HEALTHY & SUSTAINABLE GROWTH2021 ANNUAL REPORTINGREDION INCORPORATED5 WESTBROOK CORPORATE CENTERWESTCHESTER, IL 60154708.551.2600WWW.INGREDION.COMHEALTHY & SUSTAINABLE GROWTH2021 ANNUAL REPORT220879_LOT COVER_4348_ING_AnnualReport.indd 1220879_LOT COVER_4348_ING_AnnualReport.indd 13/28/22 9:32 AM3/28/22 9:32 AM In 2021, Ingredion continued to advance its Driving Growth Roadmap to deliver solid net sales and profit growth. We continued to invest in our business, capitalizing on key trends that are shaping the global food and beverage industry to better position Ingredion to meet the rising demand for on-trend ingredients from our specialty growth platforms. Specialty ingredients performed exceptionally well across our four regions led by texturants and sugar reduction delivering net sales growth in the high teens, and now specialties represent 33 percent of our overall net sales.STRONG FINANCIAL PERFORMANCE AND COST DISCIPLINE We generated net sales of $6.9 billion in 2021, up 15 percent from the previous year, reflecting over $600 million of price mix improvement. The results include full year reported and adjusted operating income of $310 million and $685 million, respectively, and reported and adjusted earnings of $1.73 and $6.67 per share, respectively, with full year reported results reflecting the impact of a $340 million charge related to the contribution of our operations to a joint venture in Argentina. We also returned cash to shareholders of $172 million in dividends.Our team successfully completed our three-year Cost Smart program, delivering $170 million of cumulative run-rate savings and exceeding our original $125 million target by 36 percent. We will now carry forward this momentum as part of a rebranded strategic pillar called Cost Competitiveness, which will focus on operating excellence and driving continued efficiencies across our business. ADVANCING THE DRIVINGROWTH ROADMAPOver the last four years, Ingredion’s product portfolio has been significantly broadened through more than $700 million of organic growth investments and M&A. Last year alone, we invested approximately $140 million in our specialty growth platforms through acquisitions and capital investments to drive organic growth. These strategic investments are further differentiating us in the marketplace and are expanding our higher-value ingredient portfolio and formulating capabilities. We have built a solid position in plant-based proteins in the U.S. and Canada with significant headroom for growth, and we have acquired, partnered, and invested our way to being the market leader in high-intensity natural sweeteners with a rapidly growing position in stevia and Reb M. With our broadened capabilities, we continue to reimagine the way we connect with customers. I am particularly proud of how our go-to-market and technical support teams have engaged and co-created on disruptive food innovations for consumers, positioning us to be part of our customers’ new product launches.We are very proud of the progress we made against our bold sustainability commitment, outlined in our 2030 All Life plan. Notably, we advanced our goal to sustainably source 100 percent of our priority crops by 2025, reaching 33 percent, up eight percent from the previous year, while expanding customer engagements going forward.OUR PURPOSE AND VALUES-DRIVEN GROWTH CULTURE CONTINUE TO UNDERPIN OUR SUCCESSIt was a proud moment for our employees to learn that Ingredion was, once again, named one of the World’s Most Admired Companies by Fortune magazine for the 13th consecutive year. We were also honored to be included on Bloomberg’s Gender-Equality Index for the fifth consecutive year. Finally, we earned a near-perfect score on the Human Rights Campaign Foundation’s Corporate Equality Index for the second consecutive year. These external acknowledgments are a testament to the commitment and values that our people bring to work every day in support of our diverse and inclusive work culture.Ingredion continues to benefit from its diverse and experienced board. I want to offer my sincere appreciation to Barbara Klein for her dedication and commitment in serving Ingredion as she stepped down after 17 years. At the same time, we announced two new board members in 2021, Catherine Suever and Chuck Magro. We look forward to their contributions and the relevant and global perspectives they will provide.In closing, I want to thank our shareholders, who continue to see the long-term growth potential of Ingredion, and our employees for their continued commitment and focus as we effectively met the unique challenges of 2021. We look forward to building on the progress in 2022.DEAR VALUED SHAREHOLDERSJames P. Zallie, President & CEO April 7, 2022$1.61B$1.76B Q1 Q2 Q3 Q4$1.76B$1.76B2021QUARTERLY NET SALES Adjusted operating income and adjusted earnings per share are not financial measures calculated in accordance with generally accepted accounting principles (GAAP). See pages 53 and 52, respectively, of the Form 10-K forming part of this annual report to shareholders for a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.SHAREHOLDER INFORMATION | HEALTHY & SUSTAINABLE GROWTHCORPORATE HEADQUARTERS5 Westbrook Corporate CenterWestchester, IL 60154708.551.2600708.551.2700 faxwww.ingredion.comSTOCK EXCHANGEThe common shares of Ingredion Incorporated trade on the New York Stock Exchange under the ticker symbol INGR. Our Company is a member of the Russell 1000 Index and the S&P MidCap 400 Index.TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRARComputershare 866.517.4574 or 201.680.6685 (outside the U.S.) or 888.269.5221 (hearing impaired – TTY phone)SHAREHOLDER ASSISTANCEIngredion Incorporated c/o ComputershareP.O. Box 30170College Station, TX 77842-3170Send overnight correspondence to:Ingredion Incorporated c/o Computershare211 Quality Circle, Suite 210 College Station, TX 77845Shareholder website: www.computershare.com/investorShareholder online inquiries:https://www-us.computershare.com/investor/contactINVESTOR AND SHAREHOLDER CONTACTInvestor Relations Department 708.551.2592investor.relations@ingredion.comCOMPANY INFORMATIONCopies of the Annual Report, the Annual Report on Form 10-K and quarterly reports on Form 10-Q may be obtained, without charge, by writing to Investor Relations at the corporate headquarters address, by calling 708.551.2603, by emailing investor.relations@ingredion.com or by visiting our website at ir.ingredionincorporated.com.ANNUAL MEETING OF SHAREHOLDERSThe 2022 Annual Meeting of Shareholders will be held on Friday, May 20, 2022, at 9:00 a.m. Central Daylight Time. The Annual Meeting will be a hybrid meeting, held in person at The Westin Chicago Lombard, 70 Yorktown Center, Lombard, IL 60148 and via the internet by visiting http://www.virtualshareholdermeeting.com/INGR2022. A formal notice of that meeting, proxy statement and proxy voting card are being made available to shareholders in accordance with U.S. Securities and Exchange Commission (“SEC”) regulations.INDEPENDENT AUDITORSKPMG LLP200 East Randolph Drive Chicago, IL 60601312.665.1000BOARD COMMUNICATIONInterested parties may communicate directly with any member of our Board of Directors, including the Chairman of the Board, or the non-management directors or the independent directors, as a group, by writing in care of Corporate Secretary, Ingredion Incorporated,5 Westbrook Corporate Center, Westchester, IL 60154.SAFE HARBORCertain statements in this Annual Report that are neither reported financial results nor other historical information are forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and Company plans and objectives to differ materially from those expressed in the forward-looking statements. A description of some of these risks and uncertainties is contained in our reports on Forms 10-K, 10-Q and 8-K filed with the SEC.This entire report was printed on recycled paper that contains 10% post-consumer waste. DFIN recycles all of the plates, waste paper and unused inks, further reducing its carbon footprint.Copyright © 2022 Ingredion Incorporated. All Rights Reserved.2220879_LOT COVER_4348_ING_AnnualReport.indd 2220879_LOT COVER_4348_ING_AnnualReport.indd 23/28/22 9:32 AM3/28/22 9:32 AM 3$11M*$74M*$103M*2018 2019 2020 2021 2021 CEO LETTER | HEALTHY & SUSTAINABLE GROWTHSTRATEGIC INITIATIVES TO FORGE GROWTHSPECIALTIES GROWTHBuild on our global innovation strengths aligning with current and future consumer trends and a changing customer landscapeCOMMERCIAL EXCELLENCEAccelerate and deliver value through customer co-creation and differentiated go-to-market capabilitiesPURPOSE/CULTURE/ VALUES/TALENTUnleash the potential of our people by embracing an inclusive culture supported by contemporary values and an inspiring purposeCOST COMPETITIVENESS THROUGH OPERATIONAL EXCELLENCEContinuously optimize our operations and global support functions to reduce waste, lower our costs and enable greater value delivery to our customersWe made great progress executing and operating to develop new ways of working and have transitioned our Cost Smart program to Cost Competitiveness. The program has achieved $170 million in cumulative run-rate savings, exceeding our initial $125 million target.THE DIFFERENCE COST COMPETITIVENESS CAN MAKECOST SMART POSITIONED OUR TEAMS WELL FOR THE CHALLENGES AND OPPORTUNITIES IN 2021 $170M**actioned run-rate savingsWe remain guided, united, and inspired by our purpose of bringing the potential of people, nature, and technology together to make life better as we fulfilled our role as an essential business, employer of choice, and responsible neighbor.““James P. Zallie, President & CEO 220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 3220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 33/22/22 10:02 PM3/22/22 10:02 PM 4CUSTOMER AND INVESTOR VALUE CREATION ROADMAP INGREDIENT SOLUTIONS THAT MAKE LIFE BETTERCustomer Co-Creation and Consumer Preferred InnovationPurpose and Performance Driven CultureSustainable and Trusted SourcingSupply Chain and Operational ExcellenceCore Food and Industrial IngredientsValue CreationValue CreationSTARCH-BASED TEXTURIZERSCLEAN AND SIMPLE INGREDIENTSPLANT-BASED PROTEINSSUGAR REDUCTION AND SPECIALTY SWEETENERSFOOD SYSTEMSDRIVINGROWTHHOW WE ENABLED CONSUMER-PREFERRED INNOVATION IN 2021We used consumer insights, sensory capabilities, proprietary research and teams of scientists to deliver innovative ingredient solutions that support today's lifestyles. Consumers want food and beverages that are closest to nature — made from ingredients that are understood and authentic. 1 Innova 2021; includes: starches, modified starches, sugar and syrups, high-intensity sweeteners, fibers, flours, plant-based proteins, thickeners and assorted fruit and vegetable essences, juices and purees.70% of global new product launches contain ingredients that Ingredion produces1120+countries served32Ingredion Idea Labs®500global food technology R&D scientists16024/7 technical support staff2,500virtual workshops1,800size of patent estate 220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 4220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 43/24/22 4:33 PM3/24/22 4:33 PM 5pounds of sugar (equivalent to 1,786 quadrillion calories) was avoided in consumer diets around the world with products* we sold to our customers1 BILLIONSEIZING OPPORTUNITIES TO CREATE SHAREHOLDER VALUE IN 20212021 HIGHLIGHTS | HEALTHY & SUSTAINABLE GROWTHnew plant-based product launches from Ingredion Idea Labs®14*This includes stevia, allulose and polyols. Sustainably source 100% of global waxy corn in supply chain by end of 202295%complete57%of growers33%completeSustainably source 100% of the corn, tapioca, potato, pulses and stevia crops in our supply chain by 2025Educating growers and implementing integrated pest management into 70% of our agricultural supply by end of 2027PARTNERING FORREGENERATIVE AGRICULTURE SUCCESSPhoto provided by Soil and Water Outcomes FundWe advanced our regenerative agriculture program through the Soil and Water Outcomes Fund by partnering with PepsiCo and Nutrien to incentivize growers to choose more sustainable practices for corn grown in Illinois. Our pilot program enrolled nearly 15,000 acres generating nearly 9,000 metric tons of CO2e reduction. We advanced our regenerative agriculture program through the Soil and Water Outcomes Fund by partnering with PepsiCo and Nutrien to incentivize growers to choose more sustainable practices for corn grown in Illinois. Our pilot program enrolled nearly 15,000 acres generating nearly 9,000 metric tons of CO2e reduction. 220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 5220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 53/24/22 7:19 PM3/24/22 7:19 PM CUSTOMIZED INGREDIENT SYSTEMSFood and beverage developers are constantly working to innovate their formulations to align with consumers’ tastes and preferences. This capability was initially established with our foundational acquisition of TIC Gums in 2017 and further strengthened with our acquisition of KaTech last year. Plant-based solutions are supported by consumers who are mindful of the environment, animal welfare, sustainability and digestive health. We're continually investing to help our customers formulate and capitalize on the trends shaping the food industry. With state-of-the-art facilities in Canada and Nebraska, our ingredient solutions are 100% sustainably sourced from North American farms, enabling manufacturers to create innovative, plant-based food and beverages.Our existing customer pipeline remains robust across many food categories, such as alternative dairy, plant-based meat, fortified bakery and healthy snacks.CREATING SUSTAINABLE VALUE: PLANT-BASED PROTEINSSTORIES OF SUCCESS | HEALTHY & SUSTAINABLE GROWTHgrowth in plant-based proteins in 2021121%6220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 6220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 63/22/22 10:33 PM3/22/22 10:33 PM 7THE STEVIA TRIFECTAIn 2020, Ingredion acquired PureCircle, the world’s leading producer and innovator of plant-based stevia sweeteners and flavors for the food and beverage industry. PureCircle has helped us reach new customers, reinvigorate our existing customers, significantly expanded our capabilities and strengthened our R&D pipeline. PureCircle continues to be a catalyst for growth in sugar reduction and specialty sweeteners that aligns with our strategy to create long-term shareholder value and drive growth opportunities for plant-based alternatives that are sustainable, good for the environment and taste great.CREATING HEALTHY VALUE: SUGAR REDUCTION More than farmers make up our verticallyintegrated stevia supply chain4,000Our new partnership with Amyris, a leading biotechnology company, to manufacture and market a great tasting Reb M sweetener produced sustainably by fermentation rounds out our stevia portfolio, forming the "perfectly sweet trifecta" of offerings in extracted, bio-fermented, and fermented Reb M.partnershipUnder Ingredion’s leadership, PureCircle’s net sales are up by more than60%on an annualized basis since 2020220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 7220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 73/23/22 12:21 AM3/23/22 12:21 AM 8OUR GROWTH ACROSS THE GLOBENORTH AMERICA$4.137MMof net sales$487MM operating incomeSOUTH AMERICA$1.057MMof net sales$138MM operating incomeWe are continuously innovating with our customers to leverage our global reach and local touch through our Ingredion Idea Labs® around the world. Our worldwide presence and ability to manage and certify our supply chain provides the ability to deliver consistent quality and on-trend solutions.27%specialties ingredients20%specialties ingredients18% adjusted for Argentina contribution to JV220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 8220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 83/22/22 10:03 PM3/22/22 10:03 PM 9GLOBAL GROWTH | HEALTHY & SUSTAINABLE GROWTHEUROPE, MIDDLE EAST, AFRICA$703MMof net sales$106MM operating incomeASIA-PACIFIC$997MMof net sales$87MM operating income55%specialties ingredients57%specialties ingredients220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 9220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 93/23/22 1:29 PM3/23/22 1:29 PM 101 See Financial Performance Metrics beginning on page 52 of the Annual Report on Form 10-K for a reconciliation of these metrics, which are not calculated in accordance with Generally Accepted Accounting Principles (GAAP), to the most comparable GAAP measures54%9%8%11%18%FOODBEVERAGEBREWINGANIMAL NUTRITIONOTHER3.6%10-YEAR ADJUSTED EPS COMPOUNDANNUAL GROWTH RATE110.7%ADJUSTED RETURN ON INVESTED CAPITAL1NET SALES (in millions)'21 $6,894'20 $5,987'19 $6,209OPERATING INCOME (in millions)'21 $310'20 $582'19 $664REPORTED DILUTED EARNINGS PER SHARE (in dollars)'21 $1.73'20 $5.15'19 $6.13ADJUSTED DILUTED EARNINGS PER SHARE1 (in dollars)'21 $6.67'20 $6.23'19 $6.65ADJUSTED RETURN ON INVESTED CAPITAL1 (percentage)'21 10.7%'20 10.8%'19 12.1%MARKET CAPITALIZATION as of 12/31/21 (in billions)'21 $6.4'20 $5.3'19 $6.3Dollars in millions, except per share amounts; years ended December 312021 % Change2020 % Change2019Reported Income Statement DataNet sales$6,894 15%$5,987 (4)%$6,209 Operating income 310 (47)% 582 (12)% 664 Diluted earnings per share 1.73 (66)% 5.15 (16)% 6.13 Balance Sheet and Other DataCash and cash equivalents328 665 264 Total assets 6,999 6,858 6,040 Total debt 2,046 2,186 1,848 Total equity (including redeemable equity) 3,225 3,072 2,772 Annual dividends declared per common share 2.58 2.54 2.51 Net debt to adjusted EBITDA ratio1 1.9 1.7 1.7 Cash provided by operations392 829 680 Mechanical stores expense 55 54 57 Depreciation and amortization 220 213 220 Capital expenditures and mechanical stores purchases 300 340 328SALES (BASED ON 2021 NET SALES)FINANCIAL HIGHLIGHTS | HEALTHY & SUSTAINABLE GROWTH220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 10220879_LOT BODY_4348_ING_AnnualReport-GlossyPages.indd 103/24/22 5:10 PM3/24/22 5:10 PM UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X(cid:84)(cid:84)
(cid:84) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
(cid:84) 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)
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Delaware
22-3514823
5 Westbrook Corporate Center, Westchester, Illinois 60154
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (708) 551-2600
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, par value $0.01 per share
INGR
New York Stock Exchange
X(cid:84)(cid:84)
X(cid:84)(cid:84)
X(cid:84)(cid:84)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:84) No (cid:84)
X(cid:84)(cid:84)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:84) No (cid:84)
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 (cid:84) No (cid:84)
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 (cid:84) No (cid:84)
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.
X(cid:84)(cid:84)
Large accelerated filer (cid:84)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) Accelerated filer (cid:84) Non-accelerated filer (cid:84) Smaller reporting company (cid:84) Emerging growth company (cid:84)
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. (cid:84)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that
prepared or issued its audit report Yes (cid:84) No (cid:84)
X(cid:84)(cid:84)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:84) No (cid:84)
The aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant on the last day of the most recently completed
second fiscal quarter (based upon the per share closing price of $90.50 as reported on the New York Stock Exchange on June 30, 2021, and, for
the purpose of this calculation only, the assumption that all of the registrant’s directors and executive officers are affiliates) was approximately
$6,055,000,000.
The number of shares outstanding of the registrant’s common stock, par value $0.01 per share, as of February 18, 2022 was 66,714,756
Documents Incorporated by Reference:
Information required by Part III (Items 10, 11, 12, 13 and 14) of this document is incorporated by reference to certain portions of the registrant’s
definitive Proxy Statement to be distributed in connection with its 2022 Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission within 120 days after December 31, 2021.
X(cid:84)(cid:84)
INGREDION INCORPORATED
1
TABLE OF CONTENTS TO FORM 10-K
PART I
ITEM 1
ITEM 1A
ITEM 1B
ITEM 2
ITEM 3
ITEM 4
PART II
ITEM 5
ITEM 6
ITEM 7
Business...................................................................................................3
Risk Factors .............................................................................................8
Unresolved Staff Comments ............................................................. 12
Properties ............................................................................................. 12
Legal Proceedings............................................................................... 13
Mine Safety Disclosures..................................................................... 13
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities....................... 13
[Reserved] ............................................................................................ 14
Management’s Discussion and Analysis of Financial Condition
and Results of Operations................................................................. 14
ITEM 7A
Quantitative and Qualitative Disclosures About Market Risk .... 20
ITEM 8
ITEM 9
ITEM 9A
ITEM 9B
ITEM 9C
PART III
ITEM 10
ITEM 11
ITEM 12
ITEM 13
Financial Statements and Supplementary Data ............................ 21
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .............................................. 47
Controls and Procedures ................................................................... 47
Other Information............................................................................... 47
Disclosure Regarding Foreign Jurisdictions that
Prevent Inspections ............................................................................ 47
Directors, Executive Officers and Corporate Governance ........... 48
Executive Compensation ................................................................... 48
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters ........................... 48
Certain Relationships and Related Transactions and Director
Independence...................................................................................... 48
ITEM 14
Principal Accountant Fees and Services ......................................... 48
PART IV
ITEM 15
ITEM 16
Exhibits and Financial Statement Schedules ................................. 48
Form 10-K Summary .......................................................................... 49
Signatures
................................................................................................................ 50
2
INGREDION INCORPORATED
For purposes of this report, unless the context otherwise requires,
all references herein to the “Company,” “Ingredion,” “we,” “us,”
and “our” shall mean Ingredion Incorporated and its consolidated
subsidiaries.
PART I
ITEM 1. Business
Our Company
Ingredion Incorporated (“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. We develop, produce and sell a variety of
food and beverage ingredients, primarily starches and sweeteners, for a
wide range of industries and we manage our operations geographically
on a regional basis, with our businesses and investments classified into
the following segments:
• North America – U.S., Mexico and Canada
• South America – Brazil, Argentina, Chile, Colombia, Ecuador, Peru and
Uruguay
• Asia-Pacific – South Korea, Thailand, China, Australia, Japan, New
Zealand, Indonesia, Singapore, the Philippines, Malaysia, India and
Vietnam
• Europe, Middle East and Africa (“EMEA”) – Pakistan, Germany, Poland,
the United Kingdom and South Africa
Our product lines include starches and sweeteners, animal feed products
and edible corn oil. Our starch-based products include both food-grade
and industrial starches, as well as biomaterials. Our sweetener products
include glucose syrups, high maltose syrups, high fructose corn syrup,
caramel color, dextrose, polyols, maltodextrins, and glucose and syrup
solids. Our products are derived primarily from the processing of corn
and other starch-based materials, such as tapioca, potato and rice.
Geographic Scope and Operations
We utilize our global network of manufacturing facilities to support
key global product lines and we have focused our recent investments
on expanding plant-based protein product lines, including pulse-based
concentrates, flours and isolates. Our manufacturing process is based on
a capital-intensive, two-step process that involves the wet-milling and
processing of starch-based materials, primarily corn. During the front-
end process, the starch-based materials are steeped in a water-based
solution and separated into starch and co-products such as protein,
fiber and germ used to produce corn oil. The starch is then either dried
for sale or further processed to make starches, sweeteners and other
ingredients that serve the particular needs of various industries.
Our North America region includes 22 manufacturing facilities producing
a wide range of starches, sweeteners, gum acacia, peas, and fruit and
vegetable concentrates. On November 3, 2020, we increased our 20
percent ownership to acquire 100 percent of the outstanding shares of
Verdient Foods, Inc (“Verdient”), which is a Canada-based producer of
pulse-based protein concentrates and flours from peas, lentils and fava
beans for human food applications.
Our South America region includes seven manufacturing facilities that
produce regular, modified, waxy tapioca starches, high fructose and high
maltose syrups and syrup solids, dextrins and maltodextrins, dextrose,
specialty starches, caramel color and sorbitol. On February 12, 2021, we
entered into an agreement with an affiliate of Grupo Arcor, an Argentine
food company, to establish Ingrear Holding S.A. (the “Arcor joint
venture”), a joint venture to combine and operate 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, we and Grupo Arcor completed
all closing conditions to finalize the transaction and formally establish
the Arcor joint venture, which is managed by a jointly appointed team of
executives.
Our Asia-Pacific region manufactures corn-based products in South
Korea, China and Thailand. We also manufacture tapioca-based and
rice-based products in Thailand and plant-based stevia sweetener
products in Malaysia and China. We supply tapioca, rice and plant-based
stevia sweetener products not only to our Asia-Pacific region, but also
to the rest of our global network. The region’s operations include ten
manufacturing facilities that produce modified, specialty, regular, waxy,
tapioca and rice starches, dextrins, glucose, high maltose syrup, plant-
based stevia sweeteners, dextrose, high fructose corn syrup and caramel
color.
We are continuing to make strategic investments in Asia. On July
1, 2020, we acquired 75 percent ownership of PureCircle Limited
(“PureCircle”), which is one of the leading producers and innovators of
plant-based stevia sweeteners and flavors for the food and beverage
industry. The acquisition brought global innovation and manufacturing
expertise, which we are leveraging with our global go-to-market model,
formulation capabilities and broad ingredient portfolio. On June 1, 2021,
we made additional investments in stevia by entering an agreement with
Amyris, Inc. (“Amyris”) for certain exclusive commercialization rights to
Amyris’ rebaudioside M by fermentation product, the exclusive licensing
of the product’s manufacturing technology and a 31 percent ownership
stake in a joint venture for the product (the “Amyris joint venture”).
Our EMEA region includes six manufacturing facilities that produce
modified and specialty starches, glucose and dextrose in Pakistan,
Germany and the United Kingdom. On April 1, 2021, we acquired
KaTech, a German-based provider of advanced texture and stabilization
solutions to the food and beverage industry.
Additionally, we utilize a network of tolling manufacturers in various
regions in the production cycle of certain specialty starches. In general,
these tolling manufacturers produce certain basic starches for us and
we in turn complete the manufacturing process of starches through our
finishing channels.
We believe our approach to production and service, which focuses on
local management and production improvements of our worldwide
operations, provides us with a unique understanding of the cultures and
product requirements in each of the geographic markets in which we
operate. This allows us to bring added value to our customers through
tailored, innovative solutions. At the same time, we believe that our
corporate functions give us the ability to identify synergies and maximize
the benefits of our global presence.
Products
Our portfolio of products is generally classified into the following
categories: Starch Products, Sweetener Products, and Co-products and
others. Within these categories, a portion of our products are considered
specialty ingredients and we refer to the remainder of our products as
core ingredients. We describe these three general product categories
in more detail below, along with a broader discussion of specialty
ingredients within the product portfolio.
Starch Products: Our starch products represented approximately 45
percent, 46 percent and 46 percent of our net sales for each of 2021,
2020 and 2019, respectively. Starches are an important component in
a wide range of processed foods, where they are used for adhesion,
clouding, dusting, expansion, fat replacement, freshness, gelling,
glazing, mouthfeel, stabilization and texture. Cornstarch is sold to
cornstarch packers for sale to consumers. Starches are also used in paper
production to create a smooth surface for printed communications and
to improve strength in recycled papers. Specialty starches are used for
enhanced drainage, fiber retention, oil and grease resistance, improved
printability and biochemical oxygen demand control. The textile industry
uses starches and specialty starches for sizing (abrasion resistance) to
provide size and finishes for manufactured products. Industrial starches
are used in the production of construction materials, textiles, adhesives,
pharmaceuticals and cosmetics, as well as in mining, water filtration,
and oil and gas drilling. Specialty starches are used for biomaterial
applications including biodegradable plastics, fabric softeners and
detergents, hair and skin care applications, dusting powders for surgical
gloves, and in the production of glass fiber and insulation.
INGREDION INCORPORATED
3
Sweetener Products: Our sweetener products represented approximately
33 percent, 35 percent and 36 percent of our net sales for 2021, 2020
and 2019, respectively. Sweeteners include products such as glucose
syrups, high maltose syrup, high fructose corn syrup, dextrose, polyols,
maltodextrin, glucose syrup solids and non-GMO (genetically modified
organism) syrups. Our sweeteners are used in a wide variety of food and
beverage products, such as baked goods, snack foods, canned fruits,
condiments, candy and other sweets, dairy products, ice cream, jams
and jellies, prepared mixes, table syrups, soft drinks, fruit-flavored drinks
and many others. These sweetener products also offer functionality in
addition to sweetness, such as texture, body and viscosity; help control
freezing points, crystallization and browning; add humectancy (ability
to add moisture) and flavor; and act as binders. Our high maltose syrups
speed the fermentation process, allowing brewers to increase capacity
without adding capital. Dextrose has a wide range of applications in
the food and confection industries, in solutions for intravenous (“IV”)
and other pharmaceutical applications, and in numerous industrial
applications like wallboard, biodegradable surface agents and moisture
control agents. Our specialty sweeteners provide affordable, natural,
reduced calorie and sugar-free solutions for our customers.
Co-products and others: Co-products and others accounted for
approximately 22 percent, 19 percent and 18 percent of our net sales for
2021, 2020 and 2019, respectively. Refined corn oil (from germ) is sold
to packers of cooking oil and to producers of margarine, salad dressings,
shortening, mayonnaise and other foods. Corn gluten feed is sold as
animal feed. Corn gluten meal is sold as high-protein feed for chickens,
pet food and aquaculture. Our other products include fruit and vegetable
products, such as concentrates, purees and essences, as well as pulse
proteins and hydrocolloids systems and blends.
Specialty Ingredients within the product portfolio: Within our three
product portfolios, we consider certain of our products to be specialty
ingredients. Specialty ingredients accounted for approximately 33
percent of our net sales for 2021, up from 32 percent and 30 percent
for 2020 and 2019, respectively. These ingredients deliver more
functionality than our other products and add additional customer value.
Our specialty ingredients are aligned with growing market and consumer
trends such as health and wellness, clean-label, simple ingredients,
affordability, indulgence and sustainability.
Plant-based Proteins: These specialty pulse-based protein ingredients
bring solutions made from lentils, chickpeas, fava beans and peas.
They add protein, dietary fiber, micronutrients and texture to food
and beverages.
Core ingredients within the product portfolio: We refer to the
remainder of our starch products, sweetener products and co-products
that do not fall into specialty ingredients, as defined above, as core
ingredients. Core ingredients accounted for approximately 67 percent of
our net sales for 2021, down from 68 percent and 70 percent in 2020
and 2019, respectively.
Competition
The starch and sweetener industry is highly competitive. Competition
within our markets is largely based on product functionality, price and
quality. Many of our products are viewed as basic ingredients that
compete with virtually identical products and derivatives manufactured
by other companies in the industry. The U.S. is a highly competitive
market with operations by other starch processors, several of which are
divisions of larger enterprises. Some of these competitors, unlike us,
have vertically integrated their starch processing and other operations.
Competitors include Archer-Daniels-Midland Company (“ADM”),
Cargill, Inc. (“Cargill”), Tate & Lyle Ingredients Americas, Inc. (“Tate &
Lyle”) and several others. Our operations in Mexico and Canada face
competition from U.S. imports and local producers including ALMEX, a
Mexican joint venture between ADM and Tate & Lyle. In South America,
Cargill conducts starch processing operations in Brazil and Argentina. We
also face competition from Roquette Frères S.A. (“Roquette”) primarily
in our EMEA, North America and Asia-Pacific regions. Many smaller local
corn and tapioca processors also operate in some of our markets.
Several of our products also compete with products made from raw
materials other than corn. High fructose corn syrup and monohydrate
dextrose compete principally with cane and beet sugar products. Co-
products such as corn oil and gluten meal compete with products of the
corn dry milling industry and with soybean oil, soybean meal and other
products. Fluctuations in prices of these competing products may affect
prices of, and profits derived from, our products.
We drive growth for our specialty ingredients portfolio by leveraging the
following growth platforms:
Customers
Starch-based Texturizers: These ingredients support the structure
and texture behind great eating experiences. Products are made
from corn, potato, rice and tapioca, and offer a multitude of textures,
functionalities and stability during processing and shelf life to a
broad range of food products.
g
: These functional ingredients address
Clean and Simple Ingredients
p
the clean label trend for finished products made with shorter lists
of food ingredients that have achieved broad consumer acceptance.
From food and beverages to pet food and personal care, consumers
are looking for clean, simple, natural and authentic products
that they can identify and trust. The broad portfolio of clean
label ingredients includes starches, sweeteners, flours, nutrition
ingredients, emulsifiers and fruit and vegetable concentrates.
y
g
p
: These solutions provide
Sugar Reduction and Specialty Sweeteners
sweetness or functional replacement for sugar in reduced-calorie
and sugar-free foods and beverages without sacrificing quality and
consistency. These specialty ingredients are made from a variety of
GMO and non-GMO raw material bases and include such ingredients
as plant-based stevia sweeteners, polyols, dextrose and allulose, a
rare sugar.
: These systems deliver ingredient combinations that
Food Systems
y
simplify a customer’s production cycle. A food system can address an
array of functional challenges including mouthfeel/texture for dairy
and alternative dairy products, thickening of sauces, stabilization in
high-protein drinks, gelling for fruit fillings, film formers for candy
shells, foaming and frothing, adding soluble fibers and nutritional
ingredients, adhering particles to breads, and emulsification of
flavors.
4
INGREDION INCORPORATED
We supply a broad range of customers in over 60 industries worldwide.
The following table shows the approximate portion of total net sales by
industry for each of the industries we served in 2021:
Industries Served
Total
Ingredion
North
America
South
America
Asia
Pacific
Food
Beverage
Brewing
Food and Beverage
Ingredients
Animal Nutrition
Other
54%
53%
46%
58%
9
8
71
11
18
13
8
74
11
15
4
17
67
17
16
5
3
66
5
29
EMEA
67%
1
—
68
7
25
Total Net sales
100%
100%
100%
100%
100%
No customer accounted for 10 percent or more of our net sales in 2021, 2020 or 2019.
Raw Materials
Corn (primarily yellow dent) is the primary basic raw material we use to
produce starches and sweeteners. The price of corn, which is determined
by reference to prices on the Chicago Board of Trade, fluctuates as a
result of various factors including: farmers’ planting decisions, climate,
domestic and foreign government policies (including those related to the
production of ethanol), livestock feeding, shortages or surpluses of world
grain supplies and trade agreements. We use chips and slices from
potato processors as the primary raw material to manufacture potato-
based starches. We also use tapioca, gum, rice, plant-based stevia, peas
and sugar as raw materials. The supply of raw materials has been, and is
anticipated to continue to be, adequate for our needs.
Corn is also grown in other areas of the world, including China, Brazil,
Europe, Argentina, Mexico, South Africa, Canada and Pakistan. Our
subsidiaries outside the U.S. utilize both local supplies of corn and corn
imported from other geographic areas, including the U.S. The supply of
corn for these subsidiaries is also generally expected to be adequate for
our needs. Corn prices for our non-U.S. subsidiaries generally fluctuate as
a result of the same factors that affect U.S. corn prices.
We also utilize specialty grains such as waxy and high amylose corn,
as well as proprietary seed varietals in our operations. In general, the
planning cycle for our specialty grain sourcing begins three years in
advance of the anticipated delivery of the specialty corn since the
necessary seed must be grown in the season before we contract to buy
the grain. To secure these specialty grains at the time of our anticipated
needs, we contract with certain farmers to grow the specialty corn
approximately two years in advance of delivery. These specialty grains
have a higher cost due to their more limited supply and require longer
planning cycles to mitigate the risk of supply shortages.
Due to the competitive nature of our industry and the availability of
substitute products not produced from corn, such as sugar from cane
or beets, end-product prices may not necessarily fluctuate in a timely
manner that correlates to raw material costs of corn.
We use derivative hedging contracts to protect the gross margin of
our firm-priced business primarily in North America, and we follow a
policy of hedging our exposure to commodity price fluctuations with
commodities futures and options contracts primarily for certain of our
North American corn purchases. Other operations may or may not be
hedged at any given time based on management’s judgment as to the
need to fix the costs of our raw materials to protect our profitability.
Outside North America, we generally enter short-term commercial sales
contracts and adjust our selling prices based upon the local raw material
costs. See Item 7A. Quantitative and Qualitative Disclosures about
Market Risk for additional information.
Other raw materials used in our manufacturing processes include
chips and slices from potato processors as the primary raw material to
manufacture potato-based starches. We also use tapioca, particularly in
certain of our production processes in the Asia-Pacific region. In addition
to corn, potatoes, and tapioca, we use pulses, gums, rice, plant-based
stevia, yellow peas and sugar as raw materials, among others.
Research and Development
Our global network of approximately 500 scientists creates innovative
food solutions in 32 Ingredion Idea Labs® with headquarters in
Bridgewater, New Jersey. Activities at Bridgewater include plant
science and physical, chemical and biochemical modifications to food
formulations, food sensory evaluation and development of non-
food applications such as starch-based biopolymers. In addition, we
have product application technology centers that direct our product
development teams worldwide to create product application solutions
to better serve the ingredient needs of our customers. Product
development activity is focused on developing product applications
for identified customer and market needs. Through this approach, we
have developed value-added products for use by customers in various
industries. We usually collaborate with customers to develop the desired
product application either in the customers’ facilities, our technical
service laboratories, or on a contract basis.
Our research and development (“R&D”) is supported by our marketing,
product technology, and technology support staff, as well as technical
support services to assist our customers with application development
and co-creation. We invest in R&D and digital transformation solutions
to support new product development and innovation, to enable greater
value delivery to our customers, to reduce waste and lower our costs and
to drive operational excellence.
Sales and Distribution
Our salaried sales personnel, who are generally dedicated to customers
in a geographic region, sell our products directly to manufacturers and
distributors. In addition, we have staff that provides technical support
to our sales personnel on an industry basis. We generally contract
with trucking companies to deliver our bulk products to customer
destinations. In North America, we generally use trucks to ship to nearby
customers. For those customers located considerable distances from our
manufacturing facilities, we primarily use either rail or a combination of
railcars and trucks to deliver our products.
Patents and Trademarks
As of December 31, 2021, we owned more than 1,800 patents and
patents pending, which relate to a variety of products and processes, as
well as a number of established trademarks under which we market our
products. We also have the right to use other patents and trademarks
pursuant to patent and trademark licenses. We do not believe that any
individual patent or trademark is material to our business.
Human Capital Resources
As of December 31, 2021, Ingredion employed approximately 12,000
employees, of which, approximately 2,500 were located in the U.S.
Approximately 30 percent of our worldwide employees are members of
labor unions and approximately 29 percent of our U.S. employees are
members of labor unions.
The following table provides additional information about our employees
as of December 31, 2021:
Region
North America
South America
Asia-Pacific
EMEA
Total Ingredion
Approximate
Number of
Employees
Percentage of
Non-unionized
Employees
Percentage
of Unionized
Employees
5,000
3,000
2,500
1,500
12,000
79
39
95
62
21
61
5
38
We believe that our future growth and innovation depend on a company
culture that values and promotes diversity and inclusion. Our diverse and
inclusive workforce fuels our high-performance culture and attracts and
helps to retain top talent.
We leverage the diverse experience and skills of our Business Resource
Groups (“BRGs”) to help inform our business strategy. Our BRGs, such
as Alliance of Black Employees, Women of Ingredion Network and PRIDE
for our LGBTQ+ cohorts, are integral in maintaining and improving a
culture of inclusion and belonging at Ingredion. BRGs, which we have
implemented across our global operations, play an essential role in
connecting employees across regions, providing them with opportunities
to enhance cultural awareness and enable collaboration, and inform our
strategies for a broad consumer marketplace.
In addition, we have joined the Paradigm for Parity® coalition, pledging
our commitment to achieving gender parity in corporate leadership
roles by 2030. As of December 31, 2021, women accounted for more
than 25 percent of both Ingredion’s Board of Directors and its Executive
Leadership team. We have committed under the Paradigm for Parity
Action Plan to significantly increase the number of women in senior
operating roles.
Additionally, Ingredion has been included for five years in the Bloomberg
Gender-Equality Index (“GEI”), a modified market capitalization-weighted
index that aims to track the performance of public companies committed
to transparency in gender-data reporting. This reference index measures
gender equality across five pillars: female leadership & talent pipeline,
equal pay & gender pay parity, inclusive culture, anti-sexual harassment
policies and pro-women brand. The 2022 GEI included 418 companies
INGREDION INCORPORATED
5
across 45 countries and regions, including firms headquartered in
Colombia and Uruguay for the first time.
To continue to attract, develop and retain top talent, Ingredion employs
a variety of tools and strategies to assess capabilities, identify skills gaps
and provide growth and advancement opportunities based on the needs
of the business and our employees. Our total approach to compensation
and benefits rewards our employees based on their respective overall
contribution to the business. In addition, we regularly assess employee
engagement levels and proactively seek continuous improvement in the
workplace.
Government Regulation
As a manufacturer and marketer of food items and items for use in the
pharmaceutical industry, our operations and the use of many of our
products are subject to various federal, state, foreign and local statutes
and regulations, including the Federal Food, Drug and Cosmetic Act and
the Occupational Safety and Health Act. We and many of our products
are also subject to regulation by various government agencies, including
the U.S. Food and Drug Administration. Among other things, applicable
regulations prescribe requirements and establish standards for product
quality, purity and labeling. Failure to comply with one or more
regulatory requirements can result in a variety of sanctions, including
monetary fines. No such fines of a material nature were imposed on us in
2021. We may also be required to comply with federal, state, foreign and
local laws regulating food handling and storage. We believe these laws
and regulations have not negatively affected our competitive position.
Our operations are also subject to various federal, state, foreign and local
laws and regulations for environmental matters, including air and water
quality, as well as other regulations intended to protect public health
and the environment. We operate industrial boilers that fire natural gas,
coal, or biofuels to operate our manufacturing facilities. Those boilers,
along with product dryers, are our primary source of greenhouse gas
emissions.
During 2021, we spent approximately $27 million for environmental
control and wastewater treatment equipment to be incorporated
into existing facilities and in planned construction projects. We
currently anticipate that we will invest approximately $29 million for
environmental facilities and programs in 2022.
Based on current laws and regulations and their enforcement and
interpretation, we do not expect that the costs of future environmental
compliance will be a material expense, although there can be no
assurance that we will remain in compliance or that the costs of
remaining in compliance will not have a material adverse effect on our
future financial condition and results of operations.
Additional Information
Our Internet address is www.ingredion.com. We make available, free
of charge through our Internet website, our annual report on Form 10-
K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended. These reports are made available as soon as reasonably
practicable after we electronically file them with or furnish them to
the Securities and Exchange Commission. Our corporate governance
guidelines, board committee charters and code of ethics are posted
on our website, the address of which is www.ingredion.com, and will
be made available in print without charge to any stockholder upon
request in writing to Ingredion Incorporated, 5 Westbrook Corporate
Center, Westchester, Illinois 60154, Attention: Corporate Secretary. The
information on, or accessible through, our website is not a part of, and is
not incorporated by reference into, this report.
Information about our Executive Officers
annually by the Board to serve until the next annual election of officers
and until their respective successors have been elected and have
qualified, or until their earlier resignation or removal by the Board.
James P. Zallie, 60
President and Chief Executive Officer since January 1, 2018. Prior
to assuming his current position, Mr. Zallie served as Executive Vice
President, Global Specialties and President, Americas from January 2016
to December 2017. Mr. Zallie previously served as Executive Vice
President, Global Specialties and President, North America and EMEA
from January 2014 to December 2015; Executive Vice President, Global
Specialties and President, EMEA and Asia-Pacific from February 2012
to January 2014; and Executive Vice President and President, Global
Ingredient Solutions from October 2010 to January 2012. Mr. Zallie
previously served as President and Chief Executive Officer of the
National Starch business from January 2007 to September 2010, when
it was acquired by Ingredion. Mr. Zallie worked for National Starch for
more than 27 years in various positions of increasing responsibility,
progressing from technical to marketing and international business
management positions. Mr. Zallie also serves as a director of Sylvamo
Corporation, a global producer of uncoated papers and as a director
of Northwestern Medicine Lake Forest Hospital, a not-for-profit
organization. Mr. Zallie earned a bachelor’s degree in food science from
Pennsylvania State University and both a master’s degree in food science
and technology and a master’s degree in finance from Rutgers University.
Valdirene Bastos-Licht, 54
Senior Vice President and President, APAC and Global Head of Pharma,
Home and Beauty since October 1, 2020. Previously, Ms. Bastos-Licht
served as Senior Vice President and President, Asia-Pacific from March
2018 to September 2020. Ms. Bastos-Licht served as Senior Vice
President, Asia-Pacific of Solvay SA’s Euro Novecare operation, from
August 2012 to February 2018. Solvay is a Belgian leader in the specialty
chemical industry. The Euro Novecare operation provides chemicals for
home and personal care, agriculture, coatings, oil and gas, and industrial
applications. Prior to that, she served as Vice President and General
Manager – Brazil of Cardinal Health Nuclear Pharmacy – Brazil from
August 2011 to August 2012. Ms. Bastos-Licht began her career with
BASF, a producer of chemicals and related products, where she spent 21
years in various positions of increasing complexity in IT, operational and
strategic supply chain and global strategic and operational marketing,
most recently serving as Vice President, General Manager Care Chemicals
Division – South America. Ms. Bastos-Licht holds both a bachelor’s and
a licensing degree in mathematics from Fundacao Santo Andre in Brazil
and a Master of Science degree in management from the MIT Sloan
School of Management.
Larry Fernandes, 57
Senior Vice President and Chief Commercial & Sustainability Officer of
Ingredion since July 17, 2018. Prior to assuming his current position,
Mr. Fernandes served as Senior Vice President and Chief Commercial
Officer since March 2018. Previously, Mr. Fernandes served as President
and General Director, Mexico from January 2014 to February 2018;
Vice President and General Manager, U.S./Canada from May 2013 to
December 2013; Vice President, Global Beverage and General Manager,
Sweetener and Industrial Solutions, U.S./Canada from November 2011 to
April 2013; and Vice President Food and Beverage Markets from October
2009 to October 2011. Prior to that, he served in several roles of
increasing responsibility in the Commercial organization from May 1990
to September 2009. Prior to joining Ingredion, Mr. Fernandes worked at
QuakerChem Canada Ltd. as a Technical Sales Manager. Mr. Fernandes
was a member of the executive board of Nueva Vision para el Desarrollo
Agroalimentario de Mexico A.C. (Mexican representation of a New Vision
for Agriculture, a global initiative of the World Economic Forum) and a
member of the executive board of IDAQUIM (representing Corn Refining
in Mexico). Mr. Fernandes was also a member of the board of directors
of the Corn Refiners Association (CRA) and the board of directors of
the International Stevia Council (ISC). Mr. Fernandes holds a bachelor’s
degree in chemical engineering with a minor in accounting from McGill
University in Montreal, Canada.
Set forth below, as of January 31, 2022, is information about all of our
executive officers, indicating their positions and offices with Ingredion
and other business experience. Our executive officers are elected
Davida M. Gable, 55
Vice President and Corporate Controller since October 1, 2021. Ms.
Gable joined Ingredion from Wayfair Inc., an e-commerce company,
6
INGREDION INCORPORATED
where she served as Head of Global Accounting and External Reporting
from August 2020 to September 2021. Prior to her service in that
position, she was Assistant Controller and Chairperson of the SEC
Disclosure Committee at AK Steel Holdings Corporation from May 2013
to July 2020. Ms. Gable also served as Director, Finance and Planning,
for Convergys Corporation, a provider of business process outsourcing
services, from January 1997 to July 2003. She began her career at
Deloitte, a global provider of audit and related services, in Chicago
before joining The Quaker Oats Company, a manufacturer of grain-based
foods and other food and beverage products, in Corporate Accounting
and Treasury. Ms. Gable holds a bachelor’s degree in accounting from
Indiana University and a master’s degree from the Kellogg School of
Management, Northwestern University. Ms. Gable is both a Certified
Public Accountant and a Certified Treasury Professional.
James D. Gray, 55
Executive Vice President and Chief Financial Officer since March 1, 2017.
Prior to assuming his current position, he served as Vice President,
Corporate Finance and Planning, from April 2016 to February 2017. Mr.
Gray previously served as Vice President, Finance, North America from
January 2014, when he joined Ingredion, to March 2016. Prior to that
service, Mr. Gray was employed by PepsiCo, Inc. from December 2004
to January 2014. He served as Chief Financial Officer, Gatorade division
and Vice President Finance of PepsiCo, Inc. from August 2010 to January
2014 and as Vice President Finance PepsiCo Beverages North America
from December 2004 to August 2010. Mr. Gray holds a bachelor’s
degree in business administration from the University of California,
Berkeley and a master’s degree from the Kellogg School of Management,
Northwestern University.
Tanya Jaeger de Foras, 51
Senior Vice President, Chief Legal Officer, Corporate Secretary and Chief
Compliance Officer since November 2021. Prior to joining Ingredion, Ms.
Jaeger de Foras was a leader in the global law department of Whirlpool
Corporation, a leading kitchen and laundry appliance company,
first serving as Chief Legal Officer for its EMEA business unit since
2015 and based in Italy. In 2019, Ms. Jaeger de Foras was appointed
Deputy General Counsel and Chief Compliance Officer and relocated
to the company’s global headquarters in Benton Harbor, Michigan.
From 2012 to 2015, Ms. Jaeger de Foras served as Deputy General
Counsel at Luxottica S.p.A (now EssilorLuxottica), an international
designer, manufacturer and distributor of ophthalmic lenses, frames
and sunglasses, as well as EMEA Regional General Counsel. Ms. Jaeger
de Foras previously worked for ten years at Pfizer, Inc., a leading
pharmaceutical and biotechnology company, holding roles of increasing
responsibility leading to her appointment as Assistant General Counsel
and Chief Counsel for the company’s $7 billion specialty care European
business unit. Jaeger de Foras began her legal career at law firm Sullivan
& Cromwell LLP, an international law firm, in New York and Paris. Ms.
Jaeger de Foras earned a bachelor’s degree in foreign service from
Georgetown University and a J.D. from Harvard Law School.
Jorgen Kokke, 53
Executive Vice President and President, Americas since October
2020. Prior to assuming his current position, Mr. Kokke served as Vice
President, Global Specialties and President, North America from February
2018 until September 2020. Mr. Kokke previously served as Senior Vice
President and President, Asia-Pacific and EMEA from January 2016 to
February 2018. Previously, Mr. Kokke served as Senior Vice President and
President, Asia-Pacific from September 2014 to December 2015 and as
Vice President and General Manager, Asia-Pacific from January 2014 to
September 2014. Prior to that role, Mr. Kokke served as Vice President
and General Manager, EMEA since joining National Starch (acquired
by Ingredion October 2010) in March 2009. He earlier served as a
Vice President of CSM NV, a global food ingredients supplier, where he
had responsibility for the global Purac Food & Nutrition business from
2006 to 2009 and as Director of Strategy and Business Development
at CSM NV. Prior to that service, he held a variety of roles of increasing
responsibility in sales, business development, marketing and general
management in Unilever’s Loders Croklaan Group, an international oil
and fats business. Mr. Kokke holds a master’s degree in economics from
the University of Amsterdam.
Pierre Perez y Landazuri, 53
Senior Vice President, Corporate Strategy, Specialties and President
EMEA since September 22, 2021. Prior to assuming his current position,
Mr. Perez y Landazuri served as Senior Vice President Texture, Protein
& Performance Specialties and President EMEA from January 2021 to
September 2021. Previously, Mr. Perez y Landazuri served as Senior
Vice President and President, EMEA from January 2018 to January
2021 and as Vice President and General Manager, EMEA for Ingredion’s
subsidiary, Ingredion Germany GmbH, from April 2016 to December
2017. Before joining Ingredion, Mr. Perez y Landazuri was employed
by CP Kelco, a global producer of specialty hydrocolloid ingredients,
from September 2000 to March 2016. He most recently served as Vice
President, Asia-Pacific from January 2014 to March 2016 in Shanghai,
China and Singapore. Prior to those roles, he served as Vice President &
General Manager, Asia-Pacific from June 2011 to December 2013 and
as Marketing & Strategy Director from January 2010 to May 2011 in
Shanghai. Mr. Perez y Landazuri previously held a number of marketing,
sales and product management roles at CP Kelco, a nature-based
ingredient solutions company, in Paris, France. Early in his career, he was
employed by chemical companies Rohm and Haas, BASF and Hercules in
sales, marketing and engineering positions. Mr. Perez y Landazuri holds
a master’s degree in chemical process engineering from ENSCP Graduate
School of Chemistry (now Chimie ParisTech) in Paris, France.
Eric Seip, 54
Senior Vice President, Global Operations and Chief Supply Chain Officer
since January 11, 2021. In this role, Mr. Seip leads global manufacturing,
supply chain and procurement excellence while driving world-class
safety, delivering cost savings through efficiency management and
accelerating digital transformation. Additionally, Mr. Seip develops,
implements and maintains supply chain strategies to ensure the
continued identification and assimilation of innovative thinking and best
practices. Mr. Seip brings more than 30 years of global operations and
supply chain experience in asset expansions, integrations, turnarounds,
operations strategy, Lean Six Sigma and change management. Before
joining Ingredion, Mr. Seip was senior vice president, global procurement
and supply chain at ChampionX (formerly Ecolab), a global oil and
gas services company, where he was responsible for more than 30
chemical plants. Mr. Seip holds a bachelor’s degree in chemistry from the
University of Pittsburgh and earned a master’s degree in finance from
Pepperdine University.
Nancy Wolfe, 53
Senior Vice President and Chief Human Resources Officer since January
24, 2022. Ms. Wolfe brings more than 20 years of extensive experience
to the position from her service in senior-level HR roles at Bayer Crop
Science (formerly Monsanto), including Senior Vice President, Human
Resources from June 2018 to January 2022 and Vice President and Chief
of Staff from August 2013 through June 2018. At Bayer Crop Science,
Ms. Wolfe developed business transformation and global restructuring
plans that drove significant cost improvements and growth. Ms. Wolfe
serves as vice chair of the board of directors for The Boys & Girls Clubs
of Greater St. Louis and is a member of Washington University’s Olin
Business School Alumni Board. Ms. Wolfe holds a bachelor’s degree
in finance and a bachelor’s degree in business administration from
Illinois State University and earned a master’s degree from Washington
University in St. Louis.
Jeremy Xu, 54
Senior Vice President and Chief Innovation Officer since October 1, 2020.
Prior to joining Ingredion, Mr. Xu worked for Royal DSM, a multinational
corporation active in fields of health, nutrition and materials, from May
2016 to September 2020. At that company, he served as President,
Human Nutrition and Health, a multibillion-dollar global business unit
including vitamins, carotenoids, nutritional lipids and nutraceuticals,
and was based in Basel, Switzerland. Prior to that role, Mr. Xu worked
for DuPont, a leading global manufacturer of chemicals, electronic and
communication technologies, performance materials, coatings and
color technologies, safety and protection materials, and agriculture and
nutrition ingredients, from April 2007 to April 2016 and from May 2000
to April 2006 in a variety of management roles in both the United States
and China. Mr. Xu has a bachelor’s degree in biology and bioengineering
from Zhejiang University in Hangzhou, China, a master’s degree in plant
physiology from The Chinese University of Hong Kong, a doctorate in
INGREDION INCORPORATED
7
biochemistry and molecular biology from Purdue University and a Master
of Business Administration degree from Purdue University. Mr. Xu speaks
English, Mandarin and Cantonese.
counterparty failures in our supply chain, customer network or otherwise
that would negatively impact our operations. These risks individually and
in the aggregate could have a material adverse effect on our operating
results, financial condition, cash flows and prospects.
ITEM 1A. Risk Factors
Our business and assets are subject to varying degrees of risk and
uncertainty. The following are factors that we believe could cause our
actual results to differ materially from expected and historical results.
Additional risks that are currently unknown to us or that we currently
view as immaterial may also impair our business or adversely affect
our financial condition or results of operations. In addition, forward-
looking statements within the meaning of the federal securities laws
that are contained in this Form 10-K or in our other SEC filings or public
statements may be subject to the risks described below as well as other
risks and uncertainties. See the cautionary notice regarding forward-
looking statements in Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Risks Related to Our Business and Our Industry
The continued spread of coronavirus disease 2019 (“COVID-19”), is
adversely affecting, and is expected to continue to adversely affect,
demand for our products and our financial results.
In December 2019, a novel strain of COVID-19 was reported to have
surfaced in Wuhan, China. COVID-19 has since spread to over 100
countries, including every state in the United States. On March 11, 2020,
the World Health Organization declared COVID-19 a pandemic and on
March 13, 2020, the U.S. declared a national emergency with respect to
COVID-19.
Our global operations expose us to risks associated with COVID-19.
We continue to monitor the health of the employees in each of our 45
manufacturing facilities, domestically and outside the U.S., as COVID-
19-related illness at a particular location could impact continued
manufacturing operations at that location.
Foreign governmental organizations and governmental organizations
at the national, state and local levels in the U.S. have taken various
actions to combat the spread of COVID-19, including, from time to time,
imposing stay-at-home orders that effectively close “non-essential”
businesses and their operations. Because we manufacture food
ingredients, our operations are currently considered “essential” under
most current COVID-19 government regulations, thus permitting us to
continue operations at our facilities and sales activities consistent with
those regulations.
Certain of our customers, however, have been deemed to be “non-
essential” industries and businesses under governmental regulations.
The industries and businesses deemed “non-essential” vary by country
and region. For example, Mexico declared one or more brewing
producers as “non-essential” industries for a period of time during the
pandemic in 2020. Our customers in affected industries are not able
to produce goods during the government-mandated closures, which
could adversely affect customer demand for our products. Further,
government-enacted stay-at-home orders have significantly limited
the end-consumers’ ability in the U.S. and foreign markets to purchase
certain food or beverage products due to limitations on the operations of
restaurants, bars and regionally specific sales channels. We expect that,
to the extent that these limitations continue to be imposed from time
to time, such limitations could continue to negatively affect customer
demand for our products, further impacting our revenues and our
operating results. Further, any inability by our customers to produce
goods may delay our customers’ ability to pay outstanding receivables,
which would adversely impact our cash flow from operations and
working capital.
In addition, COVID-19 has impacted and may further impact the broader
economies of affected countries, including negatively affecting economic
growth, the proper functioning of financial and capital markets, foreign
currency exchange rates and interest rates. Such risks include, in addition
to those described above, negative impacts on our cost of and access to
capital, pressure to extend our customers’ payment terms, insolvency
of our customers resulting in increased provisions for credit losses and
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INGREDION INCORPORATED
Changes in consumer preferences and perceptions may lessen
the demand for our products, which could reduce our sales and
profitability and harm our business.
Food products are often affected by changes in consumer tastes,
national, regional and local economic conditions and demographic
trends. For instance, changes in prevailing health or dietary preferences
causing consumers to avoid food products containing sweetener
products, including high fructose corn syrup, in favor of foods that
are perceived as being healthier, could materially reduce our sales
and profitability. Increasing concern among consumers, public health
professionals and government agencies about the potential health
concerns associated with obesity and inactive lifestyles (reflected, for
instance, in taxes designed to combat obesity, which have been imposed
recently in North America) represent a significant challenge to some
of our customers, including those engaged in the food and soft drink
industries, and could materially affect demand for our products.
Current economic conditions may adversely impact demand for our
products, reduce access to credit, affect investment returns and cause
our customers and others with whom we do business to suffer financial
hardship, all of which could adversely impact our business, results of
operations, financial condition and cash flows.
Economic conditions in South America, the European Union and many
other countries and regions in which we do business have experienced
various levels of weakness over the last few years and may continue
to do so for the foreseeable future. General business and economic
conditions that could affect us include barriers to trade (including as
a result of tariffs, duties and border taxes, among other factors), the
strength of the economies in which we operate, unemployment, inflation
and fluctuations in debt markets. While currently these conditions
have not impaired our ability to access credit markets and finance our
operations, we are subject to the risk of a further deterioration in the
financial markets.
There could be a number of other effects from these economic
developments on our business, including reduced consumer demand for
products, pressure to extend our customers’ payment terms, insolvency
of our customers resulting in increased provisions for credit losses,
decreased customer demand, including order delays or cancellations and
counterparty failures negatively impacting our operations.
In connection with our defined benefit pension plans, adverse changes
in investment returns earned on pension assets and discount rates used
to calculate pension and related liabilities or changes in required pension
funding levels may have an unfavorable impact on future pension
expenses and cash flows.
In addition, volatile worldwide economic conditions and market
instability may make it difficult for us, our customers and our suppliers
to accurately forecast future product demand trends, which could cause
us to produce excess products that could increase our inventory carrying
costs. Alternatively, this forecasting difficulty could cause a shortage
of products that could result in an inability to satisfy demand for our
products.
Our reliance on certain industries for a significant portion of our
sales could have a material adverse effect on our business.
Of our 2021 net sales, approximately 54 percent were generated by
sales to the food industry, 9 percent by sales to the beverage industry,
11 percent by sales to the animal nutrition industry, 8 percent by sales
to the brewing industry and the remaining 18 percent by sales to other
industries. If our food customers, beverage customers, animal feed
customers, or brewing industry customers were to substantially decrease
their purchases, our business might be materially adversely affected.
The uncertainty of acceptance of products developed through
biotechnology could affect our profitability.
The commercial success of agricultural products developed through
biotechnology, including genetically modified corn, depends in part
on public acceptance of their development, cultivation, distribution
and consumption. Public attitudes can be influenced by claims that
genetically modified products are unsafe for consumption or that
they pose unknown risks to the environment, even if such claims are
not based on scientific studies. These public attitudes can influence
regulatory and legislative decisions about biotechnology. The sale of our
products, which may contain genetically modified corn, could be delayed
or impeded because of adverse public perception regarding the safety
of our products and the potential effects of these products on human
health, the environment and animals.
Our future growth could be negatively impacted if we fail to
continue introducing innovative new products and services.
A significant portion of our growth depends on innovation in products,
processes and services. Our R&D efforts may not result in new products
and services at a rate or of a quality sufficient to gain market acceptance.
It may be difficult to preserve operating margins and maintain
market share in the highly competitive environment in which
we operate.
We operate in a highly competitive environment. Competition in
markets in which we compete is largely based on price, quality and
product availability. Unexpected surges in customer demand may affect
production planning and product availability. Many of our products
compete with virtually identical or similar products manufactured by
other companies in the starch and sweetener industry. In the U.S., our
competitors include divisions of larger enterprises that have greater
financial resources than we do. Some of these competitors, unlike us,
have vertically integrated their corn refining and other operations. Many
of our products also compete with products made from raw materials
other than corn, including cane and beet sugar. Fluctuation in prices of
these competing products may affect prices of, and profits derived from,
our products. In addition, government programs supporting sugar prices
indirectly impact the price of corn sweeteners, especially high fructose
corn syrup. Furthermore, co-products such as corn oil and gluten meal
compete with products of the corn dry milling industry and with soybean
oil, soybean meal and other products, the price of some of which may be
affected by government programs such as tariffs or quotas.
Due to market volatility, we may be unable to pass potential
increases in the cost of corn and other raw materials on to
customers through product price increases, or to purchase
quantities of corn and other raw materials at prices sufficient to
sustain or increase our profitability.
The price and availability of corn and other raw materials are subject
to volatility as a result of economic and industry conditions, including
supply and demand factors such as crop disease and severe weather
conditions that include drought, floods, frost and ocean currents. These
conditions are difficult to anticipate, are beyond our control and could
adversely impact our profitability by affecting the prices we pay for raw
materials.
Raw material and energy price fluctuations, and supply
interruptions and shortages could adversely affect our results
of operations.
Our finished products are made primarily from corn. Purchased corn and
other raw material costs account for between 40 percent and 70 percent
of finished product costs. Some of our products are based upon specific
varieties of corn that are produced in significantly less volumes than
yellow dent corn. These specialty grains are higher-cost due to their
more limited supply and require planning cycles of up to three years in
order for us to receive our desired amounts of specialty corn. We also
manufacture certain starch-based products from potatoes. Our current
potato starch requirements constitute a material portion of the total
available North American supply. It is possible that, in the long term,
continued growth in demand for potato starch-based ingredients and
new product development could result in capacity constraints. Also,
we utilize tapioca in the manufacturing of starch products primarily
in Thailand, as well as pulses, gum, rice, plant-based stevia and other
raw materials around the world. A significant supply disruption or
sharp increase in any of these raw material prices that we are unable
to recover through pricing increases to our customers could have an
adverse impact on our growth and profitability, especially if such an
event disproportionately affects us as compared to our competitors.
Our business could be adversely affected by fluctuations in our energy
costs, which represented approximately 8 percent of our finished product
costs in 2021. We use energy primarily to create steam required for our
production processes and to dry products. We consume natural gas,
electricity, coal, fuel oil, wood and other biomass sources to generate
energy.
The market prices for our raw materials may vary considerably
depending on supply and demand, world economies, trade agreements
and tariffs and other factors. We purchase these commodities based on
our anticipated usage and future outlook for these costs. We may not
be able to purchase these commodities at prices that we can adequately
pass on to customers, which could have an adverse impact on our
growth and profitability.
In North America, we sell a large portion of our finished products derived
from corn at firm prices established in supply contracts typically lasting
for a period of one year. In order to minimize the effect of volatility in
the cost of corn related to these firm-priced supply contracts, we enter
into corn futures and options contracts, or take other hedging positions
in the corn futures market. These derivative contracts typically mature
within one year. At expiration, we settle the derivative contracts at a net
amount equal to the difference between the then-current price of the
commodity and the derivative contract price. The fluctuations in the fair
value of these hedging instruments may adversely affect our cash flow.
We fund any unrealized losses or receive cash for any unrealized gains
on futures contracts on a daily basis. While the corn futures contracts or
hedging positions are intended to minimize the effect of volatility of corn
costs on operating profits, the hedging activity can result in losses, some
of which may be material. In addition, our hedging activities may not be
fully successful in limiting the effect of volatility in the cost of corn.
An inability to contain costs could adversely affect our future
profitability and growth.
Our future profitability and growth depend on our ability to contain
operating costs and per unit product costs and to maintain and
implement effective cost control programs, while also maintaining
competitive pricing and superior quality products, customer service and
support. Our ability to maintain a competitive cost structure depends on
continued containment of manufacturing, delivery and administrative
costs, as well as the implementation of cost-effective purchasing
programs for raw materials, energy and related manufacturing
requirements.
If we are unable to contain our operating costs and maintain the
productivity and reliability of our production facilities, our profitability
and growth could be adversely affected.
Global climate change and legal, regulatory, or market measures
to address climate change, may negatively affect our business,
operations and financial results.
We are subject to risks associated with the long-term effects of climate
change on the global economy and on our industry in particular. Extreme
weather and natural disasters within or outside the United States, such
as drought, wildfires, storms, changes in ocean currents and flooding,
could make it more difficult and costly for us to manufacture and deliver
our products to our customers, obtain raw materials from our suppliers,
or perform other critical corporate functions. In particular, if such climate
change impacts negatively affect agricultural productivity, we may be
INGREDION INCORPORATED
9
subject to decreased availability or less favorable pricing from certain
commodities that are necessary for our products, such as corn, specialty
grains, rice, plant-based stevia, peas and sugar. Adverse weather
conditions and natural disasters could reduce crop size and crop quality,
which could reduce our supplies of raw materials, lower recoveries of
usable raw materials, increase the prices of our raw materials, increase
our costs of storing and transporting raw materials, or disrupt production
schedules. Our manufacturing operations also could be adversely
affected by reduced water availability resulting from droughts.
There is a growing societal concern that carbon dioxide and other
greenhouse gases in the atmosphere may have an adverse effect on
global temperatures, weather patterns and the frequency and severity
of natural disasters. The increasing concern over climate change
could result in new domestic or international legal requirements for
us to reduce greenhouse gas emissions and other environmental
impacts of our operations, improve our energy efficiency, or undertake
sustainability measures that exceed those we currently pursue.
Furthermore, such measures may result in the taxation of greenhouse
gas emissions. Any such regulatory requirements could cause disruptions
in the manufacture of our products and result in increased capital,
procurement, manufacturing and distribution costs. Our reputation and
brand could be harmed if we fail, or are seen as having failed, to respond
responsibly and effectively to changes in legal and regulatory measures
adopted to address climate change.
In addition, changing customer preferences may result in increased
demands regarding packaging materials and other components in our
products and their environmental impact on sustainability. Further,
customers may place increasing importance on purchasing products that
are sustainably grown and made, requiring us to incur additional costs
for increased due diligence and reporting. These demands may cause
us to incur additional costs or make other changes to other operations
to respond to such demands, which could adversely affect our financial
results.
We may not successfully identify and complete acquisitions or
strategic alliances on favorable terms or achieve anticipated
synergies relating to any acquisitions or alliances and such
transactions could result in unforeseen operating difficulties and
expenditures and require significant management resources.
We regularly review potential acquisitions of complementary businesses,
technologies, services, or products, as well as potential strategic
alliances. We may be unable to find suitable acquisition candidates
or appropriate partners with which to form partnerships or strategic
alliances. Even if we identify appropriate acquisition or alliance
candidates, we may be unable to complete such acquisitions or alliances
on favorable terms, or at all. In addition, the process of integrating an
acquired business, technology, service, or product into our existing
business and operations may result in unforeseen operating difficulties
and expenditures. Integration of an acquired company may also require
significant management resources that otherwise would be available
for ongoing development of our business. Moreover, we may not realize
the anticipated benefits of any acquisition or strategic alliance and
such transactions may not generate anticipated financial results. Future
acquisitions could also require us to issue equity securities, incur debt,
assume contingent liabilities, or amortize expenses related to intangible
assets, any of which could harm our business.
Operating difficulties at our manufacturing facilities could
adversely affect our operating results.
Producing starches and sweeteners through corn refining is a capital-
intensive industry. We conduct preventive maintenance and de-
bottlenecking programs at our 45 manufacturing facilities designed
to maintain and improve grind capacity and facility reliability. If we
encounter operating difficulties at a facility for an extended period of
time or start-up problems with any capital improvement projects, we
may not be able to meet a portion of our sales order commitments and
could incur significantly higher operating expenses, both of which could
adversely affect our operating results. We also use boilers to generate
steam required in our production processes. An event that impaired
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INGREDION INCORPORATED
the operation of a boiler for an extended period of time could have a
significant adverse effect on the operations of any manufacturing facility
in which such event occurred.
In addition, we are subject to risks related to such matters as product
safety and quality; compliance with environmental, health and safety
and food safety regulations; and customer product liability claims. The
liabilities that could result from these risks may not always be covered
by, or could exceed the limits of, our insurance coverage related to
product liability and food safety matters. In addition, negative publicity
caused by product liability and food safety matters may damage our
reputation. The occurrence of any of the matters described above could
adversely affect our revenues and operating results.
We operate a multinational business subject to the economic,
political and other risks inherent in operating in foreign
countries and with foreign currencies.
We have operated in foreign countries and with foreign currencies
for many years. Our results are subject to foreign currency exchange
fluctuations. Our operations are subject to political, economic and
other risks. There has been and continues to be significant political
uncertainty in some countries in which we operate. Economic changes,
terrorist activity and political unrest may result in business interruption
or decreased demand for our products. Protectionist trade measures and
import and export licensing requirements could also adversely affect our
results of operations.
We primarily sell products derived from world commodities. Historically,
we have been able to adjust local prices relatively quickly to offset the
effect of local currency depreciation versus the U.S. dollar, although we
cannot guarantee our ability to do this in the future. The anticipated
strength in the U.S. dollar may continue to involve risks, as it could take
us an extended period of time to fully recapture the impact of a loss
of foreign currency value versus the U.S. dollar, particularly in South
America.
We may hedge transactions that are denominated in a currency other
than the currency of the operating unit entering into the underlying
transaction. Our hedging activities may not be fully successful in limiting
the adverse impacts of our currency risks.
Our profitability could be negatively impacted if we fail to
maintain satisfactory labor relations.
As of December 31, 2021, approximately 30 percent of our worldwide
employees and approximately 29 percent of our U.S. employees were
members of labor unions. Strikes, lockouts, or other work stoppages or
slowdowns involving our unionized employees, or attempts to organize
for collective bargaining purposes among nonunionized employees,
could have a material adverse effect on our business.
The inability for us to attract, develop, retain, motivate, and
maintain good relationships with our workforce, including
key personnel, could negatively impact our business and our
profitability.
Our future success depends on our ability to attract, develop, retain,
motivate, and maintain good relationships with qualified personnel,
particularly those who have extensive expertise in the ingredients
solutions industry and who may also have long service with our
company. We have such personnel in our senior executive leadership
as well as in other key areas throughout our U.S. and international
operations such as manufacturing, sales, and innovation, all of which
are critical to our future growth and profitability. We face intensive
competition in retaining and hiring individuals with the requisite
expertise, both within and outside the ingredients solutions industry,
including from companies with greater resources than ours.
Changes in labor markets as a result of COVID-19 and other
socioeconomic and demographic changes, have increased the
competition for hiring and retaining talent. As a result of this
competition, we may be unable to continue to attract, develop, retain,
motivate, and maintain good relationships with suitably qualified
individuals at acceptable compensation levels who have the managerial,
operational, and technical knowledge and experience to meet our
needs. Furthermore, the failure to execute on internal succession plans
or to effectively transfer knowledge from exiting employees to others
in the organization could adversely affect our business and results of
operations. Even if we succeed in hiring new personnel to fill vacancies,
lengthy training and orientation periods might be required before
new employees are able to achieve necessary productivity levels. Any
failure by us to attract, develop, retain, motivate, and maintain good
relationships with qualified individuals could adversely affect our
business and results of operations.
Natural disasters, war, acts and threats of terrorism, pandemics
and other significant events could negatively impact our
business.
The economies of any countries in which we sell or manufacture
products or purchase raw materials could be affected by natural
disasters. Such natural disasters could include, among others,
earthquakes, floods, or severe weather conditions; war, acts of war
or terrorism; or the outbreak of an epidemic or pandemic such as
COVID-19. Any such natural disaster could result in disruptions to
operations, asset write-offs, decreased sales and overall reduced cash
flows.
Risks Related to Our Regulatory Compliance
Government policies and regulations could adversely affect our
operating results.
Our operating results could be affected by changes in trade, monetary
and fiscal policies, laws and regulations, and other activities of the U.S.
and foreign governments, agencies and similar organizations. These
conditions include, among others, changes in a country’s or region’s
economic or political conditions, modification or termination of trade
agreements or treaties promoting free trade, creation of new trade
agreements or treaties, trade regulations affecting production, pricing
and marketing of products, local labor conditions and regulations,
reduced protection of intellectual property rights, changes in the
regulatory or legal environment, restrictions on currency exchange
activities, currency exchange rate fluctuations, burdensome taxes and
tariffs, and other trade barriers. International risks and uncertainties,
including changing social and economic conditions as well as terrorism,
political hostilities and war, could limit our ability to transact business
in these markets and could adversely affect our revenues and operating
results. Furthermore, the national and global regulation or taxation
of greenhouse gas emissions could negatively affect our business,
operations and financial results.
Our operations could be adversely affected by actions taken in
connection with cross-border disputes by the governments of countries
in which we conduct business.
The recognition of impairment charges on goodwill or long-lived
assets could adversely impact our future financial position and
results of operations.
We have $1.3 billion of total net intangible assets as of December 31, 2021,
consisting of $914 million of goodwill and $434 million of other
net intangible assets, which constitute 13 percent and 6 percent,
respectively, of our total assets as of such date. Additionally, we have
$2.8 billion of long-lived assets, or 40 percent of our total assets, as of
December 31, 2021.
We perform an annual impairment assessment for goodwill and our
indefinite-lived intangible assets and as necessary for other long-lived
assets. If the results of such assessments were to show that the fair
value of these assets were less than the carrying values, we could be
required to recognize a charge for impairment of goodwill or long-lived
assets and the amount of the impairment charge could be material. We
continue to monitor our reporting units in struggling economies and
recent acquisitions for circumstances affecting these businesses that may
negatively impact the fair value of these reporting units.
In addition, during the year ended December 31, 2021, we recorded
an impairment of $340 million related to net assets contributed to a
joint venture in South America. Of the impairment, $311 million was
related to the write-off of cumulative translation losses associated with
the contributed net assets and $29 million was related to the write-
down to fair value of the contributed net assets to fair value. See Note
5 of the Notes to the Consolidated Financial Statements for additional
information.
The future occurrence of a potential indicator of impairment, such as a
significant adverse change in the business climate that would require
a change in our assumptions or strategic decisions made in response
to economic or competitive conditions, could require us to perform an
assessment prior to the next required assessment date of July 1, 2022.
Our profitability may be affected by other factors beyond our
control.
Our operating income and ability to sustain or increase profitability
depend to a large extent upon our ability to price finished products at a
level that will cover manufacturing and raw material costs and provide
an acceptable profit margin. Our ability to maintain appropriate price
levels is determined by a number of factors largely beyond our control,
such as aggregate industry supply and market demand, which may
vary from time to time, and the economic conditions of the geographic
regions in which we conduct our operations.
Changes in our tax rates or exposure to additional income tax
liabilities could impact our profitability.
We are subject to income taxes in the U.S. and in foreign jurisdictions.
Our effective tax rates could be adversely affected by changes in the
mix of earnings by jurisdiction, changes in tax laws, or tax rates changes
in the valuation of deferred tax assets and liabilities and material
adjustments from tax audits.
The recoverability of our deferred tax assets is dependent upon our
ability to generate future taxable income. In addition, we are subject
to ongoing audits in various jurisdictions and final determinations of
prior-year tax liabilities are dependent upon many factors, including
negotiations and dispute resolutions with tax authorities. The outcome
of these final determinations could have a material effect on our
profitability and cash flows.
Pillar One and Pillar Two of the base erosion and profit shifting (“BEPS”)
project undertaken by the Organisation for Economic Cooperation and
Development (“OECD”) could result in significant tax law changes in
jurisdictions in which we do business. An OECD-led coalition of countries
is contemplating changes to long-standing international tax norms that
determine each country’s right to tax cross-border transactions. These
contemplated changes, if adopted by countries in which we do business,
could increase tax uncertainty and the risk of double taxation, thereby
adversely affecting our provision for income taxes.
Risks Related to Our Financing Activities
Increased interest rates could increase our borrowing costs.
We continue to issue debt securities to finance acquisitions, capital
expenditures and working capital, or for other general corporate
purposes. An increase in interest rates in the general economy could
result in an increase in our borrowing costs for these financings, as well
as under our revolving credit facility debt, which bears interest at an
unhedged floating rate.
We may not have access to the funds required for future growth
and expansion.
We may not have access to additional funds we need to grow and
expand our operations. We expect to fund our capital expenditures from
operating cash flow to the extent we are able to do so. If our operating
cash flow is insufficient to fund our capital expenditures, we may either
reduce our capital expenditures or utilize borrowings under our revolving
credit facility, which provides liquidity support for our commercial paper
INGREDION INCORPORATED
11
program. For further strategic growth through mergers or acquisitions,
we may also seek to generate additional liquidity through the sale of
debt or equity securities in private or public markets or through the sale
of assets. We cannot provide any assurance that our cash flows from
operations will be sufficient to fund anticipated capital expenditures or
that we will be able to obtain additional funds from financial markets
or from the sale of assets at terms favorable to us. If we are unable to
generate sufficient cash flows or raise sufficient additional funds to cover
our capital expenditures or other strategic growth opportunities, we may
not be able to achieve our desired operating efficiencies and expansion
plans, which may adversely impact our competitiveness and, therefore,
our results of operations. Our working capital requirements, including
margin requirements on open positions on futures exchanges, are
directly affected by the price of corn and other agricultural commodities,
which may fluctuate significantly and change quickly.
Risks Related to Our Information Technology Systems
Any failure by us to maintain effective control over financial
reporting could result in loss of investor confidence and
adversely impact our stock price.
If we experience material weaknesses in our internal control over
financial reporting and are unable to remediate such material
weaknesses, or are otherwise unable to maintain effective internal
control over financial reporting or our disclosure controls and
procedures, our ability to record, process and report financial
information accurately and to prepare financial statements within
required time periods, could be adversely affected, which could subject
us to litigation or investigations requiring management resources
and payment of legal and other expenses, negatively affect investor
confidence in our financial statements and adversely impact our stock
price. We previously reported a material weakness in our internal control
over financial reporting, which we fully remediated in fiscal 2021, related
to ineffective information technology general controls in the areas of
user access over certain information technology systems that support
our financial reporting processes.
Our information technology systems, processes and sites may
suffer interruptions, security breaches, or failures which may
affect our ability to conduct our business.
Our operations rely on certain key information technology systems,
which are dependent on services provided by third parties and provide
critical data connectivity, information and services for internal and
external users. These interactions include, among others, ordering
and managing materials from suppliers, risk management activities,
converting raw materials to finished products, inventory management,
shipping products to customers, processing transactions, summarizing
and reporting results of operations, human resources benefits and
payroll management, complying with regulatory, legal and tax
requirements, and other processes necessary to manage our business.
Increased information technology security and social engineering
threats and more sophisticated computer crime, including advanced
persistent threats, pose potential risks to the security of our information
technology systems, networks and services, as well as the confidentiality,
availability and integrity of our third-party and employee data. We have
put in place security measures to protect ourselves against cyber-based
attacks and disaster recovery plans for our critical systems. However,
if our information technology systems are breached, damaged, or
cease to function properly due to any number of causes, such as
catastrophic events, power outages, security breaches, or cyber-based
attacks, and if our disaster recovery plans do not effectively mitigate
the risks on a timely basis, we may encounter significant disruptions
that could interrupt our ability to manage our operations, cause loss
of valuable data and actual or threatened legal actions and cause us to
suffer damage to our reputation. These factors may adversely impact
our revenues, operating results and financial condition. We reported a
malware incident that occurred from October 2019 to December 2019,
although this incident did not have a material impact on our business.
The costs to address the foregoing security problems and security
vulnerabilities before or after a cyber incident could be significant.
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Remediation efforts may not be successful and could result in
interruptions, delays or cessation of service and loss of existing or
potential customers that may impede our sales, manufacturing or other
critical functions. Breaches of our security measures and the unapproved
dissemination of proprietary information or sensitive or confidential
data about us, our employees, our customers or other third parties
could expose us, our employees, our customers or other affected third
parties to a risk of loss or misuse of this information, result in regulatory
enforcement, litigation and potential liability for us, damage our brand
and reputation or otherwise harm our business. We rely in certain limited
capacities on third-party data management providers and other vendors
whose possible security problems and security vulnerabilities may have
similar effects on us.
Risks Related to Investment in Our Common Stock
Volatility in the stock market, fluctuations in quarterly
operating results and other factors could adversely affect the
market price of our common stock.
The market price for our common stock in the past has been, and in
the future may continue to be, significantly affected by factors such as
our announcement of new products or services or such announcements
by our competitors; technological innovation by us, our competitors
or other vendors; quarterly variations in our operating results or the
operating results of our competitors; general conditions in our or our
customers’ markets; and changes in earnings estimates by analysts or
reported results that vary materially from such estimates. In addition,
the stock market has experienced significant price fluctuations that have
affected the market prices of equity securities of many companies that
have been unrelated to the operating performance of any individual
company.
We may not continue to pay dividends or to pay dividends at the
same rate we have paid in our most recent fiscal quarters.
The payment of dividends, as well as the amount of any dividends,
is solely at the discretion of our Board of Directors. Future dividend
payments, if any, also will be subject to our financial results and the
availability of statutory surplus funds to pay dividends. These factors
could result in a change to our current policy of paying dividends.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
We own or lease (as noted below), directly and through our consolidated
subsidiaries, 45 manufacturing facilities. In addition, we lease our
corporate headquarters in Westchester, Illinois and our R&D facility in
Bridgewater, New Jersey.
The following list provides information about our manufacturing facilities
within each of our four reportable business segments as of January 31,
2022:
North America
Cardinal, Ontario, Canada
London, Ontario, Canada
Vanscoy, Saskatchewan, Canada
San Juan del Rio, Queretaro, Mexico
Guadalajara, Jalisco, Mexico
Mexico City, CDMX, Mexico
Oxnard, California, U.S.(a)
Idaho Falls, Idaho, U.S.
Bedford Park, Illinois, U.S.
Mapleton, Illinois, U.S.
Indianapolis, Indiana, U.S.
Cedar Rapids, Iowa, U.S.
Fort Fairfield, Maine, U.S.
Belcamp, Maryland, U.S.
North Kansas City, Missouri, U.S.
South Sioux City, Nebraska, U.S.
Winston-Salem, North Carolina, U.S.
Salem, Oregon, U.S.
Charleston, South Carolina, U.S.
Richland, Washington, U.S.
Moses Lake, Washington, U.S.
Plover, Wisconsin, U.S.
South America
Alcantara, Brazil
Balsa Nova, Brazil
Cabo, Brazil
Mogi-Guacu, Brazil
Barranquilla, Colombia
Cali, Colombia
Lima, Peru
Asia-Pacific
Ganzhou, China
Shandong Province, China
Shanghai, China
Enstek, Malaysia
Icheon, South Korea
Incheon City, South Korea
Ban Kao Dien, Thailand
Kalasin, Thailand
Sikhiu, Thailand
Banglen, Thailand (a)
EMEA
Hamburg, Germany
Wesenberg, Germany
Cornwala, Jaranwala, Pakistan
Mehran, Jamshoro, Pakistan
Rakh Canal, Faisalabad, Pakistan
Goole, United Kingdom (b)
(a) Facility is leased.
(b) Facility is partially owned and partially leased.
We believe our manufacturing facilities are sufficient to meet our
current production needs. We conduct preventive maintenance and de-
bottlenecking programs designed to improve grind capacity and facility
reliability. Furthermore, for the foreseeable future, we intend to continue
capital investments to support the updating, modification, improvement
and efficient operation of our facilities for the foreseeable future.
We have electricity co-generation facilities at our manufacturing
facilities in London, Ontario, Canada; Cardinal, Ontario, Canada; Bedford
Park, Illinois; Winston-Salem, North Carolina; San Juan del Rio, Queretaro
and Mexico City, CDMX, Mexico; Cali, Colombia; Cornwala, Jaranwala,
Pakistan; and Balsa Nova and Mogi-Guacu, Brazil. These facilities
provide electricity at a lower cost than is available from third parties. We
generally own and operate the co-generation facilities, except for the
facilities at our Mexico City and Brazil locations, which are owned by and
operated pursuant to co-generation agreements with third parties.
ITEM 3. 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 4. Mine Safety Disclosures
Not applicable.
PART II
ITEM 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
Trading: Ingredion’s common stock is listed on the New York Stock
Exchange (symbol: INGR).
Holders: The number of active stockholders of record of our common
stock was 3,295 on January 31, 2022.
Dividends: We have a history of paying quarterly dividends. The amount
and timing of the dividend payment, if any, is based on a number of
factors, including our estimated earnings, financial position and cash
flow. The payment of a dividend, as well as the amount of any dividend,
is solely at the discretion of our Board of Directors. Future dividend
payments will be subject to our financial results and the availability of
funds and statutory surplus to pay dividends.
Issuer Purchases of Equity Securities: The following provides
information about our stock repurchase program:
Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Maximum
Number (or
Approximate
Dollar Value) of
Shares That
May Yet be
Purchased
Under the Plans
or Programs
at End of Period
Total
Number
of Shares
Purchased
Average
Price
Paid per
Share
—
—
—
—
—
—
—
—
—
—
—
—
5,090 shares
5,090 shares
5,090 shares
(shares in thousands)
October 1 –
October 31, 2021
November 1 –
November 30, 2021
December 1 –
December 31, 2021
Total
On October 22, 2018, the Board of Directors authorized a stock
repurchase program permitting us to purchase up to 8.0 million of our
outstanding shares of common stock from November 5, 2018, through
December 31, 2023. At December 31, 2021, we had 5.1 million shares
available for repurchase under the current stock repurchase program.
INGREDION INCORPORATED
13
ITEM 6. [Reserved]
Not applicable.
ITEM 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Overview
We are a major supplier of high-quality food and industrial ingredient
solutions to customers around the world. We have 45 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. Our ingredients are used by customers in the
food, beverage, brewing and animal feed industries, among others.
Effectively managing our manufacturing costs, including costs for corn,
other raw materials and utilities, is critical to the success of our business.
In addition, our global operations expose us to fluctuations in foreign
currency exchange rates. We use derivative financial instruments, when
appropriate, for the purpose of minimizing the risks and costs associated
with fluctuations in certain raw material and energy costs, foreign
exchange rates and interest rates. The capital-intensive nature of our
business requires that we generate significant cash flow over time in
order to selectively reinvest in our operations and grow organically, as
well as to expand through strategic acquisitions and alliances.
In 2021, net sales increased over 15 percent to $6.9 billion from $6.0
billion in 2020. The increase in net sales was driven by higher sales
volumes and a strong price mix, including the pass-through of higher
input costs to customers. Operating income, net income and diluted
earnings per common share in 2021 declined from 2020 levels.
Operating income of $310 million in 2021 decreased from $582 million
in 2020, primarily due to the $340 million net asset impairment charge
related to the contribution of Ingredion’s Argentina assets to the Arcor
joint venture. Excluding the net asset impairment charge, operating
income increased to reflect our higher sales volumes.
COVID-19: Our operations in recent periods have been adversely
affected by impacts of COVID-19. On March 11, 2020, the World
Health Organization declared COVID-19 a pandemic, and on March 13,
2020, the United States declared a national emergency with respect
to COVID-19. Our global operations expose us to risks associated with
public health crises, including pandemics such as COVID-19. Foreign
governmental organizations and governmental organizations at the
national, state and local levels in the United States have taken various
actions to combat the spread of COVID-19, including, from time to time,
imposing stay-at-home orders and closing “non-essential” businesses
and their operations. As a manufacturer of food ingredients, our
operations are considered “essential” under most current COVID-19
government regulations and our facilities are operating globally. We did
not experience any material supply chain interruptions in 2021 and were
able to continue to operate and ship products from our global network
of manufacturing facilities without material interruptions. We place top
priority on our employees’ health and safety and continue to follow
the advice and the guidelines of public health authorities for physical
distancing and to make available personal protective equipment and
sanitization supplies. We are monitoring COVID-19 infection rates as well
as the pace and effectiveness of vaccination rollouts, as the net sales
volume is generally correlated with increased consumer activity and
availability of food and beverages consumed away from home.
Cost Smart Program: In July 2018, we announced a Cost Smart program,
which we designed to improve profitability, further streamline our
global business and deliver increased value to stockholders. We set a
$125 million savings target to include an anticipated $75 million in
cost of sales savings, including freight, and $50 million in anticipated
SG&A savings through 2021. Since the program’s inception, we have
periodically updated our savings targets and expect to deliver $170
million in total savings through the end of the program, far exceeding
our original target.
14
INGREDION INCORPORATED
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 KaTech on April 1, 2021, the remaining interest in Verdient
on November 3, 2020, and a controlling interest in PureCircle on July
1, 2020. The results of the acquired businesses are included in our
consolidated financial results beginning on the respective acquisition
dates, which inclusion affects the comparability of results between
years. In addition, 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, our discussion below also addresses results of
operations excluding the impact of the acquisitions and investments,
where appropriate, to provide a more comparable and meaningful
analysis.
2021 Compared to 2020 - Consolidated
Net sales. Net sales increased 15 percent to $6,894 million in 2021
compared to $5,987 million for 2020. The increase in net sales was
driven by strong price mix including the pass through of higher corn
costs and higher volumes, which also reflected inclusion of the results of
KaTech, Verdient and PureCircle.
Cost of sales. Cost of sales increased by 18 percent to $5,563 million in
2021 compared to cost of sales of $4,715 million in 2020. The increase
in cost of sales primarily reflected the increase in net sales. Our gross
profit margin of 19 percent for 2021 decreased from 21 percent in 2020.
The decrease in gross margin was driven by higher corn and input costs.
Operating expenses. Operating expenses increased 6 percent to $668
million in 2021 compared to $628 million in 2020. The increase in
operating expenses during 2021 was primarily attributable to the
inclusion of PureCircle and KaTech. Operating expenses as a percentage
of net sales were approximately 10 percent in 2021 and 2020.
Other operating (income). Other operating (income) increased 10
percent to $(34) million in 2021 compared to $(31) million in 2020.
The increase was due primarily to a net gain related to the Amyris joint
venture, an increase in equity method earnings related to the Arcor joint
venture, gains on the sale of assets and other items in 2021. These items
were partially offset by a reduction in Brazil indirect tax credits recorded
in 2021.
Restructuring and impairment charges. Restructuring and impairment
charges increased to $387 million in 2021 compared to $93 million in
2020. The increase was primarily driven by an impairment charge of
$340 million for net assets from our Argentina business we contributed
to the Arcor 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 final write-
down of the contributed net assets to fair value. This was partially offset
by $45 million in impairment charges taken on our TIC tradename
intangible asset and our equity method investment in Verdient in 2020.
Financing costs. Financing costs decreased 9 percent to $74 million in
2021 compared to $81 million in 2020. The decrease was primarily due
to Argentina hyperinflation costs. As part of the Arcor joint venture, a
majority of Argentina’s hyperinflation costs are no longer recorded in
financing costs, but instead are reflected in other operating (income)
through our share of equity earnings.
Provision for income taxes. Our effective income tax rates for 2021 and
2020 were 49.6 percent and 30.0 percent, respectively. The increase
in the effective income tax rate resulted primarily from an impairment
charge related to the Arcor joint venture in Argentina and a change in
the mix of earnings. These items were partially offset by the reversal of
an accrual from unremitted earnings, favorable judgments related to the
treatment of interest and credits on indirect taxes in Brazil and inflation
adjustments in Mexico.
Net income attributable to non-controlling interests. Net income
attributable to non-controlling interests increased 33 percent to $8
million in 2021 compared to $6 million in 2020.
Net Income attributable to Ingredion. Net income attributable to
Ingredion for 2021 decreased to $117 million from $348 million in
2020. The decrease in net income was largely attributable to the $340
million impairment charge for the Argentina assets contributed to the
Arcor joint venture, partially offset by strong price mix and volume
improvement.
North America
Net sales. North America’s net sales increased 13 percent to $4,137
million in 2021 compared to $3,662 million in 2020. The increase
was primarily driven by a 9 percent improvement in price and product
mix, a 3 percent increase in volume and a 1 percent favorable foreign
exchange.
Operating income. North America’s operating income was flat at $487
million for 2021 and 2020. Favorable price mix and higher volumes in
2021 were fully offset by higher corn and input costs and ramp-up costs
related to our plant-based protein operations in our South Sioux City and
Vanscoy facilities.
South America
Net sales. South America’s net sales increased 15 percent to $1,057
million in 2021 from $919 million in 2020. The increase was primarily
driven by a 26 percent improvement in price and product mix, which
was partially offset by an 8 percent decrease in volume and a 3
percent unfavorable foreign exchange impact. The decrease in volume
was driven by the contribution of our Argentina, Chile and Uruguay
operations to the Arcor joint venture.
Operating income. South America’s operating income increased 23
percent to $138 million in 2021 compared to $112 million in 2020. The
increase was primarily due to a strong price mix that more than offset
higher corn and input costs.
Asia-Pacific
Net sales. Asia-Pacific’s net sales increased 23 percent to $997 million
in 2021 compared to $813 million in 2020. The increase was driven by
favorable volumes of 18 percent, a favorable price and product mix of 3
percent and favorable foreign exchange impacts of 2 percent.
Operating income. Asia-Pacific’s operating income increased 9 percent
to $87 million in 2021 compared to $80 million in 2020. The increase
was primarily driven by a favorable price and product mix and year-over-
year improvement in PureCircle results that more than offset higher raw
materials and input costs.
EMEA
Net sales. EMEA’s net sales increased by 19 percent to $703 million in
2021, compared to $593 million in 2020. The increase was driven by
favorable volumes of 11 percent, partially due to the purchase of KaTech
on April 1, 2021, a favorable price and product mix of 5 percent and
favorable foreign exchange impacts of 3 percent.
Operating income. EMEA’s operating income increased 4 percent to
$106 million in 2021 compared to $102 million in 2020. The increase
was primarily attributable to a favorable price mix in Pakistan and higher
volumes in Europe.
2020 Compared to 2019 – Consolidated
A discussion of the year-over-year comparison of results for 2020 and
2019 is not included in this report and can be found in Part II, Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations in Ingredion’s annual report on Form 10-K for the
fiscal year ended December 31, 2020.
Liquidity and Capital Resources
As of December 31, 2021, Ingredion had total available liquidity of
approximately $1,719 million. Domestic liquidity of $770 million
consisted of $20 million in cash and cash equivalents and $750 million
available through a $1 billion commercial paper program that had $250
million of outstanding borrowings. The commercial paper program,
which we entered on July 27, 2021, is backed by $1 billion of borrowing
availability under a five-year revolving credit agreement that we entered
on June 30, 2021 (“Revolving Credit Agreement”).
As of December 31, 2021, we had international liquidity of
approximately $953 million, consisting of $308 million of cash and
cash equivalents and $4 million of short-term investments held by
our operations outside the U.S., as well as $641 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. As of December 31, 2021, such guarantees
aggregated $61 million. We believe that such consolidated subsidiaries
will be able to meet their financial obligations as they become due.
As of December 31, 2021, we had repaid in full the $380 million of
borrowings outstanding under a term loan credit agreement that
we previously amended on March 16, 2021 (the “Term Loan Credit
Agreement”). The Term Loan Credit Agreement restated the previous
agreement by extending the maturity date of the borrowings under the
previous agreement until March 15, 2022. No new borrowings under
the Term Loan Credit Agreement were incurred in connection with the
amendment and restatement. Borrowings under the Term Loan Credit
Agreement bore interest at a variable annual rate based on a London
Interbank Offering Rate (“LIBOR”) or a base rate, at our election, subject
to the terms and conditions thereof, plus, in each case, an applicable
margin. The Term Loan Credit Agreement reduced the applicable interest
rate margin for loans accruing interest based on LIBOR from 0.80
percent to 0.75 percent. We were required to pay a fee on the unused
availability under the Term Loan Credit Agreement, which contained
customary representations, warranties, covenants and events of default,
including covenants restricting the incurrence of liens, the incurrence
of indebtedness by our subsidiaries and certain fundamental changes
involving us and our subsidiaries, subject to certain exceptions in
each case. We were also required to maintain a specified maximum
consolidated leverage ratio and a specified minimum consolidated
interest coverage ratio.
On June 30, 2021, we entered into the Revolving Credit Agreement to
replace our previous revolving credit agreement, which we terminated.
The Revolving Credit Agreement provides for a five-year unsecured
revolving credit facility in an aggregate principal amount of $1 billion
outstanding at any time. The facility will mature on June 30, 2026.
Loans under the facility accrue interest at a per annum rate equal, at our
option, to either a specified LIBOR plus an applicable margin, or a base
rate (generally determined according to the highest of the prime rate,
the federal funds rate or the specified LIBOR plus 1.00 percent) plus an
applicable margin. The Revolving Credit Agreement contains customary
affirmative and negative covenants that, among other matters, specify
customary reporting obligations, and that, subject to exceptions,
restrict the incurrence of additional indebtedness by our subsidiaries,
the incurrence of liens and the consummation of certain mergers,
consolidations and sales of assets. We are subject to compliance, as of
the end of each quarter, with a maximum leverage ratio of 3.5 to 1.0 and
a minimum ratio of consolidated EBITDA to consolidated net interest
expense of 3.5 to 1.0, as each such financial covenant is calculated for
the most recently completed four-quarter period. As of December 31,
2021, we were in compliance with these financial covenants.
INGREDION INCORPORATED
15
On July 27, 2021, we established a commercial paper program under
which we may issue senior unsecured notes of short maturities up to a
maximum aggregate principal amount of $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. We intend to use the note proceeds
for general corporate purposes. During the period from July 27, 2021
through December 31, 2021, the average amount of commercial paper
outstanding was $670 million. As of December 31, 2021, the $250
million of commercial paper then outstanding had a weighted average
interest rate of 0.35 percent over a weighted average maturity of 40
days. The amount of commercial paper outstanding under this program
in 2022 is expected to fluctuate.
As of December 31, 2021, we had total debt outstanding of $2.0 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. The weighted average interest rate on our total indebtedness was
approximately 3.0 percent for 2021 and 3.4 percent for 2020.
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 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 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.
Net Cash Flows
Our cash provided by operating activities decreased to $392 million in
2021 from $829 million in 2020, primarily due to changes in working
capital. Our cash used by investing activities decreased to $335 million
in 2021 from $571 million in 2020, primarily due to our acquisition of a
controlling interest in PureCircle in 2020. In 2021, we used $373 million
of cash for financing activities compared to cash provided by financing
activities of $143 million in 2020. Cash used for financing activities
in 2021 was primarily used for our repayment of the $380 million
outstanding under the Term Loan Credit Agreement.
To manage price risk related to corn purchases, we use derivative
instruments, consisting of corn futures and options contracts, to lock
in our corn costs associated with firm-priced customer sales contracts.
As the market price of these commodities fluctuates, our derivative
instruments change in value and we fund any unrealized losses or
receive cash for any unrealized gains related to outstanding commodity
futures and option contracts.
We used $300 million of cash for capital expenditures and mechanical
stores purchases to update, expand and improve our facilities in 2021, as
compared to $340 million that we paid in 2020 for capital expenditures
and mechanical stores. Capital investment commitments for 2022 are
anticipated to be between $300 million and $335 million.
In April 2021, we acquired a controlling interest in KaTech for $40
million, net of cash acquired.
We declare and pay cash dividends to our common stockholders
of record on a quarterly basis. Dividends paid, including those to
noncontrolling interests, increased 3 percent to $184 million during
2021 compared to $178 million during 2020. The increase was
primarily due to an increase in the dividend paid per share during 2021.
Additionally, during 2021, we repurchased 765 thousand outstanding
shares of common stock in open market transactions at a net cost of $68
million.
16
INGREDION INCORPORATED
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.
Key Financial Performance Metrics
We use certain key financial performance metrics to monitor our
progress towards achieving our long-term strategic business objectives.
These metrics relate to our ability to drive profitability, create value for
stockholders and monitor our financial leverage. We assess whether
we are achieving our profitability and value creation objectives by
measuring our Adjusted Return on Invested Capital (“Adjusted ROIC”).
We monitor our financial leverage by regularly reviewing our ratio of
net debt to adjusted earnings before interest, taxes, depreciation and
amortization (“Net Debt to Adjusted EBITDA”). We believe these metrics
provide valuable managerial information to help us run our business and
are useful to investors.
The metrics Adjusted ROIC and Net Debt to Adjusted EBITDA include
certain financial measures (Adjusted operating income, net of tax and
Adjusted EBITDA, respectively) that are not calculated in accordance
with U.S. generally accepted accounting principles (“GAAP”). We also
have presented below the most comparable metrics calculated using
components determined in accordance with GAAP. Management uses
these non-GAAP financial measures internally for strategic decision-
making, forecasting future results and evaluating current performance.
Management believes that the non-GAAP financial measures provide
a more consistent comparison of our operating results and trends for
the periods presented. These non-GAAP financial measures are used in
addition to and in conjunction with results presented in accordance with
GAAP and reflect an additional way of viewing aspects of our operations
that, when viewed with our GAAP results, provides a more complete
understanding of factors and trends affecting our business. The non-
GAAP financial measures should be considered as a supplement to,
and not as a substitute for, or superior to, the corresponding measures
calculated in accordance with GAAP.
In accordance with our long-term objectives, we set certain objectives
relating to these key financial performance metrics that we strive to
meet. However, no assurance can be given that we will continue to meet
our financial performance metric targets. See Item 1A. Risk Factors and
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The objectives reflect our current aspirations in light of our present
plans and existing circumstances. We may change these objectives from
time to time in the future to address new opportunities or changing
circumstances as appropriate to meet our long-term needs and those of
our stockholders.
A reconciliation of non-GAAP historical financial measures to the most
comparable GAAP measure is provided in the tables below.
Adjusted ROIC: Adjusted ROIC is a financial performance ratio not
defined under GAAP, and it should be considered in addition to, and not
as a substitute for, GAAP financial measures. Ingredion defines Adjusted
ROIC as Adjusted operating income, net of tax, divided by Average
end-of-year balances for current year and prior year Total net debt and
equity. Similarly named measures may not be defined and calculated
by other companies in the same manner. Ingredion believes Adjusted
ROIC is meaningful to investors as it focuses on profitability and value-
creating potential, taking into account the amount of capital invested.
The most comparable measure calculated using components determined
in accordance with GAAP is Return on Invested Capital, which Ingredion
defines as Net income, divided by Average end-of-year balances for
current year and prior year Total net debt and equity. The calculations for
Return on Invested Capital and Adjusted ROIC for the periods indicated
are provided in the table on the following page.
Return on Invested Capital
(dollars in millions)
Net income (a)
Adjusted for:
Provision for income taxes
Other non-operating (income) expense
Financing cost, net
Restructuring/impairment charges (i)
Acquisition/integration costs
Impairment on disposition of assets
Other matters (ii)
Year Ended December 31,
2021
2020
$125
$354
123
(12)
74
47
3
340
(15)
152
(5)
81
93
11
—
(27)
Income taxes (at effective rates of 25.6% and 26.9%, respectively) (iii)
(175)
(177)
Our long-term objective is to maintain an Adjusted ROIC in excess of
10 percent. For 2021, we achieved an Adjusted ROIC of 10.7 percent as
compared to 10.8 percent for 2020.
Net Debt to Adjusted EBITDA: Net Debt to Adjusted EBITDA is a
financial performance ratio that is not defined under GAAP, and it should
be considered in addition to, and not as a substitute for, GAAP financial
measures. Ingredion defines this measure as Short-term and Long-term
debt less Cash and cash equivalents and Short-term investments, divided
by Adjusted EBITDA. Similarly named measures may not be defined
and calculated by other companies in the same manner. Ingredion
believes Total net debt to Adjusted EBITDA is meaningful to investors
as it focuses on Ingredion’s leverage on a comparable Adjusted EBITDA
basis and helps investors better understand the time required to pay
back Ingredion’s outstanding debt. The most comparable ratio calculated
using components determined in accordance with GAAP is Total net debt
to Income before income taxes, calculated as Short-term and Long-term
debt less Cash and cash equivalents and Short-term investments, divided
by Income before income taxes. The calculations for the ratio of Total net
debt to Income before income taxes and for the ratio of Total net debt to
Adjusted EBITDA are provided in the table below.
As of December 31,
2021
$308
1,738
(328)
(4)
1,714
248
220
74
38
3
340
(15)
(6)
$902
6.9
1.9
2020
$438
1,748
(665)
—
1,521
506
213
81
85
11
—
(22)
—
$874
3.0
1.7
Adjusted operating income, net of tax (b)
Short-term debt
Long-term debt
Less: Cash and cash equivalents
Short-term investments
Total net debt
Share-based payments subject to redemption
Total redeemable non-controlling interests
Total equity
Total net debt and equity
Average current and prior year
Total net debt and equity (c)
Return on Invested Capital (a ÷ c)
510
308
482
438
1,738
1,748
(328)
(665)
(4)
—
1,714
1,521
36
71
30
70
3,118
2,972
$4,939
$4,593
Net Debt to Adjusted EBITDA ratio
(dollars in millions)
Short-term debt
Long-term debt
Less: Cash and cash equivalents
Short-term investments
Total net debt (a)
Income before income taxes (b)
Adjusted Return on Invested Capital (b ÷ c)
10.7%
10.8%
Financing cost, net
$4,766
$4,473
Adjusted for:
2.6%
7.9%
Depreciation and amortization
(i) In 2021, we recorded $47 million of pre-tax restructuring charges, consisting of $27
million associated with our Cost Smart Cost of sales program, $17 million associated
with our Cost Smart SG&A program and other restructuring costs. In 2020, we recorded
$48 million of pre-tax restructuring charges, consisting of $25 million associated with
our Cost Smart SG&A program and $23 million associated with our Cost Smart Cost of
sales program. In addition, we recorded impairment charges of $45 million, consisting of
a $35 million impairment of our intangible assets related to acquired tradenames and a
$10 million impairment associated with our Verdient investment.
(ii) In 2021, we recorded $15 million of pre-tax benefits for Brazil indirect tax matters.
In 2020, we recorded $35 million of pre-tax benefits for Brazil indirect tax matters,
partially offset by other adjusted costs totaling $8 million.
(iii) The effective income tax rate was 25.6 percent for 2021 and 26.9 percent for 2020,
which removes the tax impact for the identified adjusted items as shown below.
Year Ended December 31, 2021
Year Ended December 31, 2020
Income
before
Income
Taxes
Provision
for
Income
Taxes
Effective
Income
Tax Rate
Income
before
Income
Taxes
Provision
for
Income
Taxes
Effective
Income
Tax Rate
$248
$123
49.6%
$506
$152
30.0%
47
3
340
(6)
(15)
—
—
11
(3)
—
(1)
7
(6)
27
93
11
—
—
(22)
—
—
18
2
—
—
(8)
(3)
(3)
(dollars in
millions)
As reported
Add back (deduct):
Impairment/
restructuring charges
Acquisition/
integration costs
Impairment on
disposition of assets
Fair value
adjustments on
equity investments
Other matters
Other tax matters
Tax item-Mexico
Adjusted non-GAAP
$617
$158
25.6%
$588
$158
26.9%
Restructuring/impairment (i)
Acquisition/integration costs
Impairment from disposition of assets
Other matters (ii)
Fair value adjustments to equity investments
Adjusted EBITDA (c)
Net Debt to Income before income tax ratio (a ÷ b)
Net Debt to Adjusted EBITDA ratio (a ÷ c)
(i) Restructuring/impairment charges are reduced by $9 million in 2021 and $8 million
in 2020 to exclude the accelerated depreciation associated with Cost Smart programs
that are included in Depreciation and amortization above.
(ii) We recorded $15 million of pre-tax benefits for Brazil indirect tax matters in 2021
and $35 million of pre-tax benefits for Brazil indirect tax matters, partially offset by
other adjusted charges totaling $13 million, in 2020.
Our long-term objective is to maintain a ratio of Net Debt to Adjusted
EBITDA of less than 2.25. As of December 31, 2021, and December 31,
2020, the ratio was 1.9 and 1.7, respectively.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements have been prepared in
accordance with GAAP. The preparation of these financial statements
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates under
different assumptions and conditions.
INGREDION INCORPORATED
17
We have identified below the most critical accounting policies upon
which the financial statements are based and that involve our most
complex and subjective decisions and assessments. Our senior
management has discussed the development, selection and disclosure
of these policies with members of the Audit Committee of our Board
of Directors. These accounting policies are provided in the Notes to the
Consolidated Financial Statements. The discussion that follows should
be read in conjunction with the Consolidated Financial Statements and
related notes included elsewhere in this Annual Report on Form 10-K.
Business Combinations: Our acquisitions of KaTech in 2021 and
PureCircle and Verdient in 2020 were accounted for in accordance
with Accounting Standards Codification (“ASC”) Topic 805, Business
Combinations. In purchase accounting, identifiable assets acquired and
liabilities assumed are recognized at their estimated fair values on the
date of acquisition and any remaining purchase price is recorded as
goodwill. In determining the fair values of assets acquired and liabilities
assumed, we make significant estimates and assumptions, particularly
for long-lived tangible and intangible assets. Critical estimates used
in valuing tangible and intangible assets include, but are not limited
to, future expected cash flows, discount rates, market prices and asset
lives. Although our estimates of fair value are based upon assumptions
believed to be reasonable, actual results may differ. See Note 2 of the
Notes to the Consolidated Financial Statements for more information
related to our acquisitions.
Property, Plant and Equipment and Definite-Lived Intangible Assets:
We have substantial investments in property, plant and equipment
(“PP&E”) and definite-lived intangible assets. For PP&E, we recognize the
cost of depreciable assets in operations over the estimated useful life
of the assets and evaluate the recoverability of these assets whenever
events or changes in circumstances indicate that the carrying value of
the assets may not be recoverable. For definite-lived intangible assets,
we recognize the cost of these amortizable assets in operations over
their estimated useful life and evaluate the recoverability of the assets
whenever events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable. The carrying values of PP&E
and definite-lived intangible assets at December 31, 2021 were $2.4
billion and $434 million, respectively.
In assessing the recoverability of the carrying value of PP&E and definite-
lived intangible assets, we may have to make projections regarding
future cash flows. In developing these projections, we make a variety of
important assumptions and estimates that have a significant impact on
our assessments of whether the carrying values of PP&E and definite-
lived intangible assets should be adjusted to reflect impairment. Among
these are assumptions and estimates about the future growth and
profitability of the related asset group, anticipated future economic,
regulatory and political conditions in the asset group’s market and
estimates of terminal or disposal values.
Through our continual assessment to optimize our operations, we
address whether there is a need for additional consolidation of
manufacturing facilities or to redeploy assets to areas where we can
expect to achieve a higher return on our investment. This review may
result in the closing or selling of certain of our manufacturing facilities.
The closing or selling of any of the facilities could have a significant
negative impact on the results of operations in the year in which the
closing or selling of a facility occurs.
The future occurrence of a potential indicator of impairment, such as a
significant adverse change in the business climate that would require a
change in our assumptions or strategic decisions made in response to
economic or competitive conditions, could require us to perform tests of
recoverability in the future.
Indefinite-Lived Intangible Assets and Goodwill: We have certain
indefinite-lived intangible assets in the form of tradenames and
trademarks. Our methodology for allocating the purchase price of
acquisitions is based on established valuation techniques that reflect the
consideration of a number of factors, including valuations performed by
third-party appraisers when appropriate. Goodwill is measured as the
excess of the cost of an acquired business over the fair value assigned to
identifiable assets acquired and liabilities assumed. We have identified
several reporting units for which cash flows are determinable and to
which goodwill may be allocated. Goodwill is either assigned to a specific
18
INGREDION INCORPORATED
reporting unit or allocated between reporting units based on the relative
excess fair value of each reporting unit. The carrying value of indefinite-
lived intangible assets and goodwill at December 31, 2021 was $143
million and $914 million, respectively, compared to $143 million and
$902 million, respectively, at December 31, 2020.
We assess indefinite-lived intangible assets and goodwill for impairment
annually (or more frequently if impairment indicators arise). We
perform this annual impairment assessment as of July 1 each year. In
testing indefinite-lived intangible assets for impairment, we first assess
qualitative factors to determine whether it is more-likely-than-not that
the fair value of an indefinite-lived intangible asset is impaired. After
assessing the qualitative factors, if we determine that it is more-likely-
than-not that the fair value of an indefinite-lived intangible asset is
greater than its carrying amount, then we would not be required to
compute the fair value of the indefinite-lived intangible asset. In the
event the qualitative assessment leads us to conclude otherwise, then
we would be required to determine the fair value of the indefinite-
lived intangible assets and perform a quantitative impairment test
in accordance with ASC subtopic 350-30, Intangibles – Goodwill and
Other. In performing the qualitative analysis, we consider various factors
including net sales derived from these intangibles and certain market
and industry conditions. Based on the results of our assessment, we
concluded that as of July 1, 2021, there were no impairments in our
indefinite-lived intangible assets.
In testing goodwill for impairment, we first assess qualitative factors
in determining whether it is more-likely-than-not that the fair value
of a reporting unit is less than its carrying amount. After assessing the
qualitative factors, if we determine that it is more-likely-than-not that
the fair value of a reporting unit is greater than its carrying amount,
then we do not perform an impairment test. If we conclude otherwise,
then we perform the impairment test as described in ASC Topic 350,
Intangibles – Goodwill and Other. Under this impairment test, the fair
value of the reporting unit is compared to its carrying value. If the fair
value of the reporting unit exceeds the carrying value of its net assets,
goodwill is not considered impaired, and no further testing is required.
If the carrying value of the net assets exceeds the fair value of the
reporting unit, then an impairment exists for the difference between the
fair value and carrying value of the reporting unit. This difference is not
to exceed the goodwill recorded at the reporting unit.
In performing our impairment tests for goodwill, management makes
certain estimates and judgments. These estimates and judgments include
the identification of reporting units and the determination of fair values
of reporting units, which management estimates using both discounted
cash flow analyses and an analysis of market multiples. Significant
assumptions used in the determination of fair value for reporting units
include estimates for discount and long-term net sales growth rates, in
addition to operating and capital expenditure requirements. We consider
changes in discount rates for the reporting units based on current
market interest rates and specific risk factors within each geographic
region. We also evaluate qualitative factors, such as legal, regulatory,
or competitive forces, in estimating the impact to the fair value of the
reporting units, noting no significant changes that would result in any
reporting unit failing the impairment test. Changes in assumptions
concerning projected results or other underlying assumptions could have
a significant impact on the fair value of the reporting units in the future.
Based on the results of the annual assessment, we concluded that as of
July 1, 2021, there were no impairments in our reporting units.
Retirement Benefits: We and our subsidiaries sponsor noncontributory
defined benefit pension plans (qualified and non-qualified) covering a
substantial portion of employees in the U.S. and Canada, and certain
employees in other foreign countries. We also provide healthcare and
life insurance benefits for retired employees in the U.S., Canada and
Brazil. In order to measure the expense and obligations associated
with these benefits, our management must make a variety of estimates
and assumptions, including discount rates, expected long-term rates
of return, rate of compensation increases, employee turnover rates,
retirement rates, mortality rates and other factors. We review our
actuarial assumptions on an annual basis as of December 31 (or more
frequently if a significant event requiring remeasurement occurs) and
modify our assumptions based on current rates and trends when it
is appropriate to do so. The effects of modifications are recognized
immediately on the Consolidated Balance Sheets but are generally
amortized into operating earnings over future periods, with the deferred
amount recorded in accumulated other comprehensive loss (“AOCL”).
We believe the assumptions utilized in recording our obligations under
our plans, which are based on our experience, market conditions and
input from our actuaries, are reasonable. We use third-party specialists
to assist management in evaluating our assumptions and estimates, as
well as to appropriately measure the costs and obligations associated
with our retirement benefit plans. Had we used different estimates
and assumptions for these plans, our retirement benefit obligations
and related expense could vary from the actual amounts recorded and
such differences could be material. Additionally, adverse changes in
investment returns earned on pension assets and discount rates used
to calculate pension and postretirement benefit related liabilities or
changes in required funding levels may have an unfavorable impact on
future expense and cash flow. Net periodic pension and postretirement
benefit cost for all of our plans was $3 million in 2021 and $4 million in
2020.
We determine our assumption for the discount rate used to measure
year-end pension and postretirement obligations based on high-quality
fixed-income investments that match the duration of the expected
benefit payments, which has been benchmarked using a long-term,
high-quality AA corporate bond index. We use a full yield curve approach
in the estimation of the service and interest cost components of benefit
cost by applying the specific spot rates along the yield curve used in
the determination of the benefit obligation to the relevant projected
cash flows. The weighted average discount rate used to determine our
obligations under U.S. pension plans as of December 31, 2021 and
2020, was 2.91 percent and 2.58 percent, respectively. The weighted
average discount rate used to determine our obligations under non-U.S.
pension plans as of 2021 and 2020, was 3.47 percent and 2.84 percent,
respectively. The weighted average discount rate used to determine our
obligations under our postretirement plans as of December 31, 2021 and
2020, was 4.22 percent and 3.69 percent, respectively.
A one percentage point decrease in the discount rates at 2021, would
have increased the accumulated benefit obligation and projected benefit
obligation by the following amounts (millions):
U.S. Pension Plans
Accumulated benefit obligation
Projected benefit obligation
Non-U.S. Pension Plans
Accumulated benefit obligation
Projected benefit obligation
Postretirement Plans
Accumulated benefit obligation
$43
43
$30
33
$8
Our investment approach and related asset allocation for the U.S. and
Canada plans is a liability-driven investment approach by which a higher
proportion of investments will be in interest-rate sensitive investments
(fixed income) under an active-management approach. The approach
seeks to protect the current funded status of the plans from market
volatility with a greater asset allocation to interest-rate sensitive assets.
The greater allocation to interest-rate sensitive assets is expected
to reduce volatility in plan funded status by more closely matching
movements in asset values to changes in liabilities.
Our current investment policy for our pension plans is to balance
risk and return through diversified portfolios of actively managed
equity index instruments, fixed income index securities and short-
term investments. Maturities for fixed income securities are managed
such that sufficient liquidity exists to meet near-term benefit payment
obligations. The asset allocation is reviewed regularly, and portfolio
investments are rebalanced to the targeted allocation when considered
appropriate or to raise sufficient liquidity when necessary to meet
near-term benefit payment obligations. For 2021 net periodic pension
cost, we assumed an expected long-term rate of return on assets, which
is based on the fair value of plan assets, of 4.10 percent for U.S. plans
and approximately 3.06 percent for Canadian plans. In developing
the expected long-term rate of return assumption on plan assets,
which consist mainly of U.S. and Canadian debt and equity securities,
management evaluated historical rates of return achieved on plan
assets and the asset allocation of the plans, input from our independent
actuaries and investment consultants, and historical trends in long-term
inflation rates. Projected return estimates made by such consultants are
based upon broad equity and bond indices. We also maintain several
funded pension plans in other international locations. The expected
returns on plan assets for these plans are determined based on each
plan’s investment approach and asset allocations. A hypothetical 25
basis point decrease in the expected long-term rate of return assumption
would increase 2022 net periodic pension cost for the U.S. and Canada
plans by approximately $1 million each.
Healthcare cost trend rates are used in valuing our postretirement
benefit obligations and are established based upon actual health care
cost trends and consultation with actuaries and benefit providers. At
December 31, 2021, the health care cost trend rate assumptions for the
next year for the U.S., Canada and Brazil plans were 6.00 percent, 5.74
percent and 7.79 percent, respectively.
See Note 11 of the Notes to the Consolidated Financial Statements for
more information related to our benefit plans.
New Accounting Standards
For information about new accounting standards, see Note 1 of the
Notes to the Consolidated Financial Statements.
Forward-Looking Statements
This Form 10-K 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, future operations, or future 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 therein
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 reflected 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 factors, 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
INGREDION INCORPORATED
19
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;
our ability to maintain satisfactory labor relations; our ability to attract,
develop, retain, 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.
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 Item 1A. Risk Factors above and our subsequent reports
on Form 10-Q and Form 8-K.
ITEM 7A. Quantitative and Qualitative Disclosures About
Market Risk
Hedging: We are 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. Our hedging transactions may include, but
are not limited to, a variety of derivative financial instruments such
as commodity-related futures, options and swap contracts, forward
currency-related contracts and options, interest rate swap agreements
and Treasury lock agreements (“T-Locks”). We plan to continue to use
derivative instruments to hedge such price risk and, accordingly, we will
be required to make cash deposits to or be entitled to receive cash from
20
INGREDION INCORPORATED
our margin accounts depending on the movement in the market price of
the underlying commodities. See Note 6 of the Notes to the Consolidated
Financial Statements for additional information.
Raw Material, Energy and Other Commodity Exposure: Our principal
use of derivative financial instruments is to manage commodity price risk
in North America relating to anticipated purchases of corn and natural
gas to be used in our manufacturing process. Our finished products are
made primarily from corn. In North America, we sell a large portion of
finished products at firm prices established in supply contracts typically
lasting for periods of up to one year. In order to minimize the effect of
volatility in the cost of corn related to these firm-priced supply contracts,
we enter into corn futures contracts or take other hedging positions in
the corn futures market. These contracts typically mature within one
year. At expiration, we settle the derivative contracts at a net amount
equal to the difference between the then-current price of corn and the
futures contract price. While these hedging instruments are subject to
fluctuations in value, changes in the value of the underlying exposures
we are hedging generally offset such fluctuations. While the corn futures
contracts or other hedging positions are intended to minimize the
volatility of corn costs on operating profits, occasionally the hedging
activity can result in losses, some of which may be material. Outside of
North America, sales of finished products under long-term, firm-priced
supply contracts are not material.
Energy costs represent approximately 8 percent of our cost of sales.
The primary use of energy is to create steam in the production process
and to dry product. We consume natural gas, electricity, coal, fuel oil,
wood and other biomass sources to generate energy. The market prices
for these commodities vary depending on supply and demand, world
economies and other factors. We purchase these commodities based on
our anticipated usage and the future outlook for these costs. We cannot
assure that we will be able to purchase these commodities at prices
that we can adequately pass on to customers to sustain or increase
profitability. We use derivative financial instruments, such as over-the-
counter natural gas swaps, to hedge portions of our natural gas costs
generally over the following 12 to 24 months, primarily in our North
America operations.
At December 31, 2021, we had outstanding futures and option contracts
that hedged the forecasted purchase of approximately 135 million
bushels of corn, as well as outstanding swap contracts that hedged the
forecasted purchase of approximately 35 million MMBtus of natural gas.
Based on our overall commodity hedge position at December 31, 2021, a
hypothetical 10 percent decline in market prices applied to the fair value
of the instruments would result in a charge to other comprehensive
loss (“OCL”) of approximately $3 million, net of income tax benefit
of $1 million. Any change in the fair value of the contracts, real or
hypothetical, would be substantially offset by an inverse change in the
value of the underlying hedged item.
Unrealized gains and losses associated with marking our commodities-
based cash flow hedge derivative instruments to market are recorded as
a component of OCL. As of December 31, 2021, our AOCL included $51
million of net gains (net of income tax expense of $19 million) related
to these derivative instruments. It is anticipated that $45 million of net
gains (net of income tax expense of $16 million) will be reclassified into
earnings during the next 12 months. We expect the net gains to be offset
by changes in the underlying commodities costs.
Interest Rate Exposure: We are exposed to interest rate risk on
our variable rate debt and price risk on our fixed rate debt. As of
December 31, 2021, approximately 85 percent, or $1.7 billion, of our
total debt is fixed rate debt and 15 percent, or approximately $311
million, of our total debt is variable rate debt subject to changes in
short-term rates, which could affect our interest costs. We assess market
risk based on changes in interest rates utilizing a sensitivity analysis that
measures the potential change in earnings, fair values and cash flows
based on a hypothetical 1 percentage point change in interest rates at
December 31, 2021. A hypothetical increase of 1 percentage point in
the weighted average floating interest rate would increase our annual
interest expense by approximately $3 million and would change the fair
value of our fixed rate debt at December 31, 2021 by approximately
$189 million. See Note 8 of the Notes to the Consolidated Financial
Statements for further information.
Since we have no current plans to repurchase our outstanding fixed rate
instruments before their maturities, the impact of market interest rate
fluctuations on our long-term debt is not expected to have a significant
effect on our Consolidated Financial Statements.
We occasionally use interest rate swaps and T-Locks to hedge our
exposure to interest rate changes, to reduce the volatility of our
financing costs, or to achieve a desired proportion of fixed versus
floating rate debt, based on current and projected market conditions.
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. As of December 31, 2021,
and 2020, we did not have any outstanding interest rate swaps.
We did not have any T-Locks outstanding as of December 31, 2021. As of
December 31, 2021, our AOCL account included $3 million of net losses
(net of $1 million tax benefit) related to settled T-Locks. These deferred
losses are being amortized to financing costs over the term of the senior
notes with which they are associated. The net losses reclassified into
earnings during the next 12 months are not anticipated to be significant.
Foreign Currencies: Due to our global operations, we are exposed to
fluctuations in foreign currency exchange rates. As a result, we have
exposure to translational foreign exchange risk when our foreign
operation results are translated to U.S. dollars and to transactional
foreign exchange risk when transactions not denominated in the
functional currency of the operating unit are revalued.
We selectively use derivative instruments such as forward contracts,
currency swaps and options to manage transactional foreign exchange
risk. Based on our overall foreign currency transactional exposure
at December 31, 2021, we estimate that a hypothetical 10 percent
decline in the value of the U.S. dollar would have resulted in a
transactional foreign exchange gain of approximately $9 million. At
December 31, 2021, our AOCL account included in the equity section
of our Consolidated Balance Sheets includes a cumulative translation
loss of approximately $903 million. The aggregate net assets of our
foreign subsidiaries where the local currency is the functional currency
approximated $1.7 billion at December 31, 2021. A hypothetical
10 percent decline in the value of the U.S. dollar relative to foreign
currencies would have resulted in a reduction to our cumulative
translation loss and a credit to OCL of approximately $190 million.
We primarily use derivative financial instruments such as foreign-
currency forward contracts, swaps and options to manage our foreign
currency transactional exchange risk. We enter foreign-currency
derivative instruments that are designated as both cash flow hedging
instruments as well as instruments not designated as hedging
instruments for accounting purposes. As of December 31, 2021, we
had foreign currency forward sales contracts with an aggregate notional
amount of $360 million and foreign currency forward purchase contracts
with an aggregate notional amount of $205 million not designated as
hedging instruments for accounting purposes. The amount included in
AOCL relating to these hedges at December 31, 2021 was insignificant.
The net losses reclassified into earnings during the next 12 months are
not anticipated to be significant.
Some of the countries in which we operate may incur high inflation. We
elected hyperinflation accounting for our affiliate in Argentina, which
had high cumulative inflation, determined its functional currency to be
the U.S. dollar, and measure its income statement and balance sheet
in U.S. dollars using both current and historical rates of exchange. The
effect of changes in exchange rates on its local currency denominated
monetary assets and liabilities was reflected in earnings in financing
costs in the Consolidated Statements of Income until its assets were
contributed to a joint venture in 2021 and it was deconsolidated.
ITEM 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Ingredion Incorporated:
Opinions on the Consolidated Financial Statements and Internal
Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets
of Ingredion Incorporated and subsidiaries (the Company) as of
December 31, 2021 and 2020, the related consolidated statements
of income, comprehensive income, equity and redeemable equity,
and cash flows for each of the years in the three-year period ended
December 31, 2021, and the related notes (collectively, the consolidated
financial statements). We also have audited the Company’s internal
control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of
its operations and its cash flows for each of the years in the three-
year period ended December 31, 2021, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the
Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2021 based on criteria
established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway
Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated
financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Company’s
consolidated financial statements and an opinion on the Company’s
internal control over financial reporting based on our audits. We are a
public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or
fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audit of the consolidated financial statements included performing
procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audit
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit
of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
INGREDION INCORPORATED
21
The following are the primary procedures we performed to address this
critical audit matter. We evaluated the design and tested the operating
effectiveness of certain internal controls related to the Company’s
pension benefit obligations process, including controls related to
the assessment of the actuarial models and methodology and the
development of the discount rates. For certain plans, we involved an
actuarial professional with specialized skill and knowledge, who assisted
in:
• understanding and assessing the appropriateness of the actuarial
models and methodology used by the Company to determine the
obligations;
• the evaluation of the Company’s discount rates, by assessing chang-
es in the discount rates from the prior year and comparing it to the
change in published indices, and by evaluating the discount rates
based on the pattern of cash flows; and
• the evaluation of the selected yield curve, the consistency of the yield
curve with the prior year, and the spot rates, to further assess the
discount rates.
/s/ KPMG LLP
We have served as the Company’s auditor since 1997.
Chicago, Illinois
February 22, 2022
Definition and Limitations of Internal Control Over Financial
Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising
from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgments. The
communication of a critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing
a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Evaluation of the pension benefit obligations
As discussed in Note 11 to the consolidated financial statements, the
Company’s pension benefit obligations totaled $637 million as of
December 31, 2021. The pension benefit obligations are measured at the
actuarial present value of the benefits to which employees are entitled
based on employee service rendered and the benefits attributed by the
pension benefit formula and the employee’s expected date of separation
or retirement. The determination of the Company’s pension benefit
obligations is dependent, in part, on certain estimates and the selection
of assumptions, including discount rates.
We identified the evaluation of the pension benefit obligations as a
critical audit matter. Subjective auditor judgment was required to
evaluate the actuarial models and methodology used by the Company
to determine the obligations and to evaluate the discount rates used.
Changes in the discount rates could have a significant impact to the
measurement of the pension benefit obligations.
22
INGREDION INCORPORATED
Consolidated Statements of Income
(in millions, except per share amounts)
Net sales
Cost of sales
Gross profit
Operating expenses
Other operating (income)
Restructuring/impairment charges and related adjustments
Operating income
Financing costs
Other non-operating (income) expense
Income before income taxes
Provision for income taxes
Net income
Less: Net income attributable to non-controlling interests
Net income attributable to Ingredion
Weighted average common shares outstanding:
Basic
Diluted
Earnings per common share of Ingredion:
Basic
Diluted
See the Notes to the Consolidated Financial Statements.
Year Ended December 31,
2021
$6,894
5,563
1,331
668
(34)
387
310
74
(12)
248
123
125
8
$117
67.1
67.8
$1.74
1.73
2020
$5,987
4,715
1,272
628
(31)
93
582
81
(5)
506
152
354
6
$348
67.2
67.6
$5.18
5.15
2019
$6,209
4,897
1,312
610
(19)
57
664
81
1
582
158
424
11
$413
66.9
67.4
$6.17
6.13
INGREDION INCORPORATED
23
Consolidated Statements of Comprehensive Income
(in millions)
Net income
Other comprehensive income:
Gains (losses) on cash flow hedges, net of income tax effect of $58, $2 and $5, respectively
(Gains) losses on cash flow hedges reclassified to earnings, net of income tax effect of $55,
$17 and $4, respectively
Actuarial gains (losses) on pension and other postretirement obligations, settlements and
plan amendments, net of income tax effect of $9, $1 and $2, respectively
Currency translation adjustment
Comprehensive income
Less: Comprehensive income attributable to non-controlling interests
Comprehensive income attributable to Ingredion
See the Notes to the Consolidated Financial Statements.
2021
$125
160
(154)
19
211
361
9
$352
2020
$354
3
48
(1)
(25)
379
5
$374
2019
$424
(14)
10
9
(9)
420
9
$411
24
INGREDION INCORPORATED
Consolidated Balance Sheets
(in millions, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses
Total current assets
Property, plant and equipment, net of accumulated depreciation of $3,232 and $3,175, respectively
Intangible assets
Other assets
Total assets
Liabilities and equity
Current liabilities:
Short-term borrowings
Accounts payable
Accrued liabilities
Total current liabilities
Long-term debt
Other non-current liabilities
Total liabilities
Share-based payments subject to redemption
Redeemable non-controlling interests
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
December 31, 2021 and December 31, 2020
Additional paid-in capital
Less: Treasury stock (common stock: 11,154,203 and 10,795,346 shares at December 31, 2021 and
December 31, 2020, respectively) at cost
Accumulated other comprehensive loss
Retained earnings
Total Ingredion stockholders’ equity
Non-redeemable non-controlling interests
Total equity
Total liabilities and equity
See the Notes to the Consolidated Financial Statements.
As of December 31,
2021
2020
$328
4
1,130
1,172
63
2,697
2,423
1,348
531
6,999
308
774
430
1,512
1,738
524
3,774
36
71
—
1
1,158
(1,061)
(897)
3,899
3,100
18
3,118
$6,999
$665
—
1,011
917
54
2,647
2,455
1,346
410
6,858
438
599
421
1,458
1,748
580
3,786
30
70
—
1
1,150
(1,024)
(1,133)
3,957
2,951
21
2,972
$6,858
INGREDION INCORPORATED
25
Consolidated Statements of Equity and Redeemable Equity
Total Equity
Preferred
Stock
Common
Stock
Additional
Paid-In
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Non-
Redeemable
Non-
Controlling
Interests
Share-based
Payments
Subject to
Redemption
Redeemable
Non-
Controlling
Interests
$ —
$1
$1,096
$(1,091)
$(1,154)
$3,536
$20
$37
$ —
413
(169)
32
9
31
20
(4)
$ —
$1
$1,137
$(1,040)
$(1,158)
$3,780
348
(171)
13
16
25
$ —
$1
$1,150
$(1,024)
$(1,133)
$3,957
117
(175)
(68)
31
8
236
$ —
$1
$1,158
$(1,061)
$(897)
$3,899
11
(8)
(2)
21
10
(8)
(1)
(1)
21
11
(11)
(3)
$18
(6)
31
(1)
30
6
$36
—
—
(4)
74
70
(3)
4
$71
(in millions)
Balance, December 31, 2018
Net income attributable to Ingredion
Net income attributable to non-controlling
interests
Dividends declared
Repurchases of common stock
Share-based compensation, net of issuance
Other
Balance, December 31, 2019
Net income attributable to Ingredion
Net income (loss) attributable to non-controlling
interests
Dividends declared
Acquisition of redeemable non-controlling
interests
Share-based compensation, net of issuance
Other comprehensive income (loss)
Other
Balance, December 31, 2020
Net income attributable to Ingredion
Net income (loss) attributable to non-controlling
interests
Dividends declared
Repurchases of common stock, net
Share-based compensation, net of issuance
Other comprehensive income (loss)
Balance, December 31, 2021
See the Notes to the Consolidated Financial Statements.
26
INGREDION INCORPORATED
Consolidated Statements of Cash Flows
Year Ended December 31,
(in millions)
Cash provided by operating activities
Net income
Non-cash charges to net income:
Depreciation and amortization
Mechanical stores expense
Impairment on disposition of assets
Deferred income taxes
Other non-cash charges
Changes in working capital:
Accounts receivable and prepaid expenses
Inventories
Accounts payable and accrued liabilities
Margin accounts
Other
Cash provided by operating activities
Cash used for investing activities
Capital expenditures and mechanical stores purchases
Proceeds from disposal of manufacturing facilities and properties
Payments for acquisitions, net of cash acquired
Other
Cash used for investing activities
Cash (used for) provided by financing activities
Proceeds from borrowings
Payments on debt
Debt issuance cost
Commercial paper borrowings, net
(Repurchases) issuances of common stock, net
Dividends paid, including to non-controlling interests
Cash (used for) provided by financing activities
Effects of foreign exchange rate changes on cash
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See the Notes to the Consolidated Financial Statements.
2021
$125
220
55
340
(61)
8
(162)
(312)
226
(32)
(15)
392
(300)
18
(40)
(13)
(335)
1,300
(1,690)
—
250
(49)
(184)
(373)
(21)
(337)
665
$328
2020
$354
213
54
—
(7)
105
(3)
(14)
124
43
(40)
829
(340)
7
(236)
(2)
(571)
1,550
(1,224)
(9)
—
4
(178)
143
—
401
264
$665
2019
$424
220
57
—
3
33
(61)
(43)
51
(1)
(3)
680
(328)
2
(42)
(6)
(374)
1,209
(1,465)
—
—
66
(174)
(364)
(5)
(63)
327
$264
INGREDION INCORPORATED
27
Notes to Consolidated Financial Statements
NOTE 1 – Description of the Business and Summary of
Significant Accounting Policies
Description of the Business: Ingredion Incorporated was founded in
1906 and became an independent and public company as of December
31, 1997. Unless the context otherwise requires, all references herein to
the “Company,” “Ingredion,” “we,” “us,” and “our” shall mean Ingredion
Incorporated and its consolidated subsidiaries. We primarily manufacture
and sell sweeteners, starches, nutrition ingredients and biomaterial
solutions derived from the wet milling and processing of corn and other
starch-based materials to a wide range of industries, both domestically
and internationally.
Basis of presentation: The Consolidated Financial Statements consist
of the accounts of Ingredion, including all subsidiaries. Intercompany
accounts and transactions are eliminated in consolidation.
The preparation of the accompanying Consolidated Financial Statements
in conformity with U.S. Generally Accepted Accounting Principles
(“GAAP”) requires management to make estimates and assumptions
about future events. These estimates and the underlying assumptions
affect the amounts of assets and liabilities reported, disclosures
about contingent assets and liabilities, and reported amounts of
revenues and expenses. Such estimates include the value of purchase
consideration, valuation of accounts receivable, inventories, certain
investments, goodwill, intangible assets and other long-lived assets,
legal contingencies and assumptions used in the calculation of income
taxes and pension and other postretirement benefits, among others.
These estimates and assumptions are based on our best estimates and
judgment. We evaluate our estimates and assumptions on an ongoing
basis using historical experience and other factors, including the current
economic environment, which we believe to be reasonable under the
circumstances. We will adjust such estimates and assumptions when
facts and circumstances dictate. Foreign currency devaluations versus
the U.S. dollar, corn price volatility, access to credit markets and adverse
changes in the global economic environment have combined to increase
the uncertainty inherent in such estimates and assumptions. As future
events and their effects cannot be determined with precision, actual
results could differ significantly from these estimates. Changes in these
estimates will be reflected in the financial statements in future periods.
Assets and liabilities of foreign subsidiaries, other than those whose
functional currency is the U.S. dollar, are translated at current exchange
rates with the related translation adjustments reported in equity as a
component of accumulated other comprehensive loss (“AOCL”) and
income statement accounts are translated at the average exchange rate
during the period. However, significant non-recurring items related to
specific events are recognized at the exchange rate on the date of each
significant event. The U.S. dollar is the functional currency for Ingredion’s
subsidiaries in Mexico and Argentina. If the U.S. dollar is the functional
currency, we translate the subsidiary’s monetary assets and liabilities
at current exchange rates with the related adjustment included in net
income and non-monetary assets and liabilities at historical exchange
rates with the related translation adjustments included in AOCL.
Net Sales: Ingredion recognizes revenue under the core principle to
depict the transfer of products to customers in an amount reflecting
the consideration Ingredion expects to receive. To achieve that core
principle, Ingredion applies the following five-step approach: (1) identify
the contract with a customer, (2) identify the performance obligations
in the contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract and (5)
recognize revenue when a performance obligation is satisfied.
Ingredion identifies customer purchase orders, which in some cases
are governed by a master sales agreement, as the contracts with its
customers. For each contract, Ingredion considers the transfer of
products, each of which is distinct, to be the identified performance
obligation. In determining the transaction price for the performance
obligation, Ingredion evaluates whether the price is subject to
adjustment to determine the consideration to which Ingredion expects
to be entitled. The pricing model can be fixed or variable within the
contract. The variable pricing model is based on historical commodity
28
INGREDION INCORPORATED
pricing and is determinable prior to completion of the performance
obligation. Additionally, Ingredion has certain sales adjustments for
volume incentive discounts and other discount arrangements that
reduce the transaction price. The reduction of transaction price is
estimated using the expected value method based on an analysis
of historical volume incentives or discounts, over a period of time
considered adequate to account for current pricing and business trends.
Historically, actual volume incentives and discounts relative to those
estimated and included when determining the transaction price have not
materially differed. Volume incentives and discounts are accrued at the
satisfaction of the performance obligation and accounted for in Accounts
payable and Accrued liabilities in the Consolidated Balance Sheets.
The product price as specified in the contract, net of any discounts,
is considered the standalone selling price as it is an observable input
that represents the price if we sold the product to a similar customer in
similar circumstances. Payment is received shortly after the performance
obligation is satisfied and thus, we do not recognize any significant
financing components.
Revenue is recognized when Ingredion’s performance obligation is
satisfied and control is transferred to the customer, which occurs at
a point in time, either upon delivery to an agreed upon location or to
the customer. Further, in determining whether control has transferred,
Ingredion considers if there is a present right to payment and legal title,
along with risks and rewards of ownership having transferred to the
customer.
Shipping and handling activities related to contracts with customers
represent fulfillment costs and are recorded in Cost of sales in the
Consolidated Statements of Income. Taxes assessed by governmental
authorities and collected from customers are accounted for on a net
basis and excluded from net sales. We expense costs to obtain a contract
when we incur the costs since most contracts are one year or less. These
costs primarily include Ingredion’s internal sales force compensation.
Under the terms of these programs, the compensation is generally
earned, and the costs are recognized when we recognize the revenue.
From time to time, Ingredion may enter into long-term contracts with
its customers. Historically, the contracts entered into by Ingredion
do not result in significant contract assets or liabilities. Any such
arrangements are accounted for in Other assets or Accrued liabilities in
the Consolidated Balance Sheets.
Cash and cash equivalents: Cash equivalents consist of all instruments
purchased with an original maturity of three months or less and which
have virtually no risk of loss in value.
Accounts receivable: Accounts receivable consist of trade and other
receivables carried at approximate fair value, net of an allowance for
credit losses. The allowance for credit losses is determined using our
best estimate of expected credit losses based on historical experience
and current forecasts of future economic conditions and we adjust this
estimate over the life of the receivable as needed.
Inventories: Inventories are stated at the lower of cost or net realizable
value. Costs are predominantly determined using the weighted average
method.
Long-term investments: Ingredion may hold marketable securities and
equity investments. Long-term investments are included in Other assets
in the Consolidated Balance Sheets. Marketable securities are carried
at fair value and we record changes in fair value to Other operating
(income) in the Consolidated Statements of Income.
Equity investments in companies for which Ingredion does not have
the ability to exercise significant influence are accounted for at fair
value, with changes in fair value recorded in Other non-operating
(income) expense in the Consolidated Statements of Income. Equity
securities without readily determinable fair values are carried at cost,
less impairments, if any, and adjusted for observable price changes for
the identical or a similar investment of the same issuer. We perform a
qualitative impairment assessment to determine if such investments are
impaired. The qualitative assessment considers all available information,
including declines in the financial performance of the issuing entity, the
issuing entity’s operating environment and general market conditions.
Impairments of equity securities without readily determinable fair
value are recorded in Other non-operating (income) expense in the
Consolidated Statements of Income.
Equity investments in companies for which Ingredion has the ability to
exercise significant influence, but not control, are accounted for using
the equity method of accounting. Ingredion’s share of the earnings or
losses as reported by equity method investees, are recognized in Other
operating (income) in the Consolidated Statements of Income. Each
reporting period, Ingredion evaluates declines in the fair value of equity
method investments below carrying value to determine if they are
other-than-temporary and if so, Ingredion writes down the investment
to its estimated fair value. Impairments are recognized in Restructuring/
impairment charges and related adjustments in the Consolidated
Statements of Income.
Leases: Ingredion determines if an arrangement contains a lease, as
well as its classification as an operating lease or finance lease, at the
inception of the agreement. Lease assets represent Ingredion’s right to
use an underlying asset for the lease term and lease liabilities represent
our obligation to make lease payments arising from the lease. Lease
assets and liabilities are recognized at the lease commencement date
based on the present value of future lease payments over the lease
term. As most of Ingredion’s leases do not provide an implicit rate,
Ingredion uses an incremental borrowing rate based on the information
available at the commencement date in determining the present value
of lease payments. The lease asset value includes in our calculation any
prepaid lease payments made and any lease incentives received from
the arrangement as a reduction of the asset. Ingredion’s lease terms may
include options to extend or terminate the lease and the impact of these
options are included in the lease liability and lease asset calculations
when the exercise of the option is at Ingredion’s sole discretion and it
is reasonably certain that we will exercise that option. Ingredion will
not separate lease and non-lease components for its leases when it is
impracticable to separate them, such as leases with variable payment
arrangements. Leases with an initial term of 12 months or less are not
recorded on the Consolidated Balance Sheets.
Ingredion has operating leases for certain rail cars, office space,
warehouses and machinery and equipment. The commencement date
used for the calculation of the lease obligations recorded is the latter of
January 1, 2019 or the lease start date. Certain leases have options to
extend the life of the lease, which are included in the liability calculation
when the option is at the sole discretion of Ingredion and it is reasonably
certain that Ingredion will exercise the option. Ingredion has certain
leases that have variable payments based solely on output or usage of
the leased asset. These variable operating lease assets are excluded from
Ingredion’s Consolidated Balance Sheets presentation and expensed as
incurred. Lease expense is recognized on a straight-line basis over the
lease term.
Property, plant and equipment and definite-lived intangible
assets: Property, plant and equipment (“PP&E”) is stated at cost less
accumulated depreciation and definite-lived intangible assets are
stated at cost less accumulated amortization. For PP&E, depreciation is
generally computed on the straight-line basis over the estimated useful
lives of depreciable assets, which range from 25 to 50 years for buildings
and from two to 25 years for all other assets. Costs for mechanical stores
represent costs for spare parts used in the production process that are
capitalized in PP&E as part of machinery and equipment until they are
utilized in the manufacturing process and expensed as a period cost.
Where permitted by law, accelerated depreciation methods are used for
tax purposes. For definite-lived intangible assets, we recognize the cost
of these amortizable assets in operations over their estimated useful life,
which range from two to 30 years. Ingredion reviews the recoverability
of the net book value of PP&E and definite-lived intangible assets for
impairment whenever events or changes in circumstances indicate
that the carrying value of an asset group may not be recoverable. If this
review indicates that the carrying values of the asset group will not be
recovered, the carrying values are reduced to fair value and an impairment
loss is recognized. The impairment analysis for long-lived assets occurs
before the goodwill impairment assessment described below.
Indefinite-lived intangible assets and Goodwill: We have certain
indefinite-lived intangible assets in the form of tradenames and
trademarks. Our methodology for allocating the purchase price of
acquisitions is based on established valuation techniques that reflect the
consideration of a number of factors, including valuations performed
by third-party appraisers when appropriate. Goodwill represents the
excess of the cost of an acquired entity over the fair value assigned to
identifiable assets acquired and liabilities assumed. Ingredion assesses
indefinite-lived intangible assets and goodwill for impairment annually
(or more frequently if impairment indicators arise), which we perform as
of July 1 of each year.
In testing indefinite-lived intangible assets for impairment, Ingredion
first assesses qualitative factors to determine whether it is more-likely-
than-not that the fair value of an indefinite-lived intangible asset is
impaired. After assessing the qualitative factors, if Ingredion determines
that it is more-likely-than-not that the fair value of an indefinite-lived
intangible asset is greater than its carrying amount, then we are not
required to compute the fair value of the indefinite-lived intangible
asset. If the qualitative assessment leads Ingredion to conclude
otherwise, then we are required to determine the fair value of the
indefinite-lived intangible assets and perform a quantitative impairment
test. In performing the qualitative analysis, Ingredion considers various
factors including net sales derived from these intangibles and certain
market and industry conditions. Based on the results of the annual
assessment, Ingredion concluded that as of July 1, 2021, there were no
impairments in our indefinite-lived intangible assets.
In testing goodwill for impairment, Ingredion first assesses qualitative
factors in determining whether it is more-likely-than-not that the fair
value of a reporting unit is less than its carrying amount. After assessing
the qualitative factors, if Ingredion determines that it is more-likely-
than-not that the fair value of a reporting unit is greater than its carrying
amount, then Ingredion does not perform an impairment test. If
Ingredion concludes otherwise, then Ingredion performs an impairment
test that compares the fair value of the reporting unit to its carrying
value. If the fair value of the reporting unit exceeds the carrying value
of its net assets, goodwill is not considered impaired, and no further
testing is required. If the carrying value of the net assets exceeds the fair
value of the reporting unit, then an impairment exists for the difference
between the fair value and carrying value of the reporting unit. This
difference is not to exceed the goodwill recorded at the reporting unit.
Based on the results of the annual assessment, Ingredion concluded that
as of July 1, 2021, there were no impairments in our reporting units.
Hedging instruments: Derivative financial instruments used by
Ingredion consist of commodity futures and option contracts, forward
currency contracts and options, interest rate swap agreements and
Treasury lock agreements (“T-Locks”).
When Ingredion enters a derivative contract, we designate the derivative
as a hedge of variable cash flows to be paid related to certain forecasted
transactions (“a cash flow hedge”), as a hedge of the fair value of
certain firm commitments (“a fair value hedge”), or as a non-designated
hedging instrument. This process includes linking all derivatives that
are designated as cash flow or fair value hedges to specific assets
and liabilities on the Consolidated Balance Sheets, or to specific firm
commitments or forecasted transactions. For all hedging relationships,
Ingredion documents the hedging relationships and its risk-management
objective and strategy for undertaking the hedge transactions, the
hedging instrument, the hedged item, the nature of the risk being
hedged, how the hedging instrument’s effectiveness in offsetting
the hedged risk will be assessed and a description of the method of
measuring ineffectiveness. Ingredion also formally assesses both, at
the hedge’s inception and on an ongoing basis, whether the derivatives
that are used in hedging transactions are highly effective in offsetting
changes in cash flows or fair values of hedged items. Unrealized gains
and losses associated with marking cash flow hedging contracts to
market (fair value) are recorded as a component of other comprehensive
loss (“OCL”).
Ingredion discontinues hedge accounting prospectively when it is
unlikely that a forecasted transaction will occur or when we determine
that the designation of the derivative as a hedging instrument is no
longer appropriate since the derivative is no longer effective in offsetting
changes in the cash flows or fair value of the originally intended
hedged transaction. When hedge accounting is discontinued, Ingredion
INGREDION INCORPORATED
29
continues to carry the derivative on the Consolidated Balance Sheets at
its fair value and any accumulated gains and losses that were included
in AOCL in the period a hedge was determined to be ineffective, as well
as future gains and losses of the derivative, are recognized in earnings
in the same line item affected by the originally intended hedged
transaction.
Pension and other postemployment benefits: All U.S. pension
and postemployment benefit plans and most non-U.S. pension and
postemployment benefit plans value the vested benefit obligation based
on the actuarial present value of the vested benefits to which employees
are currently entitled based on their expected date of separation or
retirement.
For defined benefit plans, the service cost component of net periodic
benefit cost is presented within either Cost of sales or operating
expenses on the Consolidated Statements of Income. The interest
cost, expected return on plan assets, amortization of actuarial loss,
amortization of prior service credit and settlement loss components of
net periodic benefit cost are presented as Other non-operating (income)
expense on the Consolidated Statements of Income.
Actuarial gains and losses in excess of 10 percent of the greater of the
projected benefit obligation or the market-related value of plan assets
are classified in AOCL, along with the related tax impact, and recognized
as a component of net periodic benefit cost over the average remaining
service period of a plan’s active employees for active defined benefit
pension plans and over the average remaining life of a plan’s active
employees for frozen defined benefit pension plans.
Share-based compensation: Ingredion has a stock incentive plan that
provides for share-based employee compensation, including the granting
of stock options, shares of restricted stock, restricted stock units and
performance shares to certain key employees. Compensation expense
is generally recognized in the Consolidated Statements of Income on a
straight-line basis for all awards over the employee’s vesting period or
over a one-year required service period for certain retirement-eligible,
executive level employees. Ingredion estimates a forfeiture rate at the
time of certain grants and updates the estimate throughout the vesting
of certain awards within the amount of compensation costs recognized
in each period.
Earnings per common share: Basic earnings per common share
(“EPS”) is computed by dividing net income attributable to Ingredion
by the weighted average number of shares outstanding. Diluted EPS is
calculated using the treasury stock method, computed by dividing net
income attributable to Ingredion by the weighted average number of
shares outstanding, including the dilutive effect of outstanding stock
options and other instruments associated with long-term incentive
compensation plans.
Risks and uncertainties: Ingredion operates domestically and
internationally. In each country, the business and assets are subject to
varying degrees of risk and uncertainty. Ingredion insures its business
and assets in each country against insurable risks in a manner that it
deems appropriate. Because of this geographic dispersion, Ingredion
believes that a loss from non-insurable events in any one country would
not have a material adverse effect on Ingredion’s operations as a whole.
Additionally, Ingredion believes there is no significant concentration
of risk with any single customer or supplier whose failure or non-
performance would materially affect Ingredion’s results.
New 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 period of 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. We are currently evaluating the effect of adoption of ASU No.
2020-04 on our financial position and results of operations.
30
INGREDION INCORPORATED
NOTE 2 – Acquisitions
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 $40 million, net
of cash acquired, which we funded from cash on hand. The acquisition
added $26 million of goodwill and intangible assets, as well as $14
million of tangible assets, which we preliminarily recorded on the
acquisition date based on available information and incorporating our
best estimates. Beginning at the acquisition date, our Consolidated
Financial Statements reflect the effects of the acquisition and KaTech’s
financial results, which we report on a one-month lag in our Europe,
Middle East and Africa (“EMEA”) reportable business segment.
On November 3, 2020, Ingredion acquired 80 percent of the outstanding
shares of Verdient Foods, Inc. (“Verdient”), as well as land and buildings
Verdient leased from a third party. Verdient is a Canada-based producer
of pulse-based protein concentrates and flours from peas, lentils and
fava beans for human food applications. To complete the closing,
Ingredion made a total cash payment of CAD $33 million (USD $26
million), which we funded from cash on hand. Before the acquisition,
Ingredion owned 20 percent of Verdient’s outstanding shares, which
we had reported as an equity method investment until we acquired
the remaining shares. The acquisition of Verdient added $15 million of
goodwill and $14 million of tangible assets assumed on the acquisition
date of November 3, 2020. Beginning on that date, the financial results
of Verdient are wholly consolidated into our North America business
segment in our Consolidated Financial Statements.
On July 1, 2020, Ingredion acquired a 75 percent controlling interest in
PureCircle Limited (“PureCircle”), which is one of the leading producers
and innovators of plant-based stevia sweeteners for global food and
beverage industries. To complete the closing, Ingredion made a total
cash payment of $208 million, net of $14 million of cash acquired, which
we funded from cash on hand. Beginning at the acquisition date, we
wholly consolidate PureCircle’s financial statements into our Asia-Pacific
business segment in our Consolidated Financial Statements and net
income attributable to non-controlling interests that is deducted from
our net income is the portion of net income attributable to the remaining
25 percent portion of PureCircle owned by non-controlling shareholders.
The following table summarizes the final purchase price allocations for
the fair value of the PureCircle net assets at the date of acquisition,
which included non-redeemable non-controlling interests for the non-
controlling shareholders:
(in millions)
Working capital (excluding cash)
Property, plant and equipment
Other, net
Identifiable intangible assets
Goodwill
Total fair value, net of cash
Less: Non-redeemable non-controlling interests
Total purchase price, net of cash
PureCircle
$68
91
(33)
68
88
282
74
$208
The PureCircle acquisition’s identifiable intangible assets include
customer relationships, tradenames and proprietary technology. The
fair values of these intangible assets under the fair value hierarchy
were determined to be Level 3, which include unobservable inputs to
determine the fair value of an asset or liability. Unobservable inputs
are used to measure fair value to the extent that observable inputs are
not available, thereby allowing for fair value estimates to be made in
situations in which there is little, if any, market activity for an asset or
liability at the measurement date. For more information on the fair value
hierarchy, see Note 7.
The following table presents the fair values, valuation techniques and
estimated remaining useful lives for PureCircle’s identifiable assets at the
acquisition date for these Level 3 measurements (dollars in millions):
Other Intangible Assets
The following tables summarizes Ingredion’s other intangible assets as of
December 31, 2021 and 2020:
Intangible Asset
Fair Value
Valuation Technique
Proprietary technology
$32
Tradenames
Customer relationships
18
18
Relief-from-royalty
method
Relief-from-royalty
method
Multi-period excess
earnings method
Estimated
Useful Life
12 years
15 years
12 years
The fair values of proprietary technology, tradenames and customer
relationships were determined through the valuation techniques
described above using various judgmental assumptions such as discount
rates, royalty rates and customer attrition rates, as applicable. The fair
values of property, plant and equipment associated with the acquisitions
were determined to be Level 3 under the fair value hierarchy. Property,
plant and equipment values were estimated using either the cost or
market approach.
On March 1, 2019, Ingredion completed its acquisition of Western
Polymer LLC (“Western Polymer”), a U.S.-based producer of native and
modified potato starches for industrial and food applications for $42
million, net of cash acquired. Beginning on the acquisition date, our
Consolidated Financial Statements reflect the effects of the acquisition
and Western Polymer’s financial results in our North America reportable
business segment.
Pro-forma results of operation for any of the foregoing acquisitions
have not been presented as the effect of each acquisition individually
and in the aggregate with other acquisitions would not be material to
Ingredion’s results of operations for any periods presented.
Ingredion incurred $5 million, $11 million and $3 million of pre-tax
acquisition and integration costs in 2021, 2020 and 2019, respectively,
associated with our acquisitions.
NOTE 3 – Intangible Assets
Goodwill
The original carrying value of goodwill and accumulated impairment
charges by reportable business segment at December 31, 2021, was as
follows:
Goodwill before
impairment charges
Accumulated
impairment charges
North
America
South
America
Asia-
Pacific
EMEA
Total
$622
$50
$316
$69
$1,057
(1)
(33)
(121)
—
(155)
Balance at January 1, 2021
621
Acquisitions
Currency translation
Balance at
December 31, 2021
17
—
(2)
195
6
1
69
9
(4)
902
17
(5)
2
—
$623
$15
$202
$74
$914
Based on the results of our impairment assessments, we concluded that
as of July 1, 2021, there were no impairments to goodwill.
2021
Accumulated
Amortization
Net
Weighted
Average
Useful Life
(years)
(in millions)
Trademarks/tradenames
(indefinite-lived)
Patents
Customer relationships
Technology
Other
Gross
$143
33
365
103
43
— $143
(4)
29
(134)
231
(101)
(14)
2
29
Total other intangible assets
$687
(253)
$434
2020
Accumulated
Amortization
Net
Weighted
Average
Useful Life
(years)
(in millions)
Trademarks/tradenames
(indefinite-lived)
Patents
Customer relationships
Technology
Other
Gross
$143
33
356
103
38
— $143
(2)
31
(115)
241
(101)
(11)
2
27
Total other intangible assets
$673
(229)
$444
—
12
19
9
15
17
—
12
20
9
19
17
Amortization expense related to intangible assets was $27 million, $30
million and $29 million for 2021, 2020 and 2019, respectively. Based
on the results of our impairment assessments, we concluded that as of
July 1, 2021, there were no impairments to our indefinite-lived other
intangible assets. Based on acquisitions completed through 2021,
intangible asset amortization expense for the next five years is shown
below:
(in millions)
Year
2022
2023
2024
2025
2026
Amortization Expense
$27
26
26
26
25
NOTE 4 – Investments
Investments consisted of the following as of December 31, 2021 and
2020:
(in millions)
Equity investments
Equity method investments
Marketable securities
Total investments
2021
2020
$16
104
12
$8
10
11
$132
$29
INGREDION INCORPORATED
31
Amyris Joint Venture
On June 1, 2021, Ingredion entered into an agreement with Amyris,
Inc. (“Amyris”) for certain exclusive commercialization rights to Amyris’
rebaudioside M by fermentation product, the exclusive licensing of the
product’s manufacturing technology and a 31 percent ownership stake in
a joint venture for the products (the “Amyris joint venture”). In exchange,
we contributed $28 million of total consideration, which included $10
million of cash, as well as non-exclusive intellectual property licenses
and other consideration valued at $18 million. The transaction resulted
in an $8 million gain recorded in Other operating (income), which
included $18 million related to the non-exclusive intellectual property
licenses, offset by the $10 million cash payment. Beginning June 1,
2021, Ingredion accounts for the investment under the equity method.
Arcor 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 “Arcor joint venture”), a joint venture to operate 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 to combine the manufacturing
facilities, finalize the transaction and formally establish the Arcor 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 $71
million from our Argentina, Chile and Uruguay operations for 49 percent
of the outstanding shares of the Arcor joint venture valued at $64
million, as well as $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 $6 million of pre-tax transaction
and integration costs to acquire the Arcor and Amyris joint venture
investments in 2021.
NOTE 5 – Restructuring and Impairment Charges
During 2021, Ingredion recorded $387 million of net pre-tax
restructuring and impairment charges. Ingredion recorded a pre-
tax impairment charge of $340 million related to the net assets we
contributed to the Arcor joint venture and pre-tax restructuring charges
of $44 million primarily related to Ingredion’s Cost Smart program.
During 2020 Ingredion recorded a total of $93 million of pre-tax
restructuring and impairment charges, including $48 million of pre-
tax restructuring costs and $45 million of pre-tax impairment charges.
During 2019 Ingredion recorded $57 million of pre-tax restructuring
charges related to Ingredion’s Cost Smart program.
Impairment Charges
At the announcement of our agreement to invest in the Arcor joint
venture in the first quarter of 2021, we reclassified assets and liabilities
we expected to contribute to the joint venture as held for sale in
Other assets in the Consolidated Balance Sheets and we recorded an
impairment charge of $360 million based on our preliminary estimates
of their fair value. Upon completion of the transaction in the third
quarter of 2021, Ingredion finalized the fair value of the held for
sale assets and liabilities, which resulted in a $20 million favorable
adjustment to the impairment charge in the quarter. Of the final $340
million impairment charge for the net assets contributed to the Arcor
joint venture in 2021, $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 final write-down of the contributed
net assets to fair value.
During 2020 Ingredion recorded a $35 million impairment charge for its
indefinite-lived intangible asset associated with the TIC Gums tradename
32
INGREDION INCORPORATED
due to our decision to change our marketing strategy related to the
brand. Additionally, we recorded a $10 million other-than-temporary
impairment of our equity method investment in Verdient when we
agreed to acquire the remaining 80 percent interest in Verdient.
Restructuring Charges
During 2021 Ingredion recorded $47 million of pre-tax net restructuring
related charges. Ingredion recorded pre-tax net restructuring charges
of $27 million as part of our Cost Smart Cost of sales program, which
primarily consisted of accelerated depreciation and other costs recorded
in our North America segment. We also recorded $17 million of
employee-related and other costs associated with our Cost Smart selling,
general and administrative expense (“SG&A”) program, consisting of
professional services and employee-related severance costs primarily in
our North America and EMEA segments.
During 2020 Ingredion recorded a total of $48 million of pre-tax
restructuring related charges. Ingredion recorded pre-tax restructuring
charges of $25 million for our Cost Smart SG&A program, which were
primarily for employee-related severance costs recorded in our North
America and EMEA segments, professional services costs in our North
America segment and other costs. We also recorded $23 million of
pre-tax restructuring charges for our Cost Smart Cost of sales program,
which were primarily for inventory and mechanical stores write-offs
and other costs associated with the closure of our Lane Cove, Australia
production facility and closures of North America facilities and product
lines including our Berwick, Pennsylvania manufacturing facility and the
cessation of ethanol production at our Cedar Rapids, Iowa facility.
During 2019 Ingredion recorded a total of $57 million of pre-tax
restructuring charges. We recorded $29 million of pre-tax restructuring
charges for our Cost Smart Cost of sales program, which were primarily
for accelerated depreciation and employee-related severance associated
with the closure of our Lane Cove, Australia production facility and
professional services and other costs primarily in North America. Pre-
tax restructuring charges of $28 million were recorded for the Cost
Smart SG&A program, which were primarily professional services and
employee-related severance costs recorded in our North America and
South America segments. The Cost Smart Cost of sales and Cost Smart
SG&A programs began in 2018, during which we incurred $49 million of
costs as part of the Cost Smart cost of sales program and $11 million of
costs as part of the Cost Smart SG&A program.
A summary of Ingredion’s severance accrual at December 31, 2021,
which we expect to fully pay in 2022, is as follows ($ in millions):
Balance in severance accrual as of December 31, 2020
Joint venture related
Cost Smart
Payments made to terminated employees
Balance in severance accrual as of December 31, 2021
$12
1
1
(11)
$ 3
NOTE 6 – 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 December 31, 2021. Derivative financial
instruments used by Ingredion consist 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 24 months.
Ingredion maintains 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,
Ingredion uses 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 certain corn derivative instruments that are not designated as
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 price risk related to anticipated purchases of
corn.
For commodity hedges designated as cash flow hedges, unrealized gains
and losses associated with marking the commodity hedging contracts to
market (fair value) are recorded as a component of OCL and included in
the equity section of the Consolidated Balance Sheets as part of AOCL.
These amounts, as well as their related tax effects, are subsequently
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 Consolidated Statements of Cash Flows.
Ingredion had outstanding futures and option contracts that hedged the
forecasted purchase of approximately 135 million and 95 million bushels
of corn as of December 31, 2021 and 2020, respectively. Ingredion also
had outstanding swap contracts that hedged the forecasted purchase
of approximately 35 million and 33 million MMBtu of natural gas as of
December 31, 2021 and 2020, 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 both 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, which had a notional value of
$360 million and $410 million as of December 31, 2021 and 2020,
respectively. Ingredion also hedges certain liabilities using foreign
currency derivatives not designated as hedging instruments, which had
a notional value of $205 million and $224 million as of December 31,
2021 and 2020, respectively.
Ingredion hedges certain assets using foreign currency cash flow
hedging instruments, which had a notional value of $505 million and
$401 million as of December 31, 2021 and 2020, respectively. Ingredion
also hedges certain liability positions using foreign currency cash flow
hedging instruments, which had a notional value of $708 million and
$542 million as of December 31, 2021 and 2020, 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. 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.
During 2020 Ingredion settled an outstanding interest rate swap
agreement that converted the interest rates on $200 million of its $400
million 4.625 percent senior notes due November 1, 2020, to variable
rates. Ingredion redeemed these notes in July 2020 and settled the
outstanding interest rate swap. Ingredion did not have any outstanding
interest rate swaps as of December 31, 2021 or December 31, 2020.
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
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 December 31, 2021 and December
31, 2020.
The derivative instruments designated as cash flow hedges included in
AOCL as of December 31, 2021 and 2020, are reflected below:
Derivatives in Cash Flow Hedging Relationships
(in millions)
Commodity contracts, net of income tax effect of $19 and
$16, respectively
Foreign currency contracts, net of income tax effect of $ —
Interest rate contracts, net of income tax effect of $1
Total
Gains (Losses)
included in AOCL as
of December 31,
2021
2020
$51
—
(3)
$48
$47
(1)
(4)
$42
INGREDION INCORPORATED
33
The fair value and balance sheet location of Ingredion’s derivative
instruments, presented gross in the Consolidated Balance Sheets, are
reflected below:
Additional information relating to Ingredion’s derivative instruments is
presented below:
Derivatives in Cash
Flow Hedging
Relationships
(in millions)
Commodity
contracts
Foreign
currency contracts
Interest rate
contracts
Gains (Losses)
Recognized in
OCL on Derivatives
2021
2020
2019
$218
$17
$(24)
—
—
(7)
(5)
5
—
Gains (Losses)
Reclassified from
AOCL into Income
2021
2020
2019
$211
$(62)
$(12)
(1)
(2)
—
(1)
(1)
(2)
Income
Statement
Location
Cost of
sales
Net sales/
Cost
of sales
Financing
costs
Total
$218
$5 $(19)
$209 $(65)
$(14)
Gains (Losses)
Recognized
in Income
Gains (Losses)
Recognized
in Income
Income
Statement
Location of
Derivatives
Designated
as Hedging
Instruments
Derivatives
in Fair Value
Hedging
Relationships
(in millions)
2021 2020 2019
Interest rate
contracts
Financing
costs
$ — $(1)
$2
Income
Statement
Location
of Hedged
Items
Financing
costs
2021 2020 2019
$ —
$1
$(2)
As of December 31, 2021, AOCL included $45 million of net gains (net
of income taxes of $16 million) on commodities-related derivative
instruments, T-Locks and foreign currency hedges designated as cash
flow hedges that are expected to be reclassified into earnings during the
next 12 months.
NOTE 7 – 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 liabili-
ty or can be derived principally from or corroborated by observable
market data.
• Level 3 inputs are unobservable inputs for the asset or liability. Un-
observable 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.
Designated Hedging
Instruments (in millions)
Non-Designated Hedging
Instruments (in millions)
Balance Sheet
Location
Commodity
Contracts
Foreign
Currency
Contracts
Commodity
Contracts
Total
Foreign
Currency
Contracts
Accounts
receivable, net
Other assets
Assets
Accounts
payable and
accrued
liabilities
Non-current
liabilities
Liabilities
Net
(Liabilities)/
Assets
$45
7
52
5
2
7
$9
$54
6
15
13
67
12
17
6
18
8
25
$4
—
4
2
—
2
$3
—
3
4
1
5
Total
$7
—
7
6
1
7
$45
$(3)
$42
$2
$(2)
$ —
Designated Hedging
Instruments (in millions)
Non-Designated Hedging
Instruments (in millions)
Balance Sheet
Location
Commodity
Contracts
Foreign
Currency
Contracts
Commodity
Contracts
Total
Foreign
Currency
Contracts
Total
Accounts
receivable, net
Other assets
Assets
Accounts
payable and
accrued
liabilities
Non-current
liabilities
Liabilities
Net (Liabilities)/
Assets
$50
$7
$57
4
54
4
2
6
—
7
4
61
12
16
—
2
12
18
$48
$(5)
$43
$3
—
3
1
—
1
$2
$4
$7
1
5
8
1
8
9
2
2
10
11
$(5)
$(3)
34
INGREDION INCORPORATED
Assets and liabilities measured at fair value on a recurring basis are
presented below:
As of December 31, 2020
(in millions)
Total Level 1 Level 2 Level 3
Total Level 1 Level 2 Level 3
Available
for sale
securities
Derivative
assets
Derivative
liabilities
Long-term
debt
$12
$ 12
$ —
$ —
$11
$ 11
$ —
$ —
74
49
25
32
22
10
—
—
69
53
16
29
3
26
1,957
— 1,957
— 1,751
— 1,751
—
—
—
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. See
Note 11 for information on the fair value of pension plan assets.
NOTE 8 – Financing Arrangements
Ingredion had total debt outstanding of approximately $2.0 billion and
$2.2 billion at December 31, 2021 and 2020, respectively. Short-term
borrowings at December 31, 2021, consist primarily of commercial
paper borrowings and amounts outstanding under various unsecured
local country operating lines of credit.
During 2021, Ingredion amended, restated and later repaid in full the
$380 million of borrowings outstanding under the term loan credit
agreement that was amended and restated on March 16, 2021 (the
“Term Loan Credit Agreement”). The Term Loan Credit Agreement
restated the previous agreement by extending the maturity date of the
borrowings under the previous agreement until March 15, 2022. No
new borrowings under the Term Loan Credit Agreement were incurred
in connection with the amendment and restatement. Borrowings
under the Term Loan Credit Agreement bore interest at a variable
annual rate based on a London Interbank Offering Rate (“LIBOR”) or a
base rate, at Ingredion’s election, subject to the terms and conditions
thereof, plus, in each case, an applicable margin. The Term Loan Credit
Agreement reduced the applicable interest rate margin for loans
accruing interest based on LIBOR from 0.80 percent to 0.75 percent.
Ingredion was required to pay a fee on the unused availability under
the Term Loan Credit Agreement. The Term Loan Credit Agreement
contained customary representations, warranties, covenants and events
of default, including covenants restricting the incurrence of liens, the
incurrence of indebtedness by Ingredion’s subsidiaries, and certain
fundamental changes involving Ingredion and its subsidiaries, subject
to certain exceptions in each case. Ingredion also had to maintain a
specified maximum consolidated leverage ratio and a specified minimum
consolidated interest coverage ratio.
On June 30, 2021, Ingredion entered into a new revolving credit
agreement (the “Revolving Credit Agreement”) to replace the previous
revolving credit agreement, which was terminated. The Revolving Credit
Agreement provides for a five-year unsecured revolving credit facility
in an aggregate principal amount of $1 billion outstanding at any time
and the facility will mature on June 30, 2026. Loans under the facility
will accrue interest at a per annum rate equal, at Ingredion’s option,
to either a specified LIBOR plus an applicable margin, or a base rate
(generally determined according to the highest of the prime rate, the
federal funds rate or the specified LIBOR plus 1.00 percent) plus an
applicable margin. The Revolving Credit Agreement contains customary
affirmative and negative covenants that, among other matters, specify
customary reporting obligations, and that, subject to exceptions, restrict
the incurrence of additional indebtedness by Ingredion’s subsidiaries,
the incurrence of liens and the consummation of certain mergers,
consolidations and sales of assets. Ingredion is subject to compliance, as
of the end of each quarter, with a maximum leverage ratio of 3.5 to 1.0
and a minimum ratio of consolidated EBITDA to consolidated net interest
expense of 3.5 to 1.0, as each such financial covenant is calculated for
the most recently completed four-quarter period. As of December 31,
2021, Ingredion was in compliance with these financial covenants. In
addition to borrowing availability under its Revolving Credit Agreement,
as of December 31, 2021, Ingredion had approximately $641 million of
unused operating lines of credit in the various foreign countries in which
it operates.
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 $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. Since
the program was established, the average amount of commercial paper
outstanding was $670 million with an average interest rate of 0.27
percent and a weighted average maturity of 48 days. As of December
31, 2021, $250 million of commercial paper was outstanding with an
average interest rate of 0.35 percent and a weighted average maturity
of 40 days. The amount of commercial paper outstanding under this
program in 2022 is expected to fluctuate.
Presented below are Ingredion’s debt carrying amounts, net of related
discounts, premiums and debt issuance costs and fair values as of
December 31, 2021 and 2020:
(in millions)
Carrying
Value
Fair
Value
Carrying
Value
2020
Fair
Value
2.900% senior notes due June 1, 2030
$595
$619
$594
$596
3.200% senior notes due October 1, 2026
3.900% senior notes due June 1, 2050
6.625% senior notes due April 15, 2037
Revolving credit agreement
Other long-term borrowings
498
390
253
—
2
531
455
350
—
2
497
390
253
—
14
500
395
246
—
14
Total long-term debt
1,738
1,957
1,748
1,751
Term loan credit agreement
due April 12, 2021
Commercial paper
Other short-term borrowings
Total short-term borrowings
—
250
58
308
—
250
58
308
380
380
—
58
—
58
438
438
Total debt
$2,046
$2,265
$2,186 $ 2,189
Ingredion guarantees certain obligations of its consolidated subsidiaries.
The amount of the obligations guaranteed aggregated was $61 million
and $58 million at December 31, 2021 and 2020, respectively.
NOTE 9 – Leases
The components of lease expense for the indicated periods were as
follows:
(in millions)
Operating lease cost
Variable operating lease cost
Short term lease cost
Lease expense
2021
$58
26
4
$88
2020
$58
29
4
$91
2019
$55
24
3
$82
INGREDION INCORPORATED
35
Ingredion currently has no finance leases. The following is a
reconciliation of future undiscounted cash flows to the operating
lease liabilities and the related operating lease assets as presented
within Other non-current liabilities and Other assets, respectively, on
Ingredion’s Consolidated Balance Sheets as of December 31, 2021
($ in millions):
NOTE 10 – Income Taxes
The components of income before income taxes and the provision for
income taxes for the years indicated are shown below:
(in millions)
Income before income taxes:
2021
2020
2019
Additional information related to Ingredion’s operating leases is listed
below.
$52
U.S.
43
33
24
19
52
223
22
201
47
$154
$193
Foreign
Total income before income taxes
Provision for income taxes:
Current tax (benefit) expense:
U.S. federal
State and local
Foreign
Total current tax expense
Deferred tax expense (benefit):
U.S. federal
State and local
Foreign
Total deferred tax expense (benefit)
$39
209
248
2
2
180
184
$(15)
521
506
1
2
156
159
(57)
(18)
(2)
(2)
(61)
(1)
12
(7)
$74
508
582
6
2
147
155
(8)
—
11
3
Total provision for income taxes
$123
$152
$158
Deferred income taxes are provided for the tax effects of temporary
differences between the financial reporting basis and tax basis
of assets and liabilities. Significant temporary differences as of
December 31, 2021 and 2020, are summarized as follows:
Year ended December 31,
2021
2020
$58
$77
$60
$76
As of
December 31, 2021
As of
December 31, 2020
(in millions)
Deferred tax assets attributable to:
Employee benefit accruals
Pensions and postretirement plans
Lease liabilities
Bad debt
6.5 years
5.5 years
Inventory reserve
Net operating loss carryforwards
4.0%
4.9%
Tax credit carryforwards
Other
Total deferred tax assets
Valuation allowances
Net deferred tax assets
Deferred tax liabilities attributable to:
2021
2020
$28
$20
14
49
14
13
64
18
36
236
(67)
169
21
44
2
9
32
11
43
182
(30)
152
Property, plant and equipment
175
173
Identified intangibles
Right-of-use lease assets
Foreign withholding and state taxes on unremitted earnings
Goodwill
Brazilian indirect tax credits
Derivative contracts
Total deferred tax liabilities
Net deferred tax liabilities
47
46
1
27
5
19
46
42
31
20
18
16
320
346
$151
$194
2022
2023
2024
2025
2026
Thereafter
Total future lease payments
Less imputed interest
Present value of future lease payments
Less current lease liabilities
Non-current operating lease liabilities
Operating lease assets
Other Information
($ in millions)
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from operating
leases
Right-of-use assets obtained in
exchange for lease liabilities:
Operating leases
Weighted average remaining lease term:
Operating leases
Weighted average discount rate:
Operating leases
36
INGREDION INCORPORATED
Of the $64 million of tax-effected net operating loss carryforwards as of
December 31, 2021, $5 million and $14 million are for U.S. federal and
state loss carryforwards, respectively and $45 million are for foreign loss
carryforwards. U.S. federal and state loss carryforwards have various
expiration periods starting in 2024. Of the $45 million of foreign loss
carryforwards, $17 million are related to Canada, $9 million to Argentina
and $8 million to Australia with carryforward periods of 20 years, 5 years
and indefinite, respectively.
A valuation allowance is established when it is more likely than not
that all or a portion of a deferred tax asset will not be realized. Prior
to establishing a valuation allowance, we consider historical taxable
income, scheduled reversal of deferred tax liabilities, tax planning
strategies, tax carryovers and projected future taxable income. As of
December 31, 2021, Ingredion maintained valuation allowances of $5
million and $14 million for U.S. federal and state loss carryforwards,
respectively and $32 million for foreign loss carryforwards. Ingredion
also maintained valuation allowances of $6 million for state credits
and carryforwards, $1 million for certain foreign tax credits and $9
million on foreign subsidiaries’ net deferred tax assets including other
carryforwards, all of which we have determined will more likely than not
expire prior to realization.
Net operating loss carryforwards disclosed in the financial statements
differ from the as-filed tax returns due to an unrecognized tax benefit.
Foreign net operating loss carryforwards and valuation allowances would
increase $11 million, absent the unrecognized tax benefit.
A reconciliation of the U.S. federal statutory tax rate to Ingredion’s
effective tax rate follows:
Provision for tax at U.S. statutory rate
21.0%
21.0%
21.0%
2021
2020
2019
Tax rate difference on foreign income
Foreign currency FX
Inflation adjustments
Tax benefit of intercompany financing
U.S. international tax implications
Valuation allowance in Argentina
Favorable judgment on the treatment of credits
and interest on indirect taxes
Unremitted earnings
Impairment charge related to Accor joint venture
Other items, net
13.3
3.2
(4.0)
(1.6)
0.8
9.1
1.2
(0.8)
(0.8)
0.6
(0.4)
(0.6)
(4.8)
(0.6)
6.2
(0.2)
(0.3)
(1.2)
2.2
0.3
—
—
—
(12.1)
35.5
(1.3)
—
—
0.9
(0.9)
Provision at effective tax rate
49.6%
30.0%
27.1%
Ingredion has significant operations in Mexico, Pakistan and Colombia,
where the 2021 statutory tax rates are 30 percent, 29 percent and 31
percent, respectively. In addition, Ingredion’s subsidiary in Brazil has a
statutory tax rate of 34 percent before the application of local incentives
that vary each year.
During 2021 Ingredion Brazil received favorable judgments related
to the taxability of interest earned on indirect tax credits (discussed
in Note 14) and interest paid on previously recovered tax credits. In
addition, Ingredion Brazil recovered income taxes paid on government
subsidies. These items resulted in a tax benefit of $12 million or 4.8
percentage points on the effective tax rate for 2021.
Ingredion recorded a $340 million impairment charge during 2021 for
the net assets contributed to the Arcor joint venture (discussed in Note
5). No tax benefit was recorded for this impairment resulting in a 35.5
percentage point increase in the effective tax rate for 2021.
During 2021 Ingredion reversed an accrual for unremitted earnings
due to restructuring and recorded a tax benefit of $30 million or 12.1
percentage points on the effective rate. As of December 31, 2021, the
remaining balance was a $1 million accrual for foreign withholding
on certain unremitted earnings from foreign subsidiaries. No foreign
withholding taxes, federal and state taxes or foreign currency gains/
losses have been provided on distributions of approximately $2.2 billion
of unremitted earnings of Ingredion’s foreign subsidiaries, as such
amounts are considered permanently reinvested. It is not practicable
to estimate the additional income taxes, including applicable foreign
withholding taxes that would be due upon the repatriation of these
earnings.
A reconciliation of the beginning and ending amounts of unrecognized
tax benefits, excluding interest and penalties, for 2021 and 2020 is as
follows:
(in millions)
Balance at January 1
Additions for tax positions related to prior years
Reductions for tax positions related to prior years
Additions based on tax positions related to the current year
Reductions related to a lapse in the statute of limitations
Balance at December 31
2021
$46
2
(9)
2
(12)
$29
2020
$22
33
—
—
(9)
$46
Of the $29 million of unrecognized tax benefits as of December 31,
2021, $18 million represents the amount that, if recognized, could
affect the effective tax rate in future periods. The remaining $11 million
includes an offset for net operating loss carryforwards that would have
otherwise had a valuation allowance.
Ingredion accounts for interest and penalties related to income tax
matters within the provision for income taxes. Ingredion has accrued $3
million of interest expense and penalties related to the unrecognized tax
benefits as of December 31, 2021.
Ingredion is subject to U.S. federal income tax as well as income tax in
multiple states and non-U.S. jurisdictions. The U.S. federal tax returns are
subject to audit for the years 2017 through 2020. In general, Ingredion’s
foreign subsidiaries remain subject to audit for years 2010 and later.
It is reasonably possible that the total amount of unrecognized tax
benefits including interest and penalties will increase or decrease within
12 months of December 31, 2021. Ingredion believes it is reasonably
possible that none of the unrecognized tax benefits may be recognized
within 12 months of December 31, 2021, as a result of a lapse of the
statute of limitations. Ingredion has classified none of the unrecognized
tax benefits as current because they are not expected to be resolved
within the next 12 months.
NOTE 11 – Pension and Other Postretirement Benefits
Ingredion and its subsidiaries sponsor noncontributory defined benefit
pension plans (qualified and non-qualified) covering a substantial
portion of employees in the U.S. and Canada and certain employees in
other foreign countries. Plans for most salaried employees provide pay-
related benefits based on years of service. Plans for hourly employees
generally provide benefits based on flat dollar amounts and years of
service. Ingredion’s general funding policy is to make contributions to
the plans in amounts that comply with minimum funding requirements
and are within the limits of deductibility under current tax regulations.
Certain foreign countries allow income tax deductions without regard to
contribution levels and Ingredion’s policy in those countries is to make
contributions required by the terms of the applicable plan.
Included in Ingredion’s pension obligation are nonqualified supplemental
retirement plans for certain key employees. Benefits provided under
these plans are unfunded and payments to plan participants are made
directly by Ingredion.
Ingredion also provides healthcare and/or life insurance benefits for
retired employees in the U.S., Canada and Brazil. Healthcare benefits
for retirees outside the U.S., Canada and Brazil are generally covered
through local government plans.
INGREDION INCORPORATED
37
Pension Plans
Pension Obligation and Funded Status: The changes in pension benefit
obligations and plan assets during 2021 and 2020, as well as the funded
status and the amounts recognized in Ingredion’s Consolidated Balance
Sheets related to Ingredion’s pension plans at December 31, 2021 and
2020, were as follows:
(in millions)
Benefit obligation
At January 1
Service cost
Interest cost
Benefits paid
Actuarial (gain) loss
Curtailment/settlement/amendments
Foreign currency translation
U.S. Plans
Non-U.S. Plans
2021
2020
2021
2020
$409
$387
$275
$254
4
8
(24)
(14)
—
—
5
11
(23)
29
—
—
4
9
(13)
(15)
(1)
(5)
4
10
(12)
14
—
5
Benefit obligation at December 31
$383
$409
$254
$275
Fair value of plan assets
At January 1
Actual return on plan assets
Employer contributions
Benefits paid
Plan settlements
Foreign currency translation
$439
$408
$249
$231
4
1
53
1
3
7
22
4
(24)
(23)
(13)
(12)
—
—
—
—
(1)
(1)
—
4
Fair value of plan assets at December 31
$420
$439
$244
$249
Funded status
$37
$30
$(10)
$(26)
As of December 31, 2021, the decrease in the benefit obligation for U.S.
and non-U.S. plans was primarily driven by actuarial gains, which mainly
resulted from an increase in discount rates due to an increase in bond
yields compared to the prior year. As of December 31, 2020, the increase
in benefit obligations for U.S. and non-U.S. plans was driven by actuarial
losses, which mainly resulted from a decline in discount rates due to the
fall in bond yields compared to the prior year.
Amounts recorded in the Consolidated Balance Sheets as of December
31, 2021 and 2020 were as follows:
The amount recognized in AOCL at December 31, 2021 was flat
compared to prior year, for the U.S. pension plans, mainly due to the
increase in discount rates used to measure Ingredion’s obligations under
its U.S. pension which was offset by the actual return on assets being less
than the expected return on assets.
The decrease in the net amount recognized in AOCL at December 31, 2021,
for the non-U.S. pension plans, as compared to December 31, 2020,
was primarily due to higher discount rates used to measure Ingredion’s
obligations under its non-U.S. pension plans.
The accumulated benefit obligation for all defined benefit pension plans
was $619 million and $664 million at December 31, 2021 and 2020,
respectively. Information for pension plans with a projected benefit
obligation in excess of plan assets and an accumulated benefit obligation
in excess of plan assets was as follows:
(in millions)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Non-U.S. Plans
2021
$(10)
(9)
—
2020
$(11)
(10)
—
2021
$(57)
(48)
3
2020
$(81)
(70)
19
Components of net periodic benefit cost consist of the following for
2021, 2020 and 2019:
(in millions)
Service cost
Interest cost
U.S. Plans
Non-U.S. Plans
2021
2020
2019
2021
2020
2019
$4
8
$5
11
$5
14
Expected return on plan assets
(17)
(21)
(18)
Amortization of actuarial loss
—
—
1
Amortization of prior service
credit
(1)
(1)
Net periodic benefit cost
$(6)
$(6)
(1)
$1
$4
9
(8)
2
—
$7
$4
10
(8)
2
—
$8
$3
10
(8)
2
—
$7
Total amounts recorded in other comprehensive income and net periodic
benefit cost were as follows:
(in millions, pre-tax)
2021
2020
2019
2021
2020
2019
U.S. Plans
Non-U.S. Plans
Non-U.S. Plans
Net actuarial (gain) loss
$(1)
$(3)
$(25)
$(11)
(in millions)
Non-current asset
Current liabilities
Non-current liabilities
Net asset (liability) recognized
2021
$47
(1)
(9)
$37
2020
2021
2020
Prior service cost
$41
(1)
(10)
$30
$44
(1)
(53)
$36
(1)
(61)
Amortization of actuarial loss
Amortization of prior service
credit
$(10)
$(26)
Foreign currency translation
Total recorded in other
comprehensive income
—
—
1
—
—
—
—
1
—
—
—
$1
—
$7
1
(1)
(2)
(2)
(2)
1
—
—
(11)
(2)
(6)
(25)
(24)
1
7
—
—
(1)
8
—
—
6
7
Net periodic benefit cost
(6)
Total recorded in other
comprehensive income and
net periodic benefit cost
$(6)
$(8)
$(24)
$(17)
$7
$13
Amounts recorded in AOCL, excluding tax effects that have not yet been
recognized as components of net periodic benefit cost at December 31,
2021 and 2020, were as follows:
(in millions)
Net actuarial loss
Transition obligation
Prior service (credit) cost
Net amount recognized
2021
$11
—
(4)
$7
2020
$12
—
(5)
$7
Non-U.S. Plans
2021
$38
—
—
$38
2020
$61
1
—
$62
38
INGREDION INCORPORATED
The following weighted average assumptions were used to determine
Ingredion’s obligations for the pension plans for the given years:
Discount rate
Rate of compensation increase
Cash balance interest credit rate
U.S. Plans
Non-U.S. Plans
2021
2.91%
4.18
4.11
2020
2021
2.58%
3.47%
4.26
3.76
3.67
—
2020
2.84%
3.54
—
The following weighted average assumptions were used to determine
Ingredion’s net periodic benefit cost for the pension plans for the given
years:
U.S. Plans
Non-U.S. Plans
2021
2020
2019
2021
2020
2019
Discount rate
2.58%
3.34%
4.38%
2.84%
3.55%
4.33%
Expected long-term return
on plan assets
Rate of compensation increase
Cash balance interest
crediting rate
4.10
4.26
5.30
4.21
5.30
4.31
3.37
3.54
3.81
3.68
4.37
3.63
3.76
4.16
4.49
—
—
—
For 2021, Ingredion assumed an expected long-term rate of return on
assets of 4.10 percent for U.S. plans and 3.06 percent for Canadian plans.
In developing the expected long-term rate of return assumption on
plan assets, which consist mainly of U.S. and Canadian debt and equity
securities, we evaluated historical rates of return achieved on plan assets
and the asset allocation of the plans, input from Ingredion’s independent
actuaries and investment consultants, and historical trends in long-term
inflation rates. Projected return estimates are based upon broad equity
and bond indices.
The discount rate reflects a rate of return on high-quality fixed income
investments that match the duration of the expected benefit payments.
Ingredion has typically used returns on long-term, high-quality corporate
AA bonds as a benchmark in establishing this assumption. Ingredion
elects to use a full yield curve approach in the estimation of these
components of benefit cost by applying the specific spot rates along the
yield curve used in the determination of the benefit obligation to the
relevant projected cash flows.
Plan Assets: Ingredion’s investment policy for its pension plans is to
balance risk and return through diversified portfolios of fixed income
securities, equity instruments and short-term investments. Maturities
for fixed income securities are managed such that sufficient liquidity
exists to meet near-term benefit payment obligations. For U.S. pension
plans, the weighted average target range allocation of assets was 9-19
percent in equities and 81-91 percent in fixed income inclusive of other
short-term investments. The asset allocation is reviewed regularly, and
portfolio investments are rebalanced to the targeted allocation when
considered appropriate.
Ingredion’s weighted average asset allocations as of December 31, 2021
and 2020, for U.S. and non-U.S. pension plan assets are as follows:
Asset Category
Equity securities
Debt securities
Cash and other
Total
2021
14%
85
1
2020
20%
79
1
Non-U.S. Plans
2021
18%
57
25
2020
18%
58
24
100%
100%
100%
100%
With the exception of cash, which is considered Level 1 in the fair
value hierarchy, all significant pension plan assets are held in collective
trusts by Ingredion’s U.S. and non-U.S. plans. The fair values of shares
of collective trusts are based upon the net asset values of the funds
reported by the fund managers based on quoted market prices of the
underlying securities as of the balance sheet date and are considered to
be Level 2 fair value measurements. Investments measured at net asset
value (“NAV”), as a practical expedient for fair value, are excluded from
the fair value hierarchy. This may produce a fair value measurement
that may not be indicative of net realizable value or reflective of future
fair values. Furthermore, while Ingredion believes its valuation methods
are appropriate and consistent with those of other market participants,
the use of different methodologies could result in different fair value
measurements at the reporting date.
The fair values of Ingredion’s plan assets by asset category are as follows:
(in millions)
U.S. Plans:
Equity index:
U.S. (a)
NAV
Level 1
Level 2
Total
2021 2020 2021 2020 2021 2020 2021 2020
$ — $ — $ — $— $37 $45 $37 $45
International (b)
—
—
—
— 22
44
22
44
Fixed income index:
Long bond (c)
Long government bond (d)
Other (e)
Cash (f)
Total U.S. Plans
Non-U.S. Plans:
Equity index:
U.S. (a)
—
—
69
—
—
—
—
—
—
—
—
—
— 179 276 179 276
— 109
69 109
69
—
—
—
4
— 69
5
4
—
5
$69
$ — $ — $— $351 $439 $420 $439
$ — $ — $ — $— $ 26
$26 $26
$26
International (b)
—
—
—
—
17
19
17
19
Fixed income index:
Short bond (g)
Intermediate bond (h)
Long bond (i)
Other (j)
Cash (f)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8
—
—
—
—
3
34
45
93
21
—
31
38
106
26
—
34
45
93
21
8
31
38
106
26
3
Total Non-U.S. Plans
$ — $ —
$8
$3 $236 $246 $244 $249
(a) This category consists of both passively and actively managed equity index funds that
track the return of large capitalization U.S. equities.
(b) This category consists of both passively and actively managed equity index funds that
track an index of returns on international developed market equities.
(c) This category consists of an actively managed fixed income index fund that invests in
a diversified portfolio of fixed-income corporate securities with maturities generally
exceeding 10 years.
(d) This category consists of an actively managed fixed income index fund that invests
in a diversified portfolio of fixed-income U.S. treasury securities with maturities
generally exceeding 10 years.
(e) This category consists of an actively managed common collective fund that invests
in government bonds, collateralized mortgage obligations, investment grade private
credit and real estate debt. This fund is priced monthly at the aggregated market
value of the underlying investments and can be redeemed with 95 days notification.
(f) This category represents cash or cash equivalents.
(g) This category consists of both passively and actively managed fixed income index
funds that track the return of short-duration government and investment grade
corporate bonds.
(h) This category consists of both passively and actively managed fixed income index
funds that track the return of intermediate duration government and investment
grade corporate bonds.
(i) This category consists of both passively and actively managed fixed income index
funds that track the return of government bonds and investment grade corporate
bonds.
(j) This category mainly consists of investment products provided by insurance
companies that offer returns that are subject to a minimum guarantee and mutual
funds.
INGREDION INCORPORATED
39
During 2021 Ingredion made cash contributions of $1 million and $7
million to its U.S. and non-U.S. pension plans, respectively. Ingredion
anticipates that in 2022 we will make cash contributions of $1 million
and $3 million to our U.S. and non-U.S. pension plans, respectively. Cash
contributions in subsequent years will depend on a number of factors
including the performance of plan assets.
The following benefit payments to beneficiaries, which reflect anticipated
future service, as appropriate, are expected to be made in the following
years:
(in millions)
U.S. Plans
Non-U.S. Plans
2022
2023
2024
2025
2026
Years 2027 - 2031
23
24
24
23
25
125
12
13
13
13
13
72
Amounts recorded in the Consolidated Balance Sheets at December 31,
2021 and 2020 consist of:
(in millions)
Current liabilities
Non-current liabilities
Net liability recognized
2021
$(4)
(61)
$(65)
2020
$(4)
(64)
$(68)
Amounts recorded in AOCL, excluding tax effects that have not yet been
recognized as components of net periodic benefit cost at December 31,
2021 and 2020 were as follows:
(in millions)
Net actuarial loss
Prior service cost
Net amount recognized
2021
2020
$8
5
$13
$17
—
$17
Ingredion also maintains defined contribution plans. We make matching
contributions to these plans that are subject to certain vesting
requirements and are based on a percentage of employee contributions.
Amounts charged to expense for defined contribution plans totaled
$22 million, $22 million and $20 million in 2021, 2020 and 2019,
respectively.
Postretirement Benefit Plans
Ingredion’s postretirement benefit plans currently are not funded. The
information presented below includes plans in the U.S., Brazil and
Canada. The changes in the benefit obligations of the plans during 2021
and 2020, as well as the amounts recognized in Ingredion’s Consolidated
Balance Sheets at December 31, 2021 and 2020, are as follows:
Components of net periodic benefit cost consisted of the following for
2021, 2020 and 2019:
(in millions)
Service cost
Interest cost
Amortization of actuarial loss
Amortization of prior service credit
Net periodic benefit cost
2021
$1
2
1
(2)
$2
2020
$ —
3
1
(2)
$2
2019
$1
3
—
(2)
$2
Total amounts recorded in other comprehensive income and net periodic
benefit cost for 2021, 2020 and 2019 was as follows:
(in millions)
Accumulated postretirement benefit obligation
At January 1
Service cost
Interest cost
Amendments
Actuarial (gain) loss
Benefits paid
Foreign currency translation
At December 31
Fair value of plan assets
Funded status
2021
2020
$68
$69
(in millions, pre-tax)
Net actuarial loss (gain)
1
2
4
(5)
(4)
(1)
65
—
—
3
—
4
(5)
(3)
68
—
$(65)
$(68)
Prior service cost
Amortization of prior service credit
Amortization of actuarial loss
Foreign currency translation
Total recorded in other comprehensive income
Net periodic benefit cost
Total recorded in other comprehensive income
and net periodic benefit cost
2021
$(5)
2020
$4
2019
$6
4
2
(1)
(4)
(4)
2
$(2)
—
2
(1)
—
5
2
$7
—
2
—
—
8
2
$10
As of December 31, 2021, the decrease in the postretirement benefit
obligation was mainly driven by higher actuarial gains, partially offset
by a $4 million amendment and favorable foreign currency translation
related to Ingredion’s Canada and Brazil postretirement plans. The North
Kansas City retiree medical group shifted from a multiemployer plan to
the Ingredion Post Retirement Medical Health and Life Plan at the end of
2021, causing an increase to the postretirement obligation of $4 million
in 2021. As of December 31, 2020, the decrease in the postretirement
benefit obligation was mainly driven by favorable foreign currency
translation related to Ingredion’s Canada and Brazil postretirement plans.
The following weighted average assumptions were used to determine
Ingredion’s obligations under the postretirement plans in the given
years:
Discount rate
2021
4.22%
2020
3.69%
The following weighted average assumptions were used to determine
Ingredion’s net postretirement benefit cost:
Discount rate
2021
3.69%
2020
4.42%
2019
5.49%
40
INGREDION INCORPORATED
The discount rate reflects a rate of return on high-quality fixed-income
investments that match the duration of expected benefit payments.
Ingredion has typically used returns on long-term, high-quality corporate
AA bonds as a benchmark in establishing this assumption.
The healthcare cost trend rates used in valuing Ingredion’s
postretirement benefit obligations are established based upon actual
healthcare trends and consultation with actuaries and benefit providers.
The following assumptions were used as of December 31, 2021:
2021 increase in per capita cost
Ultimate trend
Year ultimate trend reached
U.S.
Canada
6.00%
4.50%
2032
5.74%
4.00%
2040
Brazil
7.79%
7.79%
2021
The following benefit payments to beneficiaries, which reflect anticipated
future service, as appropriate, are expected to be made under
Ingredion’s postretirement benefit plans:
(in millions)
2022
2023
2024
2025
2026
Years 2027 - 2031
Multi-employer Plan
$4
4
4
4
4
21
Ingredion participates in and contributes to one multi-employer benefit
plan under the terms of collective bargaining agreements that cover
certain union-represented employees and retirees in the U.S. The plan
covers medical and dental benefits for active hourly employees and
retirees represented by the United Steelworkers Union for certain U.S.
locations. The risks of participating in this multi-employer plan are
different from single-employer plans. This plan receives contributions
from two or more unrelated employers pursuant to one or more
collective bargaining agreements and the assets contributed by one
employer may be used to fund the benefits of all employees covered
within the plan.
Ingredion is required to make contributions to this multi-employer plan
as determined by the terms and conditions of the collective bargaining
agreements and plan terms, but Ingredion does not provide more than
five percent of the total contributions to the plan. For 2021, 2020 and
2019, Ingredion made regular contributions of $14 million, $14 million
and $13 million, respectively, to the plan. Ingredion cannot currently
estimate the amount of multi-employer plan contributions that will be
required in 2022 and future years, but these contributions could increase
due to healthcare cost trends. The North Kansas City retiree medical
group shifted from a multiemployer plan to the U.S. postretirement
benefit plan at the end of 2021. The remaining collective bargaining
agreements associated with the multi-employer plan expire during 2023
through 2024.
NOTE 12 – Equity
Preferred stock: Ingredion has authorized 25 million shares of $0.01
par value preferred stock, none of which were issued or outstanding at
December 31, 2021 and 2020.
Treasury stock: On October 22, 2018, the Board of Directors authorized
a stock repurchase program permitting Ingredion to purchase up to 8
million of its outstanding shares of common stock from November 5,
2018 through December 31, 2023. The parameters of Ingredion’s stock
repurchase program 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.
On November 5, 2018, Ingredion entered into a Variable Timing
Accelerated Share Repurchase (“ASR”) program with JPMorgan (“JPM”).
Under the ASR program, Ingredion paid $455 million on November
5, 2018 and acquired 4 million shares of its common stock having an
approximate value of $423 million on that date. On February 5, 2019,
Ingredion and JPM settled the difference between the initial price and
average daily volume-weighted average price (“VWAP”) less the agreed
upon discount during the term of the agreement. The final VWAP was
$98.04 per share, which was less than originally paid. Ingredion settled
the difference in cash, resulting in JPM returning $63 million of the
upfront payment to Ingredion on February 6, 2019, which lowered the
total cost of repurchasing the 4 million shares of common stock to $392
million. Ingredion adjusted Additional paid-in capital and Treasury stock
by $32 million and $31 million, respectively, in 2019 for this inflow of
cash.
During 2021, Ingredion repurchased 765 thousand shares of common
stock in open market transactions at a net cost of $68 million. Ingredion
did not repurchase any shares of common stock in open market
transactions in 2020.
Set forth below is a reconciliation of common stock share activity for
2021, 2020 and 2019:
(Shares of common stock, in thousands)
Issued
Held in
Treasury
Outstanding
Balance at December 31, 2018
77,811
11,285
66,526
Issuance of restricted stock units as
compensation
Performance shares and other
share-based awards
Stock options exercised
Purchase/acquisition of treasury stock
—
—
—
—
(105)
(5)
(182)
—
105
5
182
—
Balance at December 31, 2019
77,811
10,993
66,818
Issuance of restricted stock units
as compensation
Performance shares and other
share-based awards
Stock options exercised
Purchase/acquisition of treasury stock
—
—
—
—
(69)
(5)
(124)
—
69
5
124
—
Balance at December 31, 2020
77,811
10,795
67,016
Issuance of restricted stock units
as compensation
Performance shares and other
share-based awards
Stock options exercised
Purchase/acquisition of treasury stock
—
—
—
—
(69)
(6)
(331)
765
Balance at December 31, 2021
77,811
11,154
69
6
331
(765)
66,657
INGREDION INCORPORATED
41
Share-based payments: The following table summarizes the
components of Ingredion’s share-based compensation expense for the
years ended December 31, 2021, 2020 and 2019:
(in millions)
Stock options:
Pre-tax compensation expense
Income tax benefit
Stock option expense, net of income taxes
Restricted stock units (“RSUs”):
Pre-tax compensation expense
Income tax benefit
RSUs, net of income taxes
Performance shares and other share-based awards:
Pre-tax compensation expense
Income tax benefit
Performance shares and other share-based
compensation expense, net of income taxes
Total share-based compensation:
Pre-tax compensation expense
Income tax benefit
2021
2020
2019
$3
—
3
12
(1)
11
8
(1)
7
23
(2)
$4
—
4
12
(1)
11
7
(1)
6
23
(2)
$3
—
3
10
(2)
8
5
—
5
18
(2)
Total share-based compensation expense,
net of income taxes
$21
$21
$16
Ingredion has a stock incentive plan (“SIP”) administered by the People,
Culture and Compensation Committee (“Compensation Committee”)
of its Board of Directors that provides for the granting of stock options,
restricted stock, restricted stock units and other share-based awards to
certain key employees. A maximum of 8 million shares were originally
authorized for awards under the SIP. On May 19, 2021, Ingredion’s
stockholders approved an increase in the number of shares then
available under the SIP by 2.5 million shares. As of December 31, 2021,
3.8 million shares were available for future grants under the SIP. Shares
covered by awards that expire, terminate or lapse will again be available
for the grant of awards under the SIP.
Stock Options: Under Ingredion’s SIP, 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 10-year term and are
exercisable upon vesting, which occurs over a three-year period at the
anniversary dates of the date of grant.
Ingredion granted non-qualified options to purchase 358 thousand,
336 thousand and 247 thousand shares for the years ended
December 31, 2021, 2020 and 2019, respectively. The fair value of each
option grant was estimated using the Black-Scholes option-pricing model
with the following assumptions:
Expected life (in years)
Risk-free interest rate
Expected volatility
Expected dividend yield
For the Year Ended December 31,
2021
5.5
0.6%
23.2%
2.9%
2020
5.5
1.4%
19.8%
2.9%
2019
5.5
2.5%
19.7%
2.7%
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.
42
INGREDION INCORPORATED
A summary of stock option transactions in 2021 is as follows:
Weighted
Average
Exercise
Price per
Share
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value (in
millions)
Number of
Options (in
thousands)
2,238
$86.55
5.15
$14
358
(331)
(111)
87.12
62.05
91.39
2,154
$90.39
1,591
$91.21
5.26
4.09
$26
$21
Outstanding as of
December 31, 2020
Granted
Exercised
Cancelled
Outstanding as of
December 31, 2021
Exercisable as of
December 31, 2021
For 2021, 2020 and 2019, cash received from the exercise of stock
options was $21 million, $6 million and $6 million, respectively. As of
December 31, 2021, the unrecognized compensation cost related to
non-vested stock options totaled $2 million, which is expected to be
amortized over the weighted-average period of approximately 1.7 years.
Additional information pertaining to stock option activity is as follows:
Year Ended December 31,
(dollars in millions, except per share)
2021
2020
2019
Weighted average grant date fair value of stock
options granted (per share)
$12.31
$11.48
$14.02
Total intrinsic value of stock options exercised
10
5
10
Restricted Stock Units: Ingredion has granted restricted stock units
(“RSUs”) to certain key employees. The RSUs are primarily subject to cliff
vesting, generally after 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 2021:
(shares in thousands)
Non-vested at December 31, 2020
Granted
Vested
Cancelled
Non-vested at December 31, 2021
Number of
Restricted
Shares
Weighted
Average Fair
Value per Share
418
239
(95)
(76)
486
$96.45
87.79
121.80
89.52
$88.34
The total fair value of RSUs that vested in 2021, 2020 and 2019 was $12
million, $17 million and $16 million, respectively.
At December 31, 2021, the total remaining unrecognized compensation
cost related to RSUs was $17 million, which will be amortized on a
weighted-average basis over approximately 1.8 years. Recognized
compensation cost related to unvested RSUs is included in Share-based
payments subject to redemption in the Consolidated Balance Sheets and
totaled $25 million and $23 million at December 31, 2021 and 2020,
respectively.
Performance Shares: Ingredion has a long-term incentive plan for senior
management in the form of performance shares. Historically these
performance shares vested based solely on Ingredion’s total shareholder
return as compared to the total shareholder return of its peer group over
the three-year vesting period. Beginning with the 2019 performance
share grants, the vesting of the performance shares are based on two
performance metrics. Fifty percent of the performance shares awarded
Accumulated Other Comprehensive Loss: A summary of accumulated
other comprehensive income (loss) for 2021, 2020 and 2019, is
presented below:
Cumulative
Translation
Adjustment
Hedging
Activities
Pension and
Postretirement
Adjustment
AOCL
Balance, December 31, 2018
$(1,080)
(5)
(69)
(1,154)
Other comprehensive
(loss) income before
reclassification adjustments
Amount reclassified from
accumulated OCL
Tax benefit (provision)
Net other comprehensive
(loss) income
(9)
—
—
(9)
Balance, December 31, 2019
(1,089)
(19)
14
1
(4)
(9)
11
(17)
—
(2)
9
14
(1)
(4)
(60)
(1,158)
Balance, December 31, 2020
$(1,114)
Other comprehensive
(loss) income before
reclassification adjustments
Amount reclassified from
accumulated OCL
Tax (provision) benefit
Net other comprehensive
(loss) income
Other comprehensive (loss)
gain before reclassification
adjustments
Loss (gain) reclassified from
accumulated OCL
Tax (provision)
Net other comprehensive
income
(25)
5
(2)
(22)
—
—
(25)
311
—
211
65
(19)
51
$42
(209)
(3)
6
$48
(100)
218
—
1
65
(18)
(1)
25
$(61)
$(1,133)
28
—
(9)
146
102
(12)
19
236
$(42)
$(897)
Balance, December 31, 2021
$(903)
vest based on Ingredion’s total shareholder return as compared to the
total shareholder return of its peer group and the remaining fifty percent
vest based on the calculation of Ingredion’s three-year average Adjusted
Return on Invested Capital (“ROIC”) against an established ROIC target.
The 2021 performance shares were granted in two tranches. Vesting for
the first tranche was split evenly between Ingredion’s total shareholder
return and Adjusted ROIC against the applicable target. The second
tranche of performance share awards vest 100 percent based on the
calculation of Adjusted ROIC against the applicable target.
For the 2021 performance shares awarded based on Ingredion’s total
shareholder return, the number of shares that ultimately vest can range
from zero to 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 three-year period and is subject to approval by management and
the 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 three-year
graded vesting schedule.
For the 2021 performance shares awarded based on Adjusted ROIC,
the number of shares that ultimately vest can range from zero to
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 three-year period and is subject to approval
by management and the 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 three-year graded vesting schedule.
Ingredion awarded 108 thousand, 81 thousand and 70 thousand
performance shares in 2021, 2020 and 2019, respectively. The weighted
average fair value of the shares granted during the 2021, 2020 and 2019
was $100.29, $94.48 and $92.57, respectively.
The 2018 performance share awards that vested during 2021 achieved a
zero percent payout of the granted performance shares. As of December
31, 2021, the 2019 performance share awards are estimated to pay out
at zero percent. Additionally, there were 27 thousand shares cancelled
during 2021.
As of December 31, 2021, the unrecognized compensation cost
relating to these plans was $7 million, which will be amortized over
the remaining requisite service periods of 1.9 years. Recognized
compensation cost related to these unvested awards is included in share-
based payments subject to redemption in the Consolidated Balance
Sheets and totaled $11 million and $7 million at December 31, 2021 and
2020, respectively.
Other share-based awards under the SIP: Under the compensation
agreement with the Board of Directors, $130,000 of a non-employee
director’s annual retainer and 50 percent of the additional retainers
paid to the Lead Director and the Chairs of committees of the Board of
Directors are awarded in shares of common stock or, if a director elects
to defer all or a portion of their common stock or cash compensation,
in shares of restricted stock units. These restricted units may not be
transferred until a date not less than six months after the director’s
termination of service from the Board of Directors, at which time the
restricted units will be settled by delivering shares of common stock with
fractional shares to be paid in cash. The compensation expense relating
to this plan included in the Consolidated Statements of Income was
approximately $2 million for 2021 and 2020, as well as $1 million for
2019. At December 31, 2021, there were approximately 253 thousand
restricted stock units outstanding under this plan at a carrying value of
approximately $17 million.
INGREDION INCORPORATED
43
Supplemental Information: The following table provides the computation of basic and diluted earnings per common share (“EPS”) for the periods
presented.
(in millions, except per
share amounts)
Basic EPS
Effect of Dilutive Securities:
2021
2020
Net Income
Available
to Ingredion
Weighted
Average
Shares
Per Share
Amount
Net Income
Available
to Ingredion
Weighted
Average
Shares
Per Share
Amount
Net Income
Available to
Ingredion
Weighted
Average
Shares
2019
Per Share
Amount
$117
67.1
$1.74
$348
67.2
$5.18
$413
66.9
$ 6.17
Incremental shares from assumed
exercise of dilutive stock options and
vesting of dilutive RSUs and other awards
Diluted EPS
$117
0.7
67.8
$1.73
$348
0.4
67.6
$5.15
$413
0.5
67.4
$6.13
Approximately 0.9 million, 1.7 million and 1.1 million share-based
awards of common stock were excluded in 2021, 2020 and 2019,
respectively, from the calculation of the weighted average number of
shares outstanding for diluted EPS because their effects were anti-
dilutive.
NOTE 13 – 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 collectively Europe,
Middle East and Africa (“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 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.
Presented below are Ingredion’s net sales to unaffiliated customers by
reportable segment for the years indicated:
(in millions)
2021
2020
2019
Net sales to unaffiliated customers:
North America
South America
Asia-Pacific
EMEA
Total net sales
$4,137
$3,662
$3,834
1,057
997
703
919
813
593
960
823
592
$6,894
$5,987
$6,209
Presented below is Ingredion’s operating income by reportable segment
for the years indicated:
(in millions)
Operating income:
North America
South America
Asia-Pacific
EMEA
Corporate
Subtotal
Acquisition/integration costs
Restructuring/impairment charges
Impairment on disposition of assets
Other matters
Total operating income
2021
2020
2019
$487
$487
$522
138
87
106
112
80
102
(133)
(122)
685
(3)
(47)
(340)
15
659
(11)
(93)
-
27
96
87
99
(99)
705
(3)
(57)
-
19
$310
$582
$664
Presented below are Ingredion’s total assets by reportable segment as of
December 31, 2021 and 2020:
(in millions)
Assets:
North America (a)
South America
Asia-Pacific
EMEA
Total assets
As of December 31,
2021
2020
$4,203
$4,231
799
1,403
594
818
1,255
554
$6,999
$6,858
(a) For purposes of presentation, North America includes Corporate assets.
44
INGREDION INCORPORATED
Presented below are Ingredion’s depreciation and amortization,
mechanical stores expense and capital expenditures and mechanical
stores purchases by reportable segment:
(in millions)
2021
2020
2019
Depreciation and amortization:
North America (a)
South America
Asia-Pacific
EMEA
Total
Mechanical stores expense (b):
North America (a)
South America
Asia-Pacific
EMEA
Total
Capital expenditures and mechanical stores
purchases:
North America (a)
South America
Asia-Pacific
EMEA
Total
$146
$147
$146
18
40
16
19
32
15
22
37
15
$220
$213
$220
$43
$39
6
3
3
7
4
4
$40
10
4
3
$55
$54
$57
$166
$243
$226
38
81
15
39
46
12
45
40
17
$300
$340
$328
(a) North America includes Corporate activities.
(b) Represents costs for spare parts used in the production process that are recorded
in PP&E as part of machinery and equipment until they are utilized in the
manufacturing process and expensed as a period cost.
The following table presents net sales to unaffiliated customers by
country of origin for the years indicated:
(in millions)
U.S.
Mexico
Brazil
Canada
Korea
Others
Total
2021
$2,509
1,170
586
459
323
1,847
$6,894
2020
$2,284
984
447
393
268
1,611
$5,987
Net Sales
2019
$2,368
1,075
479
390
270
1,627
$6,209
The following table presents long-lived assets (excluding intangible
assets and deferred income taxes) by country as of December 31, 2021
and 2020:
NOTE 14 – Commitments and Contingencies
In January 2019, Ingredion’s Brazilian subsidiary received a favorable
decision from the Federal Court of Appeals (“Lower Court”) in Sao Paulo,
Brazil, related to certain indirect taxes collected in prior years (referred
as “Brazil indirect tax matters” in these financial statements). Ingredion
finalized its calculation of the amount of the credits and interest due
from the favorable decision, concluding that Ingredion could be entitled
to approximately $66 million of credits spanning a period from 2005 to
2018. The Department of Federal Revenue of Brazil, however, issued an
Internal Ruling in which it charged that Ingredion was entitled to only
$22 million of the calculated indirect tax credits and interest for the
period from 2005 to 2014. As a result of the Internal Ruling, Ingredion
recorded $22 million in pre-tax benefits in Other operating (income) in
the Consolidated Statements of Income in 2019.
The Brazil National Treasury filed a motion for clarification with the
Brazilian Supreme Court (“Court”), asking the Court, among other things,
to modify the Lower Court’s decision to approve the Internal Ruling.
In 2020, Ingredion received another favorable Lower Court judgment
that clarified the calculation of Ingredion’s benefit, allowing Ingredion
to claim gross treatment within the indirect tax claim calculation and
a larger indirect tax claim against the government. As a result of the
decision, Ingredion recorded an additional $35 million pre-tax benefit
in the Consolidated Income Statements in Other operating (income) in
2020 related to the open period of 2005 to 2014.
In May 2021, the Court issued its ruling related to the calculation of
certain indirect taxes, which affirmed the Lower Court rulings that
Ingredion had received in previous years and affirmed that Ingredion is
entitled to the previously recorded tax credits. The Court ruling ensures
that Ingredion will be entitled to $15 million of additional credits from
the period of 2015 to 2018 that was previously unrecorded pending
a final Court ruling. Ingredion recorded the $15 million of additional
credits in 2021 within Other operating (income) in the Consolidated
Statements of Income. As of December 31, 2021, Ingredion has $41
million of remaining indirect tax credits recorded in Other assets and
Prepaid expenses on the Consolidated Balance Sheets that result in
deferred income taxes of $5 million. Ingredion will use the income tax
offsets to eliminate its Brazilian federal tax payments in 2022 and future
years, including the income tax payable for the indirect taxes recovered.
Ingredion is currently subject to claims and suits arising in the ordinary
course of business, including labor matters, certain environmental
proceedings and other commercial claims. Ingredion also routinely
receives inquiries from regulators and other government authorities
relating to various aspects of its business, including with respect to
compliance with laws and regulations relating to the environment, and
at any given time, Ingredion has matters at various stages of resolution
with the applicable governmental authorities. The outcomes of these
matters are not within Ingredion’s complete control and may not be
known for prolonged periods of time. Ingredion does not believe that the
results of currently known legal proceedings and inquires will be material
to it. 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 Ingredion’s
financial condition or results of operations.
(in millions)
U.S.
Mexico
Canada
Brazil
Thailand
Germany
China
Others
Total
Long-lived Assets
2021
2020
$1,317
$1,276
320
272
189
156
135
128
423
342
245
202
165
137
52
423
$2,940
$2,842
INGREDION INCORPORATED
45
NOTE 15 – Supplementary Information
Accounts Receivable, Net
Accounts receivable, net as of December 31, 2021 and 2020, consist of:
Other Non-Current Liabilities
Other non-current liabilities as of December 31, 2021 and 2020, consist
of:
(in millions)
Accounts receivable — trade
Accounts receivable — other
Allowance for credit losses
Total accounts receivable
2021
$950
193
(13)
2020
$855
170
(14)
(in millions)
Deferred tax liabilities
Non-current operating lease liabilities
Pension and postretirement liabilities
$1,130
$1,011
Other
2021
$165
154
123
82
2020
$217
136
139
88
No customer accounted for 10 percent or more of Accounts receivable,
net as of December 31, 2021 or 2020 and write-offs of accounts
receivable were immaterial in 2021 and 2020. There were no significant
contract assets associated with customers as of December 31, 2021 or
2020.
Inventories
Inventories as of December 31, 2021 and 2020, consist of:
(in millions)
Finished and in process
Raw materials
Manufacturing supplies
Total inventories
PP&E
PP&E as of December 31, 2021 and 2020, consist of:
(in millions)
Land
Buildings
Machinery and equipment
Property, plant and equipment, at cost
Accumulated depreciation
Property, plant and equipment, net
2021
$688
380
104
2020
$584
236
97
$1,172
$917
2021
$206
812
4,637
5,655
2020
$207
802
4,621
5,630
(3,232)
(3,175)
$2,423
$2,455
Ingredion capitalized to PP&E interest of $4 million, $7 million and $5
million for 2021, 2020 and 2019, respectively. Ingredion recognized
depreciation expense of $194 million, $183 million and $191 million in
2021, 2020 and 2019, respectively.
Accrued Liabilities
Total other non-current liabilities
$524
$580
Supplemental Income Statements Information
Research and Development (“R&D”) expense was approximately $43
million in 2021 and 2020 and $44 million in 2019. Our R&D expense
represents investments in new product development and innovation.
R&D expense is recorded within Operating expenses in the Consolidated
Statements of Income.
Supplemental Cash Flow Information
The following represents additional cash flow information for the
indicated years:
(in millions)
Interest paid
Income taxes paid
2021
2020
2019
$72
168
$78
120
$80
145
Quarterly Financial Data (Unaudited)
Earnings per share for each quarter and the year are calculated
individually and may not sum to the total for the respective year.
Summarized quarterly financial data is as follows:
(in millions, except per share amounts)
1st QTR(b) 2nd QTR(c) 3rd QTR(d) 4th QTR(e)
2021
Net sales
Gross profit
Net income attributable to Ingredion
Basic earnings per common share
of Ingredion
Diluted earnings per common share
of Ingredion
$1,614
$1,762
$1,763
$1,755
351
(246)
367
178
323
118
290
67
(3.66)
2.65
1.76
1.00
(3.66)
2.62
1.75
0.99
Per share dividends declared
$0.64
$0.64
$0.65
$0.65
Accrued liabilities as of December 31, 2021 and 2020, consist of:
(in millions, except per share amounts)
1st QTR(e) 2nd QTR(f) 3rd QTR(g) 4th QTR(h)
(in millions)
Compensation-related costs
Current lease liabilities
Dividends payable
Taxes payable other than income taxes
Other accrued liabilities
Total accrued liabilities
2021
$105
47
44
44
2020
$96
46
43
44
190
192
$430
$421
2020
Net sales
Gross profit
Net income attributable
to Ingredion
Basic earnings per
common share of Ingredion
Diluted earnings per common
share of Ingredion
$1,543
$1,349
$1,502
$1,593
323
271
326
352
75
66
92
115
1.12
0.98
1.37
1.71
1.11
0.98
1.36
1.70
There were no significant contract liabilities associated with our
customers as of December 31, 2021 and 2020. Liabilities for volume
discounts and incentives were also not significant as of December 31,
2021 and 2020.
46
INGREDION INCORPORATED
Per share dividends declared
$0.63
$0.63
$0.64
$0.64
(a) All items in the footnotes below are presented after-tax unless otherwise noted.
(b) In the first quarter of 2021, Ingredion recorded $360 million in held for sale
impairment charges related to the Arcor joint venture with no income tax benefit, $8
million in net restructuring costs, $3 million in charges for tax matters and $1 million
in acquisition/integration costs.
(c) In the second quarter of 2021, Ingredion recorded $32 million in income for tax
matters, $10 million in other matters income, $4 million in acquisition/integration
costs, $3 million in equity method acquisition benefits and $2 million in net
restructuring costs.
(d) In the third quarter of 2021, Ingredion recorded a $20 million favorable adjustment
to the impairment charges related to the Arcor joint venture with no income tax
expense, $7 million in net restructuring costs, $4 million in acquisition/integration
costs and $4 million in charges for tax matters.
(e) In the fourth quarter of 2021, Ingredion recorded $19 million in net restructuring
and impairment costs, $12 million in benefits for other matters, $5 million in benefits
for fair value adjustments to equity investments, $4 million in charges for tax matters
and $1 million in net acquisition/integration costs.
(f) In the first quarter of 2020, Ingredion recorded $11 million in net restructuring costs.
(g) In the second quarter of 2020, Ingredion recorded $8 million in net restructuring
costs and $2 million in acquisition/integration costs.
(h) In the third quarter of 2020, Ingredion recorded $15 million in net restructuring
costs, $6 million in charges for other tax matters, $4 million in acquisition/
integration costs, $4 million in charges for early extinguishment of debt, $3 million in
charges for fair value markup of acquired inventory and $2 million in North America
storm damage costs.
(i) In the fourth quarter of 2020, Ingredion recorded $40 million in net restructuring and
impairment costs, $27 million in income for other matters, $4 million in acquisition/
integration costs, $3 million in income for other tax matters, $1 million in charges
for fair value markup of acquired inventory and $1 million in North America storm
damage costs.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure 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 December 31, 2021. Based
on that evaluation, our Chief Executive Officer and our Chief Financial
Officer concluded that, as of December 31, 2021, 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.
Management’s Annual Report on Internal Control Over
Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. This system of internal
control is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of our Consolidated
Financial Statements for external purposes in accordance with GAAP.
Internal control over financial reporting includes those policies and
processes that:
1. Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets.
2. Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of the financial statements in
accordance with generally accepted accounting principles accepted in
the U.S., and that our receipts and expenditures are being made only
with proper authorizations of our management and directors.
3. Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Management, under the supervision and with the participation of our
Chief Executive Officer and our Chief Financial Officer and the oversight
of the Board of Directors, conducted an evaluation of the effectiveness
of our internal control over financial reporting as of December 31, 2021
based upon the framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework (2013). The scope of the assessment included all of the
subsidiaries of Ingredion. Based on the evaluation, management
concluded that our internal control over financial reporting was effective
as of December 31, 2021. The effectiveness of our internal control over
financial reporting has been audited by KPMG LLP, an independent
registered public accounting firm, as stated in their report included in
the Consolidated Financial Statements filed with this report.
Under guidelines established by the U.S. Securities and Exchange
Commission, companies are allowed to exclude acquisitions from their
first assessment of internal control over financial reporting following the
date of the acquisition. Ingredion management excluded the acquisition
of KaTech, which was completed on April 1, 2021, from the assessment
of the effectiveness of internal control over financial reporting. Total
assets of $61 million and total net sales of $35 million associated with
the acquisition are included in the Consolidated Financial Statements of
Ingredion as of and for the year ended December 31, 2021.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting
that occurred during the quarter ended December 31, 2021 that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
ITEM 9B. Other Information
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
INGREDION INCORPORATED
47
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
Information required by this Item 10 is incorporated herein by reference
to Ingredion’s definitive proxy statement for Ingredion’s 2022 Annual
Meeting of Stockholders (the “Proxy Statement”), including the
information in the Proxy Statement appearing under the headings
“Proposal 1. Election of Directors,” “The Board and Committees,” and
“Delinquent Section 16(a) Reports.” The information regarding executive
officers required by Item 401 of Regulation S-K is included in Part 1 of
this report under the heading “Information about our Executive Officers.”
Ingredion has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and controller. The code of
ethics is posted on Ingredion’s Internet website, which is found at www.
ingredion.com. Ingredion intends to disclose on its website, within any
period that may be required under SEC rules, any amendments to, or
waivers under, a provision of its code of ethics that applies to Ingredion’s
principal executive officer, principal financial officer or controller that
relates to any element of the code of ethics definition enumerated in
Item 406(b) of Regulation S-K.
ITEM 11. Executive Compensation
Information required by this Item 11 is incorporated herein by reference
to the Proxy Statement, including the information in the Proxy
Statement appearing under the headings “Executive Compensation,”
“Compensation Committee Report,” “Director Compensation” and
“Compensation Committee Interlocks and Insider Participation.”
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Information required by this Item 12 is incorporated herein by reference
to the Proxy Statement, including the information in the Proxy Statement
appearing under the headings “Equity Compensation Plan Information
as of December 31, 2021” and “Security Ownership of Certain Beneficial
Owners and Management.”
ITEM 13. Certain Relationships and Related Transactions and
Director Independence
Information required by this Item 13 is incorporated herein by reference
to the Proxy Statement, including the information in the Proxy Statement
appearing under the headings “Review and Approval of Transactions
with Related Persons,” “Certain Relationships and Related Transactions”
and “Independence of Board Members.”
ITEM 14. Principal Accountant Fees and Services
Information required by this Item 14 is incorporated herein by reference
to the Proxy Statement, including the information in the Proxy Statement
appearing under the heading “2021 and 2020 Audit Firm Fee Summary.”
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
ITEM 15(a)(1) Consolidated Financial Statements
Financial Statements (see the Index to the Consolidated Financial
Statements on page 44 of this report).
ITEM 15(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted because the
information either is not required or is otherwise included in the
Consolidated Financial Statements and notes thereto.
ITEM 15(a)(3) Exhibits
The following list of exhibits includes both exhibits submitted with this
Form 10-K as filed with the SEC and those incorporated by reference
from other filings.
48
INGREDION INCORPORATED
Exhibit No. Description
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1*
10.2*
Amended and Restated Certificate of Incorporation of
Ingredion Incorporated, as amended (incorporated by
reference to Exhibit 3.1 to Ingredion’s Annual Report on
Form 10-K for the year ended December 31, 2019, filed on
February 19, 2020) (File No. 1-13397).
Amended By-Laws of Ingredion (incorporated by reference
to Exhibit 3.1 to Ingredion’s Current Report on Form 8-K
dated December 9, 2016, filed on December 14, 2016)
(File No. 1-13397).
Description of Ingredion’s Securities Registered Pursuant
to Section 12 of the Securities Exchange Act of 1934
(incorporated by reference to Exhibit 4.1 to Ingredion’s
Annual Report on Form 10-K for the year ended December
31, 2019, filed on February 19, 2020) (File No. 1-13397).
Indenture dated as of August 18, 1999, between Ingredion
and The Bank of New York, as Trustee (incorporated
by reference to Exhibit 4.1 to Ingredion’s Registration
Statement on Form S-3, filed on September 19, 2019) (File
No. 333-233854).
Fourth Supplemental Indenture dated as of April 10, 2007,
between Corn Products International, Inc. and The Bank of
New York Trust Company, N.A., as Trustee (incorporated
by reference to Exhibit 4.4 to Ingredion’s Current Report
on Form 8 K dated April 10, 2007, filed on April 10, 2007)
(File No. 1-13397).
Seventh Supplemental Indenture, dated as of September
17, 2010, between Corn Products International, Inc. and
The Bank of New York Mellon Trust Company, N.A. (as
successor trustee to The Bank of New York), as Trustee
(incorporated by reference to Exhibit 4.3 to Ingredion’s
Current Report on Form 8-K dated September 14, 2010,
filed on September 20, 2010) (File No. 1-13397).
Ninth Supplemental Indenture, dated as of September
22, 2016, between Ingredion and The Bank of New York
Mellon Trust Company, N.A. (as successor trustee to The
Bank of New York), as Trustee (incorporated by reference
to Exhibit 4.1 to Ingredion’s Current Report on Form 8-K
dated September 22, 2016, filed on September 22, 2016)
(File No. 1-13397).
Tenth Supplemental Indenture, dated as of May 13, 2020,
between Ingredion and The Bank of New York Mellon Trust
Company, N.A. (as successor trustee to The Bank of New
York), as Trustee (incorporated by reference to Exhibit
4.1 to Ingredion’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2020, filed on August 5, 2020)
(File No. 1-13397).
Eleventh Supplemental Indenture, dated as of May 13,
2020, between Ingredion and The Bank of New York
Mellon Trust Company, N.A. (as successor trustee to The
Bank of New York), as Trustee (incorporated by reference
to Exhibit 4.2 to Ingredion’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2020, filed on August
5, 2020) (File No. 1-13397).
Stock Incentive Plan as amended and restated as of May
19, 2021 (the “Stock Incentive Plan”) (incorporated by
reference to Exhibit 10.1 to Ingredion’s Current Report on
Form 8-K dated May 20, 2021, filed on May 20, 2021) (File
No. 1-13397).
Form of Indemnification Agreement entered into by each
of the members of Ingredion’s Board of Directors and
Ingredion’s executive officers (incorporated by reference to
Exhibit 10.14 to Ingredion’s Annual Report on Form 10-K
for the year ended December 31, 1997, filed on March 31,
1998) (File No. 1-13397).
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15
10.16*
10.17*
Supplemental Executive Retirement Plan as effective July
18, 2012 (incorporated by reference to Exhibit 10.7 to
Ingredion’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2012, filed on November 2, 2012)
(File No. 1-13397).
Annual Incentive Plan as effective July 18, 2012
(incorporated by reference to Exhibit 10.10 to Ingredion’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2012, filed on November 2, 2012) (File No.
1-13397).
Form of Performance Share Award Agreement for use in
connection with awards under the Stock Incentive Plan
Form of Performance Share Award Agreement for use in
connections with awards under the Stock Incentive Plan
(incorporated by reference to Exhibit 10.2 to Ingredion’s
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2021, filed on May 7, 2021) (File No. 1-13397).
21.1
23.1
24.1
31.1
31.2
32.1
Form of Stock Option Award Agreement for use in
connection with awards under the Stock Incentive Plan.
32.2
Form of Restricted Stock Units Award Agreement for use in
connection with awards under the Stock Incentive Plan.
Form of Restricted Stock Units Award Agreement for use
in connection with awards under the Stock Incentive Plan
(incorporated by reference to Exhibit 10.3 to Ingredion’s
Quarterly Report on Form 10-Q for the quarter ended
March 31, 2021, filed May 7, 2021) (File No. 1-13397).
Form of Executive Severance Agreement entered into by
certain executive officers of Ingredion (incorporated by
reference to Exhibit 10.17 to Ingredion’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2018, filed
on August 3, 2018) (File No. 1-13397).
Form of Executive Severance Agreement entered into by
certain executive officers of Ingredion (incorporated by
reference to Exhibit 10.18 to Ingredion’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2018, filed
on August 3, 2018) (File No. 1-13397).
Letter of Agreement, dated as of November 10, 2016,
between Ingredion and Jorgen Kokke (incorporated by
reference to Exhibit 10.28 to Ingredion’s Annual Report on
Form 10-K for the year ended December 31, 2016, filed on
February 22, 2017) (File No. 1-13397).
Letter of Agreement, dated as of December 1, 2017,
between Ingredion and Jorgen Kokke (incorporated by
reference to Exhibit 10.23 to Ingredion’s Annual Report on
Form 10-K for the year ended December 31, 2017, filed on
February 21, 2018) (File No, 1-13397).
Letter of Agreement, dated as of June 30, 2020, between
Ingredion and Jorgen Kokke (incorporated by reference
to Exhibit 10.1 to Ingredion’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2020, filed on
November 6, 2020) (File No, 1-13397).
Revolving Credit Agreement, dated as of June 30, 2021,
by and among Ingredion Incorporated, as Borrower, the
Subsidiary Borrowers from time to time party thereto, the
Lenders from time to time party thereto and JPMorgan
Chase Bank, N.A., as Administrative Agent (incorporated
by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated July 1, 2021, filed on July 1,
2021) (File No. 1-13397).
Summary of Non-Employee Director Compensation.
Separation Agreements and General Release, dated June
25, 2021, by and between Janet M. Bawcom and Ingredion
Incorporated (incorporated by reference to Exhibit 10.1
to the Company’s Current Report on for 8-K dated July 1,
2021, filed on July 1 2021) (File No. 1-13397).
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting
Firm.
Power of Attorney.
Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) under the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) under the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to
Rule 13a-14(b) or Rule 15d-14(b) under the Securities
Exchange Act of 1934 and Section 1350 of Chapter 63 of
Title 18 of the United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to
Rule 13a-14(b) or Rule 15d-14(b) under the Securities
Exchange Act of 1934 and Section 1350 of Chapter 63 of
Title 18 of the United States Code, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2002.
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
101.DEF
101.LAB
101.PRE
104
Inline XBRL Taxonomy Extension Calculation Linkbase
Document.
Inline XBRL Taxonomy Extension Definition Linkbase
Document.
Inline XBRL Taxonomy Extension Label Linkbase
Document.
Inline XBRL Taxonomy Extension Presentation Linkbase
Document.
Cover Page Interactive Data File (the cover page XBRL tags
are embedded within the Inline XBRL document, which is
contained in Exhibit 101).
*Management contract or compensatory plan or arrangement required to
be filed as an exhibit to this form pursuant to Item 15(b) of this report.
ITEM 16. Form 10-K Summary
None.
INGREDION INCORPORATED
49
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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: February 22, 2022
By: /s/ James P. Zallie
James P. Zallie
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant, in the capacities indicated and on the dates indicated.
Signature
Title
Date
/s/ James P. Zallie
President, Chief Executive Officer
and Director
February 22, 2022
James P. Zallie
(Principal executive officer)
/s/ James D. Gray
Chief Financial Officer
February 22, 2022
James D. Gray
(Principal financial officer)
/s/ Davida M. Gable
Controller
February 22, 2022
Davida M. Gable
(Principal accounting officer)
*Luis Aranguren-Trellez
Director
February 22, 2022
Luis Aranguren-Trellez
*David B. Fischer
Director
February 22, 2022
David B. Fischer
*Paul Hanrahan
Director
February 22, 2022
Paul Hanrahan
*Rhonda L. Jordan
Director
February 22, 2022
Rhonda L. Jordan
*Gregory B. Kenny
Director
February 22, 2022
Gregory B. Kenny
*Victoria J. Reich
Director
February 22, 2022
Victoria J. Reich
*Catherine A. Suever
Director
February 22, 2022
Catherine A. Suever
*Stephan B. Tanda
Director
February 22, 2022
Stephan B. Tanda
* Jorge A. Uribe
Director
February 22, 2022
Jorge A. Uribe
*Dwayne A. Wilson
Director
February 22, 2022
Dwayne A. Wilson
*By: /s/ Tanya Jaeger de Foras
Tanya Jaeger de Foras
Attorney-in-fact
Date: February 22, 2022
50
INGREDION INCORPORATED
SHAREHOLDER CUMULATIVE TOTAL RETURN | HEALTHY & SUSTAINABLE GROWTH
The performance graph below shows the cumulative
total return to shareholders (stock price appreciation
or depreciation plus reinvested dividends) during the
5-year period from December 31, 2016 to December 31,
2021, for our common stock compared to the cumulative
total return during the same period for the Russell 1000
Index and our peer group. The Russell 1000 Index is a
comprehensive stock market index representing equity
investments in the 1,000 largest U.S. companies ranked
by total market capitalization. The Russell 1000 Index
only includes publicly traded common stocks belonging
to U.S. companies, as determined in accordance with the
selection criteria published by FTSE Russell, the creator
of the index.
As of December 31, 2021, our total shareholder return peer group
consisted of the following 21 companies:
AAK AB (publ.)
Archer-Daniels-Midland Company
Associated British Foods plc
Celanese Corporation
Danone S.A.
Ecolab Inc.
General Mills, Inc.
Huntsman Corporation
Kellogg Company
Kerry Group plc
Koninklijke DSM N.V.
McCormick & Company, Inc.
Mondelez International, Inc.
Novozymes A/S
Sealed Air Corporation
Sensient Technologies Corporation
Tate & Lyle plc
The Kraft Heinz Company
Tyson Foods, Inc.
Unilever PLC
W. R. Grace & Co.
To enhance the alignment of our total shareholder return peer group of
companies with our evolving business, the following companies were removed
from our prior-year peer group: (i) Albemarle Corporation, (ii) Balchem
Corporation, (iii) Crown Holdings, Inc., (iv) Givaudan SA, (v) International
Flavors & Fragrances Inc., (vi) Nutrien Ltd., (vii) Symrise AG, and (viii) The
Mosaic Company. In addition, the following companies were added to our
prior-year peer group: (i) Danone S.A., (ii) General Mills, Inc., (iii) Kellogg
Company, (iv) Mondelez International, Inc. (v) The Kraft Heinz Company, (vi)
Tyson Foods, Inc., and (vii) Unilever PLC.
Comparison of Cumulative Five Year Total Return
INGREDION
$250
RUSSELL 1000 INDEX
$200
2021 PEER GROUP
2020 PEER GROUP
$150
$100
$50
Base Period
Dec. 31, 2016
Dec. 31, 2017
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2020
Dec. 31, 2021
Ingredion Incorporated
Russell 1000 Index
2021 Peer Group
2020 Peer Group
$100.00
$100.00
$100.00
$100.00
113.87
121.69
111.41
118.05
76.18
115.87
98.18
110.47
79.76
152.28
119.89
136.90
69.75
184.20
123.43
153.44
88.13
232.93
137.14
194.17
Comparison of Cumulative Total Return among our Company, the Russell 1000 Index and our Peer Group
(For the period from December 31, 2016 to December 31, 2021. Source: Standard & Poor’s)
The graph assumes that:
• as of the market close on December 31, 2016, you made one-time $100 investments in our common stock and in market capital
base-weighted amounts which were apportioned among all the companies whose equity securities constitute each of the other three
named indices, and
• all dividends were automatically reinvested in additional shares of the same class of equity securities constituting such investments
at the frequency with which dividends were paid on such securities during the applicable time frame.
INGREDION INCORPORATED
51
Financial Performance Metrics
Reconciliation of Diluted Earnings Per Share (“EPS”) to Non-GAAP Adjusted Diluted EPS
Net income attributable to Ingredion
Add back (deduct):
Restructuring/impairment charges, net of income tax (i)
Acquisition/integration costs, net of income tax (ii)
Impairment on disposition of assets (iii)
Other matters, net of income tax (iv)
Fair value adjustments to equity investments, net of income tax expense (v)
Tax provision (benefit) - Mexico (vi)
Other tax matters (vii)
NAFTA award (viii)
Gain from change in postretirement plan, net of income tax (ix)
Non-GAAP adjusted net income
EPS may not foot or recalculate due to rounding.
Year ended
31-Dec-21
$1.73
Year ended
31-Dec-20
$5.15
Year ended
31-Dec-19
$6.13
Year ended
31-Dec-11
$5.32
0.53
0.10
5.01
(0.32)
(0.07)
0.09
(0.40)
-
-
1.11
0.13
-
(0.24)
-
0.04
0.04
-
-
0.65
0.03
-
(0.16)
-
(0.04)
-
-
-
$6.67
$6.23
$6.61
0.08
0.26
-
-
-
-
-
(0.75)
(0.23)
$4.68
i During the year ended December 31, 2021, the Company recorded $47 million of net pre-tax restructuring-related charges, consisting of $17 million of employee-related and
other costs associated with its Cost Smart SG&A program and $27 million of net charges as part of its Cost Smart Cost of sales program. During the year ended December 31,
2020, the Company recorded $93 million of pre-tax restructuring and impairment charges, which included a $35 million impairment charge in the fourth quarter of 2020 for
a TIC Gum intangible asset and $48 million of pre-tax restructuring charges, consisting of $25 million of employee-related and other costs associated with its Cost Smart SG&A
program and $23 million of restructuring related expenses primarily in North America and APAC as part of its Cost Smart Cost of sales program. During the year ended December
31, 2019, the Company recorded $57 million of pre-tax restructuring charges, including $29 million of net restructuring related expenses as part of the Cost Smart cost of sales
program and $28 million of employee-related and other costs, including professional services, associated with our Cost Smart SG&A program. During the year ended December
31, 2011, the Company recorded $10 million of pre-tax restructuring-related charges.
ii During the year ended December 31, 2021, the Company recorded acquisition and integration costs for our acquisitions of PureCircle, KaTech and Verdient Foods businesses,
as well as investments with Amyris and Arcor joint ventures. The 2020 period primarily includes costs related to the acquisition and integration of the business acquired from
PureCircle Limited. The 2019 period primarily includes costs related to the acquisition and integration of the business acquired from Western Polymer, LLC. The 2011 period
primarily includes costs related to the acquisition and integration of National Starch.
iii During the year ended December 31, 2021, the Company recorded a $340 million net asset impairment charge related to the contribution of the Company’s Argentina
operations to the Arcor joint venture, which primarily consisted of $311 million for cumulative foreign translation losses related to the contributed net assets.
iv In 2021, we recorded $15 million of pre-tax benefits for Brazil indirect tax matters. In 2020, we recorded $35 million of pre-tax benefits for Brazil indirect tax matters, partially
offset by other adjusted costs totaling $8 million. In 2019, we recorded $22 million of pre-tax benefits for Brazil indirect tax matters, partially offset by other charges during the
period.
v During the year ended December 31, 2021, the Company recorded a net pre-tax fair value adjustment of $6 million to its equity investments.
vi The Company recorded a tax provision of $6 million for the year ended December 31, 2021 as a result of the movement of the Mexican peso against the U.S. dollar during the
period. The Company recorded a tax provision of $3 million for the year ended December 31, 2020 as a result of the movement of the Mexican peso against the U.S. dollar and
its impact to the remeasurement of the Company’s Mexico financial statements. During the year ended December 31, 2019, the company recorded a tax benefit of $3 million as
a result of the movement of the Mexican peso against the U.S. dollar during the period.
vii This relates to tax impact related legal entity rationalization and other tax settlements and matters.
viii During the year ended December 31, 2011, the Company received a $58 million settlement from the Government of Mexico regarding a North American Free Trade (“NAFTA”)
dispute.
ix During the year ended December 31, 2011, a United States hourly postretirement plan became a member of a multi-employer plan. Because of this change, a non-cash gain of
$30 million was recognized as a reduction of net periodic benefit cost during 2011.
52
INGREDION INCORPORATED
Return on Invested Capital
(dollars in millions)
Net income (a)
Adjusted for:
Provision for income taxes
Other non-operating (income) expense
Financing cost, net
Restructuring/impairment charges (i)
Acquisition/integration costs
Impairment on disposition of assets
Other matters (ii)
Income taxes (at effective rates of 25.6% and 26.9%, respectively) (iii)
Adjusted operating income, net of tax (b)
Short-term debt
Long-term debt
Less: Cash and cash equivalents
Short-term investments
Total net debt
Share-based payments subject to redemption
Total redeemable non-controlling interests
Total equity
Total net debt and equity
Average current and prior year Total net debt and equity (c)
Return on Invested Capital (a ÷ c)
Adjusted Return on Invested Capital (b ÷ c)
2021
$125
123
(12)
74
47
3
340
(15)
(175)
510
308
1,738
(328)
(4)
1,714
36
71
3,118
$4,939
$4,766
2.6%
10.7%
Year ended in December 31,
2020
$354
152
(5)
81
93
11
-
(27)
(177)
482
438
1,748
(665)
-
1,521
30
70
2,972
$4,593
$4,473
7.9%
10.8%
2019
$424
158
1
81
57
3
-
(19)
(189)
516
82
1,766
(264)
(4)
1,580
31
-
2,741
$4,352
$4,282
9.9%
12.1%
i In 2021, we recorded $47 million of pre-tax restructuring charges, consisting of $27 million associated with our Cost Smart Cost of sales program, $17 million associated with
our Cost Smart SG&A program and other restructuring costs. In 2020, we recorded $48 million of pre-tax restructuring charges, consisting of $25 million associated with our
Cost Smart SG&A program and $23 million associated with our Cost Smart Cost of sales program. In addition, we recorded impairment charges of $45 million, consisting of a
$35 million impairment of our intangible assets related to acquired tradenames and a $10 million impairment associated with our Verdient investment. In 2019, we recorded
$57 million of pre-tax restructuring charges, including $29 million of net restructuring related expenses as part of the Cost Smart Cost of sales program and $28 million of
employee-related and other costs, including professional services, associated with our Cost Smart SG&A program.
ii In 2021, we recorded $15 million of pre-tax benefits for Brazil indirect tax matters. In 2020, we recorded $35 million of pre-tax benefits for Brazil indirect tax matters, partially
offset by other adjusted costs totaling $8 million. In 2019, we recorded $22 million of pre-tax benefits for Brazil indirect tax matters, partially offset by other charges during the
period. for the favorable judgment during twelve months ended December 31, 2019. This benefit was partially offset by other charges during the period.
iii The effective income tax rate was 25.6 percent for 2021, 26.9 percent for 2020, and 26.8 percent for 2019, which removes the tax impact for the identified adjusted items as
shown below.
(dollars in millions)
As reported
Add back (deduct):
Year ended December 31, 2021
Year ended December 31, 2020
Year ended December 31, 2019
Income
before
Income
Taxes
Provision
for Income
Taxes
Effective
Income Tax
Rate
Income
before
Income
Taxes
Provision
for Income
Taxes
Effective
Income Tax
Rate
Income
before
Income
Taxes
Provision
for Income
Taxes
Effective
Income Tax
Rate
$248
$123
49.6%
$506
$152
30.0%
$582
$158
27.1%
Impairment/restructuring charges
Acquisition/integration costs
Impairment on disposition of assets
Fair value adjustments on equity investments
Other matters
Other tax matters
Tax item-Mexico
Adjusted non-GAAP
47
3
340
(6)
(15)
-
-
11
(3)
-
(1)
7
(6)
27
93
11
-
-
(22)
-
-
18
2
-
-
(8)
(3)
(3)
57
3
-
-
(19)
-
-
13
1
-
-
(8)
-
3
$617
$158
25.6%
$588
$158
26.9%
$623
$167
26.8%
INGREDION INCORPORATED
53
Net Debt to Adjusted EBITDA Ratio
(dollars in millions)
Short-term debt
Long-term debt
Less: Cash and cash equivalents
Short-term investments
Total net debt (a)
Income before income taxes (b)
Adjusted for:
Depreciation and amortization
Financing cost, net
Restructuring/impairment (i)
Acquisition/integration costs
Impairment from disposition of assets
Other matters (ii)
Fair value adjustments to equity investments
Adjusted EBITDA (c)
Net Debt to Income before income tax ratio (a ÷ b)
Net Debt to Adjusted EBITDA ratio (a ÷ c)
2021
$308
1,738
(328)
(4)
1,714
248
220
74
38
3
340
(15)
(6)
$902
6.9
1.9
2020
$438
1,748
(665)
-
1,521
506
213
81
85
11
-
(22)
-
$874
3.0
1.7
2019
$82
1,766
(264)
(4)
1,580
582
220
81
44
3
-
(19)
-
$911
2.7
1.7
i Restructuring/impairment charges are reduced by $9 million in 2021, $8 million in 2020, and $13 million in 2019, to exclude the accelerated depreciation associated with Cost
Smart programs that are included in Depreciation and amortization above.
ii In 2021, we recorded $15 million of pre-tax benefits for Brazil indirect tax matters. In 2020, we recorded $35 million of pre-tax benefits for Brazil indirect tax matters, partially
offset by other adjusted costs totaling $8 million. In 2019, we recorded $22 million of pre-tax benefits for Brazil indirect tax matters, partially offset by other charges during the
period. for the favorable judgment during twelve months ended December 31, 2019. This benefit was partially offset by other charges during the period.
54
INGREDION INCORPORATED
DIRECTORS AND OFFICERS | HEALTHY & SUSTAINABLE GROWTH
BOARD OF DIRECTORS | AS OF APRIL 7, 2022
Luis Aranguren-Trellez2
Executive President
Arancia, S.A. de C.V.
Age 60; Director since 2003
David B. Fischer2
Former President and Chief Executive Officer
Greif, Inc.
Age 59; Director since 2013
Paul Hanrahan1
Chief Executive Officer and Director
Hygo Energy Transitions Ltd.
Age 64; Director since 2006
Rhonda L. Jordan2
Former President, Global Health & Wellness,
and Sustainability
Kraft Foods Inc.
Age 64; Director since 2013
Gregory B. Kenny*3
Former President and Chief Executive Officer
General Cable Corporation
Age 69; Director since 2005
Victoria J. Reich1
Former Senior Vice President and Chief Financial Officer
Essendant Inc.
Age 64; Director since 2013
CORPORATE OFFICERS | AS OF APRIL 7, 2022
James P. Zallie
President and Chief Executive Officer
Age 60; joined Company in 2010
Lori Arnold
Vice President, Tax
Age 56; joined Company in 2011
Valdirene Bastos-Licht
Senior Vice President and President, APAC
and Global Head of Pharma, Home and Beauty
Age 54; joined Company in 2018
Larry Fernandes
Senior Vice President and
Chief Commercial and Sustainability Officer
Age 57; joined Company in 1990
James D. Gray
Executive Vice President and Chief Financial Officer
Age 55; joined Company in 2014
Tanya Jaeger de Foras
Senior Vice President, Chief Legal Officer,
Corporate Secretary and Chief Compliance Officer
Age 51; joined Company in 2021
Catherine Suever1
Former Executive Vice President
Finance and Administration and Chief Financial Officer
Parker-Hannifin Corporation
Age 63; Director since 2021
Stephan B. Tanda3
President and Chief Executive Officer
AptarGroup, Inc.
Age 56; Director since 2019
Jorge A. Uribe3
Former Global Productivity and Organization
Transformation Officer
The Procter & Gamble Company
Age 65; Director since 2015
Dwayne A. Wilson1
Former Senior Vice President
Fluor Corporation
Age 63; Director since 2010
James P. Zallie
President and Chief Executive Officer
Ingredion Incorporated
Age 60; Director since 2017
*Chairman of the Board
Committees of the Board
1 Audit Committee, Ms. Reich is Chairman.
2 People, Culture and Compensation Committee, Ms. Jordan is
Chairman.
3 Corporate Governance and Nominating Committee, Mr. Kenny
is Chairman.
Jorgen Kokke
Executive Vice President and President, Americas
Age 53; joined Company in 2010
Pierre Perez y Landazuri
Senior Vice President, Corporate Strategy,
Specialties and President, EMEA
Age 53; joined Company in 2016
Eric Seip
Senior Vice President, Global Operations
and Chief Supply Chain Officer
Age 54; joined Company in 2021
C. Kevin Wilson
Vice President and Corporate Treasurer
Age 60; joined Company in 2014
Nancy Wolfe
Senior Vice President and Chief Human Resources Officer
Age 53; joined Company in 2022
Jeremy Xu
Senior Vice President and Chief Innovation Officer
Age 54; joined Company in 2020
INGREDION INCORPORATED
55
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56
INGREDION INCORPORATED
CORPORATE HEADQUARTERS
5 Westbrook Corporate Center
Westchester, IL 60154
708.551.2600
708.551.2700 fax
www.ingredion.com
STOCK EXCHANGE
The common shares of Ingredion Incorporated trade on the
New York Stock Exchange under the ticker symbol INGR.
Our Company is a member of the Russell 1000 Index and
the S&P MidCap 400 Index.
TRANSFER AGENT, DIVIDEND DISBURSING
AGENT AND REGISTRAR
Computershare 866.517.4574 or 201.680.6685 (outside the
U.S.) or 888.269.5221 (hearing impaired – TTY phone)
SHAREHOLDER ASSISTANCE
Ingredion Incorporated c/o Computershare
P.O. Box 30170
College Station, TX 77842-3170
Send overnight correspondence to:
Ingredion Incorporated c/o Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
Shareholder website: www.computershare.com/investor
Shareholder online inquiries:
https://www-us.computershare.com/investor/contact
INVESTOR AND SHAREHOLDER CONTACT
Investor Relations Department 708.551.2592
investor.relations@ingredion.com
COMPANY INFORMATION
Copies of the Annual Report, the Annual Report on Form
10-K and quarterly reports on Form 10-Q may be obtained,
without charge, by writing to Investor Relations at the
corporate headquarters address, by calling 708.551.2603, by
emailing investor.relations@ingredion.com or by visiting our
website at ir.ingredionincorporated.com.
SHAREHOLDER INFORMATION | HEALTHY & SUSTAINABLE GROWTH
ANNUAL MEETING OF SHAREHOLDERS
The 2022 Annual Meeting of Shareholders will be held on
Friday, May 20, 2022, at 9:00 a.m. Central Daylight Time.
The Annual Meeting will be a hybrid meeting, held in person
at The Westin Chicago Lombard, 70 Yorktown Center,
Lombard, IL 60148 and via the internet by visiting
http://www.virtualshareholdermeeting.com/INGR2022.
A formal notice of that meeting, proxy statement and
proxy voting card are being made available to shareholders
in accordance with U.S. Securities and Exchange Commission
(“SEC”) regulations.
INDEPENDENT AUDITORS
KPMG LLP
200 East Randolph Drive
Chicago, IL 60601
312.665.1000
BOARD COMMUNICATION
Interested parties may communicate directly with any
member of our Board of Directors, including the Chairman
of the Board, or the non-management directors or the
independent directors, as a group, by writing in care of
Corporate Secretary, Ingredion Incorporated,
5 Westbrook Corporate Center, Westchester, IL 60154.
SAFE HARBOR
Certain statements in this Annual Report that are neither
reported financial results nor other historical information
are forward-looking statements. Such forward-looking
statements are not guarantees of future performance and
are subject to risks and uncertainties that could cause actual
results and Company plans and objectives to differ materially
from those expressed in the forward-looking statements.
A description of some of these risks and uncertainties is
contained in our reports on Forms 10-K, 10-Q and 8-K filed
with the SEC.
This entire report was printed on recycled paper that contains
10% post-consumer waste. DFIN recycles all of the plates,
waste paper and unused inks, further reducing its carbon
footprint.
Copyright © 2022 Ingredion Incorporated. All Rights
Reserved.
220879_LOT COVER_4348_ING_AnnualReport.indd 2
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HEALTHY &
SUSTAINABLE
GROWTH
2 0 2 1 A N N U A L R E P O R T
INGREDION INCORPORATED
5 WESTBROOK CORPORATE CENTER
WESTCHESTER, IL 60154
708.551.2600
WWW.INGREDION.COM
220879_LOT COVER_4348_ING_AnnualReport.indd 1
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