other assets | | | i 7 | | | i 6 | | | i 13 | | | — | | | — | | | — | |
Assets | | | i 52 | | | i 15 | | | i 67 | | | i 4 | | | i 3 | | | i 7 | |
Accounts payable and accrued liabilities | | | i 5 | | | i 12 | | | i 17 | | | i 2 | | | i 4 | | | i 6 | |
Non-current liabilities | | | i 2 | | | i 6 | | | i 8 | | | — | | | i 1 | | | i 1 | |
Liabilities | | | i 7 | | | i 18 | | | i 25 | | | i 2 | | | i 5 | | | i 7 | |
Net Assets/(Liabilities) | | $ | i 45 | | $ | ( i 3) | | $ | i 42 | | $ | i 2 | | $ | ( i 2) | | $ | — | |
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Additional information relating to the Ingredion’s derivative instruments is presented below:
i
| | | | | | | | | | | | | | | |
Derivatives in Cash Flow | | Gains (Losses) Recognized | | | | Gains (Losses) Reclassified | | ||||||||
Hedging Relationships | | Three Months Ended September 30, | | Income Statement | | Three Months Ended September 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| Location |
| 2022 |
| 2021 | | ||||
Commodity contracts | | $ | i 72 | | $ | i 36 | | Cost of sales | | $ | i 72 | | $ | i 62 | |
Foreign currency contracts | | | i 3 | | | ( i 1) | | Net sales/Cost of sales | | | i 1 | | | ( i 2) | |
Interest rate contracts | | | — | | | — | | Financing costs, net | | | — | | | — | |
Total | | $ | i 75 | | $ | i 35 | | | | $ | i 73 | | $ | i 60 | |
| | | | | | | | | | | | | | | |
Derivatives in Cash-Flow | | Gains
(Losses) Recognized | | | | Gains (Losses) Reclassified | | ||||||||
Hedging Relationships | | Nine Months Ended September 30, | | Income Statement | | Nine Months Ended September 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| Location |
| 2022 |
| 2021 | | ||||
Commodity contracts | | $ | i 240 | | $ | i 212 | | Cost of sales | | $ | i 197 | | $ | i 171 | |
Foreign currency contracts | | | i 14 | | | ( i 1) | | Net sales/Cost of sales | | | i 4 | | | ( i 1) | |
Interest rate contracts | | | — | | | — | | Financing costs, net | | | — | | | — | |
Total | | $ | i 254 | | $ | i 211 | | | | $ | i 201 | | $ | i 170 | |
As of September 30, 2022, AOCL included $ i 86 million of net gains (net of income taxes of $ i 32 million) on commodities-related derivatives instruments, foreign currency hedges, and T-Locks designated as cash flow hedges that are expected to be reclassified into earnings during the next 12 months.
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8. Fair Value Measurements
We measure certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, we use various valuation approaches. The hierarchy of those valuation approaches is in three levels based on the reliability of inputs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Below is a summary of the hierarchy levels:
| ● | Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly for substantially the full term of the financial instrument. Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability or can be derived principally from or corroborated by observable market data. |
| ● | Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. |
Assets and liabilities measured at fair value on a recurring basis are presented below:
i
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 | | As of December 31, 2021 | | ||||||||||||||||||||
(in millions) |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| ||||||||
Available for sale securities | | $ | i 4 | | $ | i 4 | | $ | — | | $ | — | | $ | i 12 | | $ | i 12 | | $ | — | | $ | — | |
Derivative assets | | | i 168 | | | i 110 | | | i 58 | | | — | | | i 74 | | | i 49 | | | i 25 | | | — | |
Derivative liabilities | | | i 63 | | | i 58 | | | i 5 | | | — | | | i 32 | | | i 22 | | | i 10 | | | — | |
Long-term debt | | | i 1,523 | | | — | | | i 1,523 | | | — | | | i 1,957 | | | — | | | i 1,957 | | | — | |
The carrying values of cash equivalents, short-term investments, accounts receivable, accounts payable and short-term borrowings approximate fair values. Commodity futures, options and swaps contracts are recognized at fair value. Foreign currency forward contracts, swaps and options are also recognized at fair value. The fair value of Ingredion’s Long-term debt is estimated based on quotations of major securities dealers who are market makers in the securities.
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9. Financing Arrangements
Presented below are Ingredion’s debt carrying amounts, net of related discounts, premiums, and debt issuance costs as of September 30, 2022 and December 31, 2021:
i
| | | | | | | |
| | As of | | As of | | ||
(in millions) | | | | ||||
i i 2.900 / % senior notes due June 1, 2030 | | $ | i 595 | | $ | i 595 | |
i i 3.200 / % senior notes due October 1, 2026 | | | i 498 | | | i 498 | |
i i 3.900 / % senior notes due June 1, 2050 | | | i 390 | | | i 390 | |
i i 6.625 / % senior notes due April 15, 2037 | | | i 253 | | | i 253 | |
Revolving credit agreement | | | — | | | — | |
Other long-term borrowings | | | i 3 | | | i 2 | |
Total long-term debt | | | i 1,739 | | | i 1,738 | |
Commercial paper | | | i 622 | | | i 250 | |
Other short-term borrowings | | | i 87 | | | i 58 | |
Total short-term borrowings | | | i 709 | | | i 308 | |
Total debt | | $ | i 2,448 | | $ | i 2,046 | |
On July 27, 2021, Ingredion established a commercial paper program under which Ingredion may issue senior unsecured notes of short maturities up to a maximum aggregate principal amount of $ i 1 billion outstanding at any time. The notes may be sold from time to time on customary terms in the U.S. commercial paper market. Ingredion intends to use the note proceeds for general corporate purposes. During the nine months ended September 30, 2022, the average amount of commercial paper outstanding was $ i 489 million with an average interest rate of i 1.50 percent and a weighted average maturity of i 18 days. From the inception of the program until September 30, 2021, the average amount of commercial paper outstanding was $ i 401 million with an average interest rate of i 0.23 percent and a weighted average maturity of i 37 days. As of September 30, 2022, $ i 622 million of commercial paper was outstanding with an average interest rate of i 3.50 percent and a weighted average maturity of i 16 days. As of December 31, 2021, $ i 250 million of commercial paper was outstanding with an average interest rate of i 0.35 percent and a weighted average maturity of i 40 days. The amount of commercial paper outstanding under this program in 2022 is expected to fluctuate.
Other short-term borrowings as of September 30, 2022 and December 31, 2021, primarily include amounts outstanding under various unsecured local country operating lines of credit.
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i10. Commitments and Contingencies
In May 2021, the Brazilian Supreme Court (“Court”) issued its ruling related to the calculation of certain indirect taxes, which affirmed the Federal Court of Appeals rulings that Ingredion had received in previous years and affirmed that Ingredion is entitled to previously recorded tax credits. The Court ruling affirmed that Ingredion is entitled to $ i 15 million of additional credits from the period of 2015 to 2018 that were previously unrecorded pending a final Court ruling. As a result, during the nine months ended September 30, 2021, Ingredion recorded the $ i 15 million of additional credits within Other operating expense (income) in the Condensed Consolidated Statements of Income. As of September 30, 2022 and December 31, 2021, Ingredion had $ i 20 million and $ i 41 million, respectively, of remaining indirect tax credits recorded in Other assets and Prepaid expenses on the Condensed Consolidated Balance Sheets. These credits resulted in an insignificant amount and $ i i 5 / million of deferred income taxes as of September 30, 2022 and December 31, 2021, respectively. We will use the income tax offsets to eliminate our Brazilian federal tax payments in 2022 and future years, including the income tax payable for the indirect taxes recovered.
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i11. Income Taxes
During the three months ended March 31, 2022, the U.S. Treasury published final foreign tax credit regulations that limit our ability to claim foreign tax credits from certain countries, primarily in South America. As a result, we recorded a provisional tax liability during the three months ended March 31, 2022, and will continue to assess the impact of the regulations on our Condensed Consolidated Financial Statements in future periods.
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12. Pension and Other Postretirement Benefits
The following table sets forth the components of net periodic benefit cost of the U.S. and non-U.S. defined benefit pension plans for the periods presented:
i
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||||||||||||||
| | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | ||||||||||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||||||
Service cost | | $ | i 1 | | $ | i 1 | | $ | i 1 | | $ | i 1 | | $ | i 3 | | $ | i 3 | | $ | i 3 | | $ | i 3 | |
Interest cost | | | i 2 | | | i 2 | | | i 2 | | | i 2 | | | i 6 | | | i 6 | | | i 7 | | | i 7 | |
Expected return on plan assets | | | ( i 5) | | | ( i 4) | | | ( i 2) | | | ( i 2) | | | ( i 13) | | | ( i 13) | | | ( i 6) | | | ( i 6) | |
Amortization of actuarial loss | | | — | | | ( i 1) | | | — | | | i 1 | | | — | | | ( i 1) | | | — | | | i 2 | |
Net periodic (benefit) cost (a) | | $ | ( i 2) | | $ | ( i 2) | | $ | i 1 | | $ | i 2 | | $ | ( i 4) | | $ | ( i 5) | | $ | i 4 | | $ | i 6 | |
We currently anticipate that we will make approximately $ i 4 million in cash contributions to our pension plans in 2022, consisting of contributions of $ i 3 million to our non-U.S. pension plans and $ i 1 million to our U.S. pension plans. For the nine months ended September 30, 2022, we made cash contributions of approximately $ i 2 million to the non-U.S. plans and an insignificant amount to the U.S. plans.
The following table sets forth the components of net postretirement benefit cost for the periods presented:
i
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
Service cost | | $ | — | | $ | — | | $ | — | | $ | — | |
Interest cost | | | i 1 | | | i 1 | | | i 2 | | | i 2 | |
Amortization of prior service cost (credit) | | | — | | | — | | | i 1 | | | ( i 1) | |
Net periodic cost (a) | | $ | i 1 | | $ | i 1 | | $ | i 3 | | $ | i 1 | |
| (a) | The service cost component of net periodic benefit cost is presented within either Cost of sales or Operating expenses on the Condensed Consolidated Statements of Income. The interest cost, expected return on plan assets, amortization of prior service credit, and amortization of actuarial loss components of net periodic benefit cost are presented as Other, non-operating (income) on the Condensed Consolidated Statements of Income. |
i13. Equity
Treasury stock: On September 26, 2022, the Board of Directors terminated the stock repurchase program it had previously authorized on October 22, 2018, that permitted Ingredion to purchase up to i 8 million of its outstanding shares of common stock from November 5, 2018, through December 31, 2023. As of the date of termination, the 2018 repurchase program had approximately i 3.8 million shares of common stock remaining for repurchase.
On September 26, 2022, the Board of Directors contemporaneously approved a new stock repurchase program to authorize Ingredion to purchase up to i 6 million shares of its outstanding common stock from September 26, 2022, through December 31, 2025. Ingredion may repurchase shares from time to time in the open market, in privately negotiated transactions, or otherwise, at prices Ingredion deems appropriate. Ingredion is not obligated to repurchase any shares under the authorization, and the new repurchase program may be suspended, discontinued, or modified at any time, for any reason and without notice. The parameters of Ingredion’s stock repurchase programs are not established solely with reference to the dilutive impact of shares issued under Ingredion’s stock incentive plan. However, Ingredion expects that, over time, share repurchases will offset the dilutive impact of shares issued under the stock incentive plan.
During the three and nine months ended September 30, 2022, we repurchased i 325 thousand and i 1,283 thousand outstanding shares of common stock in open market transactions at a net cost of $ i 29 million and $ i 112 million, respectively. During the three and nine months ended September 30, 2021, we repurchased i 500 thousand and i 765 thousand outstanding shares of common stock in open market transactions at a net cost of $ i 44 million and $ i 68 million, respectively.
/16
Share-based payments: The following table summarizes the components of Ingredion’s share-based compensation expense for the periods presented:
i
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
Stock options: | | | | | | | | | | | | | |
Pre-tax compensation expense |
| $ | i 1 |
| $ | i 1 |
| $ | i 3 | | $ | i 3 | |
Income tax benefit | |
| — | |
| — | |
| — | |
| — | |
Stock option expense, net of income taxes | |
| i 1 | |
| i 1 | |
| i 3 | |
| i 3 | |
| | | | | | | | | | | | | |
Restricted stock units ("RSUs"): | | | | | | | | | | | | | |
Pre-tax compensation expense | |
| i 4 | |
| i 2 | |
| i 10 | |
| i 8 | |
Income tax benefit | |
| — | |
| — | |
| ( i 1) | |
| ( i 1) | |
RSUs, net of income taxes | |
| i 4 | |
| i 2 | |
| i 9 | |
| i 7 | |
| | | | | | | | | | | | | |
Performance shares and other share-based awards: | | | | | | | | | | | | | |
Pre-tax compensation expense | |
| i 2 | |
| i 1 | |
| i 9 | |
| i 4 | |
Income tax benefit | |
| — | |
| — | |
| ( i 1) | |
| — | |
Performance shares and other share-based compensation expense, net of income taxes | |
| i 2 | |
| i 1 | |
| i 8 | |
| i 4 | |
| | | | | | | | | | | | | |
Total share-based compensation: | | | | | | | | | | | | | |
Pre-tax compensation expense | |
| i 7 | |
| i 4 | |
| i 22 | |
| i 15 | |
Income tax benefit | |
| — | |
| — | |
| ( i 2) | |
| ( i 1) | |
Total share-based compensation expense, net of income taxes |
| $ | i 7 |
| $ | i 4 |
| $ | i 20 | | $ | i 14 | |
Stock Options: Under Ingredion’s stock incentive plan, stock options are granted at exercise prices that equal the market value of the underlying common stock on the date of grant. The options have a i 10-year term and are exercisable upon vesting, which occurs over a i three-year period at the anniversary dates of the date of grant. Compensation expense is generally recognized on a straight-line basis for all awards over the employee’s vesting period or over a i one-year required service period for certain retirement-eligible executive level employees. Ingredion estimates a forfeiture rate at the time of grant and updates the estimate throughout the vesting period of the stock options within the amount of compensation costs recognized in each period.
Ingredion granted non-qualified options to purchase i 281 thousand shares and i 358 thousand shares for the first nine months ended September 30, 2022 and 2021, respectively. The fair value of each option grant for the periods presented was estimated using the Black-Scholes option-pricing model with the following assumptions:
i
| | | | | | | |
| | Nine Months Ended September 30, | | ||||
|
| 2022 | | 2021 | | ||
Expected life (in years) | | i 5.5 | | | i 5.5 | | |
Risk-free interest rate | | i 2.0 | % | | i 0.6 | % |
|
Expected volatility | | i 23.8 | % | | i 23.2 | % | |
Expected dividend yield | | i 2.9 | % | | i 2.9 | % | |
The expected life of options represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and Ingredion’s historical exercise patterns. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the grant date for the period corresponding to the expected life of the options. Expected volatility is based on historical volatilities of Ingredion’s common stock. Dividend yields are based on Ingredion’s dividend yield at the date of issuance.
17
Stock option activity for the nine months ended September 30, 2022 was as follows:
i
| | | | | | | | | | | |
|
| Number of Options (in thousands) |
| Weighted Average Exercise Price per Share |
| Average Remaining Contractual Term (Years) |
| Aggregate Intrinsic Value (in millions) |
| ||
Outstanding as of December 31, 2021 |
| i 2,154 |
| $ | i 90.39 | | i 5.26 | | $ | i 26 | |
Granted |
| i 281 | | | i 88.66 | | | | | | |
Exercised |
| ( i 70) | | | i 61.56 | | | | | | |
Cancelled |
| ( i 31) | | | i 103.55 | | | | | | |
Outstanding as of September 30, 2022 |
| i 2,334 | | $ | i 90.87 |
| i 5.22 |
| $ | i 7 | |
Exercisable as of September 30, 2022 |
| i 1,763 | | $ | i 91.78 |
| i 4.10 |
| $ | i 7 | |
/For the nine months ended September 30, 2022, cash received from the exercise of stock options was approximately $ i 4 million. As of September 30, 2022, the unrecognized compensation cost related to non-vested stock options totaled $ i 4 million, which is expected to be amortized over the weighted-average period of approximately i 1.7 years.
Additional information pertaining to stock option activity is as follows for the periods presented:
i
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
(dollars in millions, except per share) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
Weighted average grant date fair value of stock options granted (per share) | | $ | — | | $ | — | | $ | i 15.04 | | $ | i 12.31 | |
Total intrinsic value of stock options exercised | | $ | i 1 | | $ | — | | $ | i 2 | | $ | i 6 | |
Restricted Stock Units: Ingredion has granted restricted stock units (“RSUs”) to certain key employees. The RSUs are primarily subject to cliff vesting, generally after i three years, provided the employee remains in the service of Ingredion. The fair value of the RSUs is determined based upon the number of shares granted and the quoted market price of Ingredion’s common stock at the date of the grant.
The following table summarizes RSU activity in 2022:
i
| | | | | | |
(RSUs in thousands) |
| Number of Restricted Shares |
| Weighted Average Fair Value per Share | | |
Non-vested as of December 31, 2021 | | i 486 | | $ | i 88.34 | |
Granted | | i 207 | | | i 88.82 | |
Vested | | ( i 128) | | | i 91.20 | |
Cancelled | | ( i 45) | | | i 87.04 | |
Non-vested as of September 30, 2022 | | i 520 | | $ | i 87.95 | |
As of September 30, 2022, the total remaining unrecognized compensation cost related to RSUs was $ i 21 million, which will be amortized on a weighted-average basis over approximately i 1.5 years.
Performance Shares: Ingredion has a long-term incentive plan for senior management in the form of performance shares. The vesting of the performance shares is generally based on i i two / performance metrics. i i Fifty / percent of the performance shares awarded vest based on Ingredion’s total shareholder return as compared to the total shareholder return of its peer group and the remaining i i fifty / percent vest based on the calculation of Ingredion’s i i three-year / average Adjusted Return on Invested Capital (“Adjusted ROIC”) against an established ROIC target.
For the 2022 performance shares awarded based on Ingredion’s total shareholder return, the number of shares that ultimately vest can range from i zero to i 200 percent of the grant depending on Ingredion’s total shareholder return as compared to the total shareholder return of its peer group. The share award vesting will be calculated at the end of the i three-year period and is subject to approval by management and the People, Culture and Compensation Committee of the Board of Directors. Compensation expense is based on the fair value of the performance shares at the grant date, established using a Monte Carlo simulation model. The total compensation expense for these awards is amortized over a i three-year graded vesting schedule.
18
For the 2022 performance shares awarded based on Adjusted ROIC, the number of shares that ultimately vest can range from i zero to i 200 percent of the grant depending on Ingredion’s Adjusted ROIC performance against the target. The share award vesting will be calculated at the end of the i three-year period and is subject to approval by management and the People, Culture and Compensation Committee. Compensation expense is based on the market price of our common stock on the date of the grant and the final number of shares that ultimately vest. Ingredion will estimate the potential share vesting at least annually to adjust the compensation expense for these awards over the vesting period to reflect Ingredion’s estimated Adjusted ROIC performance against the target. The total compensation expense for these awards is amortized over a i three-year graded vesting schedule.
For the nine months ended September 30, 2022, Ingredion awarded i 86 thousand performance shares at a weighted average fair value of $ i 138.85 per share. As of September 30, 2022, the unrecognized compensation cost related to these awards was $ i 11 million, which will be amortized over the remaining requisite service period of i 1.9 years. The 2019 performance share awards, whose i three-year performance period has ended, achieved a i zero percent payout of granted performance shares. There were approximately i two thousand performance shares cancelled during 2022.
Accumulated Other Comprehensive Loss: The following is a summary of Accumulated other comprehensive loss for the nine months ended September 30, 2022 and 2021:
i
| | | | | | | | | | | | | |
(in millions) |
| Cumulative Translation Adjustment |
| Hedging Activities |
| Pension and Postretirement Adjustment |
| AOCL |
| ||||
Balance, December 31, 2021 | | $ | ( i 903) | | $ | i 48 | | $ | ( i 42) | | $ | ( i 897) | |
Other comprehensive (loss) gain before reclassification adjustments | | | ( i 195) | | | i 254 | | | — | | | i 59 | |
(Gain) reclassified from accumulated OCL | | | — | | | ( i 201) | | | i 1 | | | ( i 200) | |
Tax (provision) | | | — | | | ( i 14) | | | — | | | ( i 14) | |
Net other comprehensive (loss) income | | | ( i 195) | | | i 39 | | | i 1 | | | ( i 155) | |
Balance, September 30, 2022 | | $ | ( i 1,098) | | $ | i 87 | | $ | ( i 41) | | $ | ( i 1,052) | |
| | | | | | | | | | | | | |
(in millions) |
| Cumulative Translation Adjustment |
| Hedging Activities |
| Pension and Postretirement Adjustment |
| AOCL |
| ||||
Balance, December 31, 2020 | | $ | ( i 1,114) | | $ | i 42 | | $ | ( i 61) | | $ | ( i 1,133) | |
Other comprehensive (loss) gain before reclassification adjustments | | | ( i 85) | | | i 211 | | | — | | | i 126 | |
(Gain) reclassified from accumulated OCL | | | i 311 | | | ( i 170) | | | — | | | i 141 | |
Tax (provision) | | | — | | | ( i 11) | | | — | | | ( i 11) | |
Net other comprehensive (loss) income | | | i 226 | | | i 30 | | | — | | | i 256 | |
Balance, September 30, 2021 | | $ | ( i 888) | | $ | i 72 | | $ | ( i 61) | | $ | ( i 877) | |
19
Supplemental Information: The following Condensed Consolidated Statements of Equity and Redeemable Equity present the dividends per share for common stock for the periods indicated:
i
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Equity | | | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | Non- | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | | | | | Redeemable | Share-based | | Redeemable | | |||||
| | | | | | | | Additional | | | | | Other | | | | | Non- | | Payments | | Non- | | |||||
| | Preferred | | Common | | Paid-In | | Treasury | | Comprehensive | | Retained | | Controlling | | Subject to | | Controlling | | |||||||||
(in millions) |
| Stock |
| Stock |
| Capital |
| Stock |
| Loss |
| Earnings |
| Interests |
| Redemption |
| Interests |
| |||||||||
Balance, December 31, 2021 | | $ | — | | $ | i 1 | | $ | i 1,158 | | $ | ( i 1,061) | | $ | ( i 897) | | $ | i 3,899 | | $ | i 18 | | $ | i 36 | | $ | i 71 | |
Net income attributable to Ingredion | | | | | | | | | | | | | | | | | | i 130 | | | | | | | | | | |
Net income attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 3 | | | | | | | |
Dividends declared, common stock ($ i 0.65/share) | | | | | | | | | | | | | | | | | | ( i 43) | | | | | | | | | | |
Repurchases of common stock | | | | | | | | | | | | ( i 39) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | i 2 | | | i 9 | | | | | | | | | | | | ( i 5) | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | i 134 | | | | | | ( i 2) | | | | | | | |
Balance, March 31, 2022 | | $ | — | | $ | i 1 | | $ | i 1,160 | | $ | ( i 1,091) | | $ | ( i 763) | | $ | i 3,986 | | $ | i 19 | | $ | i 31 | | $ | i 71 | |
Net income attributable to Ingredion | | | | | | | | | | | | | | | | | | i 142 | | | | | | | | | | |
Net income attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 2 | | | | | | i 1 | |
Dividends declared, common stock ($ i 0.65/share) | | | | | | | | | | | | | | | | | | ( i 43) | | | | | | | | | | |
Dividends declared, non-controlling interests | | | | | | | | | | | | | | | | | | | | | ( i 4) | | | | | | | |
Repurchases of common stock | | | | | | | | | | | | ( i 44) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | i 2 | | | i 2 | | | | | | | | | | | | i 6 | | | | |
Fair market value adjustment to non-controlling interests | | | | | | | | | ( i 29) | | | | | | | | | | | | | | | | | | i 29 | |
Non-controlling interest purchases | | | | | | | | | | | | | | | | | | | | | | | | | | | ( i 27) | |
Other comprehensive (loss) | | | | | | | | | | | | | | | ( i 177) | | | | | | ( i 2) | | | | | | ( i 4) | |
Balance, June 30, 2022 | | $ | — | | $ | i 1 | | $ | i 1,133 | | $ | ( i 1,133) | | $ | ( i 940) | | $ | i 4,085 | | $ | i 15 | | $ | i 37 | | $ | i 70 | |
Net income attributable to Ingredion | | | | | | | | | | | | | | | | | | i 106 | | | | | | | | | | |
Net income attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 2 | | | | | | i 1 | |
Dividends declared, common stock ($ i 0.71/share) | | | | | | | | | | | | | | | | | | ( i 48) | | | | | | | | | | |
Repurchases of common stock | | | | | | | | | | | | ( i 29) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | | | | i 3 | | | | | | | | | | | | i 6 | | | | |
Non-controlling interest purchases | | | | | | | | | | | | | | | | | | | | | | | | | | | ( i 13) | |
Other comprehensive (loss) | | | | | | | | | | | | | | | ( i 112) | | | | | | ( i 3) | | | | | | ( i 2) | |
Balance, September 30, 2022 | | $ | — | | $ | i 1 | | $ | i 1,133 | | $ | ( i 1,159) | | $ | ( i 1,052) | | $ | i 4,143 | | $ | i 14 | | $ | i 43 | | $ | i 56 | |
/20
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Equity | | | | | | |
| |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | Non- | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | | | | | Redeemable | Share-based | | Redeemable |
| |||||
| | | | | | | | Additional | | | | | Other | | | | | Non- | | Payments | | Non- | | |||||
| | Preferred | | Common | | Paid-In | | Treasury | | Comprehensive | | Retained | | Controlling | | Subject to | | Controlling |
| |||||||||
(in millions) |
| Stock |
| Stock |
| Capital |
| Stock |
| Loss |
| Earnings |
| Interests |
| Redemption |
| Interests |
| |||||||||
Balance, December 31, 2020 | | $ | — | | $ | i 1 | | $ | i 1,150 | | $ | ( i 1,024) | | $ | ( i 1,133) | | $ | i 3,957 | | $ | i 21 | | $ | i 30 | | $ | i 70 | |
Net (loss) attributable to Ingredion | | | | | | | | | | | | | | | | | | ( i 246) | | | | | | | | | | |
Net income (loss) attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 4 | | | | | | ( i 1) | |
Dividends declared, common stock ($ i 0.64/share) | | | | | | | | | | | | | | | | | | ( i 44) | | | | | | | | | | |
Repurchases of common stock | | | | | | | | | | | | ( i 14) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | i 5 | | | i 16 | | | | | | | | | | | | ( i 9) | | | | |
Other comprehensive (loss) income | | | | | | | | | | | | | | | ( i 31) | | | | | | i 1 | | | | | | i 1 | |
Balance, March 31, 2021 | | $ | — | | $ | i 1 | | $ | i 1,155 | | $ | ( i 1,022) | | $ | ( i 1,164) | | $ | i 3,667 | | $ | i 26 | | $ | i 21 | | $ | i 70 | |
Net income attributable to Ingredion | | | | | | | | | | | | | | | | | | i 178 | | | | | | | | | | |
Net income attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 3 | | | | | | | |
Dividends declared, common stock ($ i 0.64/share) | | | | | | | | | | | | | | | | | | ( i 43) | | | | | | | | | | |
Dividends declared, non-controlling interests | | | | | | | | | | | | | | | | | | | | | ( i 7) | | | | | | | |
Repurchases of common stock | | | | | | | | | | | | ( i 10) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | ( i 1) | | | i 3 | | | | | | | | | | | | i 7 | | | | |
Other comprehensive income | | | | | | | | | | | | | | | i 58 | | | | | | | | | | | | | |
Balance, June 30, 2021 | | $ | — | | $ | i 1 | | $ | i 1,154 | | $ | ( i 1,029) | | $ | ( i 1,106) | | $ | i 3,802 | | $ | i 22 | | $ | i 28 | | $ | i 70 | |
Net income attributable to Ingredion | | | | | | | | | | | | | | | | | | i 118 | | | | | | | | | | |
Net income (loss) attributable to non-controlling interests | | | | | | | | | | | | | | | | | | | | | i 3 | | | | | | ( i 2) | |
Dividends declared, common stock ($ i 0.65/share) | | | | | | | | | | | | | | | | | | ( i 43) | | | | | | | | | | |
Dividends declared, non-controlling interests | | | | | | | | | | | | | | | | | | | | | ( i 3) | | | | | | | |
Repurchases of common stock | | | | | | | | | | | | ( i 44) | | | | | | | | | | | | | | | | |
Share-based compensation, net of issuance | | | | | | | | | i 1 | | | i 1 | | | | | | | | | | | | i 4 | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | i 229 | | | | | | ( i 3) | | | | | | | |
Balance, September 30, 2021 | | $ | — | | $ | i 1 | | $ | i 1,155 | | $ | ( i 1,072) | | $ | ( i 877) | | $ | i 3,877 | | $ | i 19 | | $ | i 32 | | $ | i 68 | |
Supplemental Information: The following table provides the computation of basic and diluted earnings per common share ("EPS") for the periods presented:
i
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2022 |
| Three Months Ended September 30, 2021 |
| ||||||||||||
(in millions, except per share amounts) |
| Net Income Available to Ingredion |
| Weighted Average Shares |
| Per Share Amount |
| Net Income Available to Ingredion |
| Weighted Average Shares |
| Per Share Amount |
| ||||
Basic EPS | | $ | i 106 |
| i 65.8 | | $ | i 1.61 | | $ | i 118 |
| i 67.0 | | $ | i 1.76 | |
| | | | | | | | | | | | | | | | | |
Effect of Dilutive Securities: | | | | | | | | | | | | | | | | | |
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards | | | |
| i 0.8 | | | | | | |
| i 0.6 | | | | |
Diluted EPS | | $ | i 106 |
| i 66.6 | | $ | i 1.59 | | $ | i 118 |
| i 67.6 | | $ | i 1.75 | |
/21
| | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2022 |
| Nine Months Ended September 30, 2021 |
| ||||||||||||
(in millions, except per share amounts) |
| Net Income Available to Ingredion |
| Weighted Average Shares |
| Per Share Amount |
| Net Income Available to Ingredion |
| Weighted Average Shares |
| Per Share Amount |
| ||||
Basic EPS | | $ | i 378 |
| i 66.4 | | $ | i 5.69 | | $ | i 50 |
| i 67.2 | | $ | i 0.74 | |
| | | | | | | | | | | | | | | | | |
Effect of Dilutive Securities: | | | | | | | | | | | | | | | | | |
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards | | | |
| i 0.7 | | | | | | |
| i 0.6 | | | | |
Diluted EPS | | $ | i 378 |
| i 67.1 | | $ | i 5.63 | | $ | i 50 |
| i 67.8 | | $ | i 0.74 | |
Approximately i 1.6 million and i 1.4 million share-based awards of common stock were excluded from the calculation of diluted EPS as the impact of their inclusion would have been anti-dilutive for the three and nine months ended September 30, 2022, respectively. For the three and nine months ended September 30, 2021, approximately i 1.6 million and i 1.5 million share-based awards of common stock, respectively, were excluded from the calculation of diluted EPS as the impact of their inclusion would have been anti-dilutive.
i14. Segment Information
Ingredion is principally engaged in the production and sale of starches and sweeteners for a wide range of industries and is managed geographically on a regional basis. The nature, amount, timing and uncertainty of Ingredion’s Net sales are managed by Ingredion primarily based on our geographic segments, which we classify and report as North America, South America, Asia-Pacific and EMEA. Our North America segment includes businesses in the U.S., Mexico and Canada. Our South America segment includes businesses and our share of earnings from investments in joint ventures in Brazil, Argentina, Chile, Colombia, Ecuador, Peru and Uruguay. Our Asia-Pacific segment includes the PureCircle operating segment as well as businesses in South Korea, Thailand, China, Australia, Japan, New Zealand, Indonesia, Singapore, the Philippines, Malaysia, India and Vietnam. Our EMEA segment includes businesses in Pakistan, Germany, Poland, the United Kingdom and South Africa. Net sales by product are not presented because to do so would be impracticable.
iPresented below are Ingredion’s net sales to unaffiliated customers by reportable segment for the periods indicated:
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 | | 2022 |
| 2021 |
| ||||
Net sales to unaffiliated customers: | | | | | | | | | | | | | |
North America | | $ | i 1,262 | | $ | i 1,083 | | $ | i 3,720 | | $ | i 3,096 | |
South America | | | i 293 | | | i 260 | | | i 835 | | | i 801 | |
Asia-Pacific | | | i 278 | | | i 245 | | | i 825 | | | i 728 | |
EMEA | | | i 190 | | | i 175 | | | i 579 | | | i 514 | |
Total net sales | | $ | i 2,023 | | $ | i 1,763 | | $ | i 5,959 | | $ | i 5,139 | |
/ /22
Presented below are Ingredion’s operating income by reportable segment for the periods indicated:
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
(in millions) |
| 2022 |
| 2021 | | 2022 | | 2021 |
| ||||
Operating income: | | | | | | | | | | | | | |
North America | | $ | i 126 | | $ | i 120 | | $ | i 443 | | $ | i 403 | |
South America | | | i 48 | | | i 35 | | | i 125 | | | i 108 | |
Asia-Pacific | | | i 27 | | | i 21 | | | i 70 | | | i 70 | |
EMEA | | | i 30 | | | i 23 | | | i 90 | | | i 86 | |
Corporate | | | ( i 40) | | | ( i 36) | | | ( i 109) | | | ( i 95) | |
Subtotal | | | i 191 | | | i 163 | | | i 619 | | | i 572 | |
Acquisition/integration costs | | | — | | | ( i 3) | | | ( i 1) | | | ( i 1) | |
Restructuring/impairment charges and related adjustments | | | — | | | ( i 8) | | | ( i 4) | | | ( i 22) | |
Impairment on assets held for sale | | | — | | | i 20 | | | — | | | ( i 340) | |
Other matters | | | ( i 9) | | | — | | | ( i 9) | | | i 15 | |
Total operating income | | $ | i 182 | | $ | i 172 | | $ | i 605 | | $ | i 224 | |
Presented below are Ingredion’s total assets by reportable segment as of September 30, 2022 and December 31, 2021:
| | | | | | | |
| | As of | | As of | | ||
(in millions) | |
| | ||||
Assets: | | | | | | | |
North America (a) | | $ | i 4,576 | | $ | i 4,203 | |
South America | | | i 892 | | | i 799 | |
Asia-Pacific | | | i 1,340 | | | i 1,403 | |
EMEA | | | i 595 | | | i 594 | |
Total assets | | $ | i 7,403 | | $ | i 6,999 | |
For purposes of presentation, North America includes Corporate assets.
i15. Supplementary Financial Statement Information
Accounts Receivable, Net
Accounts receivable, net are summarized as follows:
i
| | | | | | | |
| | As of | | As of | | ||
(in millions) |
|
| | ||||
Accounts receivable, net: | | | | | | | |
Accounts receivable - trade | | $ | i 1,170 | | $ | i 950 | |
Accounts receivable - other | | | i 253 | | | i 193 | |
Allowance for credit losses | | | ( i 17) | | | ( i 13) | |
Total accounts receivable | | $ | i 1,406 | | $ | i 1,130 | |
There were no significant contract assets or significant contract liabilities associated with our customers as of September 30, 2022 or December 31, 2021. Liabilities for volume discounts and incentives were also not significant as of September 30, 2022 or December 31, 2021.
/23
Inventories
Inventories are summarized as follows:
i
| | | | | | | |
| | As of | | As of |
| ||
(in millions) |
|
|
| ||||
Finished and in process |
| $ | i 895 |
| $ | i 688 | |
Raw materials | |
| i 517 | |
| i 380 | |
Manufacturing supplies and other | |
| i 88 | |
| i 104 | |
Total inventories |
| $ | i 1,500 |
| $ | i 1,172 | |
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ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context indicates otherwise, references to “we,” “us,” “our,” the “Company” and “Ingredion” mean Ingredion Incorporated and its consolidated subsidiaries.
Overview
Ingredion is a leading global ingredients solutions provider that transforms corn, tapioca, potatoes, plant-based stevia, grains, fruits, gums and vegetables into value-added ingredients and biomaterials for the food, beverage, brewing and other industries. Our Purpose is to bring the potential of people, nature and technology together to make life better. As of September 30, 2022, we had 46 manufacturing facilities located in North America, South America, Asia-Pacific and Europe, the Middle East and Africa (“EMEA”), and we manage and operate our businesses at a regional level. We believe this approach provides us with a unique understanding of the cultures and product requirements in each of the geographic markets in which we operate, bringing added value to our customers.
Ingredion has been navigating evolving global conditions that have varying impacts on our customers, suppliers, employees, operations and, ultimately, our profitability and cash flows. During the three months ended September 30, 2022, we continued to achieve strong price mix, which included increased prices for our products to manage the effects of increasing corn and freight costs. Our ability to respond to changing customer demands, increasing inflation, fluctuating foreign exchange rates, and shifting supply chain channels was affected by a variety of factors, including the ongoing, global pandemic with new variants of the coronavirus disease 2019 (“COVID-19”) and the ongoing conflict between Russia and Ukraine.
Our results for the current quarter benefited from strong price mix and that more than offset higher raw material and other input costs. Our net sales of $2,023 million for the third quarter of 2022 were 15 percent higher than our net sales of $1,763 million for the third quarter of 2021 primarily due to stronger price mix, including the pass-through of higher corn and freight costs. The net sales increase contributed to $51 million of higher gross profit during the current period when compared to the third quarter of 2021. Our operating income of $182 million for the third quarter of 2022 increased from operating income of $172 million for the third quarter of 2021. This increase was primarily due to stronger price mix that more than offset higher input and operating expense costs. Net income attributable to Ingredion for the third quarter of 2022 was $106 million, or $1.59 diluted earnings per share, which represented a decrease from $118 million, or $1.75 diluted earnings per share, for the third quarter of 2021. Excluding a $20 million favorable impairment adjustment to the estimated fair value of the net assets contributed to the Argentina joint venture recorded during the third quarter of 2021, our results for the current period reflected higher net income attributable to Ingredion as well as a higher diluted earnings per share.
Results of Operations
We have significant operations in four reporting segments: North America, South America, Asia-Pacific and EMEA. Fluctuations in foreign currency exchange rates affect the U.S. dollar amounts of our foreign subsidiaries’ revenues and expenses. For most of our foreign subsidiaries, the local foreign currency is the functional currency. Accordingly, revenues and expenses denominated in the functional currencies of these subsidiaries are translated into U.S. dollars at the applicable average exchange rates for the period.
We acquired Amishi on August 1, 2022, and KaTech on April 1, 2021, and the results of the acquired businesses are included in our consolidated financial results beginning on the acquisition date, which inclusion affects the comparability of results between years. In addition, we entered into the Argentina joint venture on February 12, 2021, which closed on August 2, 2021, and the Amyris joint venture on June 1, 2021. Our share of results in joint ventures is classified as other operating (income) and comparability between years and between financial statement line items is affected by the timing of and consideration provided to the investments. While we identify fluctuations due to the acquisitions and investments in our discussion below, we also address results of operations excluding the impact of our acquisitions and investments, where appropriate, to provide a more comparable and meaningful analysis.
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For the Three Months Ended September 30, 2022
With Comparatives for the Three Months Ended September 30, 2021
Net sales. Net sales increased 15 percent to $2,023 million for the three months ended September 30, 2022, compared to $1,763 million for the three months ended September 30, 2021. The increase in net sales was primarily driven by strong price mix.
Cost of sales. Cost of sales increased 15 percent to $1,649 million for the three months ended September 30, 2022, compared to cost of sales of $1,440 million for the three months ended September 30, 2021. The increase in cost of sales primarily reflected higher net corn costs. Our gross profit margin was flat at 18 percent for both the three months ended September 30, 2022, and the three months ended September 30, 2021.
Operating expenses. Operating expenses increased 10 percent to $180 million for the three months ended September 30, 2022, compared to $164 million for the three months ended September 30, 2021, primarily due to cost impacts of higher inflation. Operating expenses as a percentage of net sales was 9 percent for both the three months ended September 30, 2022, and the three months ended September 30, 2021.
Other operating expense (income). Other operating expense (income) was $10 million for the three months ended September 30, 2022, compared to $(1) million for the three months ended September 30, 2021.
Restructuring/impairment charges and related adjustments. Restructuring/impairment charges and related adjustments were $2 million for the three months ended September 30, 2022, compared to $(12) million for the three months ended September 30, 2021. We recognized income during the three months ended September 30, 2021, primarily due to a $20 million favorable adjustment to the estimated fair value of the net assets contributed to the Argentina joint venture.
Financing costs. Financing costs increased 20 percent to $24 million for the three months ended September 30, 2022, compared to $20 million for the three months ended September 30, 2021. The increase was primarily due to higher interest rates and higher average short-term borrowing balances.
Provision for income taxes. Our effective income tax rates for the three months ended September 30, 2022 increased to 32.3 percent from 22.2 percent for the three months ended September 30, 2021. The increase in the effective income tax rate was primarily driven by U.S. international tax implications, including foreign tax credits and a $20 million gain related to net assets contributed to the Argentina joint venture recorded during the three months ended September 30, 2021, that did not have a corresponding income tax expense. These items were partly offset by a change in value of the Mexican peso against the U.S. dollar.
Net income attributable to non-controlling interests. Net income attributable to non-controlling interests was $3 million for the three months ended September 30, 2022, compared to $1 million for the three months ended September 30, 2021. The increase in net income attributable to non-controlling interests was due to higher net income for PureCircle during the three months ended September 30, 2022, compared to September 30, 2021.
Net income attributable to Ingredion. Net income attributable to Ingredion for the three months ended September 30, 2022 was $106 million compared to a net income of $118 million for the three months ended September 30, 2021. This decrease was due primarily to a $20 million favorable adjustment to the estimated fair value of net assets contributed to the Argentina joint venture recorded in the prior year. Excluding this impairment adjustment, net income increased due to strong price mix, offset in part by higher corn and input costs.
Segment Results
North America
Net sales. North America’s net sales increased 17 percent to $1,262 million for the three months ended September 30, 2022, compared to $1,083 million for the three months ended September 30, 2021. The increase was primarily driven by a 17 percent improvement in price mix.
26
Operating income. North America’s operating income was $126 million for the three months ended September 30, 2022, compared to $120 million for the three months ended September 30, 2021. The increase was primarily due to favorable price mix that more than offset higher corn and input costs.
South America
Net sales. South America’s net sales increased 13 percent to $293 million for the three months ended September 30, 2022, from $260 million for the three months ended September 30, 2021. Excluding the effects of revenues from operations we contributed to the Argentina joint venture, net sales were 21 percent higher than in the same period last year. The increase reflected a 22 percent higher price mix across South America and a 3 percent increase in volume, which were partly offset by a 4 percent unfavorable foreign exchange impact.
Operating income. South America’s operating income increased 37 percent to $48 million for the three months ended September 30, 2022, compared to $35 million for the three months ended September 30, 2021. The increase was primarily driven by favorable price mix and higher volumes that more than offset higher corn and input costs.
Asia-Pacific
Net sales. Asia-Pacific’s net sales increased 13 percent to $278 million for the three months ended September 30, 2022, compared to $245 million for the three months ended September 30, 2021. The increase was driven by a 17 percent higher price mix and a 6 percent increase in volume, the effects of which were partially offset by unfavorable foreign exchange impacts of 10 percent.
Operating income. Asia-Pacific’s operating income increased 29 percent to $27 million for the three months ended September 30, 2022, compared to $21 million for the three months ended September 30, 2021. The increase was primarily driven by favorable price mix that more than offset higher input costs and foreign exchange impacts.
EMEA
Net sales. EMEA’s net sales increased by 9 percent to $190 million for the three months ended September 30, 2022, compared to $175 million for the three months ended September 30, 2021. The increase was driven by a 29 percent increase due to price mix, which was partially offset by unfavorable foreign exchange impacts of 19 percent and a 1 percent decrease in volume.
Operating income. EMEA’s operating income increased 30 percent to $30 million for the three months ended September 30, 2022, compared to $23 million for the three months ended September 30, 2021. The increase was primarily driven by favorable price mix that more than offset higher input costs and foreign exchange impacts.
For the Nine Months Ended September 30, 2022
With Comparatives for the Nine Months Ended September 30, 2021
Net sales. Net sales increased 16 percent to $5,959 million for the nine months ended September 30, 2022, compared to $5,139 million for the nine months ended September 30, 2021. The increase in net sales was driven by strong price mix and partially offset by negative foreign exchange impacts.
Cost of sales. Cost of sales increased 18 percent to $4,816 million for the nine months ended September 30, 2022, compared to cost of sales of $4,098 million for the nine months ended September 30, 2021. The increase in cost of sales primarily reflected higher net corn costs. Our gross profit margin of 19 percent for the nine months ended September 30, 2022 decreased from 20 percent from the nine months ended September 30, 2021. The decrease in gross margin was primarily driven by higher corn and input costs.
Operating expenses. Operating expenses increased 9 percent to $528 million for the nine months ended September 30, 2022, compared to $484 million for the nine months ended September 30, 2021, primarily due to cost impacts of higher inflation. Operating expenses as a percentage of net sales were approximately 9 percent for both the nine months ended September 30, 2022, and the nine months ended September 30, 2021.
27
Other operating expense (income). Other operating expense (income) was $4 million for the nine months ended September 30, 2022, compared to $(29) million for the nine months ended September 30, 2021. During the nine months ended September 30, 2021, we recorded $(15) million of Other operating expense (income) related to Brazil indirect tax credits and an $(8) million net gain from the formation of the Amyris joint venture.
Restructuring and impairment charges. Restructuring and impairment charges were $6 million for the nine months ended September 30, 2022, compared to $362 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2021, we recorded an impairment charge of $340 million for net assets from our Argentina business we contributed to the Argentina joint venture, of which $311 million was related to the write-off of the cumulative translation losses associated with the contributed net assets and $29 million was related to the write-down of the contributed net assets to fair value.
Financing costs. Financing costs increased 12 percent to $65 million for the nine months ended September 30, 2022, compared to $58 million for the nine months ended September 30, 2021. The increase was due to higher foreign exchange losses and third-party financing costs in the current year compared to the prior year. The increase in third-party financing costs was primarily due to higher interest rates and higher average short-term borrowing balances.
Provision for income taxes. The effective tax rate for the nine months ended September 30, 2022, decreased to 28.9 percent from 66.5 percent for the nine months ended September 30, 2021. The primary cause of the decrease was the $340 million impairment charge related to net assets contributed to the Argentina joint venture during the nine months ended September 30, 2021, that did not have a corresponding income tax benefit. The effect of this charge was partially offset by a discrete tax benefit of $30 million recorded during the three months ended June 30, 2021, due to the reversal of an accrual for withholding tax on the unremitted earnings of a foreign subsidiary.
Net income attributable to non-controlling interests. Net income attributable to non-controlling interests was $9 million for the nine months ended September 30, 2022, and $7 million for the nine months ended September 30, 2021. The increase in net income attributable to non-controlling interests was due primarily to higher net income from PureCircle in the current period.
Net Income attributable to Ingredion. Net income attributable to Ingredion for the nine months ended September 30, 2022, was $378 million compared to a net income of $50 million for the nine months ended September 30, 2021. The increase was largely attributable to the $340 million impairment charge for the Argentina assets contributed to the Argentina joint venture that we recorded during the nine months ended September 30, 2021.
Segment Results
North America
Net sales. North America’s net sales increased 20 percent to $3,720 million for the nine months ended September 30, 2022, compared to $3,096 million for the nine months ended September 30, 2021. The increase was primarily driven by a 19 percent improvement in price mix and a 1 percent increase in volume.
Operating income. North America’s operating income was $443 million for the nine months ended September 30, 2022, compared to $403 million for the nine months ended September 30, 2021. The increase was driven by favorable price mix that more than offset higher corn and input costs.
South America
Net sales. South America’s net sales increased 4 percent to $835 million for the nine months ended September 30, 2022, from $801 million for the nine months ended September 30, 2021. Excluding the effects of revenues from operations we contributed to the Argentina joint venture, net sales were 28 percent higher than in the same period last year. The increase reflected 23 percent higher price mix and a 5 percent increase in volume.
Operating income. South America’s operating income increased 16 percent to $125 million for the nine months ended September 30, 2022, compared to $108 million for the nine months ended September 30, 2021. The increase was primarily driven by favorable price mix and volumes that more than offset higher corn and input costs.
28
Asia-Pacific
Net sales. Asia-Pacific’s net sales increased 13 percent to $825 million for the nine months ended September 30, 2022, compared to $728 million for the nine months ended September 30, 2021. The increase was driven by a 13 percent higher price mix and an increase in volume of 7 percent, partially offset by unfavorable foreign exchange impacts of 7 percent.
Operating income. Asia-Pacific’s operating income was flat at $70 million for both the nine months ended September 30, 2022, and the nine months ended September 30, 2021. Operating income was flat as higher price mix was fully offset due to higher input costs and foreign exchange impacts.
EMEA
Net sales. EMEA’s net sales increased 13 percent to $579 million for the nine months ended September 30, 2022, compared to $514 million for the nine months ended September 30, 2021. The increase was driven by higher price mix of 23 percent and an increase in volume of 4 percent, partially due to the purchase of KaTech on April 1, 2021. These items were partially offset by unfavorable foreign exchange impacts of 14 percent.
Operating income. EMEA’s operating income increased 5 percent to $90 million for the nine months ended September 30, 2022, compared to $86 million for the nine months ended September 30, 2022. The increase was primarily driven by favorable price mix that more than offset higher input costs and foreign exchange impacts.
Liquidity and Capital Resources
As of September 30, 2022, we had total available liquidity of approximately $1,437 million. Domestic liquidity of $384 million consisted of $6 million in cash and cash equivalents and $378 million of short-term borrowing availability through our $1 billion commercial paper program, under which $622 million of borrowings were outstanding as of September 30, 2022. The commercial paper program, which we initiated on July 27, 2021, is backed by $1 billion of borrowing availability under a five-year revolving credit agreement that we entered into on June 30, 2021.
We had international liquidity as of September 30, 2022 of approximately $1,053 million, consisting of $288 million of cash and cash equivalents and $4 million of short-term investments held by our operations outside the U.S., as well as $761 million of unused operating lines of credit in the various foreign countries in which we operate. As the parent company, we guarantee certain obligations of our consolidated subsidiaries, which totaled $75 million as of September 30, 2022. We believe that such consolidated subsidiaries will be able to meet their financial obligations as they become due.
As of September 30, 2022, we had total debt outstanding of approximately $2.4 billion, or $1.7 billion excluding the outstanding commercial paper and other short-term borrowings. Of our outstanding debt, $1.7 billion consists of senior notes that do not require principal repayment until 2026 through 2050. See Note 9 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our debt.
The principal source of our liquidity is our internally generated cash flow, which we supplement as necessary with our ability to borrow under our credit facilities and commercial paper program and to raise funds in the capital markets. We currently expect that our available cash balances, future cash flow from operations, access to debt markets and borrowing capacity under our revolving credit facility and commercial paper program, will provide us with sufficient liquidity to fund our anticipated capital expenditures, dividends and other investing and financing activities for at least the next twelve months and for the foreseeable future thereafter. Our future cash flow needs will depend on many factors, including our rate of revenue growth, the timing and extent of our expansion into new markets, the timing of introductions of and rate of success for new products, potential acquisitions of complementary businesses and technologies, continuing market acceptance of our new products and general economic and market conditions. We may need to raise additional capital or incur indebtedness to fund our needs for less predictable strategic initiatives, such as acquisitions.
29
Net Cash Flows
Our short-term borrowings increased $401 million during the nine months ended September 30, 2022, which we primarily used to invest in capital expenditures and mechanical stores purchases, pay dividends and repurchase shares of common stock. Our cash provided by operating activities was $80 million for the nine months ended September 30, 2022, compared to cash provided by operating activities of $259 million for the nine months ended September 30, 2021. This decrease was primarily due to cash used for working capital. Cash used for working capital increased by $297 million during the nine months ended September 30, 2022, which was primarily attributable to increases in trade accounts receivable and inventory. Cash used for trade accounts receivable increased due to higher pricing and higher freight costs for products sold, and cash used for inventory increased due primarily to higher input costs from raw materials during the nine months ended September 30, 2022.
We used $203 million of cash for capital expenditures and mechanical stores purchases to update, expand and improve our facilities during the nine months ended September 30, 2022, which was identical to the amount for the nine months ended September 30, 2021. Capital investments for full-year 2022 are anticipated to be between $290 million and $320 million.
We declare and pay cash dividends to our common stockholders of record on a quarterly basis. On September 26, 2022, our Board of Directors declared a quarterly cash dividend of $0.71 per share of common stock, which was 9 percent higher than the dividend declared during the prior quarter. This dividend was paid on October 25, 2022, to stockholders of record at the close of business on October 6, 2022. Dividends paid, including those to noncontrolling interests, were $133 million for the nine months ended September 30, 2022, compared to $138 million for the nine months ended September 30, 2021.
During the three months ended September 30, 2022, we repurchased 325 thousand outstanding shares of common stock in open market transactions at a net cost of $29 million, compared to repurchases of 500 thousand outstanding shares of common stock at a net cost of $44 million in the three months ended September 30, 2021. For the nine months ended September 30, 2022, we repurchased 1,300 thousand outstanding shares of common stock in open market transactions at a net cost of $112 million, compared to repurchases of 765 thousand outstanding shares of common stock at a net cost of $68 million for the nine months ended September 30, 2021.
We have not provided foreign withholding taxes, state income taxes and federal and state taxes on foreign currency gains/losses on accumulated undistributed earnings of certain foreign subsidiaries because these earnings are considered to be permanently reinvested. It is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings. We do not anticipate the need to repatriate funds to the U.S. to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies and estimates for the nine months ended September 30, 2022.
New Accounting Pronouncements
The information called for by this section is incorporated herein by reference to Note 2 of the Condensed Consolidated Financial Statements included in this report.
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FORWARD-LOOKING STATEMENTS
This Form 10-Q contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Ingredion intends these forward-looking statements to be covered by the safe harbor provisions for such statements.
Forward-looking statements include, among others, any statements regarding Ingredion’s prospects and its future operations, financial condition, earnings, net sales, tax rates, capital expenditures, cash flows, expenses or other financial items, including management’s plans or strategies and objectives for any of the foregoing, and any assumptions, expectations or beliefs underlying any of the foregoing.
These statements can sometimes be identified by the use of forward-looking words such as “may,” “will,” “should,” “anticipate,” “assume,” “believe,” “plan,” “project,” “estimate,” “expect,” “intend,” “continue,” “pro forma,” “forecast,” “outlook,” “propels,” “opportunities,” “potential,” “provisional,” or other similar expressions or the negative thereof. All statements other than statements of historical facts in this report or referred to in this report are “forward-looking statements.”
These statements are based on current circumstances or expectations, but are subject to certain inherent risks and uncertainties, many of which are difficult to predict and beyond our control. Although we believe our expectations expressed or implied in these forward-looking statements are based on reasonable assumptions, investors are cautioned that no assurance can be given that our expectations will prove correct.
Actual results and developments may differ materially from the expectations expressed in or implied by these statements, based on various risks and uncertainties, including the impact of COVID-19 on the demand for our products and our financial results; changing consumption preferences relating to high fructose corn syrup and other products we make; the effects of global economic conditions and the general political, economic, business, and market conditions that affect customers and consumers in the various geographic regions and countries in which we buy our raw materials or manufacture or sell our products, including, particularly, economic, currency and political conditions in South America and economic and political conditions in Europe, and the impact these factors may have on our sales volumes, the pricing of our products and our ability to collect our receivables from customers; future purchases of our products by major industries which we serve and from which we derive a significant portion of our sales, including, without limitation, the food, beverage, animal nutrition, and brewing industries; the uncertainty of acceptance of products developed through genetic modification and biotechnology; our ability to develop or acquire new products and services at rates or of qualities sufficient to gain market acceptance; increased competitive and/or customer pressure in the corn-refining industry and related industries, including with respect to the markets and prices for our primary products and our co-products, particularly corn oil; the availability of raw materials, including potato starch, tapioca, gum Arabic, and the specific varieties of corn upon which some of our products are based, and our ability to pass along potential increases in the cost of corn or other raw materials to customers; energy costs and availability, including energy issues in Pakistan; our ability to contain costs, achieve budgets and realize expected synergies, including with respect to our ability to complete planned maintenance and investment projects on time and on budget as well as with respect to freight and shipping costs; the effects of climate change and legal, regulatory, and market measures to address climate change; our ability to successfully identify and complete acquisitions or strategic alliances on favorable terms as well as our ability to successfully integrate acquired businesses or implement and maintain strategic alliances and achieve anticipated synergies with respect to all of the foregoing; operating difficulties at our manufacturing facilities; the behavior of financial and capital markets, including with respect to foreign currency fluctuations, fluctuations in interest and exchange rates and market volatility and the associated risks of hedging against such fluctuations; effects of the conflict between Russia and Ukraine, including impacts on the availability and prices of raw materials and energy supplies and volatility in exchange and interest rates; our ability to attract, develop, motivate, and maintain good relationships with our workforce; the impact on our business of natural disasters, war, threats or acts of terrorism, the outbreak or continuation of pandemics such as COVID-19, or the occurrence of other significant events beyond our control; the impact of impairment charges on our goodwill or long-lived assets; changes in government policy, law, or regulation and costs of legal compliance, including compliance with environmental regulation; changes in our tax rates or exposure to additional income tax liability; increases in our borrowing costs that could result from increased interest rates; our ability to raise funds at reasonable rates and other factors affecting our access to sufficient funds for future growth and expansion; security breaches with respect to information technology systems, processes, and sites; volatility in the stock market and other factors that could adversely affect our stock price; risks affecting the continuation of our dividend policy; and our ability to maintain effective internal control over financial reporting.
31
Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement as a result of new information or future events or developments. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections. For a further description of these and other risks, see “Risk Factors” and other information included in our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 and our subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the discussion set forth in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk at pages 41 to 43 in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of the manner in which we address risks with respect to interest rates, raw material and energy costs and foreign currencies. There have been no material changes in the information provided with respect to those disclosures during the nine months ended September 30, 2022.
ITEM 4
CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and our Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2022. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2022, our disclosure controls and procedures (a) are effective in providing reasonable assurance that all information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, has been recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (b) are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting during the three months ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II OTHER INFORMATION
ITEM 1
LEGAL PROCEEDINGS
In 2015 and 2016, Ingredion self-reported certain monitoring and recordkeeping issues relating to environmental regulatory matters involving its Indianapolis, Indiana manufacturing facility. In September 2017, following inspections and the provision by Ingredion of requested information to the U.S. Environmental Protection Agency (the “EPA"), the EPA issued Ingredion a Notice of Violation, which included additional alleged violations beyond those self-reported by Ingredion. These additional alleged violations primarily relate to the results of stack testing at the facility. The allegations in the Notice of Violation, whether from the self-reported information, the inspections or the additional requested information, are not material to us. The EPA has referred the overall matter to the U.S. Department of Justice, Environment and Natural Resources Division (the "DOJ"). The DOJ and Ingredion are engaged in discussions with respect to a resolution of this matter.
We are currently subject to claims and suits arising in the ordinary course of business, including those relating to labor matters, certain environmental proceedings and commercial claims. We also routinely receive inquiries from regulators and other government authorities relating to various aspects of our business, including with respect to compliance with laws and regulations relating to the environment, and at any given time, we have matters at various stages of resolution with the applicable governmental authorities. The outcomes of these matters are not within our complete control and may not be known for prolonged periods of time. We do not believe that the results of currently known legal proceedings and inquires will be material to us. There can be no assurance, however, that such claims, suits or investigations or those arising in the future, whether taken individually or in the aggregate, will not have a material adverse effect on our financial condition or results of operations.
ITEM 1A
RISK FACTORS
We caution readers that our business activities involve risks and uncertainties that could cause actual results to differ materially from those currently expected by management. During 2022, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for 2021 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.
33
ITEM 2
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities:
The following table presents information regarding our repurchase of shares of our common stock during the three months ended September 30, 2022.
| | | | | | | | | | | |
| | | | | | | | Maximum Number | | Maximum Number |
|
| | | | | | Total Number | | (or Approximate | | (or Approximate |
|
| | | | Average | | of Shares | | Dollar Value) of | | Dollar Value) of |
|
| | Total | | Price | | Purchased as | | Shares That May Yet | | Shares That May Yet |
|
| | Number | | Paid | | Part of Publicly | | be Purchased Under | | be Purchased Under |
|
| | of Shares | | per | | Announced | | the 2018 Stock | | the 2022 Stock |
|
(shares in thousands) | | Purchased | | Share | | Programs | | Repurchase Program | | Repurchase Program |
|
July 1 – July 31, 2022 |
| 325 |
| 87.56 |
| 325 | | 4,133 shares |
| — | |
August 1 – August 31, 2022 |
| — |
| — |
| — | | 3,808 shares |
| — | |
September 1 – September 25, 2022 | | — |
| — |
| — | | 3,808 shares | | — | |
September 26 – September 30, 2022 | | — |
| — |
| — | | — | | 6,000 shares | |
Total |
| 325 |
| 87.56 |
| 325 | | | | | |
On October 22, 2018, the Board of Directors authorized a stock repurchase program (the “2018 Stock Repurchase Program”) permitting us to purchase up to an additional 8.0 million shares of our outstanding common stock from November 5, 2018, through December 31, 2023. Effective September 26, 2022, the Board of Directors terminated the 2018 Stock Repurchase Program. As of its termination date, we had 3.8 million shares available for repurchase under the 2018 Stock Repurchase Program.
On September 26, 2022, the Board of Directors contemporaneously approved a new stock repurchase program authorizing us to purchase up to 6.0 million shares of our outstanding common stock during the period from September 26, 2022, through December 31, 2025.
34
ITEM 6
EXHIBITS
a) Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index below:
| ||
Number | | Description of Exhibit |
| | |
3.2† | | Amended and Restated By-Laws of Ingredion, as amended and restated on September 22, 2022. |
| | |
31.1† | | |
| | |
31.2† | | |
| | |
32.1†† | | |
| | |
32.2†† | | |
| | |
101.INS† | | XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
| | |
101.SCH† | | Inline XBRL Taxonomy Extension Schema Document. |
101.CAL† | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF† | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB† | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE† | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104† | | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document, which is contained in Exhibit 101). |
_____________________________________
HIDDEN_ROW | | |
† | | Filed with this report. |
†† | | Furnished with this report. |
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | INGREDION INCORPORATED | |
| | | |
| | | |
DATE: | By | /s/ James D. Gray | |
| | ||
| | Executive Vice President and Chief Financial Officer | |
| | | |
DATE: | By | /s/ Davida M. Gable | |
| | Vice President, Global Controller and Global Shared Services | |
| | | |
36
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 4/15/37 | ||||
| 6/1/30 | ||||
| 10/1/26 | ||||
| 12/31/25 | ||||
| 12/31/23 | ||||
| 12/31/22 | ||||
| 12/15/22 | ||||
| Filed on: | 11/7/22 | |||
| 11/3/22 | 4, 8-K | |||
| 10/25/22 | ||||
| 10/6/22 | ||||
| For Period end: | 9/30/22 | 4 | ||
| 9/26/22 | 8-K | |||
| 9/25/22 | ||||
| 8/31/22 | 4 | |||
| 8/1/22 | ||||
| 7/31/22 | ||||
| 7/1/22 | 4 | |||
| 6/30/22 | 10-Q, 4 | |||
| 3/31/22 | 10-Q, 4 | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K, 11-K | |||
| 9/30/21 | 10-Q, 4 | |||
| 8/2/21 | 4 | |||
| 7/27/21 | ||||
| 6/30/21 | 10-Q, 4, 8-K | |||
| 6/1/21 | 4 | |||
| 4/1/21 | 4 | |||
| 3/31/21 | 10-Q, 4 | |||
| 2/12/21 | 4, 8-K | |||
| 12/31/20 | 10-K, 11-K | |||
| 3/12/20 | ||||
| 11/5/18 | ||||
| 10/22/18 | ||||
| List all Filings | ||||