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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

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 1-13397

Ingredion Incorporated

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

22-3514823

(I.R.S. Employer Identification Number)

5 Westbrook Corporate Center

WestchesterIllinois

60154

(Address of principal executive offices)

(Zip Code)

(708) 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

Common Stock, $.01 par value per share

INGR

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.

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).

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.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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  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 October 31, 2020

Common Stock, $.01 par value

66,990,288 shares

Table of Contents

INGREDION INCORPORATED

FORM 10-Q

TABLE OF CONTENTS

Page

Part I

Item 1

Financial Statements

3

Condensed Consolidated Statements of Income

3

Condensed Consolidated Statements of Comprehensive Income

4

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Equity and Redeemable Equity

6

Condensed Consolidated Statements of Cash Flows

7

Notes to Condensed Consolidated Financial Statements

8

Item 2

Management’s discussion and analysis of financial condition and results of operations

28

Item 3

Quantitative and qualitative disclosures about market risk

38

Item 4

Controls and procedures

38

Part II

Item 1

Legal proceedings

39

Item 1A

Risk factors

39

Item 2

Unregistered sales of equity securities and use of proceeds

39

Item 6

Exhibits

41

Signatures

42

2

Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended 

Nine Months Ended 

September 30, 

September 30, 

(in millions, except per share amounts)

    

2020

    

2019

    

2020

    

2019

Net sales

$

1,502

$

1,574

$

4,394

$

4,660

Cost of sales

1,176

1,230

3,474

3,671

Gross profit

326

344

920

989

Operating expenses

155

153

456

457

Other expense (income), net

2

(2)

4

(3)

Restructuring/impairment charges

16

28

41

41

Operating income

153

165

419

494

Financing costs, net

22

24

59

62

Other, non-operating (income) expense, net

(2)

1

(3)

1

Income before income taxes

133

140

363

431

Provision for income taxes

40

38

125

120

Net income

93

102

238

311

Less: Net income attributable to non-controlling interests

1

3

5

7

Net income attributable to Ingredion

$

92

$

99

$

233

$

304

Weighted average common shares outstanding:

Basic

67.2

66.9

67.2

66.9

Diluted

67.6

67.4

67.6

67.4

Earnings per common share of Ingredion:

Basic

$

1.37

$

1.48

$

3.47

$

4.54

Diluted

$

1.36

$

1.47

$

3.45

$

4.51

See Notes to Condensed Consolidated Financial Statements

3

Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended 

Nine Months Ended 

September 30, 

September 30, 

(in millions)

    

2020

    

2019

    

2020

    

2019

 

Net income

  

$

93

  

$

102

  

$

238

$

311

Other comprehensive income:

Gains (losses) on cash flow hedges, net of income tax effect of $4, $4, $12 and $4, respectively

12

(13)

(38)

(12)

Losses (gains) on cash flow hedges reclassified to earnings, net of income tax effect of $8, $ — , $14 and $1, respectively

23

(3)

42

2

Actuarial losses on pension and other postretirement obligations, settlements and plan amendments, net of income tax effect of $ —

(1)

(2)

Currency translation adjustment

13

(45)

(105)

(48)

Comprehensive income

141

40

137

251

Less: Comprehensive income attributable to non-controlling interests

3

5

5

5

Comprehensive income attributable to Ingredion

$

138

$

35

$

132

$

246

See Notes to Condensed Consolidated Financial Statements

4

Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Balance Sheets

September 30, 

December 31, 

(in millions, except share and per share amounts)

    

2020

    

2019

 

(Unaudited)

Assets

  

  

Current assets:

Cash and cash equivalents

$

553

$

264

Short-term investments

4

Accounts receivable, net

913

977

Inventories

908

861

Prepaid expenses

56

54

Total current assets

2,430

2,160

Property, plant and equipment, net of accumulated depreciation of $3,087 and $3,056, respectively

2,354

2,306

Goodwill

841

801

Other intangible assets, net of accumulated amortization of $220 and $197, respectively

479

437

Operating lease assets

161

151

Deferred income tax assets

23

13

Other assets

176

172

Total assets

$

6,464

$

6,040

Liabilities and equity

Current liabilities:

Short-term borrowings

$

62

$

82

Accounts payable and accrued liabilities

893

885

Total current liabilities

955

967

Non-current liabilities

211

220

Long-term debt

2,115

1,766

Non-current operating lease liabilities

123

120

Deferred income tax liabilities

189

195

Total liabilities

3,593

3,268

Share-based payments subject to redemption

32

31

Redeemable non-controlling interests

74

Ingredion stockholders’ equity:

Preferred stock — authorized 25,000,000 shares — $0.01 par value, none issued

Common stock — authorized 200,000,000 shares — $0.01 par value, 77,810,875 issued at September 30, 2020 and December 31, 2019, respectively

1

1

Additional paid-in capital

1,145

1,137

Less: Treasury stock (common stock: 10,822,592 and 10,993,388 shares at September 30, 2020 and December 31, 2019, respectively) at cost

(1,027)

(1,040)

Accumulated other comprehensive loss

(1,259)

(1,158)

Retained earnings

3,884

3,780

Total Ingredion stockholders’ equity

2,744

2,720

Non-redeemable non-controlling interests

21

21

Total equity

2,765

2,741

Total liabilities and equity

$

6,464

$

6,040

See Notes to Condensed Consolidated Financial Statements

5

Table of Contents

Ingredion Incorporated (“Ingredion”)

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, 2019

$

$

1

$

1,137

$

(1,040)

$

(1,158)

$

3,780

$

21

$

31

$

Net income attributable to Ingredion

233

Net income (loss) attributable to non-controlling interests

7

(2)

Dividends declared

(129)

(5)

Share-based compensation, net of issuance

8

13

1

Acquisition of redeemable non-controlling interests

74

Other comprehensive (loss) income

(101)

(2)

2

Balance, September 30, 2020

$

$

1

$

1,145

$

(1,027)

$

(1,259)

$

3,884

$

21

$

32

$

74

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, 2018

 

$

$

1

$

1,096

$

(1,091)

$

(1,154)

$

3,536

$

20

$

37

$

Net income attributable to Ingredion

304

Net income attributable to non-controlling interests

7

Dividends declared

(127)

(6)

Repurchases of common stock

32

31

Share-based compensation, net of issuance

9

16

(9)

Other comprehensive income (loss)

(60)

(2)

Balance, September 30, 2019

$

$

1

 

$

1,137

 

$

(1,044)

 

$

(1,214)

 

$

3,713

 

$

19

 

$

28

 

$

See Notes to Condensed Consolidated Financial Statements

6

Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

September 30, 

(in millions)

    

2020

    

2019

Cash provided by operating activities

Net income

$

238

$

311

Non-cash charges to net income:

Depreciation and amortization

158

158

Mechanical stores expense

39

42

Deferred income taxes

(1)

2

Charge for fair value markup of acquired inventory

3

Other

46

21

Changes in working capital:

Accounts receivable and prepaid expenses

36

(56)

Inventories

(10)

(71)

Accounts payable and accrued liabilities

54

76

Margin accounts

6

(4)

Other

(7)

11

Cash provided by operating activities

562

490

Cash used for investing activities

Capital expenditures and mechanical stores purchases, net of proceeds on disposals

(250)

(231)

Payments for acquisitions, net of cash acquired of $14 and $4, respectively

(208)

(42)

Investment in non-consolidated affiliates

(6)

(10)

Short-term investments

4

4

Other

1

Cash used for investing activities

(460)

(278)

Cash provided by (used for) financing activities

Proceeds from borrowings

1,527

839

Payments on debt

(1,186)

(858)

Payments for debt issuance costs

(9)

Repurchases of common stock, net

63

Issuances of common stock for share-based compensation, net of settlements

2

1

Dividends paid, including to non-controlling interests

  

(132)

  

(131)

Cash provided by (used for) financing activities

202

(86)

Effects of foreign exchange rate changes on cash

(15)

(10)

Increase in cash and cash equivalents

289

116

Cash and cash equivalents, beginning of period

264

327

Cash and cash equivalents, end of period

$

553

$

443

See Notes to Condensed Consolidated Financial Statements

7

Table of Contents

INGREDION INCORPORATED (“Ingredion”)

Notes to Condensed Consolidated Financial Statements

1. Interim Financial Statements

References to the “Company” are to Ingredion Incorporated (“Ingredion”) and its consolidated subsidiaries. These statements should be read in conjunction with the consolidated financial statements and the related notes to those statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The unaudited Condensed Consolidated Financial Statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 included herein were prepared by management on the same basis as the Company’s audited Consolidated Financial Statements for the year ended December 31, 2019 and reflect all adjustments (consisting solely of normal recurring items unless otherwise noted) which are, in the opinion of management, necessary for the fair presentation of the Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive 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.

2.     Summary of Significant Accounting Standards and Policies

For detailed information about the Company’s significant accounting standards, see Note 2 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Except for the matters discussed below, there have been no other material changes to the Company’s significant accounting policies for the nine months ended September 30, 2020.

Recently Adopted Accounting Standards

ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350)

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the subsequent measurement of goodwill as this ASU eliminates Step 2 from the goodwill impairment test. Under this ASU, an entity will continue to perform its annual, or interim, goodwill impairment test to determine if the fair value of a reporting unit is greater than its carrying amount. An entity should then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value using the results of its Step 1 assessment, with the loss recognized not to exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2017-04 at the beginning of its 2020 fiscal year, and this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements upon adoption.

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. This ASU is effective for annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2016-13 at the beginning of its 2020 fiscal year, and this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements upon adoption.

Significant Accounting Policies

Indefinite-lived intangible assets and goodwill: The Company has indefinite-lived intangible assets of $178 million at September 30, 2020 and December 31, 2019. Goodwill ($841 million and $801 million at September 30, 2020 and December 31, 2019, respectively) represents the excess of the cost of an acquired entity over the fair value assigned to identifiable assets acquired and liabilities assumed. The following table summarizes the Company’s indefinite-lived intangible assets at the dates presented:

8

Table of Contents

(in millions)

Balance at September 30,  2020

    

Balance at December 31,  2019

Trademarks/tradenames (indefinite-lived)

$

178

  

$

178

The original carrying value of goodwill and accumulated impairment charges by reportable business segment at September 30, 2020 was as follows:

North

South

Asia-

(in millions)

    

America

    

America

    

Pacific

    

EMEA

    

Total

 

Goodwill before impairment charges

$

608

$

54

$

229

$

65

$

956

Accumulated impairment charges

(1)

(33)

(121)

(155)

Balance at January 1,  2020

607

21

108

65

801

Acquisitions

48

48

Currency translation

(6)

(3)

1

(8)

Balance at September 30,  2020

$

607

$

15

$