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 ~~2017.~~2019. 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 with respect to environmental matters, including air and water quality, ~~and underground fuel storage tanks,~~ and 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 and they, along with product dryers, are our primary source of greenhouse gas emissions. In Argentina, we are in discussions with local regulators ~~associated with conducting~~addressing our possible undertaking to conduct studies of possible environmental remediation programs at our Chacabuco plant. We are unable to predict the outcome of these ~~discussions; however, we~~discussions, but do not believe that the ultimate cost of remediation will be material. Based on current laws and regulations and the enforcement and interpretations thereof, 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.

During ~~2017,~~2019, we spent approximately ~~$16~~$12 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 ~~$12 million and $9~~$10 million for environmental facilities and programs in ~~2018~~each of 2020 and ~~2019, respectively.~~2021.

Other

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 they are electronically filed with or furnished 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 each is available in print to any shareholder upon request in writing to Ingredion Incorporated, 5 Westbrook Corporate Center, Westchester, Illinois 60154, Attention: Corporate Secretary. The contents of our website are not incorporated by reference into this report.

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Information about our Executive Officers ~~of the Registrant~~

Set forth below, as of January 31, 2020, are the names and ages of all of our executive officers, indicating their positions and offices with the Company and other business experience. Our executive officers are elected annually by the Board to serve until the next annual election of officers and until their respective successors have been elected and have qualified, ~~unless removed~~or until their earlier resignation or removal by the Board.


Name	Age	Positions, Offices and Business Experience

~~Ilene S. Gordon~~	64	Executive Chairman of the Board since January 1, 2018. Prior to that, Ms. Gordon served as Chairman of the Board, President and Chief Executive Officer from May 4, 2009 to December 31, 2017. Ms. Gordon was President and Chief Executive Officer of Rio Tinto’s Alcan Packaging, a multinational business unit engaged in flexible and specialty packaging, from October 2007 until she joined the Company on May 4, 2009. From December 2006 to October 2007, Ms. Gordon was a Senior Vice President of Alcan Inc. and President and Chief Executive Officer of Alcan Packaging. Alcan Packaging was acquired by Rio Tinto in October 2007. From 2004 until December 2006, Ms. Gordon served as President of Alcan Food Packaging Americas, a division of Alcan Inc. From 1999 until Alcan’s December 2003 acquisition of Pechiney Group, Ms. Gordon was a Senior Vice President of Pechiney Group and President of Pechiney Plastic Packaging, Inc., a global flexible packaging business. Prior to joining Pechiney in June 1999, Ms. Gordon spent 17 years with Tenneco Inc., where she most recently served as Vice President and General Manager, heading up Tenneco’s folding carton business. Ms. Gordon also serves as a director of International Paper Company, a global paper and packaging company, and Lockheed Martin Corporation, a global security and aerospace company. She served as a director of Arthur J. Gallagher & Co., an international insurance brokerage and risk management business, from 1999 to May 2013 and as a director of Essendant Inc., formerly United Stationers Inc., a wholesale distributor of business products and a provider of marketing and logistics services to resellers, from January 2000 to May 2009. Ms. Gordon also serves as a director of The Economic Club of Chicago, Northwestern Memorial Hospital and World Business Chicago. She is also a trustee of The MIT Corporation and a Vice Chair of The Conference Board. Ms. Gordon holds a Bachelor’s degree in mathematics from the Massachusetts Institute of Technology (MIT) and a Master’s degree in management from MIT’s Sloan School of Management.

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James P. Zallie

President and Chief Executive Officer since January 1, 2018. Prior to ~~that,~~assuming his current position, Mr. Zallie served as Executive Vice President, Global Specialties and President, Americas from January 1, 2016 to December 31, 2017. Mr. Zallie previously served as Executive Vice President, Global Specialties and President, North America and EMEA from January 6, 2014 to December 31, 2015; Executive Vice President, Global Specialties and President, EMEA and Asia-Pacific from February 1, 2012 to January 5, 2014; and Executive Vice President and President, Global Ingredient Solutions from October 1, 2010 to January 31, 2012. Mr. Zallie previously served as President and Chief Executive Officer of the National Starch business from January 2007 to September 30, 2010 when it was acquired by Ingredion. Mr. Zallie worked for National Starch for more than 27 years in various positions of increasing responsibility, first in technical, then marketing and then international business management positions. Mr. Zallie ~~also~~ serves as a director of Innophos Holdings, Inc., a leading international producer of performance-critical and nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical, oral care and industrial end markets. He is a director of Northwestern Medicine ~~North Region,~~Lake Forest Hospital, a not-for-profit organization. Mr. Zallie ~~holds Masters degrees in food science and business administration from Rutgers University and~~earned a ~~Bachelor of Science~~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.

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James D. Gray

Executive Vice President and Chief Financial Officer since March 1, 2017. Prior to ~~that,~~assuming his current position, he served as Vice President, Corporate Finance and Planning, from April 1, 2016 to February 28, 2017. Mr. Gray previously served as Vice President, Finance, North America from January 6, 2014 when he joined the Company to March 31, 2016. Prior to that, Mr. Gray was employed by PepsiCo, Inc. from December 1, 2004 to January 3, 2014. He served as Chief Financial Officer, Gatorade division and Vice President Finance of PepsiCo, Inc. from August 16, 2010 to January 3, 2014. Prior to that Mr. Gray served as Vice President Finance PepsiCo Beverages North America from December 1, 2004 to August 14, 2010. Mr. Gray holds a ~~Bachelor’s~~bachelor’s degree in ~~Business Administration~~business administration from the University of California, Berkeley, and a ~~Master’s~~master’s degree from the Kellogg School of Management, Northwestern University.

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Jorgen Kokke		49 51		Executive Vice President, Global Specialties, and President, North America since February 5, 2018. Prior to ~~that,~~assuming his current position, Mr. Kokke previously served as Senior Vice President and President, Asia-Pacific and EMEA from January 1, 2016 to February 4, 2018. Previously, Mr. Kokke served as Senior Vice President and President, Asia-Pacific from September 16, 2014 to December 31, ~~2015;~~2015, and as Vice President and General Manager, Asia-Pacific from January 6, 2014 to September 15, 2014. Prior to that, Mr. Kokke served as Vice President and General Manager, EMEA since joining National Starch (acquired by Ingredion inOctober 1, 2010) on March 1, 2009. Prior to that, he 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.~~2009, Prior ~~thereto,~~to that, Mr. Kokke was Director of Strategy and Business Development at CSM NV. Prior to that, he held a variety of roles of increasing responsibility in sales, business development, marketing and general management in Unilever’s Loders Croklaan Group. Mr. Kokke holds a ~~Master’s~~master’s degree in economics from the University of Amsterdam.

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Stephen K. Latreille

Vice President and Corporate Controller since April 1, 2016. Prior to ~~that~~assuming his current position, Mr. Latreille served as Vice President, Corporate Finance, from August 5, 2014 to March 31, 2016. From August 26, 2014 to November 18, 2014, Mr. Latreille also led the Company’s Investor Relations and Corporate Communications function on an interim basis. He previously served as Director, Corporate Finance and Planning from March 4, 2013, when he joined the Company, to August 4, 2014. Prior to that, Mr. Latreille was employed by Kraft Foods, Inc., then the world’s second largest food company, ~~from December 1994 to December 28, 2012. Kraft Foods was spun off from Mondelez International on October 1, 2012.~~for over 18 years. He served as Senior Director, Finance and Strategy, North America Customer Service and Logistics from April 1, 2009 to December 28, 2012. Mr. Latreille served as Senior Director, Investor Relations from June 18, 2007 to March 31, 2009. Prior to that, he held several positions of increasing responsibility ~~with~~while at Kraft ~~Foods, including Business Unit Finance Director.~~Foods. Prior to his time with Kraft Foods, Mr. Latreille held several positions ~~of increasing responsibility with~~at Rand McNally & Company, a leading provider of maps, navigation and travel content, and Price Waterhouse, one of the world’s largest accounting firms. Mr. Latreille is a member of the advisory board of the Department of Finance, Broad College of Business, Michigan State University and of Ladder Up, a not-for-profit ~~entity.~~organization that provides free financial services in Illinois. Mr. Latreille holds a ~~Bachelor’s~~bachelor’s degree in accounting from Michigan State University and a Master of Business Administration degree from the Kellogg School of Management at Northwestern University. He is a member of the American Institute of Certified Public Accountants.

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Pierre Perez y Landazuri		49		51		Senior Vice President and President, EMEA since January 1, 2018. Prior to ~~that~~assuming his current position, Mr. Perez y Landazuri served as Vice President and General Manager, EMEA for the Company’s subsidiary, Ingredion Germany GmbH, from April 15, 2016 to December 31, 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 ~~thereto~~to that, 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. Prior to that, Mr. Perez y Landazuri held a number of marketing, sales and product management roles at CP Kelco in Paris, France. Early in his career, he was employed by Rohm and Haas, BASF and Hercules in sales, marketing and engineering positions. Mr. Perez y Landazuri holds a ~~Master’s~~master’s degree in chemical process engineering from ENSCP Graduate School of Chemistry (now Chimie ParisTech) in Paris, France.

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~~Ernesto Pousada~~Robert J. Stefansic	50 58	Senior Vice President, Operating Excellence, Information Technology and ~~President, South America~~Chief Supply Chain Officer since ~~January 1,~~September 17, 2018. Prior to that Mr. Peres Pousada served as Senior Vice President and President, South America of the Company’s subsidiary, Ingredion Brasil Ingredientes Industriais Ltda., from February 1, 2016 to December 31, 2017. Prior to that Mr. Peres Pousada was employed by Suzano Papel e Celulose, a Brazilian pulp and paper manufacturer, from November 3, 2004 to January 31, 2016. He most recently served as Chief Operating Officer from December 1, 2007 to January 31, 2016. Prior to that Mr. Peres Pousada served as Pulp Project Officer from November 3, 2004 to November 30, 2007. Before joining Suzano Papel e Celulose, Mr. Peres Pousada was employed by The Dow Chemical Company from January 1990 to December 2004 in various positions in Brazil, the U.S. and Switzerland. Mr. Peres Pousada holds a Bachelor’s degree in mechanical engineering from Instituto Mauá de Tecnologia in Brazil and a specialization in business administration from Fundação Instituto de Administração, also in Brazil.

~~Martin Sonntag~~	52	Senior Vice President, Strategy and Global Business Development since November 1, 2015. Prior to that Mr. Sonntag served as Vice President and General Manager, EMEA from February 1, 2014 to October 31, 2015. Prior theretoassuming his current position, he served as an executive investment partner and portfolio manager at ADCURAM Group AG from April 2013 to January 2014. Previously, Mr. Sonntag served as General Manager of Dow Wolff Cellulosics GmbH from July 2007 to March 2013. From October 2004 to March 2007, he served as Global Business Director for Liquid Resins & Intermediates at The Dow Chemical Company. Mr. Sonntag served as Global Product Manager for Liquid Resins & Intermediates and Global Product Marketing Manager for Intermediates from 2003 to 2005 and Global Product Manager for Liquid Resins & Intermediates and Converted Epoxy Resins from 2000 to 2003. Previously, Mr. Sonntag, who joined Dow in Stade, Germany in 1989 as a Process Design Engineer, held a variety of engineering and management positions. Mr. Sonntag holds a Bachelor’s degree in chemical engineering from the Hamburg University of Technology and is a graduate of the INSEAD Advanced Management Program. Mr. Sonntag will leave the Company on March 1, 2018, to pursue other career interests.

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~~Robert J. Stefansic~~

Senior Vice President, Operating Excellence, Sustainability, Information Technology and Chief Supply Chain Officer since March 1, ~~2017. Prior to that Mr. Stefansic served~~2017, and as Senior Vice President, Operational Excellence, Sustainability and Chief Supply Chain Officer from May 28, 2014 to February 28, 2017. From January 1, 2014 to May 27, 2014, Mr. Stefansic served as Senior Vice President, Operational Excellence and Environmental, Health, Safety & Sustainability. Prior to that, Mr. Stefansic served as Vice President, Operational Excellence and Environmental, Health, Safety and Sustainability from August 1, 2011 to December 31, 2013. He previously served as Vice President, Global Manufacturing Network Optimization and Environmental, Health, Safety and Sustainability of National Starch, and subsequently Ingredion, from November 1, 2010 to July 31, 2011. Prior to that, he served as Vice President, Global Operations of National Starch, from November 1, 2006 to October 31, ~~2010. Prior to that, he served~~2010, and as Vice President, North America Manufacturing of National Starch from December 13, 2004 to October 31, 2006. Prior to joining National Starch, he held positions of increasing responsibility with The Valspar Corporation, General Chemical Corporation and Allied Signal Corporation. Mr. Stefansic holds a ~~Bachelor~~bachelor’s degree in chemical engineering and a ~~Master’s~~master’s degree in business administration from the University of South Carolina.

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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 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 filings or statements may be subject to the risks described below as well as other risks and uncertainties. ~~Please read~~See the cautionary notice regarding forward-looking statements in Item ~~7 below.~~7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 more healthy, could reduce our sales and profitability, and such reductions could be material. 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.

Current economic conditions may adversely impact demand for our products, reduce access to credit 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 remain challenging for the foreseeable future. General business and economic conditions that could affect us include barriers to trade (including as a result of Brexit, 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, there can be no assurance that there will not be 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 ~~expense~~expenses and cash ~~flow.~~flows.

In addition, ~~the~~ 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.

Approximately 5354 percent of our ~~2017~~2019 sales were made to companies engaged in the food industry and approximately 1210 percent were made to companies in the beverage industry. Additionally, sales to the animal nutrition and ~~paper and corrugating industries each represented approximately 10 percent of our 2017 net sales. Net sales to the~~ brewing industry represented approximately 79 percent and approximately 8

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percent, respectively, of our ~~2017~~2019 net sales. If our food customers, beverage customers,

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animal feed ~~customers, paper and corrugating~~ 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 ~~impaired~~impeded because of adverse public perception regarding the safety of our products and the potential effects of these products on ~~animals,~~ human health, the environment, and ~~the environment.~~animals.

Our future growth could be negatively impacted if we fail to introduce sufficient new products and services.

While we do not believe that any individual patent or trademark is material to our business, a portion of our growth comes from innovation in products, processes, and services. We cannot guarantee that our research and development efforts will result in new products and services at a rate or of a quality sufficient to meet expectations.

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 but are not limited to 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.

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.

We operate in a highly competitive environment and it may be difficult to preserve operating margins and maintain market share.

We operate in a highly competitive environment. Competition in markets in which we compete is largely based on price, quality, 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., ~~there are~~our competitors ~~several of which are~~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. ~~Competition in markets in~~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 ~~we compete is largely based on price, quality and product availability.~~may be affected by government programs such as tariffs or quotas.

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Due to market volatility, we cannot assure that we can adequately pass potential increases in the cost of corn and other raw materials on to customers through product price increases or 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 is influenced by economic and industry conditions, including supply and demand factors such as crop disease and severe weather conditions, such as drought, floods, or frost, that are difficult to anticipate and which we cannot control.

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 65 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 ~~amount~~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 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.

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Energy costs represent approximately 109 percent of our finished product costs. We use energy primarily to create steam inrequired for our production processes and to dry products. We consume coal, natural gas, electricity, wood, and fuel oil to generate energy. In Pakistan, the overall economy has been slowed by severe energy shortages which both negatively impact our ability to produce sweeteners and starches, and also negatively impact the demand from our customers due to their inability to produce their end products because of the shortage of reliable 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 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.

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 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 and options contracts, or take other hedging positions in the corn futures market. Additionally, we produce and sell ethanol and enter into swap contracts to hedge price risk associated with fluctuations in market prices of ethanol. We are unable to directly hedge price risk related to co-product sales; however, we occasionally enter into hedges of soybean oil (a competing product to our animal feed and corn oil) in order to mitigate the price risk of animal feed and corn oil sales. 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 ~~(corn, soybean oil, or ethanol)~~ and the derivative contract price. ~~These hedging instruments are subject to fluctuations in value; however, changes in the value of the underlying exposures we are hedging generally offset such fluctuations.~~ 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. Outside of North America, sales of finished products under long-term, firm-priced supply contracts are not material. We also use over-the-counter natural gas swaps to hedge portions of our natural gas costs, primarily in our North America operations.

An inability to contain costs could adversely affect our future profitability and growth.

Our future profitability and growth depends on our ability to contain operating costs and per unit product costs and to maintain and implement effective cost control programs, while at the same time 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, freight, 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.

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Increased interest rates could increase our borrowing costs.

We may 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 any existing debt that bears interest at an unhedged floating rate.

~~Future~~Climate change and future costs of environmental compliance may be material.

Our business could be affected in the future by national and global regulation or taxation of greenhouse gas ~~emissions. In~~emissions, as well as the ~~U.S.,~~potential effects of climate change. Changes in precipitation extremes, droughts and water availability have the ~~U.S. Environmental Protection Agency (“EPA”) has adopted regulations requiring~~potential to impact Ingredion's agricultural supply as well as the ~~owners and operators~~availability of certain facilities to measure and report their greenhouse gas emission. The EPA has also begun to regulate greenhouse gas emissions from certain stationary and mobile sources under the Clean Air Act. For example, the EPA has proposed rules regarding the construction and operation of coal-fired boilers. California and Ontario are also moving forward with various programs to reduce greenhouse gases.water for our manufacturing operations. Globally, a number of countries ~~that are parties to the Kyoto Protocol~~ have instituted or are considering climate change legislation and regulations. ~~Most notable is~~Ingredion continues to assess the ~~European Union~~

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~~Greenhouse Gas Emission Trading System.~~climate change, regulatory pressures and changing consumer behaviors on our business strategy. It is difficult at this time to estimate the likelihood of passage or predict the potential impact of any additional legislation. Potential consequences could include increased energy, transportation, and raw materials costs, and we may be required to make additional investments in our facilities and equipment.

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 acquisitions 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, if 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 also may 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 plants could adversely affect our operating results.

Producing starches and sweeteners through corn refining is a capital intensive industry. We have 44 plants and have preventive maintenance and de-bottlenecking programs designed to maintain and improve grind capacity and facility reliability. If we encounter operating difficulties at a plant 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 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 ~~manufacturing~~production processes. An event that impaired the operation of a boiler for an extended period of time could have a significant adverse effect on the operations of any plant in which such event occurred.

Also, 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

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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. Our success will depend in part on our ability to manage continued global political and economic uncertainty.

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 devaluations versus the U.S. dollar, although we cannot guarantee our ability to do this in the future. For example, due to pricing controls on many consumer products imposed in the recent past by the Argentine government, it takes longer than it had previously taken to achieve pricing improvement in response to currency devaluations versus the U.S. dollar in that country. The anticipated strength in the U.S. dollar may continue to provide some challenges, as it could take an extended period of time to fully recapture the impact of foreign currency devaluations versus the U.S. dollar, particularly in South America.

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We may hedge transactions that are denominated in a currency other than the currency of the operating unit entering into the underlying transaction. We are subject to the risks normally attendant to such hedging activities.

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, provide critical data connectivity, information, and services for internal and external users. These interactions include, but are not limited to: 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 orand 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, all of which may adversely impact our revenues, operating results, and financial condition. Our recent malware incident which lasted from October 2019 to December 2019 is one example of this type of risk, although this particular incident did not result in any material impact to our revenues, operating results, or financial condition.

The costs to address the foregoing security problems and security vulnerabilities before or after a cyber incident could be significant. 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 or our customers or other third parties could expose us, our customers or other third parties affected 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.

Our profitability could be negatively impacted if we fail to maintain satisfactory labor relations.

~~Approximately~~As of December 31, 2019, approximately 31 percent of our U.S. employees and 3736 percent of our non-U.S. employees ~~are~~were members of unions. Strikes, lockouts, or other work stoppages or slowdowns involving our unionized employees could have a material adverse effect on us.

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Natural disasters, war, acts and threats of terrorism, pandemics, and other significant events could negatively impact our business.

~~If the~~The economies of any countries in which we sell or manufacture products or purchase raw materials ~~are~~could be affected by natural disasters. Such natural disasters ~~such as~~could include, among others, earthquakes, floods, or severe weather; war, acts of war, or terrorism; or the outbreak of aan epidemic or pandemic; itsuch as the ongoing coronavirus outbreak emanating from China at the beginning of 2020. Any such natural disaster could result in asset write-offs, decreased sales and overall reduced cash flows.

~~Government policies and regulations could adversely affect our operating results.~~

~~Due to cross-border disputes, our operations could be adversely affected by actions taken 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~~$1.2 billion of total intangible assets atas of December 31, ~~2017,~~2019, consisting of ~~$803~~$801 million of goodwill and ~~$493~~$437 million of other intangible ~~assets.~~assets, which constitute 13 percent and 7 percent, respectively, of our total assets as of such date. Additionally, we have ~~$2.4~~$2.6 billion of long-lived assets, ator 44 percent of our total assets, as of December 31, ~~2017.~~2019.

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

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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. ~~Based on the results of the annual assessment, we concluded that as of October 1, 2017, it was more likely than not that the fair value of our reporting units was greater than their carrying value.~~ We continue to monitor our reporting units in struggling economies and recent acquisitions for challenges in ~~the business~~these businesses that may negatively impact the fair value of these reporting units.

~~Even though it was determined that there was no additional long-lived asset impairment as of October 1, 2017, the~~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 ~~October~~July 1, ~~2018.~~2020.

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 various other 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 Tax Cuts and Jobs Act (“TCJA”), which was enacted in December 2017, significantly ~~alters~~altered existing U.S. tax law and includes numerous and complex provisions that substantially affect our business. The U.S. Treasury Department and the Internal Revenue Service continue to interpret and issue guidance on provisions of the TCJA ~~contains a~~that could differ from the way in which we interpret some of the provisions. Consequently, we may make adjustments to our provision ~~that requires recognition of a liability~~ for income taxes based on ~~the deemed repatriation of our offshore earnings. In addition, the reduction~~differences in interpretation in the corporate tax rate to 21 percent requires us to remeasure deferred income taxes. The provisional impact of the tax on the deemed repatriation of earnings along with the impact of the remeasurement of deferred income taxes has been recordedperiods in income tax from continuing operations in 2017. Although we believe these estimates are reasonable, the underlying calculations are not complete and evolving analyses and interpretations could result in material adjustments to these estimates in 2018.which guidance is issued.

The TCJA also creates a new requirement that the global intangible low-taxed income (“GILTI”) of our foreign affiliates must be included currently in our U.S. taxable income beginning in 2018. The GILTI provisions are extremely complex and their application to our facts and circumstances remains unclear. The application of the GILTI provisions could materially increase our effective tax rate in 2018 and beyond.

Significant changes in the tax laws of the U.S. and numerous foreignjurisdictions in which we do business could result from the base erosion and profit shifting (“BEPS”) project undertaken by the Organization for Economic Cooperation and Development (“OECD”). AnOECD-led coalition of 44 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 finalized and~~as adopted bycountries ~~would~~in which we do business, could increase tax uncertainty and the riskof double taxation, thereby adversely affecting our provision forincome taxes.

The recoverability of our deferred tax assets, which are predominantly in Brazil, Canada, Germany, Mexico, and the U.S., is dependent upon our ability to generate future taxable income in these jurisdictions. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions and a material assessment by a governing tax authority could affect our profitability and cash flows.

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We may not have access to the funds required for future growth and expansion.

We may need additional funds 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 our general credit facilities. 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 ~~non-productive~~ 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

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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.

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 may 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 ~~the~~ 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.

No assurance can be given that we will continue to pay ~~dividends.~~dividends, or as to the amount of any dividend we pay.

The payment of dividends, as well as the amount of any dividends, is at the discretion of our Board of Directors and will be subject to our financial results and the availability of statutory surplus funds to pay dividends.

Our profitability may be affected by other factors beyond our control.

Our operating income and ability to 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

~~None~~None.

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ITEM 2. ~~PROPERTIES~~PROPERTIES

We own or lease (as noted below), directly and through our consolidated subsidiaries, 44 manufacturing facilities. In addition, we lease our corporate headquarters in Westchester, Illinois and our research and development facility in Bridgewater, New Jersey.

The following list details the locations of our manufacturing facilities within each of our four reportable business ~~segments:~~segments as of February 1, 2020:


North America	South America	~~Asia Pacific~~Asia-Pacific	EMEA

Cardinal, Ontario, Canada	Baradero, Argentina	~~Lane Cove, Australia~~Shandong Province, China	Hamburg, Germany
London, Ontario, Canada	Chacabuco, Argentina	~~Guangzhou,~~Shanghai, China	Cornwala, Pakistan
San Juan del Rio, Queretaro, Mexico	Balsa Nova, Brazil	~~Shandong Province, China~~Icheon, South Korea	Faisalabad, Pakistan
Guadalajara, Jalisco, Mexico	Cabo, Brazil	~~Shanghai, China~~Incheon, South Korea	Mehran, Pakistan
Mexico City, Edo, Mexico	Mogi-Guacu, Brazil	~~Icheon, South Korea~~Ban Kao Dien, Thailand	Goole, United Kingdom(b)
Oxnard, California, U.S.(a)	Rio de Janeiro, Brazil	~~Incheon, South Korea~~
~~Stockton, California, U.S.~~	~~Barranquilla, Colombia~~	~~Ban Kao Dien,~~Kalasin, Thailand
Idaho Falls, Idaho, U.S.	~~Cali,~~Barranquilla, Colombia	~~Kalasin,~~Sikhiu, Thailand
Bedford Park, Illinois, U.S.	~~Lima, Peru~~Cali, Colombia	~~Sikhiu,~~Banglen, Thailand(a)
Mapleton, Illinois, U.S.	Lima, Peru	~~Banglen, Thailand~~
Indianapolis, Indiana, U.S.
Cedar Rapids, Iowa, U.S.
Fort Fairfield, Maine, U.S.
Belcamp, Maryland, U.S.
North Kansas City, Missouri, U.S.
Winston-Salem, North Carolina, U.S.
Grand Forks, North Dakota, U.S.
Salem, Oregon, U.S.
Berwick, Pennsylvania, U.S.
Charleston, South Carolina, U.S.
Richland, Washington, U.S.
Moses Lake, Washington, U.S.
Plover, Wisconsin, U.S.

(a)

~~(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 have preventive maintenance and de-bottlenecking programs designed to further improve grind capacity and facility reliability.

We have electricity co-generation facilities at our plants in London, Ontario, Canada; Cardinal, Ontario, Canada; ~~Stockton, California, U.S.;~~ Bedford Park, Illinois, U.S.; Winston-Salem, North Carolina, U.S.; San Juan del Rio and Mexico City, Mexico; Cali, Colombia; Cornwala, Pakistan; and Balsa Nova and Mogi-Guacu, Brazil, that provide electricity at a lower cost than is available from third parties. We generally own and operate these co-generation facilities, except for the facilities at our Mexico City, Mexico; and Balsa Nova and Mogi-Guacu, Brazil locations, which are owned by, and operated pursuant to co-generation agreements with third parties.

In recent years, we have made significant capital expenditures to update, expand and improve our facilities, spending ~~$314~~$328 million in ~~2017.~~2019. We believe these capital expenditures will allow us to operate efficient facilities for the foreseeable future. ~~We currently anticipate that capital expenditures and mechanical stores purchases for 2018 will approximate $330 to $360 million.~~

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ITEM 3. LEGAL PROCEEDINGS

~~We are~~The Company’s subsidiary, National Starch and Chemical (Thailand) Co. Ltd., self-reported to the Rayong Provincial Department of Industry of the Ministry of Industry (the “DIW”) an administrative error in registering one of its waste transporters in Thailand. The DIW notified National Starch and Chemical (Thailand) Co. Ltd. of failure to comply with Section 8 (5) of the Factory Act in connection with the waste transporter and, in May 2019, imposed fines on a ~~party~~per shipment basis totaling THB 3,330,000, or approximately $107,000. There was no assertion by the DIW or the Ministry of Industry that any harm had been caused to ~~a large number of labor claims relating~~the environment. The fines were paid in May 2019 and this administrative error is not expected to our Brazilian operations. As of December 31, 2017, we have reserved an aggregate of approximately $5 million with respect to these claims. These labor claims primarily relate to dismissals, severance, health and safety, work schedules, and salary adjustments.reoccur.

We are currently subject to ~~various other~~ claims and suits arising in the ordinary course of business, including labor matters, certain environmental proceedings, and other 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 ~~even if unfavorable to us,~~ 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.

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PART II

~~PART II~~

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Trading:Shares of our common stock are traded on the New York Stock Exchange ~~(“NYSE”)~~ under the ticker symbol “INGR.”

Holders: The number of holders of record of our common stock was ~~4,160~~3,633 at January 31, ~~2018.~~2020.

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 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.

~~The quarterly high and low market prices for our common stock and cash dividends declared per common share for 2016 and 2017 are shown below.~~

1st QTR

2nd QTR

3rd QTR

4th QTR

2017

Market prices

High

$
128.95

$
124.48

$
125.99

$
142.64

Low

113.07

113.42

115.47

120.67

Per share dividends declared

0.50

0.50

0.60

0.60

2016

Market prices

High

$
108.00

$
129.42

$
140.00

$
137.62

Low

84.57

104.24

128.18

113.92

Per share dividends declared

0.45

0.45

0.50

0.50

Issuer Purchases of Equity Securities:

The following table summarizes information with respect to our purchases of our common stock during the fourth quarter of ~~2017.~~2019.


				Maximum Number
				(or Approximate
			Total Number of	Dollar Value) of
	Total	Average	Shares Purchased as	Shares That May Yet
	Number	Price	Part of Publicly	be Purchased Under
	of Shares	Paid	Announced Plans or	the Plans or Programs
(shares in thousands)	Purchased	per Share	Programs	at End of Period
October 1 – October 31, ~~2017~~2019	—	—	—	~~3,702~~5,855 shares
November 1 – November 30, ~~2017~~2019	—	—	—	~~3,702~~5,855 shares
December 1 – December 31, ~~2017~~2019	—	—	—	—	~~3,750~~5,855 shares
Total	—	—	—

On December 12, 2014, the Board of Directors authorized a stock repurchase program permitting us to purchase up to 5.0 million of our outstanding shares of common stock from January 1, 2015, through December 31, 2019. On October 22, 2018, the Board of Directors authorized a new stock repurchase program permitting us to purchase up to 5an additional 8.0 million of our outstanding shares of common ~~shares~~stock from ~~January 1, 2015,~~November 5, 2018 through December 31, ~~2019.~~2023. At December 31, ~~2017,~~2019, we have ~~3.7~~5.9 million shares available for repurchase under the stock repurchase ~~program.~~programs.

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ITEM 6. SELECTED FINANCIAL DATA

Selected financial data is provided below.


(in millions, except per share amounts)	2019 (a)			2018			2017			2016 (b)			2015 (c)
Summary of operations:
Net sales (j)	$	6,209		$	6,289		$	6,244		$	6,022		$	5,958
Net income attributable to Ingredion		413	(d)		443	(e)		519	(f)		485	(g)		402	(h)
Net earnings per common share of Ingredion:
Basic		6.17	(d)		6.25	(e)		7.21	(f)		6.70	(g)		5.62	(h)
Diluted		6.13	(d)		6.17	(e)		7.06	(f)		6.55	(g)		5.51	(h)
Cash dividends declared per common share of Ingredion		2.51			2.45			2.20			1.90			1.74
Balance sheet data:
Working capital	$	1,193		$	1,192		$	1,458		$	1,274		$	1,208
Property, plant and equipment, net		2,306			2,198			2,217			2,116			1,989
Total assets		6,040			5,728			6,080			5,782			5,074
Long-term debt		1,766			1,931			1,744			1,850			1,819
Total debt		1,848			2,100			1,864			1,956			1,838
Total equity (i)	$	2,741		$	2,408		$	2,917		$	2,595		$	2,180
Shares outstanding, year end		66.8			66.5			72.0			72.4			71.6
Additional data:
Depreciation and amortization	$	220		$	247		$	209		$	196		$	194
Mechanical stores expense		57			57			57			57			57
Capital expenditures and mechanical stores purchases		328			350			314			284			280

(in millions, except per share amounts)

2017

2016 (a)

2015 (b)

2014

2013

Summary of operations:

Net sales

$
5,832

$
5,704

$
5,621

$
5,668

$
6,328

Net income attributable to Ingredion

519
(c)

485
(d)

402
(e)

355
(f)

396

Net earnings per common share of Ingredion:

Basic

7.21
(c)

6.70
(d)

5.62
(e)

4.82
(f)

5.14

Diluted

7.06
(c)

6.55
(d)

5.51
(e)

4.74
(f)

5.05

Cash dividends declared per common share of Ingredion

2.20

1.90

1.74

1.68

1.56

Balance sheet data:

Working capital

1,458

1,274

1,208

1,423

1,394

Property, plant and equipment, net

2,217

2,116

1,989

2,073

2,156

Total assets

6,080

5,782

5,074

5,085

5,353

Long-term debt

1,744

1,850

1,819

1,798

1,710

Total debt

1,864

1,956

1,838

1,821

1,803

Total equity (g)

$
2,917

$
2,595

$
2,180

$
2,207

$
2,429

Shares outstanding, year end

72.0

72.4

71.6

71.3

74.3

Additional data:

Depreciation and amortization

$
209

$
196

$
194

$
195

$
194

Capital expenditures and mechanical stores purchases

314

284

280

276

298

(a)	~~(a)~~Includes Western Polymer LLC (“Western Polymer”) from March 1, 2019 forward.

(b)

Includes TIC Gums Incorporated at December 31, 2016 for balance sheet data only.

(c)

~~(b)~~

Includes Penford Corporation (“Penford”) from March 11, 2015 forward and Kerr Concentrates, Inc. (“Kerr”) from August 3, 2015 forward.

(d)

~~(c)~~Includes after-tax restructuring expenses of $44 million, including $22 million of net restructuring related expenses as part of the Cost Smart Cost of sales program and $22 million of employee-related and other costs, including professional services, associated with our Cost Smart SG&A program. Additionally, includes after-tax income of $11 million, related to other matters and $2 million of after-tax acquisition/integration expenses.

(e)

Includes after-tax restructuring charges of $51 million consisting of costs associated with the Cost Smart Cost of sales program in relation to the cessation of wet-milling at the Stockton, California plant, employee-related severance and other costs in relation to the Cost Smart SG&A program, other costs related to the North America Finance Transformation initiative, and other costs related to abandonment of certain assets related to our leaf extraction process in Brazil. Additionally, includes after-tax charge of $3 million to the provision for income taxes related to the enactment of the TCJA in December 2017.

(f)

Includes after-tax restructuring charges of $31 million ~~($0.42 per diluted common share)~~ consisting of employee-related severance and other costs associated with the restructuring in Argentina, restructuring charges related to the abandonment of certain assets related to our leaf extraction process in Brazil, employee-related severance and other costs associated with the Finance Transformation initiative, and other restructuring charges including employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities. Additionally, includes after-tax charge of $23 million ~~($0.31 per diluted common share)~~ to the provision for income taxes related to the enactment of the TCJA in December 2017, $6 million ~~($0.08 per diluted common share)~~ related to the flow-through of costs primarily associated with the sale of TIC Gums inventory that was adjusted to fair value at the acquisition date in accordance with business combination accounting rules, and $3 million ~~($0.04 per diluted common share)~~ associated with the integration of acquired operations, partially offset by a tax benefit of $10 million ~~($0.14 per diluted common share)~~ due to deductible foreign exchange loss resulting from the tax settlement between the U.S. and Canada, and a $6 million ~~($0.08 per diluted common share)~~ after-tax gain from an insurance settlement primarily related to capital reconstruction.

(g)

~~(d)~~

Includes after-tax restructuring charges of $14 million ~~($0.20 per diluted common share)~~ consisting of employee severance-related charges and other costs associated with the execution of global IT outsourcing contracts, severance-related costs attributable to our optimization initiatives in North America and South America, and additional charges pertaining to our 2015 Port Colborne plant sale. Additionally, includes after-tax costs of $2 million ~~($0.03 per diluted common share)~~ associated with the integration of acquired operations and $27 million ~~($0.36 per diluted common share)~~ associated with an income tax matter.

(h)

~~(e)~~

Includes after-tax charges for impaired assets and restructuring costs of $18 million, ~~($0.25 per diluted common share),~~ after-tax costs of $7 million ~~($0.10 per diluted common share)~~ relating to the acquisition and integration of both Penford and Kerr, after-tax costs of $6 million ~~($0.09 per diluted common share)~~ relating to the sale of Penford and Kerr inventory that was adjusted to fair value

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at the respective acquisition dates in accordance with business combination accounting rules, after-tax costs of $4 million ~~($0.06 per diluted common share)~~ relating to a litigation settlement and an after-tax gain from the sale of a plant of $9 ~~million ($0.12 per diluted common share).~~
million.

(i)	~~(f)~~Includes non-controlling interest.

(j)

~~Includes a $33~~During the three months ended December 31, 2019, the Company changed its presentation of net sales. The change is applied retrospectively to all periods presented. For the year ended December 31, 2016, Net sales was previously reported as $5,704 million ~~impairment charge ($0.44 per diluted common share) to write-off goodwill at our Southern Cone~~ and adjusted as $6,022 million. For the year ended December 31, 2015, Net sales was reported as $5,621 million and adjusted as $5,958 million. See Note 2of ~~South America reporting unit and after-tax costs of $1 million ($0.02 per diluted common share) related~~the Notes to the ~~then-pending Penford acquisition.~~

Consolidated Financial Statements.

~~(g)~~

~~Includes non-controlling interests.~~

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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 44 manufacturing plants located in North America, South America, ~~Asia Pacific~~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 ~~paper and corrugating, and brewing~~ industries, among others.

Our growth strategy is centered on delivering value-added ingredient solutions for our customers. The foundation of our strategy is operating excellence, which includes our focus on safety, quality and continuous improvement. We see growth opportunities in three areas: first, we are working to expand our current business through organic growth; second, we are focused on broadening our ingredient portfolio with on-trend products through internal and external business development; finally, we look for growth from geographic expansion as we pursue extension of our reach to new locations. The ultimate goal of these strategies and actions is to deliver increased shareholder value.

Critical success factors in our business include managing our significant manufacturing costs, including costs for corn, other raw materials, and utilities. In addition, due to our global operations we are exposed 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. Also, 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 through strategic acquisitions and alliances. We utilize certain key financial metrics relating to return on invested capital ~~employed~~ and financial leverage to monitor our progress toward achieving our strategic business objectives (see section entitled “Key Financial Performance Metrics”).

~~We had a solid year in 2017 as~~The financial results of 2019 for operating income, net income and diluted earnings per common share ~~grew~~declined from ~~2016. Our earnings growth was driven principally by continued strong~~2018. Operating income declined in 2019 from 2018 primarily due to lower operating results in all segments. The main drivers of the operating income decline were commodity margin pressures, higher production and supply chain costs, and unfavorable currency translation.

In July 2018, we announced a $125 million savings target for our ~~North America segment. Operating income also grew~~Cost Smart program, designed to improve profitability, further streamline our global business, and deliver increased value to shareholders. We set Cost Smart savings targets to include an anticipated $75 million in ~~our EMEA~~cost of sales savings, including freight, and ~~Asia Pacific segments, which was offset~~$50 million in anticipated SG&A savings by ~~lower earnings~~year end 2021.

Our Cost Smart program and other initiatives resulted in ~~our South America segment due to continued difficult macroeconomic conditions and increased costs~~restructuring charges in ~~Argentina.~~

2019. During the ~~first quarter~~year ended December 31, 2019, we recorded $57 million of ~~2017, we implemented an organizational~~pre-tax restructuring effort in Argentina to achieve a more competitive cost position in the region, which resulted in a strike by the labor union and an interruption of manufacturing activities during the second quarter of 2017. We finalized a new labor agreement with the labor union in the second quarter, ending the strike on June 1, 2017.charges. We recorded ~~total pre-tax~~$29 million for our Cost Smart Cost of sales program. We recorded $15 million of restructuring charges in relation to the closure of the Lane Cove, Australia production facility, consisting of $10 million of accelerated depreciation, $4 million of employee-related severance, and $1 million of other costs. We expect to incur additional expense of $10 million to $12 million in 2020 in relation to the closure, excluding potential proceeds from the sale of land and equipment. Additionally, during the year ended December 31, 2019, we recorded $3 million of employee-related expenses primarily related to the South America operations restructuring. Finally, we recorded $11 million of other costs, including professional services, during the year ended December 31, 2019, primarily in ~~Argentina~~North America including other costs of ~~$17~~$2 million in relation to the prior year cessation of wet-milling at the Stockton, California plant. We do not expect to incur any additional costs in relation to the cessation of wet-milling at the Stockton, California plant. We recorded pre-tax restructuring charges of $28 million for the year ended December 31, ~~2017, related to the workforce reduction.~~

~~During the second quarter of 2017, we announced a Finance Transformation initiative in North America~~2019 for the ~~U.S.~~Cost Smart SG&A program. These costs include $15 million, of other costs, including professional services, and ~~Canada businesses to strengthen organizational capabilities and drive efficiencies to support our growth strategy. For~~$13 million of employee-related severance for the year ended December 31, ~~2017, we~~2019. These charges were recorded ~~pre-tax restructuring charges of $6 million ($3 million of severance costs~~primarily in the Company’s North America and $3South America operations, and include $2 million of other ~~costs)~~costs associated with the Finance Transformation initiative in Latin America for the year ended December

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31, 2019. The Company expects to continue to incur additional charges in 2020 related to ~~this initiative. We~~the Cost Smart SG&A program, however, it does not expect to incur ~~between $1 million and $2 million of~~any additional ~~employee-related severance and other~~restructuring costs ~~in 2018.~~

~~During the fourth quarter of 2017, we recorded $13 million of pre-tax restructuring charges~~ related to ~~our leaf extraction process in Brazil.~~ The charges consisted of $6 million of abandonment of certain assets, $6 million of inventory write downs and $1 million related to other costs, including employee-related severance costs. We expect to incur $1 million of additional other costs in 2018. Additionally, we reached an insurance settlement in North America for $9 million primarily related to capital reconstruction.its Finance Transformation initiative.

Our cash provided by operating activities ~~remained relatively flat at $769~~decreased to $680 million for the year ended December 31, ~~2017, compared to $771~~2019, from $703 million in the prior ~~year. The increase in current~~ year ~~earnings over the prior year were offset by an increase of cash outflow in working capital~~ primarily due to ~~the outflow in accounts payable and accrued~~

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~~liabilities for the $63 million payment made to the Internal Revenue Service (“IRS”) in the third quarter of 2017 to complete the double taxation settlement between the U.S. and Canada~~.lower current year net earnings. Our cash used for financing activities ~~increased~~decreased during the year ended December 31, ~~2017,~~2019, compared to the prior year, primarily due to the repurchase of ~~approximately one~~5.8 million shares of our outstanding common stock in ~~open market transactions for $123 million~~2018 offset by our debt repayments in 2019.

As previously announced on October 15, 2019 and November 19, 2019, we detected suspicious activity affecting several servers within certain data centers on our network. Immediately, we took steps to identify and contain the situation, which included engaging a third-party consultant. We assessed the impact of the incident and did not identify any impact to our financial reporting systems nor any material impacts to our Key Financial Performance Metrics discussed below. We incurred immaterial costs to perform these necessary remediation efforts during the first quarter of 2017. During the second and third quarters, we also refinanced a total of $500 million of senior notes with borrowings under our revolving credit facility and a new term loan entered into during the third quarter.

~~On March 9, 2017, we completed our acquisition of Sun Flour Industry Co., Ltd. (“Sun Flour”) in Thailand for $18 million. As of~~three months ended December 31, ~~2017, we paid $16 million~~2019. We are not aware of any evidence that any customer, supplier, or employee data has been improperly accessed, misused or transferred by any third party. The remediation work related to this incident was completed in cash and recorded $2 million in accrued liabilities for the final deferred payment due to the previous owner. The acquisition of Sun Flour adds a fourth manufacturing facility to our operations in Thailand. Sun Flour produces rice-based ingredients used primarily in the food industry. This transaction enhances our global supply chain and leverages other capital investments that we have made in Thailand to grow our specialty ingredients and service customers around the world. The acquisition did not have a material impact on our financial condition, results of operations or cash flows in 2017.December 2019.

Looking ahead, we anticipate that our operating income and net income will grow in 2018 compared to 2017. In North America, we expect operating income to increase driven by improved product mix and margins occurring in the latter half of the year offset by higher operating costs in Mexico. In South America, we expect operating income to improve over the prior year driven by volume recovery and favorable price mix. We intend to continue to maintain a high degree of focus on cost and network optimization during 2018 as we manage through the improving macroeconomic environment in this segment We expect operating income growth in Asia Pacific during the latter half of the year given anticipated high tapioca costs. We also expect operating income growth in EMEA in 2018.

We currently expect that our available cash balances, future cash flow from operations, access to debt markets, and borrowing capacity under our credit facilities will provide us with sufficient liquidity to fund our anticipated capital expenditures, dividends, and other investing and financing activities for the foreseeable future. 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.

Results of Operations

We have significant operations in four reporting segments: North America, South America, ~~Asia Pacific~~Asia-Pacific and EMEA. 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. Fluctuations in foreign currency exchange rates affect the U.S. dollar amounts of our foreign subsidiaries’ revenues and expenses. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, resulted in a three-year cumulative inflation in that country which exceeded 100 percent as of June 30, 2018. As a result, we adopted highly inflationary accounting as of July 1, 2018, for our Argentina affiliate in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Under highly inflationary accounting, our affiliate’s functional currency becomes the U.S. dollar, and its income statement and balance sheet will be measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on Argentine peso-denominated monetary assets and liabilities will be reflected in earnings in Financing costs. The impact of all foreign currency exchange rate changes, where significant, is provided below.

We acquired ~~Penford Corporation~~Western Polymer LLC (“~~Penford”), Kerr Concentrates, Inc. (“Kerr”), Shandong Huanong Specialty Corn Development Co., Ltd. (“Shandong Huanong”), TIC Gums Incorporated (“TIC Gums”~~Western Polymer”) and Sun Flour Industry Co., Ltd. (“Sun Flour”) on March ~~11, 2015, August 3, 2015, November 29, 2016, December 29, 2016,~~1, 2019, and March 9, 2017, respectively. The results of the acquired businesses are included in our consolidated financial results from the respective acquisition dates forward. While we identify fluctuations due to the acquisitions, our discussion below also addresses results of operations ~~absent~~excluding the impact of the acquisitions and the results of the acquired businesses, where appropriate, to provide a more comparable and meaningful analysis.

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~~2017~~2019 Compared to ~~2016~~2018 – Consolidated


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales	$	6,209	$	6,289	$	(80)	(1)	%
Cost of sales		4,897		4,921		24	—	%
Gross profit		1,312		1,368		(56)	(4)	%

Operating expenses		610		611		1	—	%
Other income, net		(19)		(10)		9	90	%
Restructuring/impairment charges		57		64		7	11	%

Operating income		664		703		(39)	(6)	%

Financing costs, net		81		86		5	6	%
Other, non-operating expense/(income), net		1		(4)		(5)	(125)	%

Income before income taxes		582		621		(39)	(6)	%
Provision for income taxes		158		167		9	5	%
Net income		424		454		(30)	(7)	%
Less: Net income attributable to non-controlling interests		11		11		—	—	%
Net income attributable to Ingredion	$	413	$	443	$	(30)	(7)	%

Year Ended December 31,

Favorable (Unfavorable)

Favorable (Unfavorable)

(in millions)

2017

2016

Variance

Percentage

Net sales

$
5,832

$
5,704

$
128

2
%
Cost of sales

4,359

4,302

(57)

(1)
%
Gross profit

1,473

1,402

71

5
%

Operating expenses

611

579

(32)

(6)
%
Other income, net

(18)

(4)

14

(350)
%
Restructuring/impairment charges

38

19

(19)

(100)
%

Operating income

842

808

34

4
%

Financing costs, net

73

66

(7)

(11)
%

Income before income taxes

769

742

27

4
%
Provision for income taxes

237

246

9

4
%
Net income

532

496

36

7
%
Less: Net income attributable to non-controlling interests

13

11

(2)

(18)
%
Net income attributable to Ingredion

$
519

$
485

$
34

7
%

Net Income attributable to ~~Ingredion.~~Ingredion. Net income attributable to Ingredion for 2019 decreased to $413 million from $443 million in 2018. Our results for 2019 included $35 million of one-time after-tax net costs, driven primarily by after-tax restructuring costs of $44 million. The restructuring charges consist of costs associated with our Cost Smart Cost of sales program and our Cost Smart SG&A program (see Note 5 of the Notes to the Consolidated Financial Statements for additional information).

Our results for 2018 included $54 million of one-time after-tax net costs, driven primarily by after-tax restructuring costs of $51 million. The restructuring charges consist of costs associated with our Cost Smart Cost of sales program in relation to the cessation of wet-milling at the Stockton, California plant, costs related to the Cost Smart SG&A program, including employee-related severance and other costs for restructuring projects in the South America, Asia-Pacific, and North America segments, costs related to the Latin America and North America Finance Transformation initiatives, and costs related to the cessation of our leaf extraction process in Brazil. During the year ended December 31, 2018, we adjusted our provisional amounts related to enactment of the Tax Cuts and Jobs Act ("TCJA") and recognized an incremental $3 million of tax expense related to the TCJA.

Net sales. Net sales were slightly down for the year ended December 31, 2019 as compared to the year ended December 31, 2018. Changes in foreign currency exchange rates and volume reduction due to the cessation of Stockton wet milling were partially offset by favorable price/product mix.

Cost of sales. Cost of sales for year ended December 31, 2019 were flat when compared to the year ended December 31, 2018 primarily due to higher net corn costs. Our gross profit margin was 21 percent and 22 percent for the years ended December 31, 2019, and 2018, respectively. The gross profit margin decrease primarily reflected higher raw material costs.

Operating expenses. Operating expenses were flat when comparing the year ended December 31, 2019, to the year ended December 31, 2018. This was primarily driven by lower selling costs, offset by higher general administrative costs. Operating expenses, as a percentage of gross profit, were 46 percent for the year ended December 31, 2019, as compared to 45 percent for the year ended December 31, 2018.

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Other income, net. Our change in other income, net for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was as follows:


	Year Ended December 31,				Favorable (Unfavorable)
(in millions)	2019		2018		Variance
Brazil tax matter	$	22	$	—	$	22
Value-added tax recovery		—		5		(5)
Other		(3)		5		(8)
Other income, net	$	19	$	10	$	9

In January 2019, the Company’s Brazilian subsidiary received a favorable decision from the Federal Court of Appeals in Sao Paulo, Brazil, related to certain indirect taxes collected in prior years. As a result of the decision, the Company expects to be entitled to indirect tax credits against its Brazilian federal tax payments in 2020 and future years. The Company finalized its calculation of the amount of the credits and interest due from the favorable decision, concluding that the Company could be entitled to approximately $86 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 the Company is entitled to only $22 million of the calculated indirect tax credits and interest for the period from 2005 to 2014. The Brazil National Treasury has filed a motion for clarification with the Brazilian Supreme Court, asking the Court, among other things, to modify the lower court’s decision to approve the Internal Ruling, which could impact the decision in favor of the Company. Due to the uncertainty arising from the issuance of the Internal Ruling, the Company recorded $22 million of credits in 2019 in accordance with ASC 450, Contingencies. The $22 million of future tax credits, which was recorded in the Consolidated Income Statement in Other income, resulted in additional deferred income taxes of $8 million. The income taxes will be paid as and when the tax credits are utilized. The Company continues to monitor the pending decisions within the Brazilian courts that may result in changes to the calculations and the timing of the recording of any additional gains and receipt of the benefits.

Financing costs, net. Our financing costs, net for the year ended December 31, 2019 decreased $5 million from the year ended December 31, 2018, driven by a reduction in foreign currency losses, partly offset by higher interest expense.

Provision for income taxes. Our effective income tax rates for the years ended December 31, 2019 and 2018 were 27.1 percent and 26.9 percent, respectively.

The increase in the effective tax rate was primarily driven by a reduction in the excess tax benefit related to share-based payment awards. This was offset by the revaluation of the Mexican Peso versus the U.S. dollar which impacted the U.S. dollar denominated balances held in Mexico compared to the devaluation of the Mexican Peso versus the U.S. dollar, in the prior year. Additionally, the effective tax rate was reduced from the prior year due to relatively lower valuation allowances on Argentine net operating losses.

Net income attributable to non-controlling interests. Net income attributable to non-controlling interests for the year ended December 31, 2019, was flat when compared to the year ended December 31, 2018.

2019 Compared to 2018 – North America


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	3,834	$	3,857	$	(23)	(1)	%
Operating income		522		545		(23)	(4)	%

Net sales. Our decrease in net sales of 1 percent for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was driven by a 2 percent decrease in volume, offset by a 1 percent improvement in price/product mix.

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Operating income. Our operating income decreased $23 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018, due to higher net cost of corn and production costs, which were partially offset by favorable pricing.

2019 Compared to 2018 – South America


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	960	$	988	$	(28)	(3)	%
Operating income		96		99		(3)	(3)	%

Net sales. Our decrease in net sales of 3 percent for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was driven by currency devaluations of 20 percent in Argentina and Brazil, partly offset by a 15 percent increase in price/product mix and 2 percent increase in volume.

Operating income. Our decrease in operating income of $3 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was primarily driven by foreign exchange impacts and higher net corn costs, which were partially offset by favorable pricing actions.

2019 Compared to 2018 – Asia-Pacific


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	823	$	837	$	(14)	(2)	%
Operating income		87		104		(17)	(16)	%

Net sales. Our decrease in net sales of 2 percent for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was driven by unfavorable currency translation.

Operating income. Our decrease in operating income of $17 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was driven by higher regional input costs, increased net corn cost in Australia, and foreign exchange impacts.

2019 Compared to 2018 – EMEA


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	592	$	607	$	(15)	(2)	%
Operating income		99		116		(17)	(15)	%

Net sales. Our decrease in net sales of 2 percent for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was driven unfavorable foreign exchange of 11 percent, offset by volume growth of 2 percent and improved price/product mix of 7 percent.

Operating income. Our decrease in operating income of $17 million for the year ended December 31, 2019, as compared to the year ended December 31, 2018, was driven by higher raw material costs and unfavorable foreign exchange impacts, driven primarily by the Pakistan rupee, which was partially offset by improved price mix.

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2018 Compared to 2017 ~~increased~~– Consolidated


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2018		2017		Variance		Percentage
Net sales	$	6,289	$	6,244	$	45	1	%
Cost of sales		4,921		4,772		(149)	(3)	%
Gross profit		1,368		1,472		(104)	(7)	%

Operating expenses		611		616		5	1	%
Other income, net		(10)		(18)		(8)	(44)	%
Restructuring/impairment charges		64		38		(26)	(68)	%

Operating income		703		836		(133)	(16)	%

Financing costs, net		86		73		(13)	(18)	%
Other, non-operating income		(4)		(6)		(2)	(33)	%

Income before income taxes		621		769		(148)	(19)	%
Provision for income taxes		167		237		70	30	%
Net income		454		532		(78)	(15)	%
Less: Net income attributable to non-controlling interests		11		13		2	15	%
Net income attributable to Ingredion	$	443	$	519	$	(76)	(15)	%

Net Income attributable to Ingredion. Net income attributable to Ingredion for 2018 decreased to $443 million from $519 million ~~from $485~~in 2017. Our results for 2018 included $54 million of one-time after-tax net costs, driven primarily by after-tax restructuring costs of $51 million. The restructuring charges consist of costs associated with our Cost Smart Cost of sales program in ~~2016.~~ relation to the cessation of wet-milling at the Stockton, California plant, costs related to the Cost Smart SG&A program, including employee-related severance and other costs for restructuring projects in the South America, Asia-Pacific, and North America segments, costs related to the Latin America and North America Finance Transformation initiatives, and costs related to the cessation of our leaf extraction process in Brazil (see Note 5 of the Notes to the Consolidated Financial Statements for additional information). During the year ended December 31, 2018, we adjusted our provisional amounts related enactment of the TCJA and recognized an incremental $3 million of tax expense related to the TCJA.

Our results for 2017 included $47 million of one-time after-tax net ~~after-tax~~ costs, driven primarily by restructuring costs of $31 million. The restructuring charges consisted of costs associated with the restructuring in Argentina, charges related to the abandonment of certain assets related to our leaf extraction process in Brazil, costs associated with the Finance Transformation initiative, and other pre-tax restructuring charges including employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities (see Note 5 of the Notes to the Consolidated Financial Statements for additional information). Our after-tax net ~~after-tax~~ results also included a net $23 million charge to the provision for income taxes related to the enactment of the ~~Tax Cuts and Jobs Act (“TCJA”)~~TCJA in December 2017, a $6 million charge relating to the flow-through of costs primarily associated with the sale of TIC Gums inventory that was adjusted to fair value at the acquisition date in accordance with business combination accounting rules, and a $3 million charge associated with the integration of acquired operations, partially offset by a tax benefit of $10 million due to a deductible foreign exchange loss resulting from the tax settlement between the U.S. and Canada and a $6 million gain from an insurance settlement primarily related to capital reconstruction.

Our results for 2016 included $43 million of net after-tax costs, primarily driven by a $27 million charge for the U.S.-Canada income tax settlement and related after-tax reserve and restructuring costs of $14 million. These restructuring charges consisted of employee-related severance charges and other costs associated with the execution of global IT outsourcing contracts, severance-related costs attributable to optimization initiatives in North America and South America, and additional charges pertaining to our 2015 Port Colborne plant sale. Our net after-tax costs also included $2 million associated with the integration of acquired operations.

Without the restructuring, income tax reform, fair value adjustment of inventory, acquisition-related charges, income tax settlement, and insurance settlement, our net income and diluted earnings per share would have grown 7 percent and 8 percent, respectively, from 2016. These increases primarily reflect continued strong operating results in our North America segment and, to a lesser extent, Asia Pacific and EMEA during the year, partially offset by lower earnings in our South America segment due to continued difficult macroeconomic conditions andNet sales. Net sales increased ~~costs in Argentina. The increase for the year ended December 31, 2017, was partially offset by higher net financing costs.~~

~~Net sales.~~ ~~Our increase in net sales of 2~~1 percent for the year ended December 31, ~~2017~~2018, as compared to the year ended December 31, ~~2016, was~~2017. Volume growth of 1 percent driven by ~~volume growth~~specialty products and favorable price/product mix of 3 percent ~~which was comprised~~were offset by unfavorable currency translation of ~~2 percent growth from~~3 percent.

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recent acquisitions and 1 percent increase in organic volume growth, and favorable currency translation of 1 percent reflecting a stronger Brazilian real. The increase was partially offset by a 2 percent decrease in price/product mix.

Cost of sales. Cost of sales for ~~2017~~2018 increased 13 percent to $4.5 billion from $4.4 billion ~~from $4.3 billion~~ in ~~2016~~2017 primarily ~~driven by~~due to higher ~~net sales volume, partially offset by lower net~~ raw material ~~cost. Gross corn costs per ton for 2017 decreased approximately 2 percent from 2016 driven by lower market prices for corn.~~and manufacturing expenses. Our gross profit margin was 2522 percent and 24 percent for the years ended December 31, 2018, and 2017, respectively. The gross profit margin decrease primarily reflected higher raw material costs and manufacturing expenses.

Operating expenses. Our decrease in operating expenses of 1 percent for the year ended December 31, ~~2017, and 2016. The gross profit margin remained flat reflecting favorable currency translation offset by higher input costs as a result of the temporary manufacturing interruption in Argentina.~~

~~Operating expenses.~~ ~~Our increase in operating expenses of 6 percent for the year ended December 31, 2017,~~2018, as compared to the year ended December 31, ~~2016,~~2017, was primarily driven by ~~the incremental operating expenses of acquired operations.~~lower general administrative costs, partially offset by higher selling and research and development expenses. Operating expenses, as a percentage of gross profit, were 4145 percent for the year ended December 31, ~~2017,~~2018, as compared to 4142 percent infor the ~~prior year.~~year ended December 31, 2017.

Other income, ~~net.~~net. Our change in other income, net for the year ended December 31, ~~2017,~~2018, as compared to the year ended December 31, ~~2016,~~2017, was as follows:


	Year Ended December 31,				Favorable (Unfavorable)

							Year Ended December 31,				Favorable (Unfavorable)
(in millions)	2017		2016		Variance		2018		2017		Variance
Insurance settlement	$	9	$	—	$	9	$	—	$	9	$	(9)
Value-added tax recovery		6		5		1		5		6		(1)
Other		3		(1)		4		5		3		2
Other income, net	$	18	$	4	$	14	$	10	$	18	$	(8)

Financing costs, ~~net.~~net. Our ~~change in~~ financing costs, net for the year ended December 31, ~~2017~~2018 increased $7$13 million from the year ended December 31, ~~2016, due to an increase in interest expense,~~2017, primarily driven by ~~increased short-term borrowings with higher interest rates and~~ unfavorable currency ~~translation.~~translation, including the impact of highly inflationary accounting related to Argentina.

Provision for income taxes. Our effective income tax rates for the years ended December 31, 2018 and 2017 were 26.9 percent and ~~2016 were~~ 30.8 percent, ~~and 33.1 percent,~~ respectively.

~~The TCJA was enacted on December 22, 2017.~~ The TCJA introduced numerous changes in the U.S. federal tax laws. Changes that have a significant impact on our effective tax rate are a reduction in the U.S. corporate tax rate from 35 percent to 21 percent, ~~and~~ the imposition of a U.S. tax on our global intangible low-taxed income (“GILTI”). and the foreign-derived intangible income (“FDII”) deduction. The TCJA also ~~provides~~provided for a one-time transition tax on the deemed repatriation of cumulative foreign earnings as of December 31, 2017, and ~~eliminates~~eliminated the tax on dividends from our foreign subsidiaries by allowing a ~~100 percent~~100-percent dividends received deduction.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to provide guidance on the application of ~~U.S. Generally Accepted Accounting Principles (“GAAP”)~~GAAP to situations in which the registrant does not have all the necessary information available, prepared or analyzed (including computations) in sufficient detail to complete the accounting for the income tax effects of the TCJA.

~~We have~~In the fourth quarter of 2017, we calculated ~~what we believe is~~ a ~~reasonable estimate of the~~provisional impact of the TCJA in accordance with SAB 118 and our understanding of the TCJA, including published guidance as of December 31, 2017. During the ~~date of this filing,~~third and ~~we have recorded $23 million of provisional income tax expense in the~~ fourth quarter of ~~2017, the period in which the~~2018, we recorded $2 million and $1 million, respectively, of net incremental tax expense as we finalized our TCJA ~~was enacted. The provisional amount of $23 million is composed of the following four items:~~

(in millions)

One-time transition tax

$
21
Remeasurement of deferred tax assets and liabilities

(38)
Net impact of provision for taxes on unremitted earnings

33
Other items, net

7
Net impact of the TCJA on our 2017 income tax expense

$
23

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~~We may update our estimate in 2018 as~~expense based on additional ~~information, including~~ guidance from federal and state regulatory agencies, becomes available and we finalize our computations, which are complex and subject to interpretation. Any adjustment to these provisional tax amounts will be recorded in the quarter of 2018 in which our analysis is completed.

~~Under a provision in the TCJA, all~~agencies. (See Note 9 of the undistributed earnings of our foreign subsidiaries were deemed to be repatriated at December 31, 2017, and were subjected to a transition tax. As a result, a provisional transition tax liability of $21 million, or 2.7 percentage points on effective tax rate, was recorded in income from continuing operations in the fourth quarter of 2017. Although these earnings that were deemed to be repatriated are not subject to additional U.S. federal income upon distribution, these earnings could be subject to foreign withholding and state income tax upon distribution. In addition, distributions of these previously-taxed earnings could give rise to taxable exchange gain or loss in the U.S.

~~As a result of the reduction in the U.S. corporate tax rate, we recorded a provisional tax benefit of $38 million, or 4.9 percentage points on the effective tax rate, due~~Notes to the ~~remeasurement of our U.S.~~Consolidated Financial Statements for additional information.) The following table summarizes the provisional and final net ~~deferred~~ tax ~~liabilities.~~

Due to a change in the U.S. tax treatment of dividends received from foreign subsidiaries, we have recorded a provisional tax liability of $33 million, or 4.3 percentage points on the effective tax rate, for foreign dividend withholding and state income taxes payable upon the distribution of unremitted earnings from certain foreign subsidiaries from which we expect to receive cash distributions in 2018 and beyond.

~~The net~~expense impact of the ~~TCJA on our 2017 tax expense includes a provisional tax liability~~TCJA:


	Provisional 2017		Final 2017
(in millions)	TCJA Impact		TCJA Impact
One-time transition tax	$	21	$	25
Remeasurement of deferred tax assets and liabilities		(38)		(38)
Net impact of provision for taxes on unremitted earnings		33		35
Other items, net		7		4
Net impact of the TCJA	$	23	$	26

Table of $7 million, or 0.9 percentage points on the effective tax rate (included in other items, net), for the difference in our 2017 tax expense as calculated with and without the changes triggered by the TCJA.Contents

~~Because of the complexity of the new GILTI rules,~~Additionally, we are continuing to evaluate this provision of the TCJA for the application of ASC 740. Under GAAP, we are allowed to make an accounting policy choice of either treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or factoring such amounts into our measurement of our deferred taxes (the “deferred method”). We have not made any adjustments related to potential GILTI tax in our financial statements, as we have not made a policy decision regarding whether to record deferred taxes on GILTI.

We had been pursuing relief from double taxation under the U.S.-Canada tax treaty for the years 2004 through 2013. During the fourth quarter of 2016, a tentative settlement was reached between the U.S. and Canada and, consequently, we established a net reserve of $24 million, including interest thereon, recorded as a $70 million cost and a $46 million benefit, or 3.2 percentage points on the effective tax rate. In addition, as a result of the settlement, for the years 2014 through 2016, we had established a net reserve of $7 million, or 1.0 percentage points on the effective tax rate in 2016. In the third quarter of 2017, the two countries finalized the agreement, which eliminated the double taxation, and we paid $63 million to the U.S. Internal Revenue Service to settle the ~~U.S. federal portion of the accrued~~ liability. As a result of that agreement, we ~~are~~were entitled to a net tax ~~affected~~ benefit of $10 million primarily due to a foreign exchange loss deduction on our 2017 U.S. federal income tax return, or 1.3 percentage points on the effective tax rate. As a result of the final settlement, we received refunds totaling $42 million from Canadian revenue agencies and recorded $2 million, or 0.3 percentage points on the effective tax rate, of interest through tax expense in 2018.

We use the U.S. dollar as the functional currency for our subsidiaries in Mexico. ~~Because of the increase in the value of the Mexican peso versus the U.S. dollar in~~In 2017, ~~the Mexican tax provision includes decreased tax expense of approximately $4 million, or 0.5 percentage points on the effective tax rate. In 2016,~~ a decline in ~~the~~ value of the Mexican peso versus the U.S. dollar increased tax expense by ~~$18~~$4 million or ~~2.4~~0.5 percentage points on the effective tax rate. ~~These impacts are~~This impact was largely associated with foreign currency translation gains and losses for local tax purposes on ~~net U.S. dollar monetary~~net-U.S.-dollar-monetary assets held in Mexico for which there iswas no corresponding gain or loss in pre-tax income.

During ~~2017,~~2018, we increased the valuation allowance on the net deferred tax assets in ~~Argentina. As a result, we recorded a valuation allowance in~~Argentina by $6 million, or 1.0 percentage points on the ~~amount of~~effective tax rate, compared to $16 million, or 2.0 percentage points on the effective tax rate ~~compared to $7 million and or 1.0 percentage points on the effective tax rate~~ in ~~2016. Additionally in 2017, distributions were repatriated from foreign affiliates resulting in the reversal of $4 million or 0.5 percentage points on the effective tax rate.~~2017.

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During 2016, our foreign tax credits increased in the amount of $22 million, or 3.0 percentage points on the effective tax rate. In addition, we accrued taxes on unremitted earnings of foreign subsidiaries in the amount of $4 million, or 0.5 percentage points on effective tax rate, and had net favorable reversals of previously unrecognized tax benefits of $2 million, or 0.3 percentage points on effective tax rate.

Without the impact of the items described above, our effective tax rate would have been approximately 25.1 percent and 28.1 percent for 2018 and ~~28.3 percent for~~ 2017, ~~and 2016,~~ respectively. The remaining year-over-year decrease in the effective income tax rate is primarily attributable to the impact of U.S. tax reform.

Net income attributable to non-controlling interests. Net income attributable to non-controlling interests for the year ended December 31, ~~2017, increased~~2018, decreased $2 million from the year ended December 31, ~~2016,~~2017, primarily due to ~~improved net income~~unfavorable currency translation at our non-wholly-owned operation in Pakistan.

~~2017~~2018 Compared to ~~2016~~2017 – North America


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)

									Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2017		2016		Variance		Percentage		2018		2017		Variance		Percentage
Net sales to unaffiliated customers	$	3,529	$	3,447	$	82	2	%	$	3,857	$	3,843	$	14	—	%
Operating income		661		610		51	8	%		545		654		(109)	(17)	%

Net ~~sales.~~ ~~Our increase in net~~ sales ~~of 2 percent for the year ended December 31, 2017, as compared to the year ended December 31, 2016, was driven by~~ ~~volume growth of 3 percent primarily from the TIC Gums acquisition, and was partially offset by a 1 percent decrease in price/product mix driven by lower raw material costs.~~

~~Operating income.~~Our increase in operating income of $51 million for the year ended December 31, 2017, as compared to the year ended December 31, 2016, was primarily driven by net margin improvement from favorable raw material costs compared to the prior period and organic and acquisition-related volume growth, in addition to operational efficiencies and partially offset by a decrease in price/product mix.

~~2017 Compared to 2016 – South America~~

Year Ended December 31,

Favorable (Unfavorable)

Favorable (Unfavorable)

(in millions)

2017

2016

Variance

Percentage

Net sales to unaffiliated customers

$
1,007

$
1,010

$
(3)

—
%
Operating income

80

89

(9)

(10)
%

~~Net sales.~~ . Net sales remained relatively flat for the year ended December 31, ~~2017,~~2018, as compared to the year ended December 31, ~~2016, as a 3 percent~~ ~~favorable currency translation~~2017. Volume growth for specialty and Mexico was primarily ~~reflecting a stronger Brazilian real was~~ offset by ~~a 3 percent decrease~~volume declines for sweeteners in ~~price/product mix.~~the U.S. and Canada.

Operating ~~income.~~income. Our decrease in operating income of $9$109 million for the year ended December 31, ~~2017,~~2018, as compared to the year ended December 31, 2016, was primarily driven by unfavorable price/product mix and difficult macroeconomic conditions in the region and interruption of manufacturing activities resulting in temporary higher operating costs in Argentina during the second quarter of 2017. This decrease was partially offset by a net margin improvement from favorable raw material costs and a favorable currency translation primarily reflecting a stronger Brazilian real and Argentine peso.

2017, ~~Compared to 2016 – Asia Pacific~~

Year Ended December 31,

Favorable (Unfavorable)

Favorable (Unfavorable)

(in millions)

2017

2016

Variance

Percentage

Net sales to unaffiliated customers

$
740

$
709

$
31

4
%
Operating income

112

111

1

1
%

~~Net sales.~~ ~~Our increase in net sales of 4 percent for the year ended December 31, 2017, as compared to the year ended December 31, 2016,~~ was driven by ~~organic volume growth of 8 percent~~higher production and ~~favorable currency translation of 2~~

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~~percent primarily reflecting a stronger Korean won, partially offset by a 6 percent decrease~~supply chain costs, lower sweetener demand in ~~price/product mix due to core customer mix diversification.~~

~~Operating income.~~ ~~Our increase in operating income of $1 million for the year ended December 31, 2017, as compared to the year ended December 31, 2016, was driven by~~ volume growth, improved operational efficiencies, and favorable currency translation primarily reflecting a stronger Korean won, partially offset by a decrease in price/product mix due to core customer mix diversification.

~~2017 Compared to 2016 – EMEA~~

Year Ended December 31,

Favorable (Unfavorable)

Favorable (Unfavorable)

(in millions)

2017

2016

Variance

Percentage

Net sales to unaffiliated customers

$
556

$
538

$
18

3
%
Operating income

113

106

7

7
%

~~Net sales.~~ Our increase in net sales of 3 percent for the year ended December 31, 2017, as compared to the year ended December 31, 2016, was driven by a 2 percent increase in price/product mix and organic volume growth of 1 percent.

~~Operating income.~~ ~~Our increase in operating income of $7 million for the year ended December 31, 2017, as compared to the year ended December 31, 2016, was driven by~~ ~~favorable price/product mix and volume growth, partially offset by increased operational costs.~~

~~2016 Compared to 2015 – Consolidated~~

Year Ended December 31,

Favorable (Unfavorable)

Favorable (Unfavorable)

(in millions)

2016

2015

Variance

Percentage

Net sales

$
5,704

$
5,621

$
83

1
%
Cost of sales

4,302

4,379

77

2
%
Gross profit

1,402

1,242

160

13
%

Operating expenses

579

555

(24)

(4)
%
Other income, net

(4)

(1)

3

(300)
%
Restructuring/impairment charges

19

28

9

32
%

Operating income

808

660

148

22
%

Financing costs, net

66

61

(5)

(8)
%

Income before income taxes

742

599

143

24
%
Provision for income taxes

246

187

(59)

(32)
%
Net income

496

412

84

20
%
Less: Net income attributable to non-controlling interests

11

10

(1)

(10)
%
Net income attributable to Ingredion

$
485

$
402

$
83

21
%

~~Net Income attributable to Ingredion.~~ Net income attributable to Ingredion for 2016 increased to $485 million from $402 million in 2015. Our results for 2016 included $43 million of net after-tax costs, primarily driven by a $27 million charge for the U.S.-Canada income tax settlement and related after-tax reserve and restructuring costs of $14 million. These restructuring charges consisted of employee-related severance charges and other costs associated with the execution of global IT outsourcing contracts, employee-related severance costs attributable to optimization initiatives in North America and South America, and additional charges pertaining to our 2015 Port Colborne plant sale. Our net after-tax costs also included $2 million associated with the integration of acquired operations.

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Our results for 2015 included $26 million of net after-tax costs, primarily driven by restructuring costs of $18 million. These restructuring charges consisted of $11 million for impaired assets and restructuring costs in Brazil and Canada and $7 million for after-tax employee-related severance costs associated with the Penford acquisition. Our net after-tax costs also included $7 million associated with the acquisition and integration of both Penford and Kerr, $6 million relating to the sale of Penford and Kerr inventory that was adjusted to fair value at the respective acquisition dates in accordance with business combination accounting rules, and $4 million relating to a litigation settlement, partially offset by an after-tax gain of $9 million from the sale of our Port Colborne plant.

Without the income tax settlement charge, the restructuring, impairment, and acquisition-related charges, the gain from the plant sale and the litigation settlement costs, our net income and diluted earnings per share would have grown 23 percent and 21 percent, respectively, from 2015. These increases primarily reflect significantly improved operating income in North America and, to a lesser extent, in Asia Pacific and EMEA, as compared to 2015.

~~Net sales.~~ Our increase in net sales of 1 percent for the year ended December 31, 2016, as compared to the year ended December 31, 2015, was driven by a price/product mix improvement of 5 percent, partially offset by unfavorable currency translation of 4 percent primarily reflecting a stronger U.S. dollar. Volume remained flat, as our 2 percent volume increase due to acquisitions was offset by an organic volume decrease of 2 percent primarily reflecting the impact of the Port Colborne plant sale.

~~Cost of sales~~. Cost of sales for 2016 decreased 2 percent to $4.3 billion from $4.4 billion in 2015. This reduction primarily reflects the effects of currency translation. Gross corn costs per ton for 2016 increased approximately 3 percent from 2015, driven by higher market prices for corn. Currency translation caused cost of sales for 2016 to decrease approximately 5 percent from 2015, reflecting the impact of the stronger U.S. dollar. Our gross profit margin for 2016 was 25 percent, compared to 22 percent in 2015. This increase primarily reflects significantly improved gross profit margins in North America and, to a lesser extent, in Asia Pacific and EMEA.

~~Operating expenses.~~ Our increase in operating expenses of 4 percent for the year ended December 31, 2016, as compared to the year ended December 31, 2015, was primarily driven by higher compensation-related costs and incremental operating expenses of acquired operations. This increase was partially offset by favorable translation primarily reflecting a stronger U.S. dollar and weaker foreign currencies. Operating expenses represented 41 percent of gross profit in 2016, ~~as compared to 45 percent of gross profit in 2015.~~

~~Other income, net.~~ ~~Our change in other income, net for the year ended December 31, 2016, as compared to the year ended December 31, 2015, was as follows:~~

Year Ended December 31,

Favorable (Unfavorable)

(in millions)

2016

2015

Variance

Value-added tax recovery

$
5

$
4

$
1

Gain from sale of plant

—

10

(10)

Litigation settlement

—

(7)

7

Expense associated with tax indemnification

—

(4)

4

Other

(1)

(2)

1

Other income, net

$
4

$
1

$
3

~~Financing costs, net.~~ Our change in financing costs, net for the year ended December 31, 2016, increased $5 million as compared to the year ended December 31, 2015, primarily due to an increase in interest expense, driven by higher weighted average borrowing costs that more than offset the impact of reduced average debt balances, and a decrease in interest income due to lower average cash balances and short-term investment rates, partially offset by unfavorable currency translation.

~~Provision for income taxes~~. ~~Our effective income tax rates for the years ended December 31, 2016, and 2015 were 33.1 percent and 31.2 percent, respectively.~~

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~~We had been pursuing relief from double taxation under the U.S.-Canada tax treaty for the years 2004 through 2013. During the fourth quarter of 2016, a tentative settlement was reached between~~ the U.S. and Canada, and consequently, we established a net reserve of $24 million, including interest thereon, recorded as a $70 million cost and a $46 million benefit, or 3.2 percentage points on the effective tax rate. In addition, as a result of the settlement, for the years 2014 through 2016, we had established a net reserve of $7 million, or 1.0 percentage points on the effective tax rate in 2016. ~~Of this amount, $4 million pertains to 2016.~~commodity margin pressures.

We use the U.S. dollar as the functional currency for our subsidiaries in Mexico. Because of the continued decline in the value of the Mexican peso versus the U.S. dollar, our tax provisions for 2016 and 2015 were increased by $18 million or 2.4 percentage points and $17 million, or 2.9 percentage points, respectively. A primary cause was foreign currency translation gains for local income tax purposes on net U.S. dollar monetary assets held in Mexico for which there is no corresponding gain in our pre-tax income.

During 2016, our foreign tax credits increased in the amount of $22 million, or 3.0 percentage points on the effective tax rate and we had net favorable reversals of previously unrecognized tax benefits of $2 million, or 0.3 percentage points on effective tax rate. This was partially offset by a valuation allowance on the net deferred tax assets in Argentina in the amount of $7 million or 1.0 percentage points on the effective tax rate in 2016 and accrued taxes on unremitted earnings of foreign subsidiaries in the amount of $4 million, or 0.5 percentage points on the effective rate in 2016.

Finally, in the second quarter of 2016, we elected to early adopt ASU No. 2016-09, related to stock compensation. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the provision for income taxes when stock options are exercised or restricted shares and performance shares vest. Our 2016 tax provision includes a tax benefit of $12 million, or 1.6 percentage points, related to the adoption of this standard.

Based on the final settlement of an audit matter, in 2015 we reversed $4 million of the $7 million income tax expense and other income that was recorded in 2014. As a result, our effective income tax rate for 2015 was reduced by 0.7 percentage points. Substantial portions of the sale of Port Colborne, Canada, assets resulted in favorable tax treatment that reduced the effective tax rate by approximately 0.4 percentage points. Additionally, the 2015 tax provision includes $2 million of net favorable reversals of previously unrecognized tax benefits due to the lapsing of the statute of limitations, which reduced the effective tax rate by 0.3 percentage points.

~~Without the impact of the items described above, our effective tax rates for 2016 and 2015 would have been approximately 30.0 percent and 29.7 percent, respectively.~~

We have significant operations in the U.S., Canada, Mexico, and Pakistan where the statutory tax rates, including local income taxes are approximately 37 percent, 25 percent, 30 percent and 31 percent in 2016, respectively. In addition, our subsidiary in Brazil has a statutory tax rate of 34 percent, before local incentives that vary each year.

~~Net income attributable to non-controlling interests~~. Net income attributable to non-controlling interests for the year ended December 31, 2016, increased $1 million from the year ended December 31, 2015, due to improved net income at our non-wholly-owned operation in Pakistan.

~~2016~~2018 Compared to ~~2015 – North America~~

Year Ended December 31,

Favorable (Unfavorable)

Favorable (Unfavorable)

(in millions)

2016

2015

Variance

Percentage

Net sales to unaffiliated customers

$
3,447

$
3,345

$
102

3
%
Operating income

610

479

131

27
%

~~Net sales.~~ Our increase in net sales of 3 percent for the year ended December 31, 2016, as compared to the year ended December 31, 2015, was driven by price/product mix improvement of 4 percent, partially offset by a 1 percent volume decline due to a decrease in organic volume of 4 percent driven primarily by the impact of the Port Colborne plant sale, partially offset by a 3 percent volume increase due to acquisitions.

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~~Operating income.~~Our increase in operating income of $131 million for the year ended December 31, 2016, as compared to the year ended December 31, 2015, was primarily driven by improved product price/mix and improved operational efficiencies, partially offset by a net margin decrease from unfavorable raw material costs. Our North American results included business interruption insurance recoveries in both 2016 and 2015 relating to the reimbursement of costs in those years.

~~2016 Compared to 2015~~2017 – South America


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)

									Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2016		2015		Variance		Percentage		2018		2017		Variance		Percentage
Net sales to unaffiliated customers	$	1,010	$	1,013	$	(3)	—	%	$	988	$	1,052	$	(64)	(6)	%
Operating income		89		101		(12)	(12)	%		99		81		18	22	%

Net ~~sales.~~ sales. Net sales remained relatively flat for the year ended December 31, ~~2016,~~2018, as compared to the year ended December 31, ~~2015, as a 17 percent~~ ~~unfavorable~~2017. The decrease was driven by currency ~~translation primarily reflecting a weaker Argentine peso~~devaluations of 19% in Argentina and ~~a 5 percent volume reduction were~~Brazil, partly offset by a ~~22 percent~~13% increase in price/product ~~mix.~~mix from price increases used to offset higher raw material costs and foreign currency fluctuations.

Operating ~~income.~~income. Our ~~decrease~~increase in operating income of ~~$12~~$18 million for the year ended December 31, ~~2016,~~2018, as compared to the year ended December 31, ~~2015,~~2017, was primarily driven by ~~a net margin decrease from unfavorable raw material costs, increased~~improved operational ~~costs resulting from continuing difficult macroeconomic conditions in~~efficiencies and the ~~region, and a volume reduction. This decrease was~~lapping

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of the 2017 Argentina manufacturing optimization project, partially offset by ~~an increase in price/product mix.~~unfavorable currency translation reflecting a weaker Brazilian real and Argentine peso.

~~2016~~2018 Compared to ~~2015~~2017 – ~~Asia Pacific~~Asia-Pacific


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)

									Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2016		2015		Variance		Percentage		2018		2017		Variance		Percentage
Net sales to unaffiliated customers	$	709	$	733	$	(24)	(3)	%	$	837	$	772	$	65	8	%
Operating income		111		107		4	4	%		104		115		(11)	(10)	%

Net ~~sales.~~ sales. Our ~~decrease~~increase in net sales of 38 percent for the year ended December 31, ~~2016,~~2018, as compared to the year ended December 31, ~~2015,~~2017, was driven by volume growth of 3 percent, favorable currency translation of 3 percent, and a 52 percent ~~decrease~~increase in price/product mix due to ~~the pass through of lower raw material costs in~~favorable pricing to ~~our customers and a 2 percent unfavorable currency translation~~ ~~primarily~~ ~~reflecting a weaker Korean won, partially~~ offset ~~by organic volume growth of 4 percent.~~higher tapioca costs.

Operating ~~income.~~income. Our ~~increase~~decrease in operating income of $4$11 million for the year ended December 31, ~~2016,~~2018, as compared to the year ended December 31, ~~2015,~~2017, was driven by a ~~net margin increase from favorable raw material~~delay in the pass-through of higher tapioca costs, partially offset by ~~a decrease in price/product mix and unfavorable currency translation~~ ~~primarily~~ ~~reflecting a weaker Chinese yuan and Korean won.~~specialty volume growth.

~~2016~~2018 Compared to ~~2015~~2017 – EMEA


	Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)

									Year Ended December 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2016		2015		Variance		Percentage		2018		2017		Variance		Percentage
Net sales to unaffiliated customers	$	538	$	530	$	8	2	%	$	607	$	577	$	30	5	%
Operating income		106		93		13	14	%		116		114		2	2	%

Net ~~sales.~~ sales. Our increase in net sales of 25 percent for the year ended December 31, ~~2016,~~2018, as compared to the year ended December 31, ~~2015,~~2017, was driven by ~~organic~~ volume growth of 6 percent, a 3 percent increase in price/product mix, partially offset by unfavorable currency translation of 3 percent primarily reflecting a weaker British pound sterling and Pakistan rupee and a 1 percent decrease in price/product mix resulting from the pass through of lower corn costs in pricing to our customers.4 percent.

Operating ~~income.~~income. Our increase in operating income of ~~$13~~$2 million for the year ended December 31, ~~2016,~~2018, as compared to the year ended December 31, ~~2015,~~2017, was driven by ~~a net margin increase from favorable raw material costs~~

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specialty and ~~organic~~ core volume growth ~~partially~~and improved price/product mix, partly offset by unfavorable currency translation ~~primarily reflecting a weaker British pound sterling~~in Pakistan and ~~Pakistan rupee.~~ higher raw material costs.

Liquidity and Capital Resources

At December 31, ~~2017,~~2019, our total assets were ~~$6.1~~$6.0 billion, as compared to ~~$5.8~~$5.7 billion at December 31, ~~2016.~~2018. The increase was driven principally by ~~our net income growth.~~continued capital investment in growth platforms. Total equity increased to ~~$2.9~~$2.7 billion at December 31, ~~2017,~~2019, from ~~$2.6~~$2.4 billion at December 31, ~~2016.~~2018. This increase primarily reflects our ~~earnings growth, partially offset by treasury stock repurchases of $123 million during the first quarter of 2017.~~ current year earnings.

On ~~August 18, 2017,~~April 12, 2019, we ~~entered into a new~~amended and restated the Term Loan Credit Agreement that was set to mature on April 25, 2019 (“Term Loan”) of $165 million to establish a 24-month senior unsecured term loan credit ~~facility. Under the Term Loan, we were allowed three borrowings~~facility in an amount of up to $500 million ~~total. The Term Loan~~that matures ~~18 months from~~on April 12, 2021. We used the ~~date~~$500 million of ~~the final borrowing. As of October 25, 2017, we had initiated all three~~ borrowings under the new facility to pay down the amounts outstanding under our revolving credit facility described below and to pay off the Term Loan ~~totaling $420 million, due April 25, 2019. The proceeds were used to refinance $300 million of 1.8 percent senior notes due September 25, 2017, and pay down~~balance.

All borrowings ~~outstanding~~under the amended term loan credit agreement for the new facility (“Amended Term Loan Credit Agreement”) will bear interest at a variable annual rate based on the ~~revolving~~London Interbank Offered Rate (“LIBOR”) or a base rate, at our election, subject to the terms and conditions thereof, plus, in each case, an applicable margin. We are required to pay a fee on the unused availability under the Amended Term Loan Credit Agreement. The Amended Term Loan Credit Agreement contains 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 the Company and our subsidiaries, subject to certain exceptions in each case. We must also maintain a specified consolidated leverage ratio and consolidated interest coverage ratio. As of December 31, 2019, we were in compliance with these financial covenants. The occurrence of an event of default under the Amended Term Loan Credit Agreement could result in all loans and other obligations being declared due and payable and the term loan credit ~~facility. In December 2017, we paid down $25 million~~facility being terminated.

Table of ~~the Term Loan. On January 16, 2018, we paid an additional $185 million towards the Term Loan. Both payments were made with cash on-hand. See also Note 7 of the Consolidated Financial Statements.~~Contents

On October 11, 2016, we entered into a ~~new~~ five-year, senior, unsecured $1 billion revolving credit agreement (the “Revolving Credit Agreement”) that replaced our previously existing $1 billion senior unsecured revolving credit ~~facility that would have matured on October 22, 2017. See also Note 7 of the Notes to the Consolidated Financial Statements.~~facility.

Subject to certain terms and conditions, we may increase the amount of the revolving credit facility under the Revolving Credit Agreement by up to $500 million in the aggregate. We may also obtain up to two one-year extensions of the maturity date of the Revolving Credit Agreement at our request and subject to the agreement of our lenders. All committed pro rata borrowings under the revolving credit facility will bear interest at a variable annual rate based on either the LIBOR or base rate, at our election, subject to the terms and conditions thereof, plus, in each case, an applicable margin based on our leverage ratio (as reported in the financial statements delivered pursuant to the Revolving Credit Agreement) or our credit rating. Subject to specified conditions, we may designate one or more of our subsidiaries as additional borrowers under the Revolving Credit Agreement provided that we guarantee all borrowings and other obligations of any such subsidiaries thereunder.

The Revolving Credit Agreement contains customary representations, warranties, covenants, events of default and other terms and conditions, including ~~limitations on~~covenants restricting liens, ~~incurrence of~~ subsidiary debt and ~~mergers.~~mergers, subject to certain exceptions in each case. We must also comply with a leverage ratio covenant and an interest coverage ratio covenant. As of December 31, 2019, we were in compliance with these financial covenants. The occurrence of an event of default under the Revolving Credit Agreement could result in all loans and other obligations under the agreement being declared due and payable and the revolving credit facility being terminated. ~~We met all covenant requirements as of December 31, 2017.~~ As of December 31, ~~2017,~~2019, there were no$10 million in borrowings outstanding under ~~our~~the Revolving Credit ~~Agreement.~~Agreement, with an additional $990 million available for use under the Revolving Credit Agreement as of the end of the year. In addition to the credit facilities described above, we have a number of short-term credit facilities consisting of operating lines of credit outside of the U.S.

On September 22, 2016, we issued 3.20 percent Senior Notes due October 1, 2026, in an aggregate principal amount of $500 million. The net proceeds from the sale of the notes of approximately $497 million were used to repay $350 million of term loan debt, to repay $52 million of borrowings under our previously existing $1 billion revolving credit facility and for general corporate purposes. See also Note 7 of the Notes to the Consolidated Financial Statements.

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As of December 31, ~~2017,~~2019, we had a total debt outstanding of ~~$1.9~~$1.8 billion. As of December 31, ~~2017,~~2019, our total debt consisted of the following:



(in millions)
3.2% senior notes due October 1, 2026	$	496	$	497
4.625% senior notes due November 1, 2020		398		400
6.625% senior notes due April 15, 2037		254		253
5.62% senior notes due March 25, 2020		200		200
Term loan credit agreement due April 25, 2019		395
Term loan credit agreement due April 12, 2021				405
Revolving credit facility		—		10
Fair value adjustment related to hedged fixed rate debt instruments		1		1
Long-term debt		1,744		1,766
Short-term borrowings		120		82
Total debt	$	1,864	$	1,848

The Company’s long-term debt matures as follows: $600 million in 2020, $500 million in 2026, and $250 million in 2037. The Company’s Term Loan of $405 million matures in 2021. The Company’s long-term debt as of December 31, 2019 includes the 5.62% senior notes due March 25, 2020 and 4.625% senior notes due November 1, 2020. The Company has the ability and intent to refinance such senior notes on a long-term basis using the revolving credit facility or other sources prior to the maturity date.

We, as the parent company, guarantee certain obligations of our consolidated subsidiaries. As of December 31, ~~2017,~~2019, such guarantees aggregated ~~$56~~$57 million. We believe that such consolidated subsidiaries will meet their financial obligations as they become due.

Historically, the principal source of our liquidity has been our internally generated cash flow, which we supplement as necessary with our ability to borrow onunder our ~~bank lines~~credit facilities and to raise funds in the capital markets. In addition to borrowing availability under our Revolving Credit Agreement, we also have approximately ~~$488~~$585 million of unused operating lines of credit in the various foreign countries in which we operate.

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The weighted average interest rate on our total indebtedness was approximately ~~4.0~~4.3 percent and 4.8 percent for ~~both 2017~~2019 and ~~2016,~~2018, respectively.

Net Cash Flows

A summary of operating cash flows for 2019, 2018, and 2017 is shown below:



(in millions)	2017		2016		2015		2019		2018		2017
Net income	$	532	$	496	$	412	$	424	$	454	$	532
Depreciation and amortization		209		196		194		220		247		209
Mechanical stores expense		57		57		57		57		57		57
Write-off of impaired assets		—		—		10
Charge for fair value mark-up of acquired inventory		9		—		10		—		—		9
Gain on sale of plant		—		—		(10)
Deferred income taxes		67		(5)		(6)		3		(23)		67
Changes in working capital		(121)		(8)		(24)		(54)		(118)		(121)
Other		16		35		43		30		86		16
Cash provided by operations	$	769	$	771	$	686	$	680	$	703	$	769

Cash provided by operations was ~~$769~~$680 million in ~~2017,~~2019, as compared with ~~$771~~$703 million in ~~2016.~~2018. The ~~increase~~decrease in ~~current year earnings over the prior year were offset by an increase of cash outflow in working capital~~ 2019 was primarily due to ~~the outflow in accounts payable and accrued liabilities for the $63 million payment made to the IRS in the third quarter of 2017 to complete the double taxation settlement between the U.S. and Canada. The increase in 2016 operating cash flow from~~lower current year net earnings versus the prior ~~year~~year. Cash provided by operations in 2018 decreased compared to 2017 primarily ~~reflects our~~due to lower net earnings in 2018 and the change in deferred income ~~growth.~~tax provision.

To manage price risk related to corn purchases, ~~in North America,~~ we use derivative instruments, ~~(corn~~consisting of corn futures and options ~~contracts)~~contracts, to lock in our corn costs associated with firm-priced customer sales contracts. We are unable to directly hedge price risk related to co-product sales; however, we occasionally enter into hedges of soybean oil (a competing product to our animal feed and corn oil) in order to mitigate the price risk of animal feed and corn oil sales. Additionally, we enter into futures contracts to hedge price risk associated with fluctuations in market prices of ethanol. As the market

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price of these commodities fluctuate, 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 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 our margin accounts depending on the movement in the market price of the underlying ~~commodity.~~commodities.

Listed below are our primary investing and financing ~~activities:~~activities for 2019, 2018, and 2017:



(in millions)	2017		2016		2015		2019		2018		2017
Payments for acquisitions	$	(17)	$	(407)	$	(434)
Capital expenditures and mechanical stores purchases		(314)		(284)		(280)	$	(328)	$	(350)	$	(314)
Payments for acquisitions, net of cash acquired								(42)		—		(17)
Payments on debt		(1,240)		(874)		(1,366)		(1,465)		(738)		(1,240)
Proceeds from borrowings		1,144		1,000		1,388		1,209		987		1,144
Dividends paid (including to non-controlling interests)		(165)		(141)		(126)		(174)		(182)		(165)
Repurchases of common stock		(123)		—		(41)		63		(657)		(123)

On December ~~15, 2017,~~27, 2019, our board of directors declared a quarterly cash dividend of ~~$0.60~~$0.63 per share of common stock. This dividend was paid on January ~~25, 2018,~~27, 2020, to stockholders of record at the close of business on ~~December 31, 2017.~~January 2, 2020.

In the first quarter of 2017, we repurchased 1 million common shares in open market transactions at a cost of $123 million. There were no additional open market shares repurchased during the remainder of 2017.

We ~~currently anticipate that~~paid $328 million of capital expenditures and mechanical stores purchases to update, expand and improve our facilities in 2019. In April 2019, we acquired Western Polymer for ~~2018 will be approximately $330 million to $360~~$42 million.

~~On March 9, 2017,~~We paid $657 million during 2018 to repurchase common stock. We purchased 1.8 million shares of our common stock in open market transactions for $202 million during the second, third and fourth quarters of 2018. Additionally on November 5, 2018, we ~~completed our acquisition of Sun Flour in Thailand for $18 million. As of December 31, 2017,~~entered into a Variable Timing Accelerated Share Repurchase (“ASR”) program with JPMorgan (“JPM”). Under the ASR program, we paid ~~$16~~$455 million on November 5, 2018 and acquired 4 million shares of our common stock having an approximate value of $423 million on that date. On February 5, 2019, we 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. We settled the difference in cash, resulting in JPM returning $63 million of the upfront payment to us on February 6, 2019 as an inflow to cash from financing activities, and ~~recorded $2~~lowering the total cost of repurchasing the 4 million ~~in accrued liabilities for the final deferred payment due~~shares of common stock to the previous owner. The acquisition of Sun Flour adds a fourth manufacturing facility to our operations in Thailand. Sun Flour produces rice-based ingredients used primarily in the food industry. This transaction enhances our global supply chain and leverages other capital investments that we have made in Thailand to grow our specialty ingredients and service customers around the world.

On December 29, 2016, we acquired TIC Gums, a U.S.-based company that provides advanced texture systems to the food and beverage industry. Consistent with our strategy for new platform growth, this acquisition enhanced our texture capabilities and formulation expertise and provided additional opportunities for us to provide solutions for natural, organic and clean-label demands of our customers. TIC Gums utilizes a variety of agriculturally derived ingredients, such as acacia gum and guar gum, to form the foundation for innovative texture systems and allow for clean-label reformulation. TIC Gums operates two production facilities, one in Belcamp, Maryland, and one in Guangzhou, China. TIC Gums also maintains a research and development lab in each of these facilities. We funded the $396 million acquisition with cash and short-term borrowings.

On November 29, 2016, we completed our acquisition of Shandong Huanong in China for $12 million in cash. The acquisition of Shandong Huanong, located in Shandong Province, adds a second manufacturing facility to our operations in China. It produces starch raw material for our plant in Shanghai, which makes value-added ingredients for the food industry.

On August 3, 2015, we completed our acquisition of Kerr, a privately-held producer of natural fruit and vegetable concentrates for approximately $102 million in cash. Kerr serves major food and beverage companies, flavor houses and ingredient producers from its manufacturing locations in Oregon and California. The acquisition of Kerr provided us with the opportunity to expand our product portfolio.

On March 11, 2015, we completed our acquisition of Penford, a manufacturer of specialty starches that was headquartered in Centennial, Colorado. The total purchase consideration for Penford was $332 million, which included$392 million.

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the extinguishment of $93 million in debt in conjunction with the acquisition. The acquisition of Penford provides us with, among other things, an expanded specialty ingredient product portfolio consisting of potato starch-based offerings.

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. Approximately ~~$351~~$248 million of our total cash and cash equivalents and short-term investments of ~~$604~~$264 million at December 31, ~~2017, was~~2019, were held by our operations outside of the U.S. We expect that available cash balances and credit facilities in the U.S., along with cash generated from operations and access to debt markets, will be sufficient to meet our operating and other cash needs for the foreseeable future.

Hedging and Financial Risk

Hedging: We are exposed to market risk stemming from changes in commodity prices (primarily corn and natural gas), ~~foreign currency~~foreign-currency exchange rates, and interest rates. In the normal course of business, we actively manage our exposure to these market risks by entering into various hedging transactions, authorized under established policies that place ~~clear~~ 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”). See Note 6 of the Notes to the Consolidated Financial Statements for additional information.

Commodity Price Risk: 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. We periodically enter into futures, options and swap contracts for a portion of our anticipated corn and natural gas usage, generally over the following 12 to 24 months, in order to hedge price risk associated with fluctuations in market prices. We also enter into futures contracts to hedge price risk associated with fluctuations in the market price of ethanol. We are unable to directly hedge price risk related to co-product sales; however, we occasionally enter into hedges of soybean oil (a competing product to our corn oil) in order to mitigate the price risk of corn oil sales. Unrealized gains and losses associated with marking our commodities-based cash flow hedge derivative instruments to market are recorded as a component of other comprehensive income (“OCI”). AtAs of December 31, ~~2017,~~2019, our ~~accumulated~~Accumulated other comprehensive loss account (“AOCI”) included ~~$12~~$11 million of net losses ~~net~~(net of income ~~taxes~~tax benefit of ~~$7 million,~~$5 million) related to these derivative instruments. It is anticipated that $9 million of ~~these~~net losses (net of income ~~taxes~~tax benefit of $5$3 million) will be reclassified into earnings during the next 12 months. We expect the net losses to be offset by changes in the underlying commodities costs.

Foreign Currency Exchange Risk: Due to our global operations, including operations in many emerging markets, we are exposed to fluctuations in ~~foreign currency~~foreign-currency exchange rates. As a result, we have exposure to translational ~~foreign exchange~~foreign-exchange risk when our foreign operations’ results are translated to U.S. dollars and to transactional ~~foreign exchange~~foreign-exchange risk when transactions not denominated in the functional currency of the operating unit are ~~revalued.~~revalued into U.S. dollars. We primarily use derivative financial instruments such as ~~foreign currency~~foreign-currency forward contracts, swaps and options to manage our foreign currency transactional exchange risk. AtWe enter into foreign-currency derivative instruments that are designated as both cash flow hedging instruments as well as instruments not designated as hedging instruments as defined by ASC 815, Derivatives and Hedging. As of December 31, ~~2017,~~2019, we had foreign currency forward sales contracts with an aggregate notional amount of ~~$447~~$621 million and foreign currency forward purchase contracts ~~that are designated as fair value hedges~~ with an aggregate notional amount of ~~$121~~$356 million ~~that hedged transactional exposures. The fair value~~not designated as hedging instruments.

As of ~~these derivative instruments is an asset of $11 million at~~ December 31, ~~2017.~~

~~Table~~2019, we had foreign-currency forward sales contracts with an aggregate notional amount of ~~Contents~~

~~We also have foreign currency derivative instruments that hedge certain foreign currency transactional exposures~~$374 million and ~~are~~foreign-currency forward purchase contracts with an aggregate notional amount of $541 million designated as cash flow ~~hedges. As of December 31, 2017,~~hedging instruments. The amount included in AOCI ~~included $1 million of gains, net of taxes,~~ relating to these ~~hedges.~~hedges at December 31, 2019, was $3 million of net gains (net of income tax expense of $1 million). It is anticipated that $3 million of net gains (net of income tax expense of $1 million) will be reclassified into earnings during the next 12 months.

We have significant operations in Argentina. ~~We utilize~~In the ~~official exchange rate published by~~second quarter of 2018, the Argentine ~~government~~peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, indicated that the three-year cumulative inflation in that country exceeded 100 percent as of June 30, 2018. As a result, we elected to adopt highly inflationary accounting as of July 1, 2018 for ~~re-measurement purposes. Due to exchange controls put~~our affiliate, Ingredion Argentina S.A. Under highly inflationary accounting, our affiliate’s functional currency is the U.S. dollar, and its income statement and balance sheet are measured in ~~place by the Argentine government, a parallel market exists for exchanging Argentine pesos to~~ U.S. dollars atusing both current and

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historical rates ~~less favorable than the official rate, although the difference~~of exchange. The effect of changes in exchange rates ~~has decreased significantly from past levels.~~on Argentine-peso-denominated monetary assets and liabilities is reflected in earnings in financing costs.

Interest Rate Risk: 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. We did not have any T-Locks outstanding as of December 31, ~~2017.~~2019.

As of December 31, ~~2017,~~2019, our AOCI account included $1 million of net losses (net of an insignificant amount of income ~~taxes of $1 million)~~tax benefit) related to settled T-Locks. These deferred losses are being amortized to financing costs over the terms of the senior notes with which they are associated. It is anticipated that $1 million of these net losses (net of an insignificant amount of income ~~taxes of $1 million)~~tax benefit) will be reclassified into earnings during the next 12 months.

As of December 31, ~~2017,~~2019, we have an interest rate swap agreement that effectively converts the interest rates on $200 million of our $400 million of ~~4.625 percent~~4.625% senior notes due November 1, 2020, to variable rates. This swap agreement calls for us to receive interest at the fixed coupon rate of the ~~respective~~ notes and to pay interest at a variable rate based on the six-month U.S. dollar LIBOR ~~rate~~ plus a spread. We have designated this interest rate swap agreement as a hedge of the changes in fair value of the underlying debt obligation attributable to changes in interest rates and account for it as a fair value hedge. The fair value of ~~this~~the interest rate swap agreement was a $1 million loss at December 31, ~~2017,~~2019, and is reflected in the Consolidated Balance ~~Sheets~~Sheet within ~~other~~Other assets, with an offsetting amount recorded in ~~long-term~~Long-term debt to adjust the carrying amount of the hedged debt obligations.

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Contractual Obligations and Off-Balance Sheet Arrangements

The table below summarizes our significant contractual obligations as of December 31, ~~2017.~~2019. Information included in the table is cross-referenced to the Notes to the Consolidated Financial Statements elsewhere in this report, as applicable.


		Payments due by period
				Less						More
	Note			than 1		2 – 3		4 – 5		than 5
Contractual Obligations (in millions)	reference	Total		year		years		years		years
Long-term debt	7	$	1,766	$	600	$	416	$	—	$	750
Interest on long-term debt	7		444		75		65		65		239
Operating lease obligations	8		189		49		69		38		33
Pension and other postretirement obligations	10		134		7		15		15		97
Purchase obligations (a)			882		288		261		132		201
Total (b)		$	3,415	$	1,019	$	826	$	250	$	1,320

Payments due by period

Less

More

Note

than 1

2 – 3

4 – 5

than 5

Contractual Obligations (in millions)

reference

Total

year

years

years

years

Long-term debt

7

$
1,745

$
—

$
995

$
—

$
750

Interest on long-term debt

7

557

67

121

65

304

Operating lease obligations

8

197

45

71

45

36

Pension and other postretirement obligations

10

132

8

16

16

92

Purchase obligations (a)

1,026

265

262

239

260

Total (b)

$
3,657

$
385

$
1,465

$
365

$
1,442

(a)

~~(a)~~

The purchase obligations relate principally to raw material and power supply sourcing agreements, including take or pay contracts, which help to provide us with adequate power and raw material supply at certain of our facilities.

(b)

~~(b)~~

The above table does not reflect unrecognized income tax benefits of ~~$39~~$22 million, the timing of which is uncertain. See Note 9 of the Notes to the Consolidated Financial Statements for additional information with respect to unrecognized income tax benefits.

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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 ~~return on capital employed (“ROCE”)~~ability to drive profitability, create value for shareholders, and monitor our financial ~~leverage, each of which is tracked on an ongoing basis.~~leverage. We assess whether we are achieving ~~an adequate return on invested capital~~our profitability and value creation objectives by measuring our ~~ROCE against our cost of capital.~~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”), and our ~~“Net~~Net Debt to ~~Capitalization”~~Capitalization percentage to assure that we are properly financed. We believe these metrics provide valuable managerial information to help us run our business and are useful to investors.

The metrics ~~below~~Adjusted ROIC and Net Debt to Adjusted EBITDA include certain information ~~(including Capital Employed, Adjusted~~(Adjusted Operating Income, net of tax and Adjusted EBITDA, ~~and Net Debt)~~respectively) that is not calculated in accordance with 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. ~~By disclosing~~Management believes that the non-GAAP financial ~~measures, management intends to~~metrics provide a more ~~meaningful,~~ 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, ~~provide~~provides a more complete understanding of factors and trends affecting our business. These non-GAAP 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.

Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies. A reconciliation of non-GAAP historical financial measures to the most comparable GAAP measure is provided in the tables below.

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~~Our calculations of these key financial metrics for 2017 with comparisons to the prior year are as follows:~~

Return on Capital Employed (dollars in millions)

2017

2016

Total equity *

$
2,595

$
2,180

Add:

Cumulative translation adjustment *

1,008

1,025

Share-based payments subject to redemption*

30

24

Total debt *

1,956

1,838

Less:

Cash and cash equivalents *

(512)

(434)

Capital employed * (a)

5,077

4,633

Operating income

842

808

Adjusted for:

Impairment/restructuring charges

38

19

Acquisition/integration costs

4

3

Charge for fair value mark-up of acquired inventory

9

—

Insurance settlement

(9)

—

Adjusted operating income

884

830

Income taxes (at effective tax rates of 28.6% and 29.4%, respectively)**

(253)

(244)

Adjusted operating income, net of tax (b)

$
631

$
586

Return on Capital Employed (b ÷ a)

12.4%

12.6%

* ~~Balance sheet amounts used in computing capital employed represent beginning of period balances.~~

** The effective income tax rate for 2017 and 2016 excludes the impacts of impairment/restructuring charges, acquisition and integration related costs, sale of acquiree inventory that was adjusted to fair value at the acquisition date, income tax reform, and an insurance settlement. Including these items, our effective income tax rate for 2017 and 2016 was 30.8 percent and 33.1 percent, respectively. Listed below is a schedule that reconciles our effective income tax rate under GAAP to the adjusted income tax rate:

Year ended December 31, 2017

Year ended December 31, 2016
(dollars in millions)

Income before Income Taxes

Provision for Income Taxes

Effective Income Tax Rate

Income before Income Taxes

Provision for Income Taxes

Effective Income Tax Rate
As reported

$
769

$
237

30.8%

$
742

$
246

33.1%
Add back (deduct):

Income tax settlement

—

10

—

(27)

Impairment/restructuring charges

38

7

19

5

Acquisition/integration costs

4

1

3

1

Charge for fair value mark-up of acquired inventory

9

3

—

—

Insurance settlement

(9)

(3)

—

—

Income tax reform

—

(23)

—

—

Adjusted non-GAAP

$
811

$
232

28.6%

$
764

$
225

29.4%

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Net Debt to Adjusted EBITDA ratio (dollars in millions)

2017

2016

Short-term debt

$
120

$
106

Long-term debt

1,744

1,850

Less: Cash and cash equivalents

(595)

(512)

Short-term investments

(9)

(4)

Total net debt (a)

1,260

1,440

Net income attributable to Ingredion

519

485

Add back:

Impairment/restructuring charges

38

19

Acquisition/integration costs

4

3

Charge for fair value mark-up of acquired inventory

9

—

Insurance settlement

(9)

—

Net income attributable to non-controlling interest

13

11

Provision for income taxes

237

246

Financing costs, net of interest income of $11 and $10, respectively

73

66

Depreciation and amortization

209

196

Adjusted EBITDA (b)

$
1,093

$
1,026

Net Debt to Adjusted EBITDA ratio (a ÷ b)

1.2

1.4

Net Debt to Capitalization percentage (dollars in millions)

2017

2016
Short-term debt

$
120

$
106
Long-term debt

1,744

1,850
Less: Cash and cash equivalents

(595)

(512)
Short-term investments

(9)

(4)
Total net debt (a)

1,260

1,440
Deferred income tax liabilities

199

171
Share-based payments subject to redemption

36

30
Total equity

2,917

2,595
Total capital

3,152

2,796
Total net debt and capital (b)

$
4,412

$
4,236

Net Debt to Capitalization percentage (a ÷ b)

28.6%

34.0%

~~Commentary on Key Financial Performance Metrics:~~ In accordance with our long-term objectives, we set certain objectives relating to these key financial performance metrics that we strive to meet. As of December 31, ~~2017,~~2019, we ~~had~~ achieved all of our established objectives ~~except that our net debt to capitalization percentage was below our objective.~~identified as described below. 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 ~~set out below~~ 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 shareholders.

~~ROCE~~ — 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 metric ratio not defined under GAAP, and it should be considered in addition to, and not as a substitute for, GAAP financial measures. The Company defines Adjusted ROIC as Adjusted operating income, net of tax, divided by Average 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. The Company 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 the Company defines as Net income, divided by Average current year and prior year Total net debt and equity. The calculations for Return on Invested Capital and Adjusted ROIC are provided in the table below.

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Return on Invested Capital (dollars in millions)	2019		2018
Net income (a)	$	424	$	454
Adjusted for:
Provision for income taxes (iii)		158		167
Other, non-operating expense (income), net		1		(4)
Financing cost, net		81		86
Restructuring/impairment charges (i)		57		64
Acquisition/integration costs		3		0
Other matters (ii)		(19)		0
Income taxes (at effective rates of 26.3% and 25.8%, respectively) (iii)		(185)		(198)
Adjusted operating income, net of tax (b)		520		569

Short-term debt		82		169
Long-term debt		1,766		1,931
Less: Cash and cash equivalents		(264)		(327)
Short-term investments		(4)		(7)
Total net debt		1,580		1,766
Total equity and Share-based payments subject to redemption		2,772		2,445
Total net debt and equity	$	4,352	$	4,211

Average current and prior year Total net debt and equity (c)	$	4,282	$	4,212

Return on Invested Capital (a ÷ c)		9.7%		10.8%
Adjusted Return on Invested Capital (b ÷ c)		12.1%		13.5%

(i)

During the year ended December 31, 2019, the Company recorded $57 million of pre-tax restructuring/impairment charges. 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, 2018, we recorded $64 million of pre-tax restructuring/impairment charges. During the year ended December 31, 2018, we recorded $64 million of pre-tax restructuring charges consisting of $49 million of restructuring expenses as part of the Cost Smart cost of sales program, $11 million of restructuring charges related to the Cost Smart SG&A program, and $4 million of restructuring charges related to other projects.

(ii)

During the year ended December 31, 2019, we recorded a $22 million pre-tax benefit for the favorable judgement received by Ingredion from the Federal Court of Appeals in Brazil related to certain indirect taxes collected in prior years. As a result of the decision, the Company expects to be entitled to credits against its Brazilian federal tax payments in 2020 and future years. The benefit recorded represents the Company's current estimate of the credits and interest due from the favorable decision in accordance with ASC 450, Contingencies. This benefit was offset by other adjusted charges during the period.

(iii)

The effective income tax rate for the years ended December 31, 2019 and 2018 was 27.1 percent and 26.1 percent, respectively. For purposes of this calculation we exclude the provision for income taxes from the calculation and subsequently add back income taxes for adjusted operating income using the adjusted effective income tax rate. The adjusted effective income tax rate is calculated by removing the tax impact for the identified adjusted items below.


	Year Ended December 31, 2019					Year Ended December 31, 2018
(dollars in millions)	Income before Income Taxes		Provision for Income Taxes		Effective Income Tax Rate	Income before Income Taxes		Provision for Income Taxes		Effective Income Tax Rate
As reported	$	582	$	158	27.1%	$	621	$	167	26.9%
Add back (deduct):
Impairment/restructuring charges		57		13			64		13
Acquisition/integration costs		3		1			—		—
Insurance settlement		—		—			—		(3)
Other matters		(19)		(8)			—		—
Adjusted non-GAAP	$	623	$	164	26.3%	$	685	$	177	25.8%

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Our long-term objective is to maintain ~~a ROCE~~an Adjusted ROIC in excess of ~~10.0~~12 percent. ~~In determining this performance metric,~~For the ~~negative cumulative translation adjustment~~year ended December 31, 2019, we achieved an Adjusted ROIC of 12.1 percent as compared to 13.5 percent as of December 31, 2018. The decrease in Adjusted ROIC percentage is added back to total equity to calculate returns based on our original investment costs. Our ROCE for 2017 decreased to 12.4 percent from 12.6 percent in 2016, reflecting a higher equity balance at the beginning of 2017 asprimarily a result of ~~strong 2016~~lower adjusted operating income, net ~~earnings.~~of tax in 2019.

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. The Company 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. The Company believes Total net debt to Adjusted EBITDA is meaningful to investors as it focuses on the Company’s leverage on a comparable EBITDA basis, and helps investors better understand the time required to pay back the Company’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.


Net Debt to Adjusted EBITDA ratio	2019		2018
Short-term debt	$	82	$	169
Long-term debt		1,766		1,931
Less: Cash and cash equivalents		(264)		(327)
Short-term investments		(4)		(7)
Total net debt (a)		1,580		1,766

Income before income taxes (b)		582		621
Adjusted for:
Depreciation and amortization		220		247
Financing cost, net		81		86
Restructuring/impairment (i)		44		30
Acquisition/integration costs		3		—
Other matters (ii)		(19)		—
Adjusted EBITDA (c)	$	911	$	984

Net Debt to Income before income tax ratio (a ÷ b)		2.7		2.8
Net Debt to Adjusted EBITDA ratio (a ÷ c)		1.7		1.8

(i)

2019 Restructuring/impairment charges are reduced by $13 million to exclude the accelerated depreciation primarily related to the Lane Cove, Australia production facility closure. 2018 Restructuring/impairment charges are reduced above by $34 million to exclude the accelerated depreciation from cessation of wet-milling at the Stockton, California plant. The accelerated depreciation is included in Depreciation and amortization above, and to include in restructuring/impairment charge would include the charge twice. See Note 5 for reconciliation to the $57 million and $64 million restructuring charges recorded in 2018 and 2019, respectively.

(ii)

Our long-term objective is to maintain a ratio of ~~net debt~~Net Debt to ~~adjusted~~Adjusted EBITDA of less than 2.25. ~~This~~As of December 31, 2019, the ratio was ~~1.2~~1.7, which is a decrease from 1.8 as of December 31, ~~2017, down from 1.4 last year and remains below our target.~~2018. The ~~decline~~decrease primarily reflects our reduction of net debt ~~and continued strong EBITDA results~~ in ~~2017.~~2019.

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Net Debt to Capitalization percentage: The Company defines Net Debt to Capitalization percentage — as Total net debt, defined as Short-term and Long-term debt less Cash and cash equivalents and Short-term investments, divided by Total net debt and capital, defined as the sum of Deferred income tax liabilities, Share-based payments subject to

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redemption, Total equity, and Total net debt. The calculations for Net Debt to Capitalization percentage are provided in the table below.


Net Debt to Capitalization percentage (dollars in millions)	2019		2018
Short-term debt	$	82	$	169
Long-term debt		1,766		1,931
Less: Cash and cash equivalents		(264)		(327)
Short-term investments		(4)		(7)
Total net debt (a)		1,580		1,766
Deferred income tax liabilities		195		189
Share-based payments subject to redemption		31		37
Total equity		2,741		2,408
Total capital		2,967		2,634
Total net debt and capital (b)	$	4,547	$	4,400

Net Debt to Capitalization percentage (a ÷ b)		34.7%		40.1%

Our long-term objective is to maintain a Net Debt to Capitalization percentage in the range of 32 to 35 percent. As of December 31, ~~2017,~~2019, our Net Debt to Capitalization percentage was ~~28.6~~34.7 percent, down from ~~34.0~~40.1 percent ~~a year ago,~~as of December 31, 2018, primarily reflecting our reduction of Total net debt in ~~2017.~~2019.

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.

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~~acquisition of Western Polymer in ~~2017 of Sun Flour and in 2016 of Shandong Huanong and TIC Gums were~~2019 was accounted for in accordance with ~~ASC~~Accounting Standards Codification (“ASC”) Topic 805, Business Combinations ~~as amended.~~. In purchase accounting, identifiable assets acquired and liabilities assumed, are recognized at their estimated fair values at the acquisition date, 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 with respect to 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 3 of the Notes to the Consolidated Financial Statements for more information related to our acquisitions.

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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, ~~2017,~~2019, were ~~$2.2~~$2.3 billion and ~~$315~~$259 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 business unit or asset group, anticipated future economic, regulatory and political conditions in the business unit’s or asset group’s market and estimates of terminal or disposal values. No impairment charges for PP&E or definite-lived intangible assets were recorded in ~~2017.~~2019.

In 2015, we announced plans to consolidate our manufacturing network in Brazil. Plants in Trombudo Central and Conchal have been closed and production has been moved to plants in Balsa Nova and Mogi Guaçu, respectively. In 2015, we recorded total pre-tax restructuring-related charges of $12 million related to these plant closures, which included a $10 million charge for impaired assets.

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

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selling of any of the facilities could have a significant negative impact on the results of operations in the year that the closing or selling of a facility occurs.

Even though it was determined that there was no ~~additional~~ long-lived asset impairment as of December 31, ~~2017,~~2019, 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.

~~Goodwill and~~ Indefinite-Lived Intangible ~~Assets:~~Assets and Goodwill: We have certain indefinite-lived intangible assets in the form of trade names 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 reporting unit or allocated between reporting units based on the relative excess fair value of each reporting unit. ~~In addition, we have certain indefinite-lived intangible assets in the form of trade names and trademarks.~~ The carrying value of ~~goodwill and~~ indefinite-lived intangible assets and goodwill at December 31, ~~2017,~~2019, was ~~$803~~$178 million and ~~$178~~$801 million, respectively, compared to ~~$784~~$178 million and ~~$201~~$791 million, respectively, a year ago. ~~The increase in goodwill is mainly due to the acquisition of Sun Flour in 2017, and the decrease in~~

We assess indefinite-lived intangible assets ~~is mainly due changes in the purchase accounting~~and goodwill for the acquisition of TIC Gums, which was preliminary as of December 31, 2016, and finalized during 2017. See Note 3 of the Notes to the Consolidated Financial Statements for additional information related to both acquisitions.

~~We perform our goodwill and indefinite-lived intangible asset~~ impairment ~~tests~~ annually ~~as of October 1, or~~(or more frequently if ~~an event occurs or circumstances change~~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 ~~would more likely than not reduce~~ the fair value of ~~a reporting unit below~~an indefinite-lived intangible asset is impaired. After assessing the qualitative factors, if the we determine that it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is greater than its carrying ~~value.~~ 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. 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, 2019, there were no impairments in our indefinite-lived intangible assets.

In testing goodwill for impairment, we first ~~assesses~~assess qualitative factors in determining whether it is ~~more likely than not~~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 ~~not more likely than not~~more-likely-than-not that the fair value of a reporting unit is ~~less~~greater than its carrying amount, then we do not perform the two-step impairment test. If we conclude otherwise, then we perform the first step of the two-step

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impairment test as described in ASC Topic 350. In the first step (“Step One”), 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, a second step (“Step Two”) of the impairment assessment is performed in order to determine the implied fair value of a reporting unit’s goodwill.

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 considered changes in discount rates for the reporting units based on current market interest rates and specific risk factors within each geographic region. We also evaluated 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 ~~October~~July 1, ~~2017, it was more likely than not that the fair value of~~2019, there were no impairments in our reporting units was greater than their carrying value. We continue to monitor our reporting units in struggling economies and recent acquisitions for challenges in the business that may negatively impact the fair value of these reporting units.

In performing the annual qualitative impairment assessment for other indefinite-lived intangible assets, we considered various factors in determining if it was more likely than not that the fair value of these indefinite-lived intangible assets was greater than their carrying value. We evaluated net sales attributable to these intangible assets as compared to original projections and evaluated future projections of net sales related to these assets. In addition, we considered market and industry conditions in the reporting units in which these intangible assets reside noting no significant changes that would result in a failed Step One impairment test as described in ASC Topic 350. Based on the

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results of this qualitative assessment as of October 1, 2017, we concluded that it was more likely than not that the fair value of these indefinite-lived intangible assets was greater than their carrying value.

Income Taxes: We recognize the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities and provide a valuation allowance when deferred tax assets are not more likely than not to be realized. We have considered forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, we would increase the valuation allowance and make a corresponding charge to earnings in the period in which we make such determination. Likewise, if we later determine that we are more likely than not to realize the deferred tax assets, we would reverse the applicable portion of the previously provided valuation allowance. We had a valuation allowance of ~~$34~~$29 million and ~~$21~~$31 million at December 31, ~~2017~~2019, and ~~2016,~~2018, respectively. The ~~increase~~decrease in the valuation allowance from ~~2016~~2019 to ~~2017~~2018 is primarily ~~attributed~~attributable to ~~a valuation~~the devaluation of the Argentina Peso offset by an increased allowance ~~recorded~~ on the net deferred tax assets (including net operating losses) in Argentina.

We are regularly audited by various taxing authorities, and sometimes these audits result in proposed assessments where the ultimate resolution may result in us owing additional taxes. We establish reserves when, despite our belief that our tax return positions are appropriate and supportable under local tax law, we believe there is uncertainty with respect to certain positions and we may not succeed in realizing the tax benefits. We evaluate these unrecognized tax benefits and related reserves each quarter and adjust the reserves and the related interest and penalties in light of changing facts and circumstances regarding the probability of realizing tax benefits, such as the settlement of a tax audit or the expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of tax benefit realization are reasonable. However, final determinations of prior-year tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different than estimates reflected in assets and liabilities and historical income tax provisions. The outcome of these final determinations could have a material effect on our income tax provision, net income, or cash flows in the period in which that determination is made. We believe our tax positions comply with applicable tax law and that we have adequately provided for any known tax contingencies. We had been pursuing relief from double taxation under the U.S.-Canada tax treaty for the years 2004-2013. During the fourth quarter of 2016, a tentative settlement was reached between the U.S. and Canada and, consequently, we established a net reserve of $24 million, including interest thereon, recorded as a $70 million liability and a $46 million benefit. In the third quarter of 2017, the two countries finalized the agreement, which eliminated the double taxation, and we paid $63 million to the IRS to settle the liability. As a result of that agreement, we are entitled to deduct a foreign exchange loss of $10 million on our 2017 U.S. federal income tax return due to the foreign exchange loss deduction. Our liability for unrecognized tax benefits, excluding interest and penalties at December 31, ~~2017~~2019 and ~~2016~~2018 was ~~$39~~$22 million and ~~$86~~$30 million, respectively. ~~The decrease from 2016 to 2017 is primarily attributable to the U.S.-Canada tax settlement of $58 million referenced above.~~

No foreign withholding taxes, state income taxes, and federal and state taxes on foreign currency gains and losses have been provided on approximately ~~$2.7~~$3.0 billion of undistributed earnings of ~~certain~~ foreign earnings that are considered ~~to be~~ indefinitely reinvested. If future events, including changes in tax law, material changes in estimates of cash, working capital, and long-term investment requirements, necessitate that these earnings be distributed, an additional provision for income taxes may apply, which could materially affect our future effective tax rate and cash flows.

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

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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 balance sheet, but are generally amortized into operating earnings over future periods, with the deferred amount recorded in accumulated other comprehensive income. We believe the assumptions utilized in recording our obligations under our plans, which are based on our experience, market conditions, and input from our

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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 with respect to 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 $4$10 million in ~~2017~~2019 and $8$6 million in ~~2016.~~2018.

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. In 2016, we changed the method used to estimate the service and interest cost components of net periodic benefit cost for certain of our defined benefit pension and postretirement benefit plans. Historically, we estimated the service and interest cost components using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Beginning in 2016, we have elected toWe use a full yield curve approach in the estimation of ~~these~~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. We have made this change to improve the correlation between projected benefit cash flows and the corresponding yield curve spot rates and to provide a more precise measurement of service and interest costs. This change does not affect the measurement of our total benefit obligations as the change in the service cost and interest cost is completely offset in the actuarial (gain) loss reported. The weighted average discount rate used to determine our obligations under U.S. pension plans ~~for~~as of December 31, ~~2017~~2019 and ~~2016~~2018 was ~~3.70~~3.34 percent and ~~4.30~~4.38 percent, respectively. The weighted average discount rate used to determine our obligations under non-U.S. pension plans ~~for~~as of December 31, ~~2017~~2019 and ~~2016~~2018 was ~~4.02~~3.55 percent and ~~4.34~~4.33 percent, respectively. The weighted average discount rate used to determine our obligations under our postretirement plans ~~for~~as of December 31, ~~2017~~2019 and ~~2016~~2018 was ~~4.92~~4.18 percent and ~~5.42~~5.24 percent, respectively.

A one percentage point decrease in the discount rates at December 31, ~~2017,~~2019, would have increased the accumulated benefit obligation and projected benefit obligation by the following amounts (millions):



U.S. Pension Plans
Accumulated benefit obligation	$	52	$	49
Projected benefit obligation		53		50


Non-U.S. Pension Plans
Accumulated benefit obligation	$	30	$	31
Projected benefit obligation		33		34


Postretirement Plans
Accumulated benefit obligation	$	8	$	9

We changed our investment approach and related asset allocation for the U.S. and Canada plans during 2016 to 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 as compared to the prior passive investment strategy. 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 ~~2018~~2020 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 5.30 percent for U.S. plans and approximately 3.86 percent for Canadian plans. In developing the expected ~~long-term~~long-

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term rate of return assumption on plan assets, which consist mainly of U.S. and Canadian debt and equity ~~and debt~~ securities,

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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 ~~2018~~2020 net periodic pension cost for the U.S. and Canada plans by less than $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, ~~2017,~~2019, the health care cost trend rate assumptions for the next year for the U.S., Canada, and Brazil plans were ~~6.50~~6.00 percent, ~~5.54~~5.83 percent and ~~8.41~~7.38 percent, respectively.

The sensitivities of service cost and interest cost and year-end benefit obligations to changes in healthcare cost trend rates (both initial and ultimate rates) for the postretirement benefit plans as of December 31, ~~2017,~~2019, are as follows:


(in millions)	~~2017~~2019
One-percentage point increase in trend rates:
Increase in service cost and interest cost components	$	1—
Increase in year-end benefit obligations		76

One-percentage point decrease in trend rates:
Decrease in service cost and interest cost components		1—
Decrease in year-end benefit obligations		65

See Note 10 of the Notes to the Consolidated Financial Statements for more information related to our benefit plans.

New Accounting Standards

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The FASB has also issued additional ASUs to provide further updates and clarification to this Update, including ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. We plan to adopt the standard as of the effective date. The standard will allow various transition approaches upon adoption. We plan to use the modified retrospective approach for the transition to the new standard. Based on our analysis to date, our assessment is that the adoption of the guidance in this Update is not expected to have a material impact on our revenue recognition timing or amounts, as we have not identified any material changes to the recognition of revenue for existing customer contracts.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842),~~ which supersedes Topic 840, Leases. This Update increases the transparency and comparability of organizations by recognizing lease assets and lease liabilities on the balance sheet for leases longer than 12 months and disclosing key information about leasing arrangements. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed. This Update is effective for annual periods beginning after December 15, 2018, with early adoption permitted. We currently plan to adopt the standard as of the effective date. Adoption will require a modified retrospective approach for the transition. We expect the adoption of the guidance in this Update to have a material impact on our Consolidated Balance Sheets as operating leases will be recognized both as assets and liabilities on the Consolidated

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~~Balance Sheets. We are in the process of quantifying the magnitude of these changes and assessing the implementation approach for accounting for these changes.~~

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

In ~~March 2017,~~June 2016, the FASB issued ASU No. ~~2017-07,~~ ~~Compensation – Retirement Benefits~~2016-13, Financial Instruments - Credit Losses (Topic ~~715)~~326): ~~Improving the Presentation~~Measurement of ~~Net Periodic Pension Cost~~Credit Losses on Financial Instruments, which requires us to measure and ~~Net Periodic Postretirement Benefit Cost~~.recognize expected credit losses for financial assets held and not accounted for at fair value through net income. This Update requires an entity to change the classification of the net periodic benefit cost for pension and postretirement plans within the statement of income by eliminating the ability to net all of the components of the costs together within operating income. The Update will require the service cost component to continue to be presented within operating income, classified within either cost of sales or operating expenses depending on the employees covered within the plan. The remaining components of the net periodic benefit cost, however, must be presented in the statement of income as a non-operating income (loss) below operating income. The Update is effective for annual periods beginning after December 15, 2017, with early adoption permitted only within the first interim period for public entities. We plan to adopt this Update in 2018. When adopted, the new guidance must be applied retrospectively for all income statement periods presented. The Update will reduce our operating income and will require a new financial statement line item below operating income within the Consolidated Statements of Income for the non-operating income (loss) components. Net income within the Consolidated Statements of Income will not change upon adoption of the Update.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~ ~~This Update~~ modifies accounting guidance for hedge accounting by making more hedge strategies eligible for hedge accounting, amending presentation and disclosure requirements, and changing how companies assess ineffectiveness. The intent is to simplify the application of hedge accounting and increase transparency of information about an entity’s risk management activities. The amended guidance is effective for annual periods beginning after December 15, 2018,2019, with early adoption permitted. We ~~are in~~will adopt ASU 2016-13 at the ~~process~~beginning of ~~assessing~~our 2020 fiscal year and the ~~effects of these updates including potential changes to existing hedging arrangement, as well as the implementation approach for accounting for these changes.~~

Update will not have a material impact on our Consolidated Financial Statements upon adoption.

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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. The Company intends these forward-looking statements to be covered by the safe harbor provisions for such statements.

Forward-looking statements include, among ~~other things,~~others, any statements regarding the Company’s prospects or future financial condition, earnings, revenues, tax rates, capital expenditures, cash flows, expenses or other financial items, any statements concerning the Company’s prospects or future operations, including management’s plans or strategies and objectives therefor, and any assumptions, expectations or beliefs underlying the foregoing.

These statements can sometimes be identified by the use of forward looking words such as “may,” “will,” “should,” “anticipate,” ~~“assume”,~~“assume,” “believe,” “plan,” “project,” “estimate,” “expect,” “intend,” “continue,” “pro forma,” “forecast,” “outlook,” “propels,” “opportunities,” ~~“potential”, “provisional”,~~“potential,” “provisional,” or other similar expressions or the negative thereof. All statements other than statements of historical facts in this report or referred to in or incorporated by reference into this report are “forward-looking statements.”

These statements are based on current circumstances or expectations, but are subject to certain inherent risks and uncertainties, many of which are difficult to predict and are beyond our control. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, ~~stockholders~~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 changing consumption preferences relating to high fructose corn syrup and other raw materials; the effects of global economic conditions including, particularly, continuation or worsening of the current economic, currency and political conditions in South America and economic conditions in Europe, and their impact on our sales volumes and pricing of our products, our ability to collect our receivables from customers and our ability to raise funds at reasonable rates; fluctuations in worldwide markets for corn and other commodities, and the associated risks of hedging against such fluctuations; fluctuations in the markets and prices for our co-products, particularly corn oil; fluctuations in aggregate industry supply and market demand; the behavior of financial markets, including foreign currency fluctuations and fluctuations in interest and exchange rates; volatility and turmoil in the capital markets; the commercial and consumer credit environment; general political, economic, business, and market conditions that affect customers and ~~weather conditions~~consumers in the various geographic regions and countries in which we buy our raw materials or manufacture or sell our ~~products;~~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 financial performance of major industries which we serve and from which we derive a significant portion of our sales, including, without limitation, the food, ~~and~~ beverage, paper and corrugated, and brewing industries; ~~energy costs~~the uncertainty of acceptance of products developed through genetic modification and availability, freight and shipping costs, and changes in regulatory controls regarding quotas; tariffs, duties, taxes and income tax rates; particularly recently enacted United States tax reform; operating difficulties; availability of raw materials, including potato starch, tapioca, gum arabic, and the specific varieties of corn upon which our products are based;biotechnology; our ability to develop or acquire new products and services at rates or of qualities sufficient to meet expectations; changes in government policy, law or regulations and costs of legal compliance, including with respect to environmental compliance; 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; ~~boiler reliability;~~ our ability to ~~effectively integrate and operate acquired businesses; our ability to~~contain costs, achieve budgets and to realize expected ~~synergies;~~synergies, including with respect to our ability to complete planned maintenance and investment projects ~~successfully~~on time and on ~~budget;~~budget, achieving expected savings under our Cost Smart program as well as with respect to freight and shipping costs; 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 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 and security breaches with respect to information technology systems, processes and sites, as well as boiler reliability; our ability to maintain satisfactory labor ~~disputes; genetic~~relations; the impact that weather, natural disasters, war or similar acts of hostility, acts and ~~biotechnology issues; changing consumption preferences including those relating to high fructose corn syrup; increased competitive and/or customer pressure in the corn-refining industry; and~~threats of terrorism, the outbreak or continuation of ~~serious communicable disease or hostilities including acts of terrorism. Factors relating~~pandemics and other significant events could have on our business; tariffs, quotas, duties, taxes and income tax rates, particularly United States tax reform enacted in 2017; and our ability to the acquisition of TIC Gums that could cause actual results and developments to differ from expectations include: the anticipated benefits of the acquisition, including synergies, may not be realized; and the integration of TIC Gum’s operations with those of Ingredion which may be materially delayed or may be more costly or difficult than expected.raise funds at reasonable rates.

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~~1A. Risk Factors above and our subsequent reports on ~~Forms~~Form 10-Q and Form 8-K.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Exposure:We are exposed to interest rate risk on our ~~variable-rate~~variable rate debt and price risk on our ~~fixed-rate~~fixed rate debt. As of December 31, ~~2017,~~2019, approximately 62 percent or $1.2 billion of our total debt ~~are fixed-rate~~is fixed rate debt and 38 percent or approximately ~~$714~~$697 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, ~~2017.~~2019. A hypothetical increase of 1 percentage point in the weighted average floating interest rate would increase our annual interest expense by approximately $7$3 million. See Note 7 of the Notes to the Consolidated Financial Statements ~~entitled “Financing Arrangements”~~ for further information.

At December 31, ~~2017~~2019 and ~~2016,~~2018, the carrying and fair values of long-term debt were as follows:


	2017				2016
	Carrying		Fair		Carrying		Fair

									2019				2018
									Carrying		Fair		Carrying		Fair
(in millions)	amount		value		amount		value		amount		value		amount		value

3.2% senior notes due October 1, 2026	$	496	$	492	$	496	$	482	$	497	$	491	$	496	$	462
4.625% senior notes, due November 1, 2020		398		421		398		428		400		399		399		409
6.625% senior notes, due April 15, 2037		254		325		254		299		253		246		254		295
5.62% senior notes, due March 25, 2020		200		212		200		217		200		200		200		205
1.8% senior notes, due September 25, 2017		—		—		299		301
6.0% senior notes, due April 15, 2017		—		—		200		202
Term loan credit agreement due April 25, 2019		395		395		—		—		—		—		165		165
Term loan credit agreement due April 12, 2021										405		405		—		—
U.S. revolving credit facility		—		—		—		—		10		10		418		418
Fair value adjustment related to hedged fixed rate debt instruments		1		—		3		—		1		—		(1)		—
Total long-term debt	$	1,744	$	1,845	$	1,850	$	1,929	$	1,766	$	1,751	$	1,931	$	1,954

A hypothetical change of 1 percentage point in interest rates would change the fair value of our fixed rate debt at December 31, ~~2017,~~2019, by approximately ~~$91~~$71 million. Since we have no current plans to repurchase our outstanding ~~fixed-rate~~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 have an interest rate swap agreement that effectively converts the interest rates on $200 million of our $400 million ~~4.625 percent~~4.625% senior notes due November 1, 2020, to variable rates. This swap agreement calls for us to receive interest at the fixed coupon rate of the respective notes and to pay interest at a variable rate based on the six-month U.S. dollar LIBOR rate plus a spread. We have designated this interest rate swap agreement as a hedge of the changes in fair value of the underlying debt obligations attributable to changes in interest rates and account for it as a fair value hedge. The fair value of the interest rate swap agreements ~~approximated~~was a $1 million loss at December 31, ~~2017,~~2019, and is reflected in the Consolidated Balance ~~Sheets~~Sheet within ~~other~~Other assets, with an offsetting amount recorded in long-term debt to adjust the carrying amount of the hedged debt obligations.

Raw Material, Energy, and Other Commodity Exposure: 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 109 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 coal, natural gas, electricity, wood, and fuel oil to generate

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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

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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 American operations.

At December 31, ~~2017,~~2019, we had outstanding futures and option contracts that hedged the forecasted purchase of approximately 9298 million bushels of corn and 16 million pounds of soybean oil. We are unable to directly hedge price risk related to co-product sales; however, we occasionally enter into hedges of soybean oil (a competing product to corn oil) in order to mitigate the price risk of corn oil sales.corn. We also had outstanding swap and option contracts that hedged the forecasted purchase of approximately 3530 million mmbtu’s of natural gas at December 31, ~~2017. Additionally at December 31, 2017, we had outstanding ethanol futures contracts that hedged the forecasted sale of approximately 4 million gallons of ethanol.~~2019. Based on our overall commodity hedge position at December 31, ~~2017,~~2019, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to other comprehensive income of approximately ~~$30~~$1 million, net of income tax benefit. ~~It should be noted that any~~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.

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, ~~2017,~~2019, 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 $5$4 million. At December 31, ~~2017,~~2019, our accumulated other comprehensive loss account included in the equity section of our Consolidated Balance ~~Sheets~~Sheet includes a cumulative translation loss of approximately ~~$1.0~~$1.1 billion. The aggregate net assets of our foreign subsidiaries where the local currency is the functional currency approximated $1.4 billion at December 31, ~~2017.~~2019. 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 other comprehensive income of approximately ~~$156~~$157 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Ingredion Incorporated Index to Consolidated Financial Statements and Supplementary Data		Page
Report of Independent Registered Public Accounting Firm		58 52
Consolidated Statements of Income		60 55
Consolidated Statements of Comprehensive Income		61 56
Consolidated Balance Sheets		62 57
Consolidated Statements of Equity and Redeemable Equity		63 58
Consolidated Statements of Cash Flows		64 59
Notes to the Consolidated Financial Statements		65
~~Quarterly Financial Data (Unaudited)~~	60	~~100~~

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~~Report~~

Report of Independent Registered Public Accounting Firm

To the ~~stockholders~~Stockholders and ~~board~~Board of ~~directors~~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”)~~Company) as of December 31, ~~2017~~2019 and ~~2016,~~2018, the related consolidated statements of income, comprehensive income (loss), equity and redeemable equity, and cash flows for each of the years in the three-year period ended December 31, ~~2017,~~2019, and the related notes (collectively, the ~~“consolidated~~consolidated financial ~~statements”)~~statements). We also have audited the Company’s internal control over financial reporting as of December 31, ~~2017,~~2019, 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, ~~2017~~2019 and ~~2016,~~2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2017,~~2019, 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, ~~2017,~~2019 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases effective January 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842), and its subsequent amendments.

Basis for ~~Opinion~~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 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”)~~(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 audits 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 audits 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.

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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

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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 ~~Company acquired Sun Flour Industry Co., LTD (“Sun Flour”) during~~critical audit matter communicated below is a matter arising from the ~~first quarter of 2017, and management excluded from its assessment~~current period audit of the ~~effectiveness~~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 judgment. 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 and other postretirement employee benefit obligations (OPEB)

As discussed in Note 10 to the consolidated financial statements, the Company’s ~~internal control over financial reporting~~estimated pension benefit obligations totaled $641 million as of December 31, ~~2017, Sun Flour’s internal control over financial reporting associated with total assets of $20 million and total net sales of less than $1 million included~~2019. The Company’s OPEB includes plans in the ~~consolidated financial statements~~US, Brazil and Canada, which are fully unfunded liabilities. As of December 31, 2019, the Company had a net liability of $69 million related to the Company’s other postretirement benefit plans. The pension and OPEB obligations are measured at the actuarial present value of the ~~Company as~~vested benefits to which employees are currently entitled based on the employee’s expected date of ~~and for the year ended December 31, 2017. Our audit of internal control over financial reporting~~separation or retirement. The determination of the ~~Company also excluded an~~Company’s pension and OPEB obligations is dependent, in part, on the selection of certain estimates and actuarial assumptions, including discount rates.

We identified the evaluation of the pension and OPEB obligations to be a critical audit matter. Significant 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. Small changes in the discount rates would impact the measurement of the pension and OPEB obligations.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal ~~control~~controls over ~~financial reporting~~the Company’s pension and OPEB obligations process, including controls related

Table of ~~Sun Flour.~~ Contents

to the assessment of the actuarial models and the development of the discount rates. We involved an actuarial professional with specialized skill and knowledge, who assisted in:

●

understanding and assessing the actuarial models and methodology used by the Company to determine the obligations,

●

the evaluation of the Company’s discount rates, by assessing changes in the discount rates from the prior year and comparing it to the change in published indices, and 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~~1997.

Chicago, ~~Illinois~~IL
February ~~21, 2018~~19, 2020

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Ingredion Incorporated (“Ingredion”)

Consolidated Statements of ~~Income~~Income

Year Ended December 31,
(in millions, except per share amounts)

2017

2016

2015
Net sales before shipping and handling costs

$
6,180

$
6,022

$
5,958
Less: shipping and handling costs

348

318

337
Net sales

5,832

5,704

5,621
Cost of sales

4,359

4,302

4,379
Gross profit

1,473

1,402

1,242

Operating expenses

611

579

555
Other income, net

(18)

(4)

(1)
Restructuring/impairment charges

38

19

28

Operating income

842

808

660

Financing costs, net

73

66

61

Income before income taxes

769

742

599
Provision for income taxes

237

246

187
Net income

532

496

412
Less: Net income attributable to non-controlling interests

13

11

10
Net income attributable to Ingredion

$
519

$
485

$
402

Weighted average common shares outstanding:

Basic

72.0

72.3

71.6
Diluted

73.5

74.1

73.0

Earnings per common share of Ingredion:

Basic

$
7.21

$
6.70

$
5.62
Diluted

7.06

6.55

5.51



	Year Ended December 31,
(in millions, except per share amounts)	2019		2018		2017
Net sales	$	6,209	$	6,289	$	6,244
Cost of sales		4,897		4,921		4,772
Gross profit		1,312		1,368		1,472

Operating expenses		610		611		616
Other income, net		(19)		(10)		(18)
Restructuring/impairment charges		57		64		38

Operating income		664		703		836

Financing costs, net		81		86		73
Other, non-operating expense (income), net		1		(4)		(6)

Income before income taxes		582		621		769
Provision for income taxes		158		167		237
Net income		424		454		532
Less: Net income attributable to non-controlling interests		11		11		13
Net income attributable to Ingredion	$	413	$	443	$	519

Weighted average common shares outstanding:
Basic		66.9		70.9		72.0
Diluted		67.4		71.8		73.5

Earnings per common share of Ingredion:
Basic	$	6.17	$	6.25	$	7.21
Diluted		6.13		6.17		7.06

See the Notes to the Consolidated Financial Statements.

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Ingredion Incorporated (“Ingredion”)

Consolidated Statements of ~~Comprehensive~~Comprehensive Income (Loss)

(in millions)

2017

2016

2015
Net income

$
532

$
496

$
412
Other comprehensive income:

Losses on cash flow hedges, net of income tax effect of $6, $6, and $19, respectively

(10)

(11)

(42)
Losses on cash flow hedges reclassified to earnings, net of income tax effect of $2, $16, and $14, respectively

4

33

32
Actuarial gains (losses) on pension and other postretirement obligations, settlements and plan amendments, net of income tax effect of $2, $4, and $5, respectively

6

(10)

13
(Gains) losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect of $1, $-, and $-, respectively

(1)

1

1
Unrealized gains on investments, net of income tax effect of $1, $-, and $-, respectively

2

1

—
Currency translation adjustment

57

7

(324)
Comprehensive income

590

517

92
Less: Comprehensive income attributable to non-controlling interests

13

12

10
Comprehensive income attributable to Ingredion

$
577

$
505

$
82




(in millions)	2019		2018		2017
Net income	$	424	$	454	$	532
Other comprehensive income:
(Losses) gains on cash flow hedges, net of income tax effect of $5, $2, and $6, respectively		(14)		6		(10)
Losses on cash flow hedges reclassified to earnings, net of income tax effect of $4, $2, and $2, respectively		10		4		4
Actuarial gains (losses) on pension and other postretirement obligations, settlements and plan amendments, net of income tax effect of $2, $5, and $2, respectively		9		(15)		6
Gains related to pension and other postretirement obligations reclassified to earnings, net of income tax effect of $ — , $ — , and $1, respectively		—		—		(1)
Unrealized gains on investments, net of income tax effect of $ — , $ — , and $1, respectively		—		—		2
Currency translation adjustment		(9)		(129)		57
Comprehensive income		420		320		590
Less: Comprehensive income attributable to non-controlling interests		9		3		13
Comprehensive income attributable to Ingredion	$	411	$	317	$	577

See the Notes to the Consolidated Financial Statements.

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Ingredion Incorporated (“Ingredion”)

Consolidated Balance ~~Sheets~~Sheets

As of December 31,

(in millions, except share and per share amounts)

2017

2016

Assets

Current assets:

Cash and cash equivalents

$
595

$
512

Short-term investments

9

4

Accounts receivable, net

961

923

Inventories

823

789

Prepaid expenses

27

24

Total current assets

2,415

2,252

Property, plant and equipment:

Land

225

183

Buildings

731

704

Machinery and equipment

4,252

4,055

Property, plant and equipment, at cost

5,208

4,942

Accumulated depreciation

(2,991)

(2,826)

Property, plant and equipment, net

2,217

2,116

Goodwill

803

784

Other intangible assets, net of accumulated amortization of $139 and $106, respectively

493

502

Deferred income tax assets

9

7

Other assets

143

121

Total assets

$
6,080

$
5,782

Liabilities and equity

Current liabilities:

Short-term borrowings

$
120

$
106

Accounts payable

493

440

Accrued liabilities

344

432

Total current liabilities

957

978

Non-current liabilities

227

158

Long-term debt

1,744

1,850

Deferred income tax liabilities

199

171

Share-based payments subject to redemption

36

30

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, 2017 and December 31, 2016, respectively

1

1

Additional paid-in capital

1,138

1,149

Less: Treasury stock (common stock: 5,815,904 and 5,396,526 shares at December 31, 2017 and December 31, 2016, respectively) at cost

(494)

(413)

Accumulated other comprehensive loss

(1,013)

(1,071)

Retained earnings

3,259

2,899

Total Ingredion stockholders’ equity

2,891

2,565

Non-controlling interests

26

30

Total equity

2,917

2,595

Total liabilities and equity

$
6,080

$
5,782


	As of December 31,
(in millions, except share and per share amounts)	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	264	$	327
Short-term investments		4		7
Accounts receivable, net		977		951
Inventories		861		824
Prepaid expenses		54		29
Total current assets		2,160		2,138

Property, plant and equipment, net of accumulated depreciation of $3,056 and $2,915, respectively		2,306		2,198

Goodwill		801		791
Other intangible assets, net of accumulated amortization of $197 and $167, respectively		437		460
Operating lease assets		151		—
Deferred income tax assets		13		10
Other assets		172		131
Total assets	$	6,040	$	5,728

Liabilities and equity
Current liabilities:
Short-term borrowings	$	82	$	169
Accounts payable		504		452
Accrued liabilities		381		325
Total current liabilities		967		946

Non-current liabilities		220		217
Long-term debt		1,766		1,931
Non-current operating lease liabilities		120		—
Deferred income tax liabilities		195		189
Share-based payments subject to redemption		31		37

Ingredion stockholders’ equity:
Preferred stock — authorized 25,000,000 shares — $0.01 par value, NaN issued		—		—
Common stock — authorized 200,000,000 shares — $0.01 par value, 77,810,875 issued at December 31, 2019 and 2018, respectively		1		1
Additional paid-in capital		1,137		1,096
Less: Treasury stock (common stock: 10,993,388 and 11,284,681 shares at December 31, 2019 and 2018, respectively) at cost		(1,040)		(1,091)
Accumulated other comprehensive loss		(1,158)		(1,154)
Retained earnings		3,780		3,536
Total Ingredion stockholders’ equity		2,720		2,388
Non-controlling interests		21		20
Total equity		2,741		2,408
Total liabilities and equity	$	6,040	$	5,728

See the Notes to the Consolidated Financial Statements.

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Ingredion Incorporated (“Ingredion”)

Consolidated Statements of Equity and Redeemable Equity

Total Equity

Share-based

Additional

Accumulated Other

Non-

Payments

Common

Paid-In

Treasury

Comprehensive

Retained

Controlling

Subject to

(in millions)

Stock

Capital

Stock

Loss

Earnings

Interests

Redemption

Balance, December 31, 2014

$
1

$
1,164

$
(481)

$
(782)

$
2,275

$
30

$
22

Net income attributable to Ingredion

402

Net income attributable to non-controlling interests

10

Dividends declared

(125)

(4)

Repurchases of common stock

(34)

Share-based compensation, net of issuance

(4)

48

2

Other comprehensive loss

(320)

Balance, December 31, 2015

1

1,160

(467)

(1,102)

2,552

36

24

Net income attributable to Ingredion

485

Net income attributable to non-controlling interests

11

Dividends declared

(138)

(7)

Share-based compensation, net of issuance

(11)

54

6

Other comprehensive income (loss)

31

(10)

Balance, December 31, 2016

1

1,149

(413)

(1,071)

2,899

30

30

Net income attributable to Ingredion

519

Net income attributable to non-controlling interests

13

Dividends declared

(159)

(15)

Repurchases of common stock

(123)

Share-based compensation, net of issuance

(11)

42

6

Other comprehensive income (loss)

58

(2)

Balance, December 31, 2017

$
1

$
1,138

$
(494)

$
(1,013)

$
3,259

$
26

$
36


	Total Equity														Share-based
					Additional				Accumulated Other				Non-		Payments
	Preferred		Common		Paid-In		Treasury		Comprehensive		Retained		Controlling		Subject to
(in millions)	Stock		Stock		Capital		Stock		Loss		Earnings		Interests		Redemption
Balance, December 31, 2016	$	—	$	1	$	1,149	$	(413)	$	(1,071)	$	2,899	$	30	$	30
Net income attributable to Ingredion												519
Net income attributable to non-controlling interests														13
Dividends declared												(159)		(15)
Repurchases of common stock								(123)
Share-based compensation, net of issuance						(11)		42								6
Other comprehensive income (loss)										58				(2)
Balance, December 31, 2017		—		1		1,138		(494)		(1,013)		3,259		26		36
Net income attributable to Ingredion												443
Net income attributable to non-controlling interests														11
Dividends declared												(173)		(9)
Repurchases of common stock						(33)		(624)
Share-based compensation, net of issuance						(5)		27								1
Other comprehensive loss										(134)				(7)
Other						(4)				(7)		7		(1)
Balance, December 31, 2018		—		1		1,096		(1,091)		(1,154)		3,536		20		37
Net income attributable to Ingredion												413
Net income attributable to non-controlling interests														11
Dividends declared												(169)		(8)
Repurchases of common stock, net						32		31
Share-based compensation, net of issuance						9		20								(6)
Other comprehensive loss										(4)				(2)
Balance, December 31, 2019	$	—	$	1	$	1,137	$	(1,040)	$	(1,158)	$	3,780	$	21	$	31

See the Notes to the Consolidated Financial Statements.

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Ingredion Incorporated (“Ingredion”)

Consolidated Statements of Cash ~~Flows~~Flows

Year Ended December 31,

(in millions)

2017

2016

2015

Cash provided by operating activities

Net income

$
532

$
496

$
412

Non-cash charges to net income:

Depreciation and amortization

209

196

194

Mechanical stores expense

57

57

57

Deferred income taxes

67

(5)

(6)

Write-off of impaired assets

—

—

10

Gain on sale of plant

—

—

(10)

Charge for fair value markup of acquired inventory

9

—

10

Other

39

44

39

Changes in working capital:

Accounts receivable and prepaid expenses

(44)

(131)

(29)

Inventories

(34)

(19)

9

Accounts payable and accrued liabilities

(49)

127

30

Margin accounts

6

15

(34)

Other

(23)

(9)

4

Cash provided by operating activities

769

771

686

Cash used for investing activities

Payments for acquisitions, net of cash acquired of $-, $4, and $16, respectively

(17)

(407)

(434)

Capital expenditures and mechanical stores purchases

(314)

(284)

(280)

Investment in a non-consolidated affiliate

—

(2)

—

Short-term investments

(3)

1

27

Proceeds from disposal of plants and properties

8

3

38

Cash used for investing activities

(326)

(689)

(649)

Cash used for financing activities

Proceeds from borrowings

1,144

1,000

1,388

Payments on debt

(1,240)

(874)

(1,366)

Debt issuance costs

—

(6)

—

Repurchases of common stock

(123)

(8)

(41)

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

9

29

21

Dividends paid, including to non-controlling interests

(165)

(141)

(126)

Excess tax benefit on share-based compensation

—

—

8

Cash used for financing activities

(375)

—

(116)

Effects of foreign exchange rate changes on cash

15

(4)

(67)

Increase (decrease) in cash and cash equivalents

83

78

(146)

Cash and cash equivalents, beginning of period

512

434

580

Cash and cash equivalents, end of period

$
595

$
512

$
434



	Year Ended December 31,
(in millions)	2019		2018		2017
Cash provided by operating activities
Net income	$	424	$	454	$	532
Non-cash charges to net income:
Depreciation and amortization		220		247		209
Mechanical stores expense		57		57		57
Deferred income taxes		3		(23)		67
Charge for fair value markup of acquired inventory		—		—		9
Other		33		39		39
Changes in working capital:
Accounts receivable and prepaid expenses		(61)		(70)		(44)
Inventories		(43)		(50)		(34)
Accounts payable and accrued liabilities		51		(3)		(49)
Margin accounts		(1)		5		6
Other		(3)		47		(23)
Cash provided by operating activities		680		703		769

Cash used for investing activities
Capital expenditures and mechanical stores purchases		(328)		(350)		(314)
Payments for acquisitions, net of cash acquired of $4, $ — , and $ — , respectively		(42)		—		(17)
Investment in non-consolidated affiliates		(10)		(15)		—
Short-term investments		3		1		(3)
Proceeds from disposal of plants and properties		2		1		8
Other		1		2		—
Cash used for investing activities		(374)		(361)		(326)

Cash used for financing activities
Proceeds from borrowings		1,209		987		1,144
Payments on debt		(1,465)		(738)		(1,240)
Repurchases of common stock, net		63		(657)		(123)
Issuances of common stock for share-based compensation, net of settlements		3		1		9
Dividends paid, including to non-controlling interests		(174)		(182)		(165)
Cash used for financing activities		(364)		(589)		(375)

Effects of foreign exchange rate changes on cash		(5)		(21)		15

(Decrease) increase in cash and cash equivalents		(63)		(268)		83

Cash and cash equivalents, beginning of period		327		595		512

Cash and cash equivalents, end of period	$	264	$	327	$	595

See the Notes to the Consolidated Financial Statements.

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Ingredion Incorporated (“Ingredion”)

Notes to Consolidated Financial Statements

NOTE 1 – Description of the Business

Ingredion Incorporated ~~(“the~~(individually and together with its consolidated subsidiaries, “the Company”) was founded in 1906 and became an independent and public company as of December 31, 1997. The Company primarily manufactures and sells ~~sweetener,~~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.

NOTE 2 – Summary of Significant Accounting Policies

Basis of presentation: The consolidated financial statements consist of the accounts of the Company, including all significant 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, goodwill, intangible assets and other long-lived assets, legal contingencies, guarantee obligations, and assumptions used in the calculation of income taxes, and pension and other postretirement benefits, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management will adjust such estimates and assumptions when facts and circumstances dictate. Foreign currency devaluations, corn price volatility, access to ~~difficult~~ 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 income (loss). ~~The U.S. dollar is the functional currency for the Company’s Mexican subsidiary.~~ Income statement accounts are translated at the average exchange rate during the period. However, significant non-recurring items related to a specific event are recognized at the exchange rate on the date of the significant event. The U.S. dollar is the functional currency for the Company’s subsidiaries in Mexico and as of July 1, 2018, in Argentina. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, resulted in a three-year cumulative inflation that exceeded 100 percent, as of June 30, 2018. As a result, the Company elected to adopt highly inflationary accounting as of July 1, 2018, for its Argentina affiliate in accordance with GAAP. Under highly inflationary accounting, the Argentina affiliate’s functional currency becomes the U.S. dollar. For foreign subsidiaries where the U.S. dollar is the functional currency, monetary assets and liabilities are translated at current exchange rates with the related adjustment included in net income. Non-monetary assets and liabilities are translated at historical exchange rates. Although the Company hedges the predominance of its transactional foreign exchange risk (see Note 6), the Company incurs foreign currency transaction gains and losses relating to assets and liabilities that are denominated in a currency other than the functional currency. For 2017, 2016, and 2015, the Company incurred foreign currency transaction net losses of $5 million, $3 million, and $6 million, respectively. The Company’s accumulated other comprehensive loss included in equity on the Consolidated Balance Sheets includes cumulative translation losses of approximately $1 billion at both December 31, 2017 and 2016.

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, net: Accounts receivable, net, consist of trade and other receivables carried at approximate fair value, net of an allowance for doubtful accounts based on specific identification of material amounts at risk and a general reserve based on historical collection experience.

Inventories: Inventories are stated at the lower of cost or net realizable value. Costs are predominantly determined using the weighted average method.

Investments: Investments are included in Other assets in the ~~common stock~~Consolidated Balance Sheets. The Company holds equity and cost method investments, and marketable securities as of ~~affiliated companies over~~December 31, 2019. Investments in which the Company does not exercise significant influence are accounted for under the cost method. In 2016, the Company invested in SweeGen Inc., which it accounts for under the cost method and which had a carrying value of $2 million as of both December 31, 2017 and 2016.

~~Table of Contents~~

~~Investments that enable the Company~~is able to exercise significant influence, but do not represent a controlling interest, are accounted for under the equity method; such investments are carried at cost, adjusted to reflect the Company’s proportionate share of income or

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loss, less dividends received. ~~The~~Investments in the common stock of affiliated companies over which the Company ~~did~~does not ~~have any investments~~exercise significant influence are accounted for under the ~~equity method at December 31, 2017, or 2016.~~cost method. The ~~Company has equity interests in the CME Group Inc. and CBOE Holdings, Inc., which are classified as available for sale securities. The investments~~marketable securities are carried at fair value with unrealized gains and losses recorded to ~~other comprehensive income. The Company would recognize a loss on its investments when there is a loss~~Other income, net in ~~value of an investment that is other than temporary. Investments are included in other assets in the Consolidated Balance Sheets and are not significant.~~accordance with Accounting Standards Codification (“ASC”) 825.

Leases: The Company leases rail cars, office space, and certain machinery and ~~equipment, and office space.~~equipment. The Company determines if an arrangement is a lease at inception of the agreement and classifies its leases ~~as either capital or operating~~ based on the terms of the related lease agreement and the criteria contained in Financial Accounting Standards Board (“FASB”) ~~Accounting Standards Codification (“ASC”)~~ASC Topic ~~840,~~ 842, Leases, and related interpretations. See also Note 8 of the Notes to the Consolidated Financial Statements for additional information.

Property, plant and equipment and depreciation:Property, plant and equipment (“PP&E”) are stated at cost less accumulated depreciation. Depreciation is generally computed on the straight-line ~~method~~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. Where permitted by law, accelerated depreciation methods are used for tax purposes. The Company recognized depreciation expense of ~~$179~~$191 million, ~~$171~~$217 million, and ~~$172~~$179 million for the years ended December 31, ~~2017, 2016,~~2019, 2018, and ~~2015,~~2017, respectively. The Company reviews the recoverability of the net book value of PP&E for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be ~~recoverable from estimated future cash flows expected to result from its use and eventual disposition.~~recoverable. If this review indicates that the carrying values will not be recovered, the carrying values would be reduced to fair value and an impairment loss would be recognized. As required under ~~accounting principles generally accepted in the U.S.,~~GAAP, the impairment analysis for long-lived assets occurs before the goodwill impairment assessment described below.No PP&E impairment was recognized in the year ended December 31, 2019 related to the Company’s annual impairment testing.

The following table summarizes the Company’s PP&E and accumulated depreciation for the periods presented:


	As of December 31,
(in millions)	2019		2018
Property, plant and equipment:
Land	$	202	$	199
Buildings		748		715
Machinery and equipment		4,412		4,199
Property, plant and equipment, at cost		5,362		5,113
Accumulated depreciation		(3,056)		(2,915)
Property, plant and equipment, net	$	2,306	$	2,198

Goodwill and other intangible assets:Goodwill ($~~803~~801 million and ~~$784~~$791 million at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively) represents the excess of the cost of an acquired entity over the fair value assigned to identifiable assets acquired and liabilities assumed. The Company also has other intangible assets of ~~$493~~$437 million and ~~$502~~$460 million at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively. ~~The carrying value of goodwill by reportable business segment at December 31, 2017 and 2016 was as follows:~~

North

South

Asia

(in millions)

America

America

Pacific

EMEA

Total

Balance at December 31, 2015

$
424

$
22

$
86

$
69

$
601

Acquisitions

186

—

—

—

186

Currency translation

—

4

(1)

(6)

(3)

Balance at December 31, 2016

610

26

85

63

784

Acquisitions

(10)
(a)

—

15

—

5

Currency translation

—

—

7

7

14

Balance at December 31, 2017

$
600

$
26

$
107

$
70

$
803

~~(a)~~

~~Related to TIC Gums Incorporated (“TIC Gums”) purchase price accounting adjustments~~

The original carrying value of goodwill ~~by reportable business segment~~ and accumulated impairment charges by reportable business segment at December 31, ~~2017 and 2016 were~~2019 was as follows:

North

South

Asia

America

America

Pacific

EMEA

Total

Goodwill before impairment charges

$
611

$
59

$
206

$
63

$
939

Accumulated impairment charges

(1)

(33)

(121)

—

(155)

Balance at December 31, 2016

610

26

85

63

784

Goodwill before impairment charges

601

59

228

70

958

Accumulated impairment charges

(1)

(33)

(121)

—

(155)

Balance at December 31, 2017

$
600

$
26

$
107

$
70

$
803


	North		South		Asia-
(in millions)	America		America		Pacific		EMEA		Total
Goodwill before impairment charges	$	601	$	59	$	228	$	70	$	958
Accumulated impairment charges		(1)		(33)		(121)		—		(155)
Balance at January 1, 2018		600		26		107		70		803
Acquisitions		—		—		—		—		—
Currency translation		—		(4)		(3)		(5)		(12)
Balance at December 31, 2018		600		22		104		65		791
Acquisitions		7		—		—		—		7
Currency translation		—		(1)		4		—		3
Balance at December 31, 2019	$	607	$	21	$	108	$	65	$	801

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The following table summarizes the Company’s other intangible assets for the periods presented:


	As of December 31, 2017

								As of December 31, 2019
(in millions)	Gross		Accumulated Amortization		Net		Weighted Average Useful Life (years)	Gross		Accumulated Amortization		Net		Weighted Average Useful Life (years)
Trademarks/tradenames (indefinite-lived)	$	178	$	—	$	178	—	$	178	$	—	$	178	—
Customer relationships		329		(62)		267	20		333		(93)		240	20
Technology		103		(68)		35	9		103		(91)		12	9
Other		22		(9)		13	16		20		(13)		7	15
Total other intangible assets	$	632	$	(139)	$	493	18	$	634	$	(197)	$	437	17

	As of December 31, 2016

								As of December 31, 2018
(in millions)	Gross		Accumulated Amortization		Net		Weighted Average Useful Life (years)	Gross		Accumulated Amortization		Net		Weighted Average Useful Life (years)
Trademarks/tradenames (indefinite-lived)	$	143	$	—	$	143	—	$	178	$	—	$	178	—
Customer relationships		227		(42)		185	20		325		(77)		248	20
Technology		100		(57)		43	10		103		(80)		23	9
TIC Gums intangible assets (preliminary)		117		—		117	Various
Other		21		(7)		14	16		21		(10)		11	16
Total other intangible assets	$	608	$	(106)	$	502	17	$	627	$	(167)	$	460	18

~~For definite-lived~~Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization is computed on the ~~Company recognizes~~straight-line basis over the ~~cost of such amortizable assets in operations over their~~ estimated useful lives of definite-lived intangible assets. Amortization expense related to intangible assets was $29 million, $30 million, and ~~evaluates~~$30 million for the years ended December 31, 2019, 2018, and 2017, respectively. The Company reviews the recoverability of the net book value of definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of ~~the assets~~an asset may not be recoverable. ~~Amortization expense related~~If this review indicates that the carrying values will not be recovered, the carrying values would be reduced to ~~intangible assets was $30 million in 2017, $25 million in 2016,~~fair value and ~~$22 million in 2015.~~an impairment loss would be recognized.

Based on acquisitions completed through December 31, ~~2017, including the purchase price allocations for Sun Flour Industry Co., Ltd. (“Sun Flour”),~~2019, intangible asset amortization expense for the next five years is shown below. ~~The amortization is subject to change based on finalization of the purchase accounting for Sun Flour.~~



(in millions)
Year	Amortization Expense		Amortization Expense
2018	$	29
2019		29
2020		27	$	28
2021		19		20
2022		18		19
2023				19
2024				19
Balance thereafter		193		154

The Company assesses ~~goodwill and other~~ indefinite-lived intangible assets and goodwill for impairment annually (or more frequently if impairment indicators arise). The Company has chosen to perform this annual impairment assessment as of ~~October~~July 1 of each year.

In testing indefinite-lived intangible assets for impairment, the Company 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 the Company 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 it would not be required to compute the fair value of the indefinite-lived intangible asset. In the event the qualitative assessment leads the Company to conclude otherwise, then it would be required to determine the fair value of the indefinite-lived intangible assets and perform a quantitative impairment test in accordance with ASC Topic 350-30, General Intangibles Other than Goodwill. In performing the qualitative analysis, the Company considers various factors including net sales derived from these intangibles and certain market and industry conditions. Based on the results of its assessment, the Company concluded that as of July 1, 2019, there were 0 impairments in its indefinite-lived intangible assets.

In testing goodwill for impairment, the Company first assesses qualitative factors in determining whether it is ~~more likely than not~~more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. After assessing the qualitative factors, if the Company determines that it is ~~not more likely than not~~more-likely-than-not that the fair value of a reporting unit is ~~less~~greater than its

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carrying amount then the Company does not perform the two-step impairment test. If the Company concludes otherwise, then it performs the first step of the two-step impairment test as described in ASC Topic 350. In the first step (“Step One”), 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, a second step (“Step Two”) of the impairment assessment is performed in order to determine the implied fair value of a reporting unit's goodwill. Determining the implied fair value of goodwill requires a valuation of the reporting unit's tangible and intangible assets and liabilities in a manner similar to the allocation of purchase price in a business combination. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of its goodwill, goodwill is deemed impaired and is written down to the extent of the difference. Based on the results of the annual assessment, the Company concluded that as of ~~October~~July 1, ~~2017, it was more likely than not that the fair value of our reporting units was greater than their carrying value. We continue to monitor our reporting~~

~~Table of Contents~~

~~units~~2019, there were 0 impairments in ~~struggling economies and recent acquisitions for challenges in the business that may negatively impact the fair value of these~~its reporting units.

~~In testing indefinite-lived intangible assets~~Revenue recognition: The Company accounts for impairment, the Company 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 the Company determines that it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, then it would not be required to compute the fair value of the indefinite-lived intangible asset. In the event the qualitative assessment leads the Company to conclude otherwise, then it would be required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment testrevenue in accordance with ASC ~~subtopic 350-30. In performing the qualitative analysis, the Company considers various factors including net sales derived~~Topic 606, Revenue from ~~these intangibles and certain market and industry conditions. Based on the results of this qualitative assessment, the Company concluded that as of October 1, 2017, it was~~Contracts with Customers, which is more ~~likely than not that the fair value~~fully described in Note 4 of the ~~indefinite-lived intangible assets was greater than their carrying value.~~

~~Revenue recognition:~~ ~~The Company recognizes operating revenues at the time title~~Notes to the goods and all risks of ownership transfer to the customer. This transfer is considered complete when a sales agreement is in place, delivery has occurred, pricing is fixed or determinable and collection is reasonably assured. In the case of consigned inventories, the title passes and the transfer of ownership risk occurs when the goods are used by the customer. Taxes assessed by governmental authorities and collected from customers are accounted for on a net basis and excluded from revenues.Consolidated Financial Statements.

Hedging instruments: ~~The Company uses derivative financial instruments principally to offset exposure to market risks arising from changes in commodity prices, foreign currency exchange rates and interest rates.~~ Derivative financial instruments used by the Company consist of commodity futures and option contracts, forward currency contracts and options, interest rate swap agreements and Treasury lock agreements (“T-Locks”). The Company enters into futures and option contracts, which are designated as hedges of specific volumes of commodities (primarily corn and natural gas) that will be purchased in a future month. These derivative financial instruments are recognized in the Consolidated Balance Sheets at fair value. The Company has also entered into interest rate swap agreements that effectively convert the interest rate on certain fixed rate debt to a variable interest rate and, on certain variable rate debt, to a fixed interest rate. The Company periodically enters into T-Locks to hedge its exposure to interest rate changes. See also Note 6 ~~and Note 7~~ of the Notes to the Consolidated Financial Statements for additional information.

On the date a derivative contract is entered into, the Company designates the derivative as ~~either~~ a hedge of variable cash flows to be paid related ~~to interest on variable rate debt, as a hedge of market variation in the benchmark rate for a future fixed rate debt issue, as a hedge of foreign currency cash flows associated with~~ certain forecasted ~~commercial~~ transactions ~~or loans, as a hedge of certain forecasted purchases of corn, natural gas or ethanol used in the manufacturing process~~ (“a cash flow hedge”), or as a hedge of the fair value of certain ~~debt obligations~~firm commitments (“a fair value hedge”), or as a non-designated hedging instrument as defined by ASC 815, Derivatives and Hedging. This process includes linking all derivatives that are designated as cash flow or fair value ~~or cash flow~~ hedges to specific assets and liabilities on the Consolidated Balance Sheets, or to specific firm commitments or forecasted transactions. These hedges are accounted for using ASC Topic 815. For all hedging relationships, the Company 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. The Company 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. When it is determined that a derivative is not highly effective as a hedge or has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

Changes in the fair value of floating-to-fixed interest rate swaps, T-Locks, commodity futures, and option contracts or foreign currency forward contracts, swaps, and options that are highly effective and that are designated and qualify as cash flow hedges are recorded in other comprehensive income, net of applicable income taxes. Realized gains and losses associated with changes in the fair value of interest rate swaps and T-Locks are reclassified from accumulated other comprehensive income (“AOCI”) to the Consolidated Statements of Income over the life of the underlying debt. Gains and losses on hedges of foreign currency cash flows associated with certain forecasted commercial transactions or loans are reclassified from AOCI to the Consolidated Statements of Income when such transactions or obligations are settled. Gains and losses on commodity hedging contracts are reclassified from AOCI to the Consolidated Statement of Income when the finished goods produced using the hedged item are sold. The maximum term over which the Company hedges exposures to the variability of cash flows for commodity price risk is generally 24 months. Changes in the fair value of a fixed-to-floating interest rate swap agreement that is highly effective and that is designated and qualifies as a

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fair value hedge, along with the loss or gain on the hedged debt obligation, are recorded in earnings. The ineffective portion of the change in fair value of a derivative instrument that qualifies as either a cash flow hedge or a fair value hedge is reported in earnings.

The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the cash flows or fair value of the hedged item, the derivative is de-designated as a hedging instrument because it is unlikely that a forecasted transaction will occur, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued, the Company continues to carry the derivative on the Consolidated Balance Sheets at its fair value, and gains and losses that were included in AOCI are recognized in 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 month a hedge is determined to be ineffective.

The Company uses derivative financial instruments such as foreign currency forward contracts, swaps and options to manage the transactional foreign exchange risk that is created when transactions not denominated in the functional currency of the operating unit are revalued. The changes in fair value of these derivative instruments and the offsetting changes in the value of the underlying non-functional currency denominated transactions are recorded in earnings on a monthly basis.

Share-based compensation: The Company 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 recognized in the Consolidated Statements of Income for the Company’s share-based employee compensation plan. The plan is more fully described in Note 1211 of the Notes to the Consolidated Financial Statements.

Earnings per common share: Basic earnings per common share (“EPS”) is computed by dividing net income attributable to ~~Ingredion~~the Company by the weighted average number of shares ~~outstanding, which totaled 72.0 million for 2017, 72.3 million for 2016 and 71.6 million for 2015.~~outstanding. Diluted EPS is calculated using the treasury stock method, computed by dividing net income attributable to ~~Ingredion~~the Company 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. The weighted average number of shares outstanding for diluted EPS calculations was 73.5 million, 74.1 million and 73.0 million for 2017, 2016, and 2015, respectively. Approximately 0.3 million, 0, and 0.3 million share-based awards of common stock were excluded in 2017, 2016, and 2015, respectively, from the calculation of the weighted average number of shares outstanding for diluted EPS because their effects were anti-dilutive.

Risks and uncertainties: The Company operates domestically and internationally. In each country, the business and assets are subject to varying degrees of risk and uncertainty. The Company insures its business and assets in each country against insurable risks in a manner that it deems appropriate. Because of this geographic dispersion, the Company

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believes that a loss from non-insurable events in any one country would not have a material adverse effect on the Company’s operations as a whole. Additionally, the Company believes there is no significant concentration of risk with any single customer or supplier whose failure or non-performance would materially affect the Company’s results.

~~New accounting standards:In May 2014, the FASB issued~~ Recently Adopted Accounting Standards

ASU No. ~~2014-09,~~ ~~Revenue from Contracts with Customers~~2016-02, Leases (Topic ~~606)~~ that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The FASB has also issued additional ASUs to provide further updates and clarification to this Update, including ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. We will adopt the standard as of the effective date, January 1, 2018. The standard will allow various transition approaches upon adoption. We plan to use the modified retrospective approach for the transition to the new standard. Based on the analysis performed by the Company to date, our assessment is that the adoption of the guidance in this Update is not expected to have a material impact on the Company’s revenue recognition timing or amounts, as we have not identified any material changes to the recognition of revenue for existing customer contracts.842)

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In February 2016, the FASB issued ~~ASU~~Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. This Update increases the transparency and comparability of organizations by recognizing lease assets and lease liabilities on the balance sheet for leases longer than 12 months and disclosing key information about leasing arrangements.Leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed. This Update is effective for annual periods beginning after December 15, 2018, with early adoption permitted. We currently plan to adopt theCompany adopted this updated standard as of January 1, 2019, using the modified retrospective approach and the effective ~~date. Adoption will require a modified retrospective approach~~date as its date of initial application. The Company elected the package of three practical expedients permitted under the transition guidance, which among other things allowed the Company to carry forward the historical lease classification of existing leases and to not reassess expired contracts for leases. The practical expedient for hindsight to determine lease term was not elected by the ~~transition. We expect~~Company. The standard resulted in the ~~adoption~~initial recognition of ~~the guidance in this Update to have a material impact on our Consolidated Balance Sheets, as~~$170 million of total operating ~~leases will be recognized both as~~lease liabilities and $161 million of operating lease assets ~~and liabilities~~ on the Consolidated Balance ~~Sheets. We~~Sheet on January 1, 2019. The standard did not materially impact the Consolidated Statement of Income or Consolidated Statement of Cash Flows. The disclosures required by the recently adopted accounting standard are included in Note 8 of the ~~process of quantifying~~Notes to the ~~magnitude of these changes and assessing the implementation approach for accounting for these changes.~~Consolidated Financial Statements.

~~In January 2017, the FASB issued~~ ASU No. ~~2017-04,~~ ~~Intangibles – Goodwill~~2017-12 and ~~Other~~ASU 2018-16, Derivatives and Hedging (Topic ~~350): Simplifying the Test for Goodwill Impairment~~. This Update simplifies the subsequent measurement of Goodwill as the Update eliminates Step 2 from the goodwill impairment test. Instead, under the Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss recognized not to exceed the total amount of goodwill allocated to that reporting unit. This Update is effective for annual periods beginning after December 15, 2019, with early adoption permitted.815)

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~. This Update requires an entity to change the classification of the net periodic benefit cost for pension and postretirement plans within the statement of income by eliminating the ability to net all of the components of the costs together within operating income. The Update will require the service cost component to continue to be presented within operating income, classified within either cost of sales or operating expenses depending on the employees covered within the plan. The remaining components of the net periodic benefit cost, however, must be presented in the statement of income as a non-operating income (loss) below operating income. The Update is effective for annual periods beginning after December 15, 2017, with early adoption permitted only within the first interim period for public entities. We plan to adopt this Update in 2018. When adopted, the new guidance must be applied retrospectively for all income statement periods presented. The Update will reduce the Company’s operating income and will require a new financial statement line item below operating income within the Consolidated Statements of Income for the non-operating income (loss) components. Net income within the Consolidated Statements of Income will not change upon adoption of the Update.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815):Targeted Improvements to Accounting for Hedging ~~Activities.~~ Activities. This Update modifies accounting guidance for hedge accounting by making more hedge strategies eligible for hedge accounting, amending presentation and disclosure requirements, and changing how companies assess ineffectiveness. The intent is to simplify the application of hedge accounting and increase transparency of information about an entity’s risk management activities. The amended guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. ~~We are in the process of assessing the effects~~The Company completed its assessment of these updates adopted on January 1, 2019, including potential changes to existing hedging ~~arrangement,~~arrangements, and determined the adoption of the guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as ~~well~~Benchmark Interest Rate for Hedge Accounting Purposes. This Update permits use of the OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes. The guidance should be adopted on a prospective basis. This Update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Update did not have a material impact on the Company’s Consolidated Financial Statements.

New Accounting Standards

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

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

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Presentation of Net Sales

During the three months ended December 31, 2019, the Company changed its presentation of shipping and handling costs. These costs were previously included as a reduction to Net sales in the Consolidated Statements of Income. The Company is now presenting these ~~changes.~~expenses within Cost of sales in the Consolidated Statements of Income. The change in presentation was applied retrospectively to all periods presented in the Consolidated Statements of Income. The change in presentation had no effect on Gross profit, Operating income, Net income, or earnings per share. The Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income, Consolidated Statements of Equity and Redeemable Equity, and Consolidated Statements of Cash Flows are not affected by this change in presentation. Total shipping and handling costs in for the year ended December 31, 2019 were $466 million.

The effect of the adjustment is as follows:


	2018				2017
(in millions)	As Reported		As Adjusted		As Reported		As Adjusted
Consolidated Statements of Income:
Net sales before shipping and handling costs	$	6,289	$	—	$	6,244	$	—
Less: shipping and handling costs		448		—		412		—
Net sales		5,841		6,289		5,832		6,244
Cost of sales		4,473		4,921		4,360		4,772
Gross profit	$	1,368	$	1,368	$	1,472	$	1,472


	For the Year Ended December 31, 2019
	First Fiscal Quarter				Second Fiscal Quarter				Third Fiscal Quarter
(in millions)	As Reported		As Adjusted		As Reported		As Adjusted		As Reported		As Adjusted
Net sales before shipping and handling costs	$	1,536	$	—	$	1,550	$	—	$	1,574	$	—
Less: shipping and handling costs		116		—		116		—		117		—
Net sales		1,420		1,536		1,434		1,550		1,457		1,574
Cost of sales		1,104		1,220		1,105		1,221		1,113		1,230
Gross profit	$	316	$	316	$	329	$	329	$	344	$	344


	For the Year Ended December 31, 2018
	First Fiscal Quarter				Second Fiscal Quarter				Third Fiscal Quarter				Fourth Fiscal Quarter
(in millions)	As Reported		As Adjusted		As Reported		As Adjusted		As Reported		As Adjusted		As Reported		As Adjusted
Net sales before shipping and handling costs	$	1,581	$	—	$	1,608	$	—	$	1,563	$	—	$	1,537	$	—
Less: shipping and handling costs		112		—		112		—		113		—		111		—
Net sales		1,469		1,581		1,496		1,608		1,450		1,563		1,426		1,537
Cost of sales		1,115		1,227		1,136		1,248		1,116		1,229		1,106		1,217
Gross profit	$	354	$	354	$	360	$	360	$	334	$	334	$	320	$	320

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	2018				2017
(in millions)	As Reported		As Adjusted		As Reported		As Adjusted
Net sales to unaffiliated customers:
North America	$	3,511	$	3,857	$	3,529	$	3,843
South America		943		988		1,007		1,052
Asia-Pacific		803		837		740		772
EMEA		584		607		556		577
Total	$	5,841	$	6,289	$	5,832	$	6,244

NOTE 3 – Acquisitions

On March ~~9, 2017,~~1, 2019, the Company completed its acquisition of ~~Sun Flour~~Western Polymer LLC (“Western Polymer”), a privately-held, U.S.-based company headquartered in ~~Thailand~~Moses Lake, Washington, that produces native and modified potato starches for ~~$18~~industrial and food applications for $42 million, net of cash acquired of $4 million. As of December 31, 2017, the Company had paid $16 million in cash and recorded $2 million in accrued liabilities for deferred payments due to the previous owner. The Company funded the acquisition primarily with cash on-hand. The acquisition ~~of Sun Flour adds a fourth~~will expand the Company's potato starch manufacturing ~~facility to our operations in Thailand. Sun Flour produces rice-based~~capacity, enhance processing capabilities, and broaden its higher-value specialty ingredients ~~used primarily in the food industry.~~business and customer base. The results of the acquired operation are included in the Company’s consolidated results from the acquisition date forward within the ~~Asia Pacific business segment, and $14 million of goodwill was allocated to that segment.~~

On December 29, 2016, the Company completed its acquisition of TIC Gums, a privately held, U.S.-based company that provides advanced texture systems to the food and beverage industry, for $396 million, net of cash acquired. The acquisition adds a manufacturing facility in both the U.S. and China. The Company funded the acquisition with proceeds from borrowings under its revolving credit agreement. The results of the acquired operations are included in the

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~~Company’s consolidated results from the respective acquisition dates forward within the~~ North America ~~and Asia Pacific business segments, and $175 million and $2 million of goodwill was allocated to those segments, respectively.~~

On November 29, 2016, the Company completed its acquisition of Shandong Huanong Specialty Corn Development Co., Ltd. (“Shandong Huanong”) in China for $12 million in cash. The Company funded the acquisition primarily with cash on-hand. The acquisition of Shandong Huanong, located in Shandong Province, adds second manufacturing facility to our operations in China. It produces starch raw material for our plant in Shanghai, which makes value-added ingredients for the food industry. The results of the acquired operation are included in the Company’s consolidated results from the acquisition date forward within the Asia Pacific business segment.

~~On August 3, 2015, the Company completed its acquisition of Kerr Concentrates, Inc. (“Kerr”), a privately held producer of natural fruit and vegetable concentrates for $102 million in cash.~~ Kerr serves major food and beverage companies, flavor houses and ingredient producers from its manufacturing locations in Oregon and California. The acquisition of Kerr provided the Company with the opportunity to expand its product portfolio. The Company finalized the purchase price allocation during the first quarter of 2016, which did not have a significant impact on previously estimated amounts. As a result of the acquisition, $27 million of goodwill was allocated to the North America segment.

On March 11, 2015, the Company completed its acquisition of Penford Corporation (“Penford”), a manufacturer of specialty starches that was headquartered in Centennial, Colorado. Total purchase consideration for Penford was $332 million, which included the extinguishment of $93 million in debt in conjunction with the acquisition. Purchase accounting for Penford was completed in 2015. The acquisition of Penford provides the Company with, among other things, an expanded specialty ingredient product portfolio consisting of potato starch-based offerings. Penford operates six manufacturing facilities in the U.S., all of which manufacture specialty starches. ~~As a result of the acquisition, $121 million of goodwill was allocated to the North America segment.~~

A preliminary allocation of the purchase price to the assets acquired and liabilities assumed was made based on available information and incorporating management’s best estimates. The assets acquired and liabilities assumed ~~for each acquisition~~ in the ~~transactions~~transaction are generally recorded at their estimated acquisition date fair values, while transaction costs associated with the ~~acquisitions were~~acquisition are expensed as incurred. ~~Goodwill~~As of December 31, 2019, $13 million of goodwill and intangible assets, ~~are open to be finalized for purchase accounting for Sun Flour as~~and $29 million of ~~December 31, 2017.~~

net tangible assets have preliminarily been recorded. Goodwill represents the amount by which the purchase price exceeds the estimated fair value of the net assets acquired. Goodwill and intangible assets are open to be finalized as of December 31, 2019 pending finalization of tax matters. The goodwill ~~of $177 million and $27 million for TIC Gums and Kerr, respectively, result~~results from synergies and other operational benefits expected to be derived from the ~~acquisitions.~~acquisition. The goodwill related to ~~TIC Gums, Shandong, and Kerr acquisitions~~Western Polymer is ~~tax deductible~~tax-deductible due to the structure of the ~~acquisitions. The goodwill related to Sun Flour is not tax deductible.~~acquisition.

~~The following table summarizes the finalized purchase price allocations for the acquisitions of TIC Gums and Kerr as of December 29, 2016, and August 3, 2015, respectively:~~

(in millions)

TIC Gums

Kerr
Working capital (excluding cash)

$
49

$
37
Property, plant and equipment

37

8
Other assets

—

1
Identifiable intangible assets

133

29
Goodwill

177

27
Total purchase price, net of cash

$
396

$
102

The identifiable intangible assets for the acquisition of TIC Gums and Kerr included items such as customer relationships, trade names, proprietary technology, and non-competition agreements. The fair values of these intangible assets were determined to be Level 3 under the fair value hierarchy. Level 3 inputs are unobservable inputs for 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 6.

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~~The following table presents the fair values, valuation techniques, and estimated remaining useful life at the acquisition date for these Level 3 measurements (dollars in millions):~~

Estimated
TIC Gums

Fair Value

Valuation Technique

Useful Life
Customer relationships

$
94

Multi-period excess earnings method

20 years
Trade names

35

Relief-from-royalty method

Indefinite
Proprietary technology

4

Relief-from-royalty method

8 years

Estimated
Kerr

Fair Value

Valuation Technique

Useful Life
Customer relationships

$
24

Multi-period excess earnings method

15 years
Trade names

4

Relief-from-royalty method

11 years
Non-competition agreements

1

Income approach method

3 years

The fair value of customer relationships, trade names, proprietary technology, and non-competition agreements 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.

~~The acquisitions of Sun Flour and Shandong Huanong added $21 million to goodwill and identifiable intangible assets and $9 million to net tangible assets as of their respective acquisition dates.~~

Included in the results of the acquired businesses for the years ended December 31, 2017 and 2015 was an increase in pre-tax cost of sales of $9 million and $10 million, respectively, relating to the sale of inventory that was adjusted to fair value at the acquisition dates for each acquired business in accordance with business combination accounting rules. The fair value adjustments for the year ended December 31, 2016, were not material.

Pro-forma results of operations for the ~~acquisitions~~acquisition made in ~~2017, 2016, and 2015~~the year ended December 31, 2019 have not been presented as the effect of ~~each~~the acquisition ~~individually and in aggregate~~ would not be material to the Company’s results of operations for any periods presented.

The Company incurred ~~$4 million,~~ $3 million, $ — , and ~~$10~~$4 million of pre-tax acquisition and integration costs in ~~2017, 2016,~~the years ended December 31, 2019, 2018, and ~~2015,~~2017, respectively, associated with its acquisitions.

NOTE 4 – ~~Sale~~Revenue Recognition

The Company applies the provisions of ~~Canadian Plant~~

~~On December 15, 2015,~~ASC 606-10, Revenue from Contracts with Customers. The Company recognizes revenue under the core principle to depict the transfer of products to customers in an amount reflecting the consideration the Company ~~sold its manufacturing assets~~expects to receive. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in ~~Port Colborne, Ontario, Canada for $35 million~~the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in ~~cash.~~ the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Company identified customer purchase orders, which in some cases are governed by a master sales agreement, as the contracts with its customers. For each contract, the Company 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, the Company evaluates whether the price is subject to adjustment to determine the consideration to which the Company expects to be entitled. The pricing model can be fixed or variable within the contract. The variable pricing model is based on historical commodity pricing and is determinable prior to completion of the performance obligation. Additionally, the Company 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

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satisfaction of the performance obligation and accounted for in Accounts payable and Accrued liabilities in the Consolidated Balance Sheets. These amounts are not significant as of December 31, 2019, and 2018. The product price as specified in the contract, net of any discounts, is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Payment is received shortly after the performance obligation is satisfied; therefore, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

Revenue is recognized when the Company’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, the Company 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. Taxes assessed by governmental authorities and collected from customers are accounted for on a net basis and excluded from net sales. The Company applies a practical expedient to expense costs to obtain a contract as incurred as most contracts are one year or less. These costs primarily include the Company’s internal sales force compensation. Under the terms of these programs, these are generally earned and the costs are recognized at the time the revenue is recognized.

From time to time the Company may enter into long-term contracts with its customers. Historically, the contracts entered into by the Company 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. There were no significant contract assets or liabilities as of December 31, 2019, and 2018.


(in millions)	2019		2018		2017
Net sales to unaffiliated customers:
North America	$	3,834	$	3,857	$	3,843
South America		960		988		1,052
Asia-Pacific		823		837		772
EMEA		592		607		577
Total	$	6,209	$	6,289	$	6,244

NOTE 5 – Restructuring and Impairment Charges

In the year ended December 31, 2019, the Company recorded $57 million of pre-tax ~~gain~~restructuring charges. Pre-tax restructuring charges of $28 million were recorded for the year ended December 31, 2019 for the Cost Smart SG&A program. These costs include $15 million, of other costs, including professional services, and $13 million of employee-related severance for the year ended December 31, 2019. These charges were recorded primarily in the Company’s North America and South America operations, and include $2 million of other costs associated with the Finance Transformation initiative in Latin America for the year ended December 31, 2019. The Company expects to continue to incur additional charges in 2020 related to the Cost Smart SG&A program.

Additionally, for the year ended December 31, 2019, the Company recorded $29 million for its Cost Smart Cost of sales program. During the year ended December 31, 2019, the Company recorded $15 million of restructuring charges in relation to the closure of the Lane Cove, Australia production facility, consisting of $10 million onof accelerated depreciation, $4 million of employee-related severance, and $1 million of other costs. The Company expects to incur additional expense of $10 million to $12 million in 2020 in relation to the closure, excluding potential proceeds from the sale ~~net~~ of land and equipment. Additionally, during the ~~write-off~~year ended December 31, 2019, the Company recorded $3 million of ~~goodwill of $2 million associated with the business.~~employee-related expenses primarily related to South America operations restructuring. The Company also recorded ~~pre-tax restructuring charges~~$11 million of $4other costs, including professional services, during the year ended December 31, 2019, primarily in North America including other costs of $2 million in ~~2015 associated with~~relation to the ~~sale~~prior year cessation of wet-milling at the ~~plant as described below. Additionally,~~Stockton, California

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plant. The Company does not expect to incur any additional costs in ~~2016~~relation to the cessation of wet-milling at the Stockton, California plant.

In the year ended December 31, 2018, the Company recorded ~~pre-tax restructuring charges of $2 million related to the Port Colborne plant sale.~~

~~NOTE 5 – Impairment and Restructuring Charges~~

~~In 2017, the Company recorded $38~~$64 million of pre-tax restructuring charges. During the first quarter of 2017, the Company implemented an organizational restructuring effort in Argentina in order to achieve a more competitive cost position. The Company notified the local labor union of a planned reduction in workforce, which resulted in a strike by the labor union and an interruption of manufacturing activities during the second quarter of ~~2017. The~~2018, the Company ~~finalized a new labor agreement with the labor union~~introduced its Cost Smart program, designed to improve profitability, further streamline its global business and deliver increased value to shareholders through anticipated savings in ~~the second quarter, ending the strike on June 1, 2017.~~cost of sales, including freight, and SG&A. For the year ended December 31, ~~2017,~~2018, the Company recorded ~~total pre-tax restructuring-related charges~~$49 million of restructuring expenses as part of the Cost Smart Cost of sales program in ~~Argentina~~relation to the cessation of ~~$17~~wet-milling at the Stockton, California plant, consisting of $34 million ~~for~~of accelerated depreciation, $8 million of mechanical stores, $3 million of employee-related severance and $4 million of other costs.

~~During~~As part of its Cost Smart SG&A program, during the ~~second~~third quarter of ~~2017,~~2018, the Company announced a Finance Transformation initiative in ~~North~~Latin America ~~for the U.S. and Canada businesses~~ to strengthen organizational capabilities and drive efficiencies to support the growth strategy of the Company. ~~For~~The Company recorded $4 million of employee-related severance and other costs for the year ended December 31, ~~2017, the Company recorded pre-tax restructuring charges of $6 million ($3 million of severance costs and $3 million of other costs) related~~2018, in relation to this initiative. ~~The Company expects to incur between $1~~In addition, restructuring expenses of $7 million ~~and $2~~($6 million ~~of additional~~ employee-related severance and ~~other costs in 2018.~~

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~~During the fourth quarter of 2017, the Company recorded $13 million of pre-tax restructuring charges related to its leaf extraction process in Brazil.~~ The charges consisted of $6 million of abandonment of certain assets, $6 million of inventory write downs and $1 million related to other costs, including employee-related severance costs. The Company expects to incur $1 million of ~~additional other costs~~consulting costs) were recorded as part of the Cost Smart SG&A program for the year ended December 31, 2018 in ~~2018.~~the South America, Asia-Pacific, and North America segments.

Additionally, for the year ended December 31, ~~2017,~~ 2018, the Company recorded $2$3 million of other ~~pre-tax~~ restructuring ~~charges including other employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities.~~

In 2016, the Company recorded $19 million of restructuring charges consisting of $11 million of employee-related severance and other costs due to the execution of global information technology outsourcing contracts, $6 million of employee-related severance costs associated with the ~~Company’s optimization initiatives in~~ North America ~~and South America, and $2~~Finance Transformation initiative as well as $1 million of other restructuring costs ~~attributable~~related to the ~~2015 Port Colborne plant sale.~~leaf extraction process in Brazil.

A summary of the Company’s severance accrual at December 31, ~~2017,~~2019, is as follows (in millions):

Balance in severance accrual as of December 31, 2016

$
7

Restructuring charge for employee-related severance costs:

Argentina

15

North America Finance Transformation

3

Other

3

Prior year restructuring activities

(2)

Payments made to terminated employees

(15)

Balance in severance accrual as of December 31, 2017

$
11


Balance in severance accrual as of December 31, 2018	$	10
Cost Smart Cost of sales and SG&A		20
Payments made to terminated employees		(16)
Foreign exchange translation		1
Balance in severance accrual as of December 31, 2019	$	15

Of the ~~$11~~$15 million severance accrual at December 31, ~~2017, $10~~2019, $14 million is expected to be paid within the next 12 months.

The Company assesses goodwill and other indefinite-lived intangible assets for impairment annually, ~~(or~~or more frequently if impairment indicators ~~arise) as of October 1 of each year. No~~arise. NaN goodwill or indefinite-lived intangible asset impairment was recognized in the ~~fourth quarters of~~years ended December 31, 2019, 2018, or 2017 ~~2016, or 2015~~ related to the Company’s annual impairment testing.

NOTE 6 – Financial Instruments, Derivatives and Hedging Activities

The Company 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, the Company actively manages its exposure to these market risks by entering into various hedging transactions, authorized under established policies that place ~~clear~~ controls on these activities. These transactions utilize exchange-traded derivatives or over-the-counter derivatives with investment grade counterparties. Derivative financial instruments currently used by the Company consist of commodity-related futures, options, and swap contracts, foreign currency-related forward contracts, and interest rate ~~swaps and T-Locks.~~swaps.

Commodity price ~~hedging:~~ hedging: The Company’s 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 the manufacturing process, generally over the next 12 to 24 months. The Company maintains a commodity-price risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by commodity-price volatility. For example, the manufacturing of the Company’s products requires a significant volume of corn and natural gas. Price fluctuations in corn and natural gas cause the actual purchase price of corn and natural gas to differ from anticipated prices.

To manage price risk related to corn purchases primarily in North America, the Company uses corn futures and ~~options~~option contracts that trade on regulated commodity exchanges to lock-in ~~its~~ corn costs associated with ~~firm-priced~~fixed-priced customer sales contracts. The Company also uses over-the-counter natural gas swaps in North America to hedge a portion of its natural gas ~~usage in North America.~~usage. These derivative financial instruments limit the impact that volatility resulting from fluctuations in market prices will have on corn and natural gas ~~purchases~~purchases. The Company’s natural gas derivatives and the majority of its corn derivatives have been designated as cash flow ~~hedges.~~ hedging instruments.

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The Company ~~also~~ enters into ~~futures contracts to hedge price risk associated with fluctuations in~~certain corn derivative instruments that are not designated as hedging instruments as defined by ASC 815, Derivatives and Hedging. Therefore, the ~~market price of ethanol. Unrealized~~realized and unrealized gains and losses

~~Table~~ from these instruments are recognized in cost of ~~Contents~~sales during each accounting period. These derivative instruments also 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 other comprehensive income (“OCI”) and included in the equity section of the Consolidated Balance Sheets as part of AOCI. These amounts 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 month a hedge is determined to be ineffective. The Company 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. ~~The amounts representing the ineffectiveness of these~~Gains and losses from cash flow ~~hedges~~hedging instruments reclassified from AOCI to earnings are ~~not significant.~~reported as Cash provided by operating activities on the Consolidated Statements of Cash Flows.

As of December 31, ~~2017, AOCI included $12~~2019, the Company had outstanding futures and option contracts that hedged the forecasted purchase of approximately 98 million bushels of ~~losses (net~~corn. The Company had outstanding swap and option contracts that hedged the forecasted purchase of ~~tax~~approximately 30 million mmbtu’s of ~~$7 million) pertaining~~natural gas at December 31, 2019.

Foreign currency hedging: Due to ~~commodities-related~~the its global operations, including operations in many emerging markets, the Company is exposed to fluctuations in foreign currency exchange rates. As a result, the Company 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. The Company’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. The Company enters into foreign currency derivative instruments that are designated as both cash flow ~~hedges. As~~hedging instruments as well as instruments not designated as hedging instruments as defined by ASC 815, Derivatives and Hedging, in order to mitigate transactional foreign-exchange risk. Gains and losses from derivative financial instruments not designated as hedging instruments are marked to market in earnings during each accounting period.

The notional value of the Company’s foreign currency derivatives not designated as hedging instruments included forward sales contracts of $621 million as of both December 31, 2019 and 2018. The notional value of the Company’s foreign currency derivatives not designated as hedging instruments also included purchase contracts with notional value of $356 million and $165 million as of December 31, ~~2016, AOCI included an insignificant amount pertaining to commodities-related derivative instruments designated as~~2019 and 2018, respectively.

The notional value of the Company’s foreign currency cash flow ~~hedges.~~hedging instruments included forward sales contracts of $374 million and $345 million as well as forward purchase contracts of $541 million and $275 million as of December 31, 2019, and 2018, respectively.

Interest rate hedging: The Company 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. The ~~Company maintains~~Company’s risk management ~~control systems~~strategy is to monitor interest rate risk attributable to both the Company’s outstanding and forecasted debt obligations as well as the Company’s offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including sensitivity analysis, to estimate the expected impact of changes in interest rates on future cash flows and the fair value of the Company’s outstanding and forecasted debt instruments.

Derivative financial instruments that have been used by the Company to manage its interest rate risk consist of interest rate swaps and T-Locks.

The Company has an interest rate swap agreement that converts the interest rates on $200 million of its $400 million of 4.625% senior notes due November 1, 2020, to variable rates. This swap agreement calls for the Company to receive interest at the fixed coupon rate of the respective notes and to pay interest at a variable rate based on the six-month U.S. dollar London Interbank Offered Rate (“LIBOR”) plus a spread. The Company has designated this interest rate swap agreement as a hedge of the changes in fair value of the underlying debt obligations attributable to changes in interest rates and accounts for it as a fair value hedging instrument. The change in fair value of an interest rate swap designated as a hedging instrument that effectively offsets the variability in the fair value of outstanding debt obligations is reported in earnings. This amount offsets the gain or loss (the change in fair value) of the hedged debt instrument that is attributable to changes in interest rates (the hedged risk), which is also recognized in earnings.

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The Company 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 AOCI 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. The Company also has interest rate swap agreements that effectively convert the interest rates on $200 million of its $400 million of 4.625 percent senior notes, due November 1, 2020, to variable rates. These swap agreements call for the Company to receive interest at the fixed coupon rate of the respective notes and to pay interest at a variable rate based on the six-month U.S. LIBOR rate plus a spread. The Company has designated these interest rate swap agreements as hedges of the changes in fair value of the underlying debt obligations attributable to changes in interest rates and accounts for them as fair value hedges. Changes in the 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 gain or loss (the change in fair value) of the hedged debt instrument that is attributable to changes in interest rates (the hedged risk), which is also recognized in earnings. The fair value of these interest rate swap agreements as of December 31, 2017 and 2016 was $1 million and $3 million, respectively, and is reflected in the Consolidated Balance Sheets within other assets, with an offsetting amount recorded in long-term debt to adjust the carrying amount of hedged debt obligations. The Company did not have any T-Locks outstanding as of December 31, ~~2017,~~2019, or 2016. As of December 31, 2017 and 2016, AOCI included $2 million of losses (net of income taxes of $1 million) and $4 million of losses (net of income taxes of $2 million), respectively, related to settled T-Locks. These deferred losses are being amortized to financing costs over the terms of the senior notes with which they are associated.2018.

~~Foreign currency hedging~~: Due to the Company’s global operations, including operations in many emerging markets, it is exposed to fluctuations in foreign currency exchange rates. As a result, the Company 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. The Company primarily uses derivative financial instruments such as foreign currency forward contracts, swaps and options to manage its transactional foreign exchange risk. As of December 31, 2017, the Company had foreign currency forward sales contracts that are designated as fair value hedges with an aggregate notional amount of $447 million and foreign currency forward purchase contracts with an aggregate notional amount of $121 million that hedged transactional exposures. As of December 31, 2016, the Company had foreign currency forward sales contracts with an aggregate notional amount of $432 million and foreign currency forward purchase contracts with an aggregate notional amount of $227 million that hedged transactional exposures. The fair values of these derivative instruments ~~were assets of $11 million and $5 million at December 31, 2017 and 2016, respectively.~~

~~Table of Contents~~

~~The Company also has foreign currency derivative instruments that hedge certain foreign currency transactional exposures and are~~ designated as cash flow ~~hedges. As~~hedges included in AOCI as of December 31, ~~2017, AOCI included $1 million of gains (net of income taxes of $1 million) related to foreign currency derivative instruments. As of December 31, 2016, the amounts included in AOCI related to these hedges were not significant.~~2019 and 2018 are reflected below:


Derivatives in Cash Flow Hedging Relationships	Amount of Gains (Losses) included in AOCI as of December 31,
(in millions)	2019		2018
Commodity contracts, net of income tax effect of $5 and $2, respectively	$	(11)	$	(2)
Foreign currency contracts, net of income tax effect of $1 and $ — , respectively		3		—
Interest rate contracts, net of income tax effect of $ — and $1, respectively		(1)		(2)
Total	$	(9)	$	(4)

By using derivative financial instruments to hedge exposures, the Company exposes itself to credit risk and market risk. Credit risk is the risk that the counterparty will fail to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not possess credit risk. The Company minimizes the credit risk in derivative instruments by entering into over-the-counter transactions only with investment grade counterparties or by utilizing exchange-traded derivatives. Market risk is the adverse effect on the value of a financial instrument that results from a change in commodity prices, interest rates or foreign exchange rates. The market risk associated with commodity-price, interest rate or foreign exchange contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

The fair value and balance sheet location of the Company’s derivative instruments, presented gross in the Consolidated Balance Sheets, are reflected below:

Fair Value of Derivative Instruments as of December 31, 2017

Derivatives Designated as Hedging Instruments (in millions):

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Commodity and foreign currency

Accounts receivable, net

$
11

Accounts payable and accrued liabilities

$
23

Commodity, foreign currency, and interest rate contracts

Other assets

3

Non-current liabilities

8

Total

$
14

$
31

Fair Value of Derivative Instruments as of December 31, 2016

Derivatives Designated as Hedging Instruments (in millions):

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Commodity and foreign currency

Accounts receivable, net

$
31

Accounts payable and accrued liabilities

$
25

Commodity, foreign currency, and interest rate contracts

Other assets

8

Non-current liabilities

2

$
39

$
27


	Fair Value of Hedging Instruments as of December 31, 2019
	Designated Hedging Instruments (in millions)								Non-Designated Hedging Instruments (in millions)
Balance Sheet Location		Commodity Contracts		Foreign Currency Contracts		Interest Rate Contracts	Total			Commodity Contracts		Foreign Currency Contracts		Interest Rate Contracts	Total
Accounts receivable, net	$	5	$	7	$	—	$	12	$	2	$	4	$	—	$	6
Other assets		1		3		1		5		—		1		—		1
Assets		6		10		1		17		2		5		—		7
Accounts payable and accrued liabilities		13		4		—		17		1		8		—		9
Non-current liabilities		4		4		—		8		—		2		—		2
Liabilities		17		8		—		25		1		10		—		11
Net (Liabilities)/Assets	$	(11)	$	2	$	1	$	(8)	$	1	$	(5)	$	—	$	(4)


	Fair Value of Hedging Instruments as of December 31, 2018
	Designated Hedging Instruments (in millions)								Non-Designated Hedging Instruments (in millions)
Balance Sheet Location		Commodity Contracts		Foreign Currency Contracts		Interest Rate Contracts	Total			Commodity Contracts		Foreign Currency Contracts		Interest Rate Contracts	Total
Accounts receivable, net	$	5	$	1	$	—	$	6	$	—	$	16	$	—	$	16
Other assets		1		—		—		1		—		1		—		1
Assets		6		1		—		7		—		17		—		17
Accounts payable and accrued liabilities		6		—		—		6		3		9		—		12
Non-current liabilities		3		—		1		4		—		4		—		4
Liabilities		9		—		1		10		3		13		—		16
Net (Liabilities)/Assets	$	(3)	$	1	$	(1)	$	(3)	$	(3)	$	4	$	—	$	1

As of December 31, 2017, the Company had outstanding futures and option contracts that hedged the forecasted purchase of approximately 92 million bushels of corn and 16 million pounds of soybean oil. The Company is unable to directly hedge price risk related to co-product sales; however, it occasionally enters into hedges of soybean oil (a competing product to corn oil) in order to mitigate the price risk of corn oil sales. The Company also had outstanding swap and option contracts that hedged the forecasted purchase of approximately 35 million mmbtu’s of natural gas at December 31, 2017. Additionally at December 31, 2017, the Company had outstanding ethanol futures contracts that hedged the forecasted sale of approximately 4 million gallons of ethanol.

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Additional information pertaining to the Company’s fair value hedges is presented below:


Line item in the statement of financial position in which the hedged item is included (in millions)	Carrying Amount of the Hedged Assets/(Liabilities)				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Assets/(Liabilities)
Balance sheet date as of	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Interest Rate Contracts:
Long-Term Debt	$	(201)	$	(199)	$	(1)	$	1

Additional information relating to the Company’s derivative instruments is presented ~~below (in millions, pre-tax):~~below:

Year ended December 31, 2017

Derivatives in Cash Flow Hedging Relationships

Amount of Gains
(Losses) Recognized in
OCI on Derivatives

Location of Gains (Losses) Reclassified from AOCI into Income

Amount of Gains
(Losses) Reclassified from
AOCI into Income

Commodity contracts

$
(22)

Cost of sales

$
(5)

Foreign currency contracts

6

Net sales/Cost of sales

1

Interest rate contracts

—

Financing costs, net

(2)

Total

$
(16)

$
(6)

Year ended December 31, 2016

Derivatives in Cash Flow Hedging Relationships

Amount of Gains
(Losses) Recognized in
OCI on Derivatives

Location of Gains (Losses) Reclassified from AOCI into Income

Amount of Gains
(Losses) Reclassified from
AOCI into Income

Commodity contracts

$
(15)

Cost of sales

$
(45)

Foreign currency contracts

(2)

Net sales/Cost of sales

(2)

Interest rate contracts

—

Financing costs, net

(2)

Total

$
(17)

$
(49)

Year ended December 31, 2015

Derivatives in Cash Flow Hedging Relationships

Amount of Gains
(Losses) Recognized in
OCI on Derivatives

Location of Gains (Losses) Reclassified from AOCI into Income

Amount of Gains
(Losses) Reclassified from
AOCI into Income

Commodity contracts

$
(61)

Cost of sales

$
(43)

Foreign currency contracts

—

Net sales/Cost of sales

—

Interest rate contracts

—

Financing costs, net

(3)

Total

$
(61)

$
(46)


Derivatives in Cash Flow Hedging Relationships	Gains (Losses) Recognized in OCI on Derivatives						Income Statement	Gains (Losses) Reclassified from AOCI into Income
(in millions)	2019		2018		2017		Location	2019		2018		2017
Commodity contracts	$	(24)	$	8	$	(22)	Cost of sales	$	(12)	$	(6)	$	(5)
Foreign currency contracts		5		—		6	Net sales/cost of sales		—		1		1
Interest rate contracts		—		—		—	Financing costs, net		(2)		(1)		(2)
Total	$	(19)	$	8	$	(16)		$	(14)	$	(6)	$	(6)


Derivatives in Fair Value Hedging Relationships	Income Statement Location of Derivatives Designated as	Gains (Losses) Recognized in Income						Income Statement Location	Gains (Losses) Recognized in Income
(in millions)	Hedging Instruments	2019		2018		2017		of Hedged Items	2019		2018		2017
Interest rate contracts	Financing costs, net	$	2	$	(2)	$	(2)	Financing costs, net	$	(2)	$	2	$	2

As of December 31, ~~2017,~~2019, AOCI included ~~approximately $9~~$7 million of net losses (net of income taxes of $5$2 million), on T-Locks, foreign currency hedges, and commodities-related derivative instruments designated as cash flow hedges that are expected to be reclassified into earnings during the next 12 months. Transactions and events expected to occur over the next twelve months that will necessitate reclassifying these derivative losses to earnings include the sale of finished goods inventory that includes previously hedged purchases of corn, natural gas and ethanol. The Company expects the losses to be offset by changes in the underlying commodities costs. Additionally at December 31, 2017, AOCI included $1 million of losses (net of income taxes of $1 million) on settled T-Locks and $1 million of gains (net of income taxes of $1 million) related to foreign currency hedges which are expected to be reclassified into earnings during the next 12 months. Cash flow hedges discontinued during ~~2017~~the years ended December 31, 2019 or ~~2016~~2018 were not significant.

Fair Value Measurements: Presented below are the fair values of the Company’s financial instruments and derivatives for the periods presented:


	As of December 31, 2019								As of December 31, 2018
(in millions)	Total		Level 1 (a)		Level 2 (b)		Level 3 (c)		Total		Level 1 (a)		Level 2 (b)		Level 3 (c)
Available for sale securities	$	13	$	13	$	—	$	—	$	11	$	11	$	—	$	—
Derivative assets		24		7		17		—		24		4		20		—
Derivative liabilities		36		5		31		—		26		6		20		—
Long-term debt		1,751		—		1,751		—		1,954		—		1,954		—

As of December 31, 2017

As of December 31, 2016

(in millions)

Total

Level 1 (a)

Level 2 (b)

Level 3 (c)

Total

Level 1 (a)

Level 2 (b)

Level 3 (c)

Available for sale securities

$
10

$
10

$
—

$
—

$
7

$
7

$
—

$
—

Derivative assets

14

3

11

—

39

6

33

—

Derivative liabilities

31

11

20

—

27

11

16

—

Long-term debt

1,845

—

1,845

—

1,929

—

1,929

—

(a)

Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets or liabilities.

(b)

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly for substantially the full term of the financial instrument. Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability or can be derived principally from or corroborated by observable market data.

(c)

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall be 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 the asset or liability at the measurement date.

The carrying values of cash equivalents, short-term investments, accounts receivable, accounts payable, and short-term borrowings approximate fair values. Commodity futures, options, and swap contracts are recognized at fair

~~Table of Contents~~

value. Foreign currency forward contracts, swaps, and options are also recognized at fair value. The fair value of the Company’s ~~long-term~~Long-term debt is estimated based on quotations of major securities dealers who are market makers in the securities. ~~Presented below are the carrying amounts and the fair values~~

Table of ~~the Company’s long-term debt at December 31, 2017 and 2016.~~Contents

December 31, 2017

December 31, 2016

Carrying

Fair

Carrying

Fair

(in millions)

Amount

Value

Amount

Value

3.2% senior notes due October 1, 2026

$
496

$
492

$
496

$
482

4.625% senior notes due November 1, 2020

398

421

398

428

6.625% senior notes due April 15, 2037

254

325

254

299

5.62% senior notes due March 25, 2020

200

212

200

217

1.8% senior notes due September 25, 2017

—

—

299

301

6.0% senior notes due April 15, 2017

—

—

200

202

Term loan credit agreement due April 25, 2019

395

395

—

—

Revolving credit facility

—

—

—

—

Fair value adjustment related to hedged fixed rate debt instrument

1

—

3

—

Total long-term debt

$
1,744

$
1,845

$
1,850

$
1,929

NOTE 7 – Financing Arrangements

The Company had total debt outstanding of ~~$1.9~~$1.8 billion and ~~$2.0~~$2.1 billion at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively. Short-term borrowings at December 31, ~~2017~~2019 and ~~2016~~2018 consist primarily of amounts outstanding under various unsecured local country operating lines of credit.

~~The $200 million of 6.0 percent senior notes due April 15, 2017, were refinanced with borrowings under the revolving credit facility in April 2017.~~

On ~~August 18, 2017,~~April 12, 2019, the Company ~~entered into a new~~amended and restated the Term Loan Credit Agreement that was set to mature on April 25, 2019 (“Term Loan”) of $165 million to establish a24-month senior unsecured term loan credit ~~facility. Under the Term Loan, the Company is allowed three borrowings~~facility in an amount of up to $500 million ~~total.~~that matures on April 12, 2021. The ~~Term Loan matures 18 months from~~Company used the ~~date~~$500 million of ~~the final borrowing. As of October 25, 2017, the Company had initiated all three~~ borrowings under the new facility to pay down amounts outstanding under its revolving credit facility and to pay off the Term Loan totaling $420 million, due April 25, 2019. The proceeds were used to refinance $300 million of 1.8 percent senior notes due September 25, 2017, and pay down borrowings outstanding on the revolving credit facility.balance.

All borrowings under the amended term loan credit agreement for the new facility (“Amended Term Loan ~~facility will~~Credit Agreement”) bear interest at a variable annual rate based on ~~the~~ LIBOR or a base rate, at the Company’s election, subject to the terms and conditions thereof, plus, in each case, an applicable margin. The Company is required to pay a fee on the unused availability under the Amended Term Loan Credit Agreement. The Amended Term Loan Credit Agreement contains customary representations, warranties, covenants and events of default, ~~terms and conditions,~~ including ~~limitations on liens,~~covenants restricting the incurrence of ~~debt, mergers~~liens, the incurrence of indebtedness by the Company’s subsidiaries and ~~significant asset dispositions.~~certain fundamental changes involving the Company and its subsidiaries, subject to certain exceptions in each case. The Company must also ~~comply with~~maintain a specified consolidated leverage ratio and consolidated interest coverage ratio. As of December 31, 2019, the Company was in compliance with these financial covenants. The occurrence of an event of default under the Amended Term Loan Credit Agreement could result in all loans and other obligations being declared due and payable and the term loan credit facility being terminated.

~~In December 2017, the Company paid down $25 million of the Term Loan. On January 16, 2018, the Company paid an additional $185 million towards the Term Loan. Both payments were made with cash on-hand.~~

On September 22, 2016, the Company issued 3.2 percent Senior Notes due October 1, 2026, in an aggregate principal amount of $500 million. These notes are unsecured obligations of the Company and rank equally with all of the Company’s other existing and future unsecured, senior indebtedness. Interest on the notes is required to be paid semi-annually in arrears on April 1 and October 1 of each year, commencing April 1, 2017. The Company may redeem these notes at its option, at any time in whole or from time to time in part, at the redemption prices set forth in the supplemental indenture pursuant to which these notes were issued. The net proceeds from the sale of the notes of approximately $497 million were used to repay the $350 million due under the Company’s Term Loan Credit Agreement, plus accrued interest, to repay $52 million of borrowings under the Company’s previously existing $1 billion revolving credit facility and for general corporate purposes.

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On October 11, 2016, the Company entered into a new five-year, senior, unsecured $1 billion revolving credit agreement (the “Revolving Credit Agreement”) that replaced ~~our~~its previously existing $1 billion senior unsecured revolving credit ~~facility that would have matured on October 22, 2017.~~ facility.

Subject to certain terms and conditions, the Company may increase the amount of the revolving credit facility under the Revolving Credit Agreement by up to $500 million in the aggregate. The Company may also obtain up to ~~two~~2 one-year extensions of the maturity date of the Revolving Credit Agreement at its requests and subject to the agreement of the lenders. All committed pro rata borrowings under the revolving credit facility ~~will~~ bear interest at a variable annual rate based on the LIBOR or base rate, at the Company’s election, subject to the terms and conditions thereof, plus, in each case, an applicable margin based on the Company’s leverage ratio (as reported in the financial statements delivered pursuant to the Revolving Credit Agreement) or the Company’s credit rating. Subject to specified conditions, the Company may designate one or more of its subsidiaries as additional borrowers under the Revolving Credit Agreement provided that the Company guarantees all borrowings and other obligations of any such subsidiaries thereunder.

The Revolving Credit Agreement contains customary representations, warranties, covenants, events of default, terms and conditions, including ~~limitations~~covenants restricting on liens, ~~incurrence of~~ subsidiary debt and ~~mergers.~~mergers, subject to certain exceptions in each case. The Company must also comply with a leverage ratio covenant and an interest coverage ratio covenant. As of December 31, 2019, the Company was in compliance with these financial covenants. The occurrence of an event of default under the Revolving Credit Agreement could result in all loans and other obligations under the agreement being declared due and payable and the revolving credit facility being terminated.

As of December 31, ~~2017,~~2019, there were no$10 million in borrowings outstanding under the Revolving Credit Agreement. In addition to borrowing availability under its Revolving Credit Agreement, the Company has approximately ~~$488~~$585 million of unused operating lines of credit in the various foreign countries in which it operates.

~~Long-term~~72

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Presented below are the Company’s debt carrying amounts, net of related discounts, premiums, and debt issuance costs, ~~consists~~and fair values as of ~~the following at~~ December ~~31:~~31, 2019 and 2018:

(in millions)

2017

2016

3.2% senior notes due October 1, 2026

$
496

$
496

4.625% senior notes due November 1, 2020

398

398

6.625% senior notes due April 15, 2037

254

254

5.62% senior notes due March 25, 2020

200

200

1.8% senior notes due September 25, 2017

—

299

6.0% senior notes due April 15, 2017

—

200

Term loan credit agreement due April 25, 2019

395

—

Revolving credit facility

—

—

Fair value adjustment related to hedged fixed rate debt instruments

1

3

Long-term debt

1,744

1,850

Short-term borrowings

120

106

Total debt

$
1,864

$
1,956


	December 31, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
(in millions)	Amount		Value		Amount		Value
3.2% senior notes due October 1, 2026	$	497	$	491	$	496	$	462
4.625% senior notes due November 1, 2020		400		399		399		409
6.625% senior notes due April 15, 2037		253		246		254		295
5.62% senior notes due March 25, 2020		200		200		200		205
Term loan credit agreement due April 25, 2019		—		—		165		165
Term loan credit agreement due April 12, 2021		405		405		—		—
Revolving credit facility		10		10		418		418
Fair value adjustment related to hedged fixed rate debt instrument		1		—		(1)		—
Long-term debt		1,766		1,751		1,931		1,954
Short-term borrowings		82		82		169		169
Total debt	$	1,848	$	1,833	$	2,100	$	2,123

The Company’s long-term debt matures as follows: $600 million in 2020, $500 million in 2026, and $250 million in 2037.

The Company’s ~~term loan~~Term Loan of ~~$395~~$405 million matures in ~~2019.~~2021. The Company’s long-term debt as of December 31, 2019 includes the 5.62% senior notes due March 25, 2020 and 4.625% senior notes due November 1, 2020. The Company has the ability and intent to refinance such senior notes on a long-term basis using the revolving credit facility or other sources prior to the maturity date.

The Company guarantees certain obligations of its consolidated subsidiaries. The amount of the obligations guaranteed aggregated ~~$56 million and $121~~$57 million at December 31, ~~2017~~2019 and ~~2016, respectively.~~2018.

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NOTE 8 – Leases

The Company determines if an arrangement is a lease at inception of the agreement. Operating leases are included in operating lease assets, and current and non-current operating lease liabilities in the Company’s Consolidated Balance Sheets. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease asset value includes in its calculation any prepaid lease payments made and any lease incentives received from the arrangement as a reduction of the asset. The Company’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 the Company’s sole discretion and it is reasonably certain that the Company will exercise that option. The Company will not separate lease and non-lease components for its leases when it is impracticable to separate the two, such as leases with variable payment arrangements. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

The Company has operating leases for certain rail cars, ~~certain~~office space, warehouses, and machinery and ~~equipment,~~equipment. The commencement date used for the calculation of the lease obligations recorded is the latter of the commencement date of the new standard (January 1, 2019) or the lease start date. Certain of the 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 the Company and ~~office space under various~~it is reasonably certain that the Company will exercise the option. The Company has certain leases that have variable payments

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based solely on output or usage of the leased asset. These variable operating lease assets are excluded from the Company’s balance sheet presentation and expensed as incurred. The Company currently has no finance leases. ~~Rental~~

Lease expense ~~under~~for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense were as follows:


Lease Cost	Year Ended December 31,
(in millions)	2019
Operating lease cost	$	55
Variable operating lease cost		24
Short term lease cost		3
Lease cost	$	82

The following is a reconciliation of future undiscounted cash flows to the operating lease liabilities and the related operating lease assets as presented on the Company’s Consolidated Balance Sheet as of December 31, 2019.


Operating Leases		As of
(in millions)		December 31, 2019
2020	$	49
2021		39
2022		30
2023		23
2024		15
Thereafter		33
Total future lease payments		189
Less imputed interest		28
Present value of future lease payments		161
Less current lease liabilities		41
Non-current operating lease liabilities	$	120
Operating lease assets	$	151

Additional information related to the Company’s operating leases ~~was $51~~is listed below. The standard resulted in the initial recognition of $170 million ~~$53~~of total operating lease liabilities. The right-of-use assets obtained in exchange for lease liabilities for the year ended December 31, 2019 includes the initial recognition of $161 million ~~and $52 million in 2017, 2016, and 2015, respectively. Minimum~~of operating lease assets as part of the adoption of the new lease standard.

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Other Information	Year Ended December 31,
($ in millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	55
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	212
	As of
	December 31, 2019
Weighted average remaining lease term:
Operating leases		5.5 years
Weighted average discount rate:
Operating leases		5.7	%

As the Company has not restated prior-year information for its adoption of ASC Topic 842, the following presents its future minimum lease payments ~~due~~for operating leases under ASC Topic 840 on ~~non-cancellable leases existing at~~ December 31, ~~2017, are shown below:~~2018:


Year (in millions)	Minimum Lease Payments
2018	$	45

Operating Leases			As of
(in millions)			December 31, 2018
2019		40	$	53
2020		31		44
2021		25		40
2022		20		27
Balance thereafter		36
2023				22
Thereafter				27
Total future lease payments			$	213

NOTE 9 – Income Taxes

The components of income before income taxes and the provision for income taxes are shown below:


(in millions)	2019		2018		2017
Income before income taxes:
U.S.	$	74	$	121	$	226
Foreign		508		500		543
Total income before income taxes		582		621		769
Provision for income taxes:
Current tax (benefit) expense:
U.S. federal		6		17		(13)
State and local		2		1		4
Foreign		147		172		179
Total current tax expense		155		190		170
Deferred tax expense (benefit):
U.S. federal		(8)		(14)		77
State and local		—		(2)		4
Foreign		11		(7)		(14)
Total deferred tax expense (benefit)		3		(23)		67
Total provision for income taxes	$	158	$	167	$	237

(in millions)

2017

2016

2015

Income before income taxes:

U.S.

$
226

$
176

$
109

Foreign

543

566

490

Total income before income taxes

769

742

599

Provision for income taxes:

Current tax (benefit) expense:

U.S. federal

(13)

95

26

State and local

4

8

3

Foreign

179

148

164

Total current tax expense

170

251

193

Deferred tax expense (benefit):

U.S. federal

77

13

(8)

State and local

4

1

(1)

Foreign

(14)

(19)

3

Total deferred tax expense (benefit)

67

(5)

(6)

Total provision for income taxes

$
237

$
246

$
187

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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, ~~2017~~2019 and ~~2016~~2018 are summarized as follows:



(in millions)	2017		2016		2019		2018
Deferred tax assets attributable to:
Employee benefit accruals	$	20	$	39	$	23	$	20
Pensions and postretirement plans		20		30		22		23
Lease liabilities						39		—
Derivative contracts		5		3		2		1
Net operating loss carryforwards		32		18		24		26
Foreign tax credit carryforwards		—		4		1		1
Other		—		24
Gross deferred tax assets		77		118		111		71
Valuation allowances		(34)		(21)		(29)		(31)
Net deferred tax assets		43		97		82		40
Deferred tax liabilities attributable to:
Property, plant and equipment		185		206		175		177
Identified intangibles		37		55		41		39
Right-of-use lease assets						37		—
Other		11		—		11		3
Gross deferred tax liabilities		233		261		264		219
Net deferred tax liabilities	$	190	$	164	$	182	$	179

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Of the ~~$32~~$24 million of tax-effected net operating loss carryforwards as of December 31, ~~2017,~~2019, approximately $9 million are for state loss carryforwards and approximately ~~$23~~$15 million are for foreign loss carryforwards. Of the ~~$18~~$26 million of tax-effected net operating loss carryforwards as of December 31, ~~2016,~~2018, approximately $8$11 million are for state loss ~~carryforwards.~~ carryforwards and approximately $15 million are for foreign loss carryforward. Income tax accounting requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In making this assessment, management considers the level of historical taxable income, scheduled reversal of deferred tax liabilities, tax planning strategies, tax carryovers and projected future taxable income. As of December 31, ~~2017,~~2019, the Company ~~maintains~~maintained valuation allowances of $9 million for state loss carryforwards, $2$4 million for state credits, $1 million for state section 163(j) limitations, $1 million for foreign tax credits and ~~$21~~$13 million for foreign loss carryforwards ~~that~~all of which management has determined will more likely than not expire prior to realization. As of December 31, ~~2016,~~2018, the Company maintains valuation allowances of $8$11 million for state loss carryforwards, $2$3 million for state credits and $9$14 million for foreign loss carryforwards ~~that~~all of which management has determined will more likely than not expire prior to realization. In addition, the Company maintains valuation allowances on foreign subsidiaries’ net deferred tax assets of $2$1 million and $3 million, for ~~both~~ the years ended December 31, ~~2017~~2019 and ~~2016.~~2018, respectively.

A reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate follows:


	2019		2018		2017
Provision for tax at U.S. statutory rate	21.0	%	21.0	%	35.0	%
Tax rate difference on foreign income	5.8		5.3		(5.6)
Net impact of tax benefit of intercompany financings	(1.2)		(0.8)		(0.8)
Net impact of global intangible low-taxed income (“GILTI”)	1.2		1.0		—
Net impact of U.S. foreign tax credits	1.0		0.5		0.3
Net impact of U.S.-Canada tax settlement	—		0.3		(1.3)
Net impact of valuation allowance in Argentina	0.3		1.0		2.0
Net impact of transition tax	—		0.6		2.7
Net impact of U.S. deferred tax remeasurement	—		—		(4.9)
Net impact of provision for taxes on unremitted earnings	—		0.3		4.3
Other items, net	(1.0)		(2.3)		(0.9)
Provision at effective tax rate	27.1	%	26.9	%	30.8	%

2017

2016

2015

Provision for tax at U.S. statutory rate

35.0
%
35.0
%
35.0
%
Tax rate difference on foreign income

(5.6)

(5.5)

(5.8)

State and local taxes, net

0.7

0.3

0.3

Tax impact of fluctuations in Mexican peso to U.S. dollar

(0.5)

2.4

2.9

Net impact of U.S. foreign tax credits

0.3

(2.3)

0.9

Net impact of U.S.-Canada tax settlement

(1.3)

3.2

—

Net impact of valuation allowance in Argentina

2.0

1.0

—

Net impact of transition tax

2.7

—

—

Net impact of U.S. deferred tax remeasurement

(4.9)

—

—

Net impact of provision for taxes on unremitted earnings

4.3

0.5

—

Other items, net

(1.9)

(1.5)

(2.1)

Provision at effective tax rate

30.8
%
33.1
%
31.2
%

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The Company has significant operations in ~~Canada,~~ Mexico, Pakistan and ~~Pakistan~~Colombia where the 2019 statutory tax rates are ~~25 percent,~~ 30 percent, 29 percent and 3033 percent, ~~in 2017,~~ respectively. In addition, the Company's subsidiary in Brazil has a statutory tax rate of 34 percent before local incentives that vary each year.

The Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017. The TCJA introduced numerous changes in the U.S. federal tax laws. Changes that have a significant impact on ~~our~~the Company’s effective tax rate are a reduction in the U.S. corporate tax rate from 35 percent to 21 percent, ~~and~~ the imposition of a U.S. tax on ~~our~~ global intangible low-taxed income (“GILTI”). and the foreign-derived intangible income (“FDII”) deduction. The TCJA also ~~provides~~provided for a one-time transition tax on the deemed repatriation of cumulative foreign earnings as of December 31, 2017 and ~~eliminates~~eliminated the tax on dividends from ~~our~~ foreign subsidiaries by allowing a ~~100 percent~~100-percent dividends received deduction.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to provide guidance on the application of GAAP to situations in which the registrant does not have all the necessary information available, prepared or analyzed (including computations) in sufficient detail to complete the accounting for the income tax effects of the TCJA.

~~Table~~In the fourth quarter of ~~Contents~~

~~The~~2017, the Company ~~has~~ calculated ~~what it believes is~~ a ~~reasonable estimate of the~~provisional impact of the TCJA in accordance with SAB 118 and its understanding of the TCJA, including published guidance as of December 31, 2017. During the ~~date of this filing,~~third and ~~has recorded $23 million of provisional income tax expense in the~~ fourth quarter of ~~2017,~~2018, the ~~period in which~~Company recorded $2 million and $1 million, respectively, of net incremental tax expense, as the Company finalized its TCJA ~~was enacted. The provisional amount of $23 million is composed of the following four items:~~

~~The Company may update its estimate in 2018 as~~expense based on additional ~~information, including~~ guidance from federal and state regulatory ~~agencies, becomes available~~agencies. The following table summarizes the provisional and ~~it finalizes its computations, which are complex and subject~~final impact of the TCJA:


	Provisional 2017		Final 2017
(in millions)	TCJA Impact		TCJA Impact
One-time transition tax	$	21	$	25
Remeasurement of deferred tax assets and liabilities		(38)		(38)
Net impact of provision for taxes on unremitted earnings		33		35
Other items, net		7		4
Net impact of the TCJA	$	23	$	26

Pro-forma results related to ~~interpretation. Any adjustment~~TCJA have not been presented, as the effect would not be material to ~~these provisional tax amounts will be recorded in~~ the ~~quarter of 2018 in which~~Company’s results for the ~~analysis is completed.~~periods presented.

Under a provision in the TCJA, all of the undistributed earnings of ~~our~~the Company’s foreign subsidiaries were deemed to be repatriated at December 31, 2017 and were subjected to a transition tax. As a result, a provisional transition tax liability of $21 million, or 2.7 percentage points on the effective tax rate, was recorded in income from continuing operations in the fourth quarter of 2017. ~~Although these earnings that were deemed to be repatriated are not subject to additional U.S. federal income~~During the third quarter of 2018, the Company finalized the transition tax ~~upon distribution, these earnings could be subject to foreign withholding~~analysis and ~~state income~~recorded an incremental $4 million liability, or 0.6 percentage points on the effective tax ~~upon distribution. In addition, distributions of these previously-taxed earnings could give rise to taxable exchange gain or loss in the U.S.~~rate.

As a result of the reduction in the U.S. corporate tax rate, the Company recorded a ~~provisional~~ tax benefit of $38 million, or 4.9 percentage points on the effective tax rate, due to the remeasurement of its U.S. net deferred tax ~~liabilities.~~liabilities, in the fourth quarter of 2017.

Due to a change in the U.S. tax treatment of dividends received from foreign subsidiaries, in the fourth quarter of 2017, the Company ~~has~~ recorded a provisional tax liability of $33 million, or 4.3 percentage points on the effective tax rate, for foreign dividend withholding and state income taxes payable upon the distribution of unremitted earnings from certain foreign subsidiaries from which it ~~expects~~expected to receive cash distributions in 2018 and beyond. During the second half of 2018, the Company finalized the provision for taxes on unremitted earnings and recorded an additional $2 million liability, or 0.3 percentage points on the effective rate.

The net impact of the TCJA on ~~its~~the Company’s 2017 tax expense ~~includes~~included a provisional tax liability of $7 million, or 0.9 percentage points on the effective tax rate (included in other items, net), for the difference in its 2017 tax expense as calculated with and without the changes triggered by the TCJA.

~~Because~~ During the second half of ~~the complexity of the new GILTI rules,~~2018, the Company ~~is continuing to evaluate this provision~~finalized other items, net and recorded a net $3 million benefit, or 0.4 percentage points on the effective tax rate.

In the fourth quarter of ~~the TCJA for the application of ASC 740. Under GAAP,~~2018, the Company ~~is allowed to make~~made an accounting ~~policy choice of either treating~~election to treat taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) ~~or factoring such amounts into our measurement~~

Table of our deferred taxes (the “deferred method”). The Company has not made any adjustments related to potential GILTI tax in its financial statements, as it has not made a policy decision regarding whether to record deferred taxes on GILTI.Contents

The Company had been pursuing relief from double taxation under the U.S.-Canada tax treaty for the years 2004 through 2013. During the fourth quarter of 2016, a tentative settlement was reached between the U.S. and Canada and, consequently, the Company established a net reserve of $24 million, including interest thereon, recorded as a $70 million cost and a $46 million benefit, or 3.2 percentage points on the effective tax rate. In addition, as a result of the settlement, for the years 2014 through 2016, the Company had established a net reserve of $7 million, or 1.0 percentage points on the effective tax rate in 2016. In the third quarter of 2017, the two countries finalized the agreement, which eliminated the double taxation, and the Company paid $63 million to the U.S. Internal Revenue Service to settle the liability. As a result of that agreement, the Company iswas entitled to a net tax benefit of $10 million primarily due to a foreign exchange loss deduction on its 2017 U.S. federal income tax return, or 1.3 percentage points on the effective tax rate.

~~The Company uses the U.S. dollar as the functional currency for its subsidiaries in Mexico. Because~~ As a result of the ~~increase in~~final settlement, the ~~value of the Mexican peso versus the U.S. dollar in 2017, the Mexican tax provision includes decreased tax expense of approximately $4~~Company received refunds totaling $42 million from Canadian revenue agencies and recorded $2 million, or 0.5 percentage points, on the effective tax rate. In 2016 and 2015, a decline in value of the Mexican peso versus the U.S. dollar increased tax expense by $18 million and $17 million, or 2.4 percentage

~~Table of Contents~~

~~points and 2.9~~0.3 percentage points on the effective tax rate, ~~respectively. These impacts are largely associated with foreign currency translation gains~~of interest and ~~losses for local~~penalties through tax ~~purposes on net U.S. dollar monetary assets held~~expense in ~~Mexico for which there is no corresponding gain or loss in pre-tax income.~~2018.

During ~~2017,~~2019, the Company increased the valuation allowance on the net deferred tax assets in Argentina. As a result, the Company recorded a valuation allowance in the amount of $2 million, or 0.3 percentage points on the effective tax rate, compared to $6 million, or 1.0 percentage points on the effective tax rate, and $16 million, or 2.0 percentage points on the effective tax rate ~~compared to $7 million~~in 2018 and ~~or 1.0 percentage points on the effective tax rate in 2016.~~2017, respectively.

During 2015, an audit was settled at a National Starch subsidiary related to a pre-acquisition period for which we are indemnified by Akzo Nobel N.V. (“Akzo”). In the third quarter of 2014, the Company recognized increased tax expense to reserve approximately $7 million ($5 million of tax and $2 million of interest) or 1.3 percentage points in the effective tax rate for the audit. In the third quarter of 2015 the reserve was reduced by approximately $4 million ($3 million of tax and $1 million of interest) which resulted in a decrease of 0.7 percentage points in the 2015 effective tax rate. These impacts are included in the rate reconciliation as “Other items, net.” The $7 million of tax expense and $4 million of reduced tax expense were recorded in the tax provision of the subsidiary, while the reimbursement from Akzo under the indemnity is recorded as other income, which results in no impact in net income for all periods.

As of December 31, 2017, for U.S. tax purposes all of the undistributed earnings and profits of ~~our~~the Company’s foreign subsidiaries were deemed to be repatriated and subjected to a transition tax. In addition, during 2017 weand 2018 the Company recorded a ~~provisional~~ liability of $33 million and $2 million, respectively, for foreign withholding and state income taxes on certain unremitted earnings from foreign subsidiaries. However, ~~we have~~the Company has not provided for foreign withholding taxes, state income taxes and federal and state taxes on foreign currency gains/losses on distributions of approximately ~~$2.7~~$3.0 billion of unremitted earnings of ~~our~~the Company’s foreign ~~subsidiaries;~~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 ~~2017~~2019 and ~~2016~~2018 is as follows:



(in millions)	2017		2016		2019		2018
Balance at January 1	$	86	$	12	$	30	$	39
Additions for tax positions related to prior years		—		72		—		—
Reductions for tax positions related to prior years		—		(9)		—		(2)
Additions based on tax positions related to the current year		12		12		—		—
Settlements		(58)		—		—		—
Reductions related to a lapse in the statute of limitations		(1)		(1)		(8)		(7)
Balance at December 31	$	39	$	86	$	22	$	30

Of the ~~$39~~$22 million of unrecognized tax benefits as of December 31, ~~2017, $15~~2019, $5 million represents the amount that, if recognized, could affect the effective tax rate in future periods. The remaining ~~$24~~$17 million includes an offset of ~~$23~~$15 million for an income tax receivable and $1 million of federal benefit created as part of the U.S.-Canada tax settlement described previously. The remaining benefit is a $1 million foreign tax credit.

The Company accounts for interest and penalties related to income tax matters within the provision for income taxes. The Company has accrued $2 million of interest expense related to the unrecognized tax benefits as of December 31, ~~2017.~~2019. The accrued interest expense was $9$2 million as of December 31, ~~2016.~~2018.

The Company 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 ~~2014 to 2017.~~2016 through 2019. In general, the Company’s foreign subsidiaries remain subject to audit for years ~~2011~~2013 and later.

It is also reasonably possible that the total amount of unrecognized tax benefits including interest and penalties will increase or decrease within 12 months of December 31, ~~2017.~~2019. The Company believes it is reasonably possible approximately $9 million of unrecognized tax benefits may be recognized within 12 months of December 31, 2019 as a result of a lapse of the statute of limitations, of which $2 million, could affect the effective tax rate. The Company has classified none of the unrecognized tax benefits as current because they are not expected to be resolved within the next 12 months.

8278

Table of Contents

NOTE 10 – Benefit Plans

The Company 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. The Company’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 the Company’s policy in those countries is to make contributions required by the terms of the applicable plan.

Included in the Company’s pension obligation are nonqualified supplemental retirement plans for certain key employees. Benefits provided under these plans are ~~only partially funded,~~unfunded and payments to plan participants are made directly by the Company.

The Company also provides healthcare and/or life insurance benefits for retired employees in the U.S., Canada, and Brazil. Healthcare benefits for retirees outside of the U.S., Canada, and Brazil are generally covered through local government plans.

On December 31, 2016, the Company merged its existing U.S. qualified pension plans into the Ingredion Incorporated Cash Balance Plan for Salaried Employees. The Ingredion Incorporated Cash Balance Plan for Salaried Employees was renamed the Ingredion Pension Plan (“Combined Plan”). Certain U.S. salaried employees are covered by a component of the Combined Plan which provides benefits based on service credits to the participating employees’ accounts of between 3 percent and 10 percent of base salary, bonus, and overtime. On January 1, 2017, the Company amended this component of the Combined Plan to eliminate the service credit percentage increases and freeze them at the January 1, 2017, rate for eligible salaried employees. The amendment also impacted the nonqualified supplemental retirement plans. The plan amendment resulted in a reduction of the benefit obligation of $5 million as of December 31, 2016. The benefit will be recognized over the remaining life of the plan as a prior service cost benefit.

In April 2016, the Company performed a pension remeasurement for one of its pension plans in Canada as a result of lump sum settlement payments made related to the Port Colborne plant sale. This plan settlement resulted in a reduction in the funded status of the Plan by $5 million. The Company recorded a pension charge of $1 million as a result of the settlement.

Pension Obligation and Funded Status: The changes in pension benefit obligations and plan assets during ~~2017~~the years ended December 31, 2019 and ~~2016,~~2018, as well as the funded status and the amounts recognized in the Company’s Consolidated Balance Sheets related to the Company’s pension plans at December 31, ~~2017~~2019, and ~~2016,~~2018, were as follows:


	U.S. Plans				Non-U.S. Plans
(in millions)	2019		2018		2019		2018
Benefit obligation
At January 1	$	357	$	393	$	223	$	248
Service cost		5		6		3		3
Interest cost		14		13		10		10
Benefits paid		(28)		(26)		(11)		(12)
Actuarial loss (gain)		39		(27)		24		(8)
Curtailment/settlement/amendments		—		(2)		(2)		—
Foreign currency translation		—		—		7		(18)
Benefit obligation at December 31	$	387	$	357	$	254	$	223

Fair value of plan assets
At January 1	$	353	$	404	$	207	$	235
Actual return on plan assets		82		(25)		24		—
Employer contributions		1		2		7		4
Benefits paid		(28)		(26)		(11)		(12)
Plan settlements		—		(2)		(3)		—
Foreign currency translation		—		—		7		(20)
Fair value of plan assets at December 31	$	408	$	353	$	231	$	207

Funded status	$	21	$	(4)	$	(23)	$	(16)

~~Table of Contents~~

U.S. Plans

Non-U.S. Plans

(in millions)

2017

2016

2017

2016

Benefit obligation

At January 1

$
367

$
359

$
223

$
219

Service cost

6

6

3

3

Interest cost

13

14

11

10

Benefits paid

(23)

(16)

(12)

(15)

Actuarial (gain) loss

30

10

7

6

Curtailment/settlement/amendments

—

(6)

—

(5)

Foreign currency translation

—

—

16

5

Benefit obligation at December 31

$
393

$
367

$
248

$
223

Fair value of plan assets

At January 1

$
368

$
354

$
211

$
206

Actual return on plan assets

59

20

17

11

Employer contributions

—

10

5

7

Benefits paid

(23)

(16)

(12)

(15)

Plan settlements

—

—

—

(5)

Foreign currency translation

—

—

14

7

Fair value of plan assets at December 31

$
404

$
368

$
235

$
211

Funded status

$
11

$
1

$
(13)

$
(12)

Amounts recognized in the Consolidated Balance Sheets as of December 31, ~~2017~~2019 and ~~2016~~2018, were as follows:


	U.S. Plans				Non-U.S. Plans
(in millions)	2019		2018		2019		2018
Non-current asset	$	32	$	7	$	31	$	32
Current liabilities		(1)		(1)		(2)		(1)
Non-current liabilities		(10)		(10)		(52)		(47)
Net asset (liability) recognized	$	21	$	(4)	$	(23)	$	(16)

U.S. Plans

Non-U.S. Plans

(in millions)

2017

2016

2017

2016

Non-current asset

$
23

$
12

$
37

$
29

Current liabilities

(2)

(1)

(1)

(1)

Non-current liabilities

(10)

(10)

(49)

(40)

Net asset (liability) recognized

$
11

$
1

$
(13)

$
(12)

Table of Contents

Amounts recognized in accumulated other comprehensive loss, excluding tax effects, that have not yet been recognized as components of net periodic benefit cost at December 31, ~~2017~~2019 and ~~2016~~2018, were as follows:


	U.S. Plans				Non-U.S. Plans

									U.S. Plans				Non-U.S. Plans
(in millions)	2017		2016		2017		2016		2019		2018		2019		2018
Net actuarial loss	$	21	$	28	$	55	$	52	$	15	$	40	$	62	$	57
Transition obligation		—		—		1		1		—		—		1		1
Prior service credit		(6)		(6)		(1)		(1)		(6)		(6)		—		(1)
Net amount recognized	$	15	$	22	$	55	$	52	$	9	$	34	$	63	$	57

The decrease in the net amount recognized in accumulated comprehensive loss at December 31, ~~2017,~~2019, for the U.S. plans as compared to December 31, ~~2016,~~2018, is mainly due to the actual return on assets ~~being greater than~~exceeding the expected return on assets. This is partially offset by the effect of the decrease in discount rates used to measure the Company’s obligations under its U.S. pension plans.

The increase in the net amount recognized in accumulated comprehensive loss at December 31, ~~2017,~~2019, for the Non-U.S. plans, as compared to December 31, ~~2016,~~2018, is ~~largely~~mainly due to ~~the effect of~~ the decrease in discount rates used to measure the Company’s obligations under its Non-U.S. pension plans. This is partially offset by the actual return on assets exceeding the expected return on assets.

The accumulated benefit obligation for all defined benefit pension plans was ~~$603~~$601 million and ~~$555~~$543 million at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

~~Table of Contents~~

Information about plan obligations and assets for plans with an accumulated benefit obligation in excess of plan assets is as follows:

U.S. Plans

Non-U.S. Plans

(in millions)

2017

2016

2017

2016

Projected benefit obligation

$
12

$
11

$
51

$
43

Accumulated benefit obligation

11

10

41

36

Fair value of plan assets

—

—

2

2


	U.S. Plans				Non-U.S. Plans
(in millions)	2019		2018		2019		2018
Projected benefit obligation	$	11	$	11	$	56	$	49
Accumulated benefit obligation		10		9		45		41
Fair value of plan assets		—		—		2		2

All U.S. plans and most non-U.S. plans value the vested benefit obligation based on the actuarial present value of the vested benefits to which employees are currently entitled based on employees’ expected date of separation or retirement.

Components of net periodic benefit cost consist of the following for the years ended December 31, ~~2017, 2016,~~2019, 2018, and ~~2015:~~2017:

Year Ended December 31,

U.S. Plans

Non-U.S. Plans

(in millions)

2017

2016

2015

2017

2016

2015

Service cost

$
6

$
6

$
8

$
3

$
3

$
4

Interest cost

13

14

14

11

10

12

Expected return on plan assets

(21)

(20)

(24)

(10)

(10)

(13)

Amortization of actuarial loss

—

1

1

2

2

3

Amortization of prior service credit

(1)

—

—

—

—

—

Settlement loss

—

—

(1)

—

1

—

Net periodic benefit cost

$
(3)

$
1

$
(2)

$
6

$
6

$
6


	Year Ended December 31,
	U.S. Plans						Non-U.S. Plans
(in millions)	2019		2018		2017		2019		2018		2017
Service cost	$	5	$	6	$	6	$	3	$	3	$	3
Interest cost		14		13		13		10		10		11
Expected return on plan assets		(18)		(21)		(21)		(8)		(9)		(10)
Amortization of actuarial loss		1		—		—		2		2		2
Amortization of prior service credit		(1)		—		(1)		—		—		—
Net periodic benefit cost	$	1	$	(2)	$	(3)	$	7	$	6	$	6

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 on the Consolidated Statements of Income.

For the U.S. plans, the Company estimates that net periodic benefit cost for ~~2018~~the year ending December 31, 2020 will include approximately $1 million relating to the amortization of the prior service credit included in accumulated other comprehensive loss as of December 31, ~~2017.~~2019.

Table of Contents

For the non-U.S. plans, the Company estimates that net periodic benefit cost for ~~2018~~the year ending December 31, 2020 will include approximately $2 million relating to the amortization of its accumulated actuarial loss.

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 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.

Total amounts recorded in other comprehensive income and net periodic benefit cost was as follows:



(in millions, pre-tax)	U.S. Plans						Non-U.S. Plans						U.S. Plans						Non-U.S. Plans
	2017		2016		2015		2017		2016		2015
													2019		2018		2017		2019		2018		2017
Net actuarial (gain) loss	$	(7)	$	10	$	—	$	(3)	$	6	$	(18)	$	(25)	$	19	$	(7)	$	7	$	4	$	(3)
Prior service credit		—		(6)		—		—		(1)		—
Prior service cost														—		—		—		1		—		—
Amortization of actuarial loss		—		(1)		(1)		(2)		(2)		(3)		(1)		—		—		(2)		(2)		(2)
Amortization of prior service credit		1		—		—		—		—		—		1		—		1		—		—		—
Settlement gain		—		—		1		—		—		—
Total recorded in other comprehensive income		(6)		3		—		(5)		3		(21)		(25)		19		(6)		6		2		(5)
Net periodic benefit cost		(3)		1		(2)		6		6		6		1		(2)		(3)		7		6		6
Total recorded in other comprehensive income and net periodic benefit cost	$	(9)	$	4	$	(2)	$	1	$	9	$	(15)	$	(24)	$	17	$	(9)	$	13	$	8	$	1

The following weighted average assumptions were used to determine the Company’s obligations under the pension plans:

U.S. Plans

Non-U.S. Plans

2017

2016

2017

2016

Discount rate

3.70
%
4.30
%
4.02
%
4.34
%
Rate of compensation increase

4.42

4.54

3.58

3.62


	U.S. Plans				Non-U.S. Plans
	2019		2018		2019		2018
Discount rate	3.34	%	4.38	%	3.55	%	4.33	%
Rate of compensation increase	4.21		4.31		3.75		3.63

~~Table of Contents~~

The following weighted average assumptions were used to determine the Company’s net periodic benefit cost for the pension plans:

U.S. Plans

Non-U.S. Plans

2017

2016

2015

2017

2016

2015

Discount rate

4.30
%
4.30
%
4.00
%
4.34
%
4.57
%
4.47
%
Expected long-term return on plan assets

5.75

5.75

7.00

5.29

5.41

6.48

Rate of compensation increase

4.54

4.71

4.31

3.62

3.73

3.76


	U.S. Plans						Non-U.S. Plans
	2019		2018		2017		2019		2018		2017
Discount rate	4.38	%	3.70	%	4.30	%	4.33	%	4.02	%	4.34	%
Expected long-term return on plan assets	5.30		5.30		5.75		4.37		4.31		5.29
Rate of compensation increase	4.31		4.42		4.54		3.63		3.58		3.62

For ~~2018 and 2017,~~the year ended December 31, 2019, the Company ~~has~~ assumed an expected long-term rate of return on assets of 5.30 percent ~~and 5.75 percent~~ for U.S. plans ~~respectively,~~ and approximately 3.86 percent ~~and 4.76 percent~~ for Canadian ~~plans, respectively.~~plans. In developing the expected long-term rate of return assumption on plan assets, which consist mainly of U.S. and Canadian ~~equity~~debt and ~~debt~~equity securities, management evaluated historical rates of return achieved on plan assets and the asset allocation of the plans, input from the Company’s 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. The decrease in expected Non-U.S. plan long-term rates of return on assets compared to 2015 is due to the change in our investment approach and related asset allocation in the U.S. and Canada that occurred during 2016 to a liability-driven investment approach. As a result, a higher proportion of investments are in interest-sensitive investments (fixed income) as compared to the prior investment strategy for the U.S. and Canada pension plans.

The discount rate reflects a rate of return on high-quality fixed income investments that match the duration of the expected benefit payments. The Company has typically used returns on long-term, high-quality corporate AA bonds as a benchmark in establishing this assumption. ~~In 2016, the~~The Company changed the method used to estimate the service and interest cost components of net periodic benefit cost for certain of our defined benefit pension and postretirement benefit plans. Historically, the Company estimated the service and interest cost components using a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. Beginning in 2016, the Company has electedelects 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: The Company’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. In 2016, the Company changed its investment approach for the U.S. and Canada plans due to the funded nature of the plans to a liability-driven investment approach. As a result, a higher proportion of investments are in interest rate-sensitive investments (fixed income) as compared to the prior investment strategy. For U.S. pension plans, the weighted average target range allocation of assets was ~~20-40~~15-25 percent in equities ~~57-79~~and 75-85 percent in fixed income ~~and 1-3 percent in cash and~~inclusive of other short-term investments. The asset allocation is reviewed regularly, and portfolio investments are rebalanced to the targeted allocation when considered appropriate.

Table of Contents

The Company’s weighted average asset allocation as of December 31, ~~2017~~2019, and ~~2016~~2018, for U.S. and non-U.S. pension plan assets is as follows:


	U.S. Plans				Non-U.S. Plans

									U.S. Plans				Non-U.S. Plans
Asset Category	2017		2016		2017		2016		2019		2018		2019		2018
Equity securities	26	%	38	%	39	%	41	%	21	%	19	%	17	%	16	%
Debt securities	73		61		46		44		78		80		63		64
Cash and other	1		1		15		15		1		1		20		20
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

~~Table of Contents~~

The fair values of the Company’s plan assets by asset category and level in the fair value hierarchy are as follows:


	Fair Value Measurements at December 31, 2017

									Fair Value Measurements at December 31, 2019
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
U.S. Plans:
Equity index:
U.S. (a)	$	—	$	51	$	—	$	51	$	—	$	43	$	—	$	43
International (b)		—		55		—		55		—		42		—		42
Fixed income index:
Long bond (c)		—		273		—		273		—		295		—		295
Long government bond (d)		—		21		—		21		—		25		—		25
Cash (e)		—		4		—		4		—		3		—		3
Total U.S. Plans	$	—	$	404	$	—	$	404	$	—	$	408	$	—	$	408
Non-U.S. Plans:
Equity index:
U.S. (a)	$	—	$	12	$	—	$	12	$	—	$	22	$	—	$	22
Canada (f)		—		22		—		22
International (b)		—		52		—		52		—		17		—		17
Real estate (g)		—		5		—		5
Fixed income index:
Intermediate bond (h)		—		25		—		25		—		52		—		52
Long bond (i)		—		84		—		84
Long bond (i)										—		95		—		95
Other (j)		—		24		—		24		—		24		—		24
Cash (e)		2		9		—		11		2		19		—		21
Total Non-U.S. Plans	$	2	$	233	$	—	$	235	$	2	$	229	$	—	$	231

Table of Contents


	Fair Value Measurements at December 31, 2018
(in millions)	Level 1		Level 2		Level 3		Total
U.S. Plans:
Equity index:
U.S. (a)	$	—	$	33	$	—	$	33
International (l)		—		35		—		35
Fixed income index:
Long bond (c)		—		258		—		258
Long govt bond (d)		—		24		—		24
Cash (e)		—		3		—		3
Total U.S. Plans	$	—	$	353	$	—	$	353
Non-U.S. Plans:
Equity index:
U.S. (a)	$	—	$	3	$	—	$	3
Canada (f)		—		13		—		13
International (l)		—		15		—		15
Real estate (g)		—		2		—		2
Fixed income index:
Intermediate bond (h)		—		34		—		34
Long bond (k)		—		99		—		99
Other (j)		—		24		—		24
Cash (e)		2		15		—		17
Total Non-U.S. Plans	$	2	$	205	$	—	$	207

Fair Value Measurements at December 31, 2016

(in millions)

Level 1

Level 2

Level 3

Total

U.S. Plans:

Equity index:

U.S. (a)

$
—

$
70

$
—

$
70

International (b)

—

68

—

68

Fixed income index:

Long bond (c)

—

227

—

227

Cash (e)

—

3

—

3

Total U.S. Plans

$
—

$
368

$
—

$
368

Non-U.S. Plans:

Equity index:

U.S. (a)

$
—

$
11

$
—

$
11

Canada (f)

—

21

—

21

International (b)

—

49

—

49

Real estate (g)

—

5

—

5

Fixed income index:

Intermediate bond (h)

—

21

—

21

Long bond (i)

—

72

—

72

Other (j)

—

23

—

23

Cash (e)

1

8

—

9

Total Non-U.S. Plans

$
1

$
210

$
—

$
211

(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 represents cash or cash equivalents.

(f)

This category consists of an actively managed equity index fund that tracks against an index of large capitalization Canadian equities.

(g)

This category consists of an actively managed equity index fund that tracks against real estate investment trusts and real estate operating companies.

(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.

(k)

This category consists of both passively and actively managed fixed income index funds that track the return of government bonds, investment grade corporate bonds and hedge funds.

(l)

This category consists of both passively and actively managed equity index funds that track an index of returns on international developed market equities as well as infrastructure assets.

~~(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 represents cash or cash equivalents.~~

~~(f)~~

~~This category consists of an actively managed equity index fund that tracks against an index of large capitalization Canadian equities.~~

~~(g)~~

~~This category consists of an actively managed equity index fund that tracks against real estate investment trusts and real estate operating companies.~~

~~(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 Canada government bonds, investment grade corporate bonds and hedge funds.~~

~~(j)~~

~~This category mainly consists of investment products provided by an insurance company that offers returns that are subject to a minimum guarantee and mutual funds.~~

All significant pension plan assets are held in collective trusts by the Company’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. This may produce a fair value measurement that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company 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.

In ~~2017,~~the year ended December 31, 2019, the Company made cash contributions of $5$1 million and $7 million to its U.S. and non-U.S. pension ~~plans.~~plans, respectively. The Company anticipates that in ~~2018~~the year ending December 31, 2020 it will make cash contributions of $2$1 million and $3 million to its 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.

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The following benefit payments, which reflect anticipated future service, as appropriate, are expected to be made:



(in millions)	U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans
2018	$	21	$	11
2019		20		12
2020		21		12	$	20	$	12
2021		22		12		21		11
2022		23		12		21		12
Years 2023 - 2027		124		70
2023						23		13
2024						22		12
Years 2025 - 2029						120		71

The Company and certain subsidiaries also maintain defined contribution plans. The Company makes 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 $20 million, $21 million, and $22 million ~~$20 million,~~in the years ended December 31, 2019, 2018, and ~~$17 million in~~ 2017, ~~2016, and 2015,~~ respectively.

Postretirement Benefit Plans: The Company’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 ~~2017~~the years ended December 31, 2019 and ~~2016,~~2018, and the amounts recognized in the Company’s Consolidated Balance Sheets at December 31, ~~2017~~2019, and ~~2016,~~2018, are as follows:



(in millions)	2017		2016		2019		2018
Accumulated postretirement benefit obligation
At January 1	$	67	$	64	$	64	$	70
Service cost		1		1		1		1
Interest cost		3		2		3		3
Employee contributions		1		—
Actuarial loss		2		2
Plan curtailments						—		(1)
Actuarial loss (gain)						6		(2)
Benefits paid		(4)		(4)		(5)		(4)
Foreign currency translation		—		2		—		(3)
At December 31		70		67		69		64
Fair value of plan assets		—		—		—		—
Funded status	$	(70)	$	(67)	$	(69)	$	(64)

Amounts recognized in the Consolidated Balance Sheets consist of:



(in millions)	2017		2016		2019		2018
Current liabilities	$	(4)	$	(4)	$	(4)	$	(4)
Non-current liabilities		(66)		(63)		(65)		(60)
Net liability recognized	$	(70)	$	(67)	$	(69)	$	(64)

Amounts recognized in accumulated other comprehensive loss (income), excluding tax effects, that have not yet been recognized as components of net periodic benefit cost at December 31, ~~2017~~2019 and ~~2016~~2018, were as follows:


(in millions)	2019		2018
Net actuarial loss	$	14	$	8
Prior service credit		(2)		(4)
Net amount recognized	$	12	$	4

(in millions)

2017

2016

Net actuarial loss

$
11

$
7

Prior service credit

(6)

(8)

Net amount recognized

$
5

$
(1)

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Components of net periodic benefit cost consisted of the following for the years ended December 31, ~~2017, 2016,~~2019, 2018, and ~~2015:~~

Year Ended December 31,
(in millions)

2017

2016

2015
Service cost

$
1

$
1

$
1
Interest cost

3

2

3
Amortization of prior service credit

(3)

(2)

(2)
Net periodic benefit cost

$
1

$
1

$
2

2017:


	Year Ended December 31,
(in millions)	2019		2018		2017
Service cost	$	1	$	1	$	1
Interest cost		3		3		3
Amortization of prior service credit		(2)		(2)		(3)
Net periodic benefit cost	$	2	$	2	$	1

~~Table~~The service cost component of ~~Contents~~net periodic benefit cost is presented within either cost of sales or operating expenses on the Consolidated Statements of Income. The interest cost and amortization of prior service credit components of net periodic benefit cost are presented as other, non-operating income on the Consolidated Statements of Income.

The Company estimates that postretirement benefit expense for these plans for ~~2018~~the year ending December 31, 2020 will include approximately $2 million relating to the amortization of the prior service credit as well as approximately $1 million relating to the amortization of its accumulated actuarial loss included in accumulated other comprehensive income as of December 31, ~~2017.~~2019.

Total amounts recorded in other comprehensive income and net periodic benefit cost was as follows:



(in millions, pre-tax)	2017		2016		2015		2019		2018		2017
Net actuarial loss (gain)	$	2	$	2	$	(2)	$	6	$	(3)	$	2
Amortization of prior service credit		3		2		2		2		2		3
New prior service credit		—		—		2
Total recorded in other comprehensive income		5		4		2		8		(1)		5
Net periodic benefit cost		1		1		2		2		2		1
Total recorded in other comprehensive income and net periodic benefit cost	$	6	$	5	$	4	$	10	$	1	$	6

The following weighted average assumptions were used to determine the Company’s obligations under the postretirement plans:

2017

2016

Discount rate

4.92
%
5.42
%


	2019		2018
Discount rate	4.18	%	5.24	%

The following weighted average assumptions were used to determine the Company’s net postretirement benefit cost:

2017

2016

2015

Discount rate

5.46
%
5.30
%
5.70
%


	2019		2018		2017
Discount rate	5.49	%	4.93	%	5.46	%

The discount rate reflects a rate of return on high-quality fixed-income investments that match the duration of expected benefit payments. The Company 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 the Company’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, ~~2017:~~2019:


	U.S.		Canada		Brazil
2019 increase in per capita cost	6.00	%	5.83	%	7.38	%
Ultimate trend	4.50	%	4.00	%	7.38	%
Year ultimate trend reached	2037		2040		2019

U.S.

Canada

Brazil

2017 increase in per capita cost

6.50
%
5.54
%
8.41
%
Ultimate trend

4.50
%
4.50
%
8.41
%
Year ultimate trend reached

2037

2031

2017

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The sensitivities of service cost and interest cost and year-end benefit obligations to changes in healthcare cost trend rates for the postretirement benefit plans as of December 31, ~~2017,~~2019, are as follows:


(in millions)	~~2017~~2019
One-percentage point increase in trend rates:
- Increase in service cost and interest cost components	$	1—
- Increase in year-end benefit obligations		76

One-percentage point decrease in trend rates:
- Decrease in service cost and interest cost components		1—
- Decrease in year-end benefit obligations		65

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The following benefit payments, which reflect anticipated future service, as appropriate, are expected to be made under the Company’s postretirement benefit plans:



(in millions)
2018	$	4
2019		4
2020		4	$	4
2021		4		4
2022		5		4
Years 2023 - 2027		24
2023				4
2024				4
Years 2025 - 2029				21

Multi-employer Plans: The Company participates in and contributes to ~~one~~1 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 U.S. Steel Workers 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.

The Company is required to make contributions to this plan as determined by the terms and conditions of the collective bargaining agreements and plan terms. For the years ended December 31, ~~2017, 2016,~~2019, 2018, and ~~2015,~~2017, the Company made regular contributions of $13 million, ~~$14~~$12 million, and ~~$12~~$13 million, respectively, to this multi-employer plan. The Company cannot currently estimate the amount of multi-employer plan contributions that will be required in ~~2018~~the year ending December 31, 2020 and future years, but these contributions could increase due to healthcare cost trends. The collective bargaining agreements associated with this plan expire during ~~2018 - 2021.~~2020 through 2024.

NOTE 11 – ~~Supplementary Information~~Equity

~~Consolidated Balance Sheets~~

(in millions)

2017

2016

Accounts receivable, net:

Accounts receivable — trade

$
760

$
751

Accounts receivable — other

209

178

Allowance for doubtful accounts

(8)

(6)

Total accounts receivable, net

961

923

Inventories:

Finished and in process

495

478

Raw materials

278

260

Manufacturing supplies

50

51

Total inventories

823

789

Accrued liabilities:

Compensation-related costs

101

107

Income taxes payable

22

40

Unrecognized tax benefits

—

72

Dividends payable

44

36

Accrued interest

15

19

Taxes payable other than income taxes

37

36

Other

125

122

Total accrued liabilities

344

432

Non-current liabilities:

Employees’ pension, indemnity, and postretirement

121

109

Other

106

49

Total non-current liabilities

$
227

$
158

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~~Consolidated Statements of Income~~

(in millions)

2017

2016

2015

Other income, net:

Insurance settlement

$
9

$
—

$
—

Value-added tax recovery

6

5

4

Gain from sale of plant

—

—

10

Legal settlement

—

—

(7)

Income tax indemnification expense (a)

—

—

(4)

Other

3

(1)

(2)

Other income, net

$
18

$
4

$
1

~~(a)~~

~~Amount fully offset by $4 million of benefit recorded in the income tax provision for 2015.~~

(in millions)

2017

2016

2015
Financing costs, net:

Interest expense, net of amounts capitalized (a)

$
79

$
73

$
69
Interest income

(11)

(10)

(14)
Foreign currency transaction losses

5

3

6
Financing costs, net

$
73

$
66

$
61

~~(a)~~

~~Interest capitalized amounted to $4 million, $4 million, and $2 million in 2017, 2016 and 2015, respectively.~~

~~Consolidated Statements of Cash Flow~~

(in millions)

2017

2016

2015

Other non-cash charges to net income:

Share-based compensation expense

$
26

$
28

$
21

Other

13

16

18

Total other non-cash charges to net income

$
39

$
44

$
39

(in millions)

2017

2016

2015

Interest paid

$
77

$
59

$
52

Income taxes paid

289

254

158

~~NOTE 12 – Equity~~

Preferred stock: The Company has authorized 25 million shares of $0.01 par value preferred stock, ~~none~~NaN of which were issued or outstanding at December 31, ~~2017~~2019 and ~~2016.~~2018.

Treasury stock:On ~~December 12, 2014,~~October 22, 2018, the Board of Directors authorized a new stock repurchase program permitting the Company to purchase up to 58 million of its outstanding shares of common ~~shares~~stock from ~~January 1, 2015,~~November 5, 2018 through December ~~12, 2019. The Company’s previously authorized stock repurchase program permitting the purchase of up to 4 million shares has been fully utilized.~~31, 2023. The parameters of the Company’s stock repurchase program are not established solely with reference to the dilutive impact of shares issued under the Company’s stock incentive plan. However, the Company expects that, over time, share repurchases will offset the dilutive impact of shares issued under the stock incentive plan.

On November 5, 2018, the Company entered into a Variable Timing Accelerated Share Repurchase (“ASR”) program with JPMorgan (“JPM”). Under the ASR program, the Company 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, the Company 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. The Company settled the difference in cash, resulting in JPM returning $63 million of the upfront payment to the Company on February 6, 2019, and lowering the total cost of repurchasing the 4 million

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shares of common stock to $392 million. The Company adjusted Additional paid-in capital and Treasury stock by $32 million and $31 million, respectively, during the first quarter of 2019 for this inflow of cash.

In ~~2017,~~the year ended December 31, 2019, the Company did not repurchase shares of common stock. In the year ended December 31, 2018, the Company repurchased 15.8 million shares of common ~~shares~~stock in open market transactions at a net cost of ~~$123~~$594 million. ~~In 2016, the Company had no repurchases of common shares in open market transactions.~~

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Set forth below is a reconciliation of common stock share activity for the years ended December 31, ~~2017, 2016,~~2019, 2018, and ~~2015:~~2017:



(Shares of common stock, in thousands)	Issued	Held in Treasury	Outstanding	Issued	Held in Treasury	Outstanding
Balance at December 31, 2014	77,811	6,489	71,322
Issuance of restricted stock units as compensation	—	(102)	102
Performance shares and other share-based awards	—	(75)	75
Stock options exercised	—	(556)	556
Purchase/acquisition of treasury stock	—	439	(439)
Balance at December 31, 2015	77,811	6,195	71,616
Issuance of restricted stock units as compensation	—	(94)	94
Performance shares and other share-based awards	—	(70)	70
Stock options exercised	—	(636)	636
Purchase/acquisition of treasury stock	—	2	(2)
Balance at December 31, 2016	77,811	5,397	72,414	77,811	5,397	72,414
Issuance of restricted stock units as compensation	—	(103)	103	—	(103)	103
Performance shares and other share-based awards	—	(75)	75	—	(75)	75
Stock options exercised	—	(443)	443	—	(443)	443
Purchase/acquisition of treasury stock	—	1,039	(1,039)	—	1,039	(1,039)
Balance at December 31, 2017	77,811	5,815	71,996	77,811	5,815	71,996
Issuance of restricted stock units as compensation				—	(100)	100
Performance shares and other share-based awards				—	(68)	68
Stock options exercised				—	(209)	209
Purchase/acquisition of treasury stock				—	5,847	(5,847)
Balance at December 31, 2018				77,811	11,285	66,526
Issuance of restricted stock units as compensation				—	(105)	105
Performance shares and other share-based awards				—	(5)	5
Stock options exercised				—	(182)	182
Purchase/acquisition of treasury stock				—	—	—
Balance at December 31, 2019				77,811	10,993	66,818

Share-based payments: The following table summarizes the components of the Company’s share-based compensation expense for the last three years:



(in millions)	2017		2016		2015		2019		2018		2017
Stock options:
Pre-tax compensation expense	$	7	$	9	$	7	$	3	$	5	$	7
Income tax benefit		(2)		(3)		(3)		—		(1)		(2)
Stock option expense, net of income taxes		5		6		4		3		4		5

RSUs:

Restricted stock units ("RSUs"):
Pre-tax compensation expense		13		12		9		10		12		13
Income tax benefit		(4)		(5)		(3)		(2)		(2)		(4)
RSUs, net of income taxes		9		7		6		8		10		9


Performance shares and other share-based awards:
Pre-tax compensation expense		6		7		5		5		4		6
Income tax benefit		(2)		(3)		(2)		—		—		(2)
Performance shares and other share-based compensation expense, net of income taxes		4		4		3		5		4		4


Total share-based compensation:
Pre-tax compensation expense		26		28		21		18		21		26
Income tax benefit		(8)		(11)		(8)		(2)		(3)		(8)
Total share-based compensation expense, net of income taxes	$	18	$	17	$	13	$	16	$	18	$	18

The Company has a stock incentive plan (“SIP”) administered by the 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. As

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of December 31, ~~2017, 3.7~~2019, 2.8 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.

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Stock Options: Under the Company’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. Compensation expense is generally recognized 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. The Company estimates a forfeiture rate at the time of grant and updates the estimate throughout the vesting of the stock options within the amount of compensation costs recognized in each period.

The Company granted non-qualified options to purchase ~~278~~247 thousand shares and ~~329~~215 thousand shares for the years ended December 31, ~~2017~~2019, and ~~2016,~~2018, respectively. The fair value of each option grant was estimated using the Black-Scholes option-pricing model with the following assumptions:



	For the Year Ended December 31,
	2017		2016		2015

							For the Year Ended December 31,
							2019		2018		2017
Expected life (in years)	5.5		5.5		5.5		5.5		5.5		5.5
Risk-free interest rate	1.9	%	1.4	%	1.4	%	2.5	%	2.5	%	1.9	%
Expected volatility	22.5	%	23.4	%	25.2	%	19.7	%	19.8	%	22.5	%
Expected dividend yield	1.7	%	1.8	%	2.0	%	2.7	%	1.8	%	1.7	%

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 the Company’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 the Company’s common stock. Dividend yields are based on current dividend payments.

A summary of stock option transactions for the year follows:


		Weighted
		Average		Average	Aggregate
	Number of	Exercise		Remaining	Intrinsic
	Options	Price per		Contractual	Value
	(in thousands)	Share		Term (Years)	(in millions)
Outstanding as of December 31, 2016	2,281	$	61.39	5.93	$	145

							Number of Options (in thousands)	Weighted Average Exercise Price per Share		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2018							2,079	$	80.25	5.51	$	42
Granted	278		117.65				247		91.85
Exercised	(443)		46.16				(182)		35.40
Cancelled	(21)		87.50				(89)		108.94
Outstanding as of December 31, 2017	2,095	$	71.81	5.87	$	142
Exercisable as of December 31, 2017	1,527	$	59.14	5.24	$	123
Outstanding as of December 31, 2019							2,055	$	84.36	5.30	$	34
Exercisable as of December 31, 2019							1,626	$	77.97	4.48	$	33

For the years ended December 31, ~~2017, 2016,~~2019, 2018 and ~~2015,~~2017, cash received from the exercise of stock options was ~~$20~~$6 million, ~~$29~~$10 million, and ~~$21~~$20 million, respectively. As of December 31, ~~2017,~~2019, the unrecognized compensation cost related to non-vested stock options totaled $3$2 million, which is expected to be amortized over the weighted-average period of approximately 1.5 years.

Additional information pertaining to stock option activity is as follows:



	Year Ended December 31,


							Year Ended December 31,
(dollars in millions, except per share)	2017		2016		2015		2019		2018		2017
Weighted average grant date fair value of stock options granted (per share)	$	23.90	$	18.73	$	16.04	$	14.02	$	24.01	$	23.90
Total intrinsic value of stock options exercised		35		46		27		10		15		35

Restricted Stock Units: The Company has granted restricted stock units (“RSUs”) to certain key employees. The RSUs are subject to cliff vesting, generally after three years provided the employee remains in the service of the Company. Compensation expense is generally recognized 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. The Company estimates a forfeiture rate at the time of grant and updates the estimate throughout the vesting of the RSUs within the

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amount of compensation costs recognized in each period. The fair value of the RSUs is determined based upon the number of shares granted and the quoted market price of the Company’s common stock at the date of the grant.

~~Table of Contents~~

The following table summarizes RSU activity for the year:


		Weighted
	Number of	Average
	Restricted	Fair Value

					Weighted
				Number of	Average
				Restricted	Fair Value
(shares in thousands)	Shares	per Share		Shares	per Share
Non-vested at December 31, 2016	429	$	81.04
Non-vested at December 31, 2018				344	$	115.06
Granted	125		119.54	178		91.11
Vested	(148)		65.03	(137)		101.54
Cancelled	(19)		95.17	(46)		114.51
Non-vested at December 31, 2017	387	$	100.13
Non-vested at December 31, 2019				339	$	108.02

The total fair value of RSUs that vested in the years ended December 31, 2019, 2018, and 2017 ~~2016, and 2015~~ was ~~$18~~$16 million, $15 million, and ~~$13~~$18 million, respectively.

At December 31, ~~2017,~~2019, the total remaining unrecognized compensation cost related to RSUs was ~~$13~~$14 million which will be amortized on a weighted-average basis over approximately ~~1.7~~1.8 years. Recognized compensation cost related to unvested RSUs is included in ~~share-based~~Share-based payments subject to redemption in the Consolidated Balance Sheets and totaled ~~$25~~$23 million and ~~$21~~$26 million at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

Performance Shares: The Company has a long-term incentive plan for senior management in the form of performance shares. ~~The ultimate payments for~~Historically these performance shares ~~awarded and~~ vested ~~will be~~ based solely on the Company’s ~~stock performance~~total shareholder return as compared to the ~~stock performance~~total shareholder return of its peer ~~group. The~~group over the three-year vesting period. Beginning with the performance share grants in the year ended December 31, 2019, the vesting of the performance shares will be based on 2 performance metrics. NaN percent of the performance shares awarded will vest based on the Company’s total shareholder return as compared to the total shareholder return of its peer group, and the remaining 50 percent will vest based on the calculation of the Company’s three-year average Return on Invested Capital (“ROIC”) against an established ROIC target.

For the performance shares awarded in the first quarter of 2019, based on the Company’s total shareholder return, the number of shares that ultimately vest can range from ~~zero~~0 to 200 percent of the awarded grant depending on the Company’s ~~stock performance~~total shareholder return as compared to the ~~stock performance~~total shareholder return of ~~the~~its peer group. The share award vesting will be calculated at the end of the three-year period and ~~are~~is subject to approval by management and the Compensation ~~Committee.~~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 performance shares awarded in the first quarter of 2019, based on ROIC, the number of shares that ultimately vest can range from 0 to 200 percent of the awarded grant depending on the Company’s 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 the Company’s common stock on the date of the grant and the final number of shares that ultimately vest. The Company will estimate the potential share vesting at least annually to adjust the compensation expense for these awards over the vesting period to reflect the Company’s estimated ROIC performance versus the target. The total compensation expense for these awards is amortized over a three-year graded vesting schedule.

The Company awarded 3870 thousand, 4427 thousand, and 4738 thousand performance shares in ~~2017, 2016,~~the years ended December 31, 2019, 2018 and ~~2015,~~2017, respectively. The weighted average fair value of the shares granted during the years ended December 31, 2019, 2018 and 2017 ~~2016,~~was $92.57, $141.91, and ~~2015 was~~ $114.08, ~~$131.34, and $77.54,~~ respectively.

The ~~2014~~ performance share award granted in the year ended December 31, 2016 vested in ~~February 2017,~~the first quarter of 2019, achieving a ~~200~~0 percent ~~pay out~~payout of the ~~grant, or 115 thousand total vested~~granted performance shares. As of December 31, ~~2017,~~2019, the performance awards granted in the year ended December 31, 2017 ~~2016, and 2015~~ are estimated to pay out at ~~127 percent, 175 percent, and 200~~0 percent, respectively. There were ~~three~~3 thousand shares cancelled during the year ended December 31, ~~2017.~~2019.

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As of December 31, ~~2017,~~2019, the unrecognized compensation cost relating to these plans was $3$4 million, which will be amortized over the remaining requisite service periods of ~~1.7~~1.8 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~~$9 million and $9$10 million at December 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

Other share-based awards under the SIP: Under the compensation agreement with the Board of Directors, ~~$110,000~~$120,000 of a non-employee director’s annual retainer and 50 percent of the additional retainers paid to the Lead Director and the Chairmen of committees of the Board of Directors are awarded in shares of common stock or, ~~restricted units based on each director’s elections~~if a director elects to ~~receive~~defer all or a portion of his or her common stock or cash compensation, ~~or a portion thereof~~ in ~~the form~~shares of restricted stock units. These restricted units ~~vest immediately, and the director is allowed to either receive these shares immediately or defer them. Deferred shares~~ cannot be transferred until a date not less than six months after the director’s termination of service from the ~~board~~Board of Directors at which time the restricted units will be settled by delivering shares of common ~~stock.~~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 $1 million in ~~2017, 2016,~~the years ended December 31, 2019, 2018, and ~~2015.~~2017. At December 31, ~~2017,~~2019, there were approximately ~~182~~210 thousand restricted stock units outstanding under this plan at a carrying value of approximately ~~$11~~$13 million.

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Accumulated Other Comprehensive Loss: A summary of accumulated other comprehensive income (loss) for the years ended December 31, ~~2015, 2016~~2017, 2018, and ~~2017~~2019, is presented below:


			Deferred				Unrealized		Accumulated
	Cumulative		(Loss) Gain		Pension and		(Loss)		Other
	Translation		on Hedging		Postretirement		Gain on		Comprehensive

(in millions)	Adjustment		Activities		Adjustment		Investment		(Loss) Gain		Cumulative Translation Adjustment		Deferred (Loss) Gain on Hedging Activities		Pension and Postretirement Adjustment		Unrealized (Loss) Gain on Investment		Accumulated Other Comprehensive Loss
Balance, December 31, 2014	$	(701)	$	(19)	$	(61)	$	(1)	$	(782)
Other comprehensive (loss) income before reclassification adjustments		(324)		(61)		18		—		(367)
Amount reclassified from accumulated OCI		—		46		1		—		47
Tax benefit (provision)		—		5		(5)		—		—
Net other comprehensive (loss) income		(324)		(10)		14		—		(320)
Balance, December 31, 2015		(1,025)		(29)		(47)		(1)		(1,102)
Other comprehensive income (loss) before reclassification adjustments		17		(17)		(14)		1		(13)
Amount reclassified from accumulated OCI		—		49		1		—		50
Tax (provision) benefit		—		(10)		4		—		(6)
Net other comprehensive income (loss)		17		22		(9)		1		31
Balance, December 31, 2016		(1,008)		(7)		(56)		—		(1,071)	$	(1,008)	$	(7)	$	(56)	$	—	$	(1,071)
Other comprehensive income (loss) before reclassification adjustments		57		(16)		8		3		52		57		(16)		8		3		52
Amount reclassified from accumulated OCI		—		6		(2)		—		4		—		6		(2)		—		4
Tax benefit (provision)		—		4		(1)		(1)		2		—		4		(1)		(1)		2
Net other comprehensive income (loss)		57		(6)		5		2		58		57		(6)		5		2		58
Balance, December 31, 2017	$	(951)	$	(13)	$	(51)	$	2	$	(1,013)		(951)		(13)		(51)		2		(1,013)
Other comprehensive (loss) income before reclassification adjustments												(129)		8		(20)		—		(141)
Amount reclassified from accumulated OCI												—		6		—		—		6
Tax (provision) benefit												—		(4)		5		—		1
Net other comprehensive (loss) income												(129)		10		(15)		—		(134)
Adoption of ASU 2016-01												—		—		—		(2)		(2)
Adoption of ASU 2018-02												—		(2)		(3)		—		(5)
Other												—		(2)		(3)		(2)		(7)
Balance, December 31, 2018												(1,080)		(5)		(69)		—		(1,154)
Other comprehensive loss before reclassification adjustments												(9)		(19)		11		—		(17)
Amount reclassified from accumulated OCI												—		14		—		—		14
Tax benefit (provision)												—		1		(2)		—		(1)
Net other comprehensive loss												(9)		(4)		9		—		(4)
Balance, December 31, 2019											$	(1,089)	$	(9)	$	(60)	$	—	$	(1,158)

~~The following table provides detail pertaining to reclassifications from AOCI into net income for the periods presented:~~

Affected Line Item in

Amount Reclassified from AOCI

Consolidated
(in millions)

2017

2016

2015

Statements of Income
Gains (losses) on cash flow hedges:

Commodity contracts

$
(5)

$
(45)

$
(43)

Cost of sales
Foreign currency contracts

1

(2)

—

Net sales/Cost of sales
Interest rate contracts

(2)

(2)

(3)

Financing costs, net
Gains (losses) related to pension and other postretirement obligations

2

(1)

(1)

(a)
Total before-tax reclassifications

(4)

(50)

(47)

Tax benefit

1

16

14

Total after-tax reclassifications

$
(3)

$
(34)

$
(33)

~~(a)~~

~~This component is included in the computation of net periodic benefit cost and affects both cost of sales and operating expenses on the Consolidated Statements of Income.~~

Table of Contents

Supplemental Information: The following table provides the computation of basic and diluted earnings per common share (“EPS”) for the periods presented.


		2019					2018					2017
		Net Income	Weighted		Per		Net Income	Weighted		Per		Net Income	Weighted		Per
		Available	Average		Share		Available	Average		Share		Available	Average		Share
(in millions, except per share amounts)		to Ingredion	Shares		Amount		to Ingredion	Shares		Amount		to Ingredion	Shares		Amount
Basic EPS	$	413	66.9	$	6.17	$	443	70.9	$	6.25	$	519	72.0	$	7.21

Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards			0.5					0.9					1.5
Diluted EPS	$	413	67.4	$	6.13	$	443	71.8	$	6.17	$	519	73.5	$	7.06

Approximately 1.1 million, 0.5 million, and 0.3 million share-based awards of common stock were excluded in the years ended December 31, 2019, 2018, and 2017, respectively, from the calculation of the weighted average number of shares outstanding for diluted EPS because their effects were anti-dilutive.

NOTE 12 – Segment Information

The Company 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 Company’s operations are classified into 4 reportable business segments: North America, South America, Asia-Pacific, and EMEA. Its North America segment includes businesses in the U.S., Mexico, and Canada. The Company’s South America segment includes businesses in Brazil, Colombia, Ecuador, and the Southern Cone of South America, which includes Argentina, Peru, Chile, and Uruguay. Its Asia-Pacific segment includes businesses in South Korea, Thailand, China, Australia, Japan, Indonesia, Singapore, the Philippines, India, Malaysia, New Zealand, and Vietnam. The Company’s EMEA segment includes businesses in Pakistan, Germany, the United Kingdom, South Africa, and Kenya. Net sales by product are not presented because to do so would be impracticable.


(in millions)	2019		2018		2017
Net sales to unaffiliated customers:
North America	$	3,834	$	3,857	$	3,843
South America		960		988		1,052
Asia-Pacific		823		837		772
EMEA		592		607		577
Total	$	6,209	$	6,289	$	6,244

Year ended December 31,

2017

2016

2015

Net Income

Weighted

Per

Net Income

Weighted

Per

Net Income

Weighted

Per

Available

Average

Share

Available

Average

Share

Available

Average

Share

(in millions, except per share amounts)

to Ingredion

Shares

Amount

to Ingredion

Shares

Amount

to Ingredion

Shares

Amount

Basic EPS

$ 519

72.0

$ 7.21

$ 485

72.3

$ 6.70

$ 402

71.6

$ 5.62

Effect of Dilutive Securities:

Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards

1.5

1.8

1.4

Diluted EPS

$ 519

73.5

$ 7.06

$ 485

74.1

$ 6.55

$ 402

73.0

$ 5.51

Table of Contents


(in millions)		2019		2018		2017
Operating income:
North America	$	522	$	545	$	654
South America		96		99		81
Asia-Pacific		87		104		115
EMEA		99		116		114
Corporate		(99)		(97)		(86)
Subtotal		705		767		878
Restructuring/impairment charges (a)		(57)		(64)		(38)
Acquisition/integration costs		(3)		—		(4)
Brazil tax matter (b)		22		—		—
Charge for fair value markup of acquired inventory		—		—		(9)
Insurance settlement		—		—		9
Other		(3)		—		—
Total operating income	$	664	$	703	$	836

(a)

The year ended December 31, 2019 includes $57 million of restructuring expenses, 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 the Cost Smart SG&A program. The year ended December 31, 2018 includes $49 million of restructuring expenses as part of the Cost Smart Cost of sales program in relation to the cessation of wet-milling at the Stockton, California plant, $11 million of restructuring costs related to Cost Smart SG&A program, $3 million of costs related to the North America finance transformation program, and $1 million of costs related to the leaf extraction process in Brazil. The year ended December 31, 2017 includes $17 million of employee-related severance and other costs associated with the restructuring in Argentina, $13 million of restructuring of related to the leaf extraction process in Brazil, $6 million of employee-related severance and other costs associated with the Finance Transformation initiative, and $2 million of other restructuring charges including employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities.

(b)

During the year ended December 31, 2019, the Company recorded a $22 million pre-tax benefit for the favorable judgement received by Ingredion from the Federal Court of Appeals in Brazil related to certain indirect taxes collected in prior years. As a result of the decision, the Company expects to be entitled to credits against its Brazilian federal tax payments in 2020 and future years. The benefit recorded represents the Company's current estimate of the credits and interest due from the favorable decision in accordance with ASC 450, Contingencies. This benefit was offset by other adjusted charges during the period.


	As of December 31,
(in millions)	2019		2018
Total assets:
North America (a)	$	3,924	$	3,737
South America		774		711
Asia-Pacific		843		792
EMEA		499		488
Total	$	6,040	$	5,728

(a)

For purposes of presentation, North America includes Corporate assets.

Table of Contents


(in millions)	2019			2018		2017
Depreciation and amortization:
North America (a)	$	146		$	180	$	140
South America		22			24		27
Asia-Pacific		37			27		25
EMEA		15			16		17
Total	$	220		$	247	$	209
Mechanical stores expense (b):
North America (a)	$	40		$	38	$	37
South America		10			11		12
Asia-Pacific		4	��		5		5
EMEA		3			3		3
Total	$	57		$	57	$	57
Capital expenditures and mechanical stores purchases:
North America (a)	$	226		$	232	$	180
South America		45			61		50
Asia-Pacific		40			39		51
EMEA		17			18		33
Total	$	328		$	350	$	314

(a)

For purposes of presentation, North America includes Corporate activities of depreciation, amortization, capital expenditures, and mechanical stores purchase, respectively.

(b)

Represents spare parts used in the production process. Such spare parts 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 last three years:


	Net Sales
(in millions)	2019		2018		2017
U.S.	$	2,368	$	2,386	$	2,423
Mexico		1,075		1,067		1,011
Brazil		479		478		534
Canada		390		404		408
Korea		270		296		285
Others		1,627		1,658		1,583
Total	$	6,209	$	6,289	$	6,244

The following table presents long-lived assets (excluding intangible assets and deferred income taxes) by country as of December 31:


	Long-lived Assets
(in millions)	2019		2018
U.S.	$	1,239	$	1,004
Mexico		343		318
Brazil		205		207
Canada		187		165
Thailand		156		137
Germany		129		129
Korea		110		110
Others		260		259
Total	$	2,629	$	2,329

NOTE 13 ~~– Segment Information~~

The Company 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 Company’s operations are classified into four reportable business segments: North America, South America, Asia Pacific, and Europe, Middle East, and Africa (“EMEA”). Its North America segment includes businesses in the U.S., Canada, and Mexico. The Company’s South America segment includes businesses in Brazil, Colombia, Ecuador, and the Southern Cone of South America, which includes Argentina, Chile, Peru, and Uruguay. Its Asia Pacific segment includes businesses in South Korea, Thailand, Malaysia, China, Japan, Indonesia, the Philippines, Singapore, India, Australia, and New Zealand. The Company’s EMEA segment includes businesses in the United Kingdom, Germany, South Africa, Pakistan, and Kenya. The Company does not aggregate its operating segments when determining its reportable segments. Net sales by product are not presented because to do so would be impracticable.

(in millions)

2017

2016

2015

Net sales to unaffiliated customers:

North America

$
3,529

$
3,447

$
3,345

South America

1,007

1,010

1,013

Asia Pacific

740

709

733

EMEA

556

538

530

Total

$
5,832

$
5,704

$
5,621

Operating income:

North America

$
661

$
610

$
479

South America

80

89

101

Asia Pacific

112

111

107

EMEA

113

106

93

Corporate (a)

(82)

(86)

(75)

Subtotal

884

830

705

Restructuring/impairment charges (b)

(38)

(19)

(28)

Acquisition/integration costs

(4)

(3)

(10)

Charge for fair value markup of acquired inventory

(9)

—

(10)

Insurance settlement

9

—

—

Litigation settlement

—

—

(7)

Gain from land sale

—

—

10

Total operating income

842

808

660

Financing costs, net

73

66

61

Income before income taxes

$
769

$
742

$
599

~~Table of Contents~~

~~(a)~~

~~For 2015, includes $4 million of expense relating to a tax indemnification agreement with offsetting income of $4 million recorded in the provision for income taxes (see Note 9).~~

~~(b)~~

For 2017, includes $17 million of employee-related severance and other costs associated with the restructuring in Argentina, $13 million of restructuring of related to our leaf extraction process in Brazil, $6 million of employee-related severance and other costs associated with the Finance Transformation initiative, and $2 million of other restructuring charges including employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities. For 2016, includes $11 million of employee-related severance and other costs associated with the execution of IT outsourcing contracts, $6 million of employee-related severance costs associated with our optimization initiative in North America and South America, and $2 million of costs attributable to the Port Colborne plant sale. For 2015, includes $12 million of charges for impaired assets and restructuring costs in Brazil, $12 million of restructuring costs associated with the Penford acquisition, and $4 million of restructuring costs in Canada.

As of December 31,

(in millions)

2017

2016

Total assets:

North America (a)

$
3,967

$
3,796

South America

812

809

Asia Pacific

774

697

EMEA

527

480

Total

$
6,080

$
5,782

~~(a)~~

~~For purposes of presentation, North America includes Corporate assets.~~

(in millions)

2017

2016

2015
Depreciation and amortization:

North America (a)

$
140

$
130

$
123
South America

27

26

30
Asia Pacific

25

23

23
EMEA

17

17

18
Total

$
209

$
196

$
194
Mechanical stores expense (b):

North America (a)

$
37

$
37

$
36
South America

12

12

13
Asia Pacific

5

5

5
EMEA

3

3

3
Total

$
57

$
57

$
57
Capital expenditures and mechanical stores purchases:

North America (a)

$
180

$
167

$
158
South America

50

56

61
Asia Pacific

51

41

36
EMEA

33

20

25
Total

$
314

$
284

$
280

~~(a)~~

~~For purposes of presentation, North America includes Corporate activities of depreciation, amortization, capital expenditures, and mechanical stores purchase, respectively.~~

~~(a)~~

~~Table of Contents~~

~~The following table presents net sales to unaffiliated customers by country of origin for the last three years:~~

Net Sales

(in millions)

2017

2016

2015

U.S.

$
2,191

$
2,117

$
1,983

Mexico

952

955

945

Brazil

519

522

452

Canada

385

375

417

Korea

275

266

276

Others

1,510

1,469

1,548

Total

$
5,832

$
5,704

$
5,621

~~The following table presents long-lived assets (excluding intangible assets and deferred income taxes) by country at December 31:~~

Long-lived Assets
(in millions)

2017

2016
U.S.

$
977

$
955
Mexico

306

303
Brazil

235

245
Canada

179

147
Thailand

137

119
Germany

133

106
Korea

109

84
Others

284

278
Total

$
2,360

$
2,237

~~NOTE 14~~ – Commitments and Contingencies

Table of Contents

that the Company could be entitled to approximately $86 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 the Company is entitled to only $22 million of the calculated indirect tax credits and interest for the period from 2005 to 2014. The Brazil National Treasury has filed a ~~party~~motion for clarification with the Brazilian Supreme Court, asking the Court, among other things, to ~~a large number~~modify the lower court’s decision to approve the Internal Ruling, which could impact the decision in favor of ~~labor claims relating~~the Company. Due to ~~our Brazilian operations.~~the uncertainty arising from the issuance of the Internal Ruling, the Company recorded $22 million of credits in 2019 in accordance with ASC 450, Contingencies. The $22 million of future tax credits, which was recorded in the Consolidated Income Statement in Other income, resulted in additional deferred income taxes of $8 million. The income taxes will be paid as and when the tax credits are utilized. The Company ~~has reserved an aggregate~~continues to monitor the pending decisions within the Brazilian courts that may result in changes to the calculations and the timing of ~~approximately $5 million as~~the recording of ~~December 31, 2017, in respect~~any additional gains and receipt of ~~these claims. These labor claims primarily relate to dismissals, severance, health and safety, work schedules, and salary adjustments.~~the benefits.

The Company is currently subject to ~~various other~~ claims and suits arising in the ordinary course of business, including labor matters, certain environmental proceedings, and other commercial claims. The Company also routinely ~~receives~~receive 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, the Company has matters at various stages of resolution with the applicable governmental authorities. The outcomes of these matters are not within the Company’s complete control and may not be known for prolonged periods of time. The Company does not believe that the results of currently known legal proceedings and inquires ~~even if unfavorable to the Company,~~ will be material to ~~the Company.~~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 the Company’s financial condition or results of operations.

NOTE 14 – Supplementary Information

Consolidated Balance Sheets


(in millions)	2019		2018
Accounts receivable, net:
Accounts receivable — trade	$	830	$	802
Accounts receivable — other		157		157
Allowance for doubtful accounts		(10)		(8)
Total accounts receivable, net	$	977	$	951
Inventories:
Finished and in process	$	565	$	522
Raw materials		237		250
Manufacturing supplies		59		52
Total inventories	$	861	$	824
Accrued liabilities:
Compensation-related costs	$	93	$	81
Income taxes payable		16		27
Current lease liabilities		41		—
Dividends payable		42		42
Accrued interest		15		15
Taxes payable other than income taxes		36		33
Other		138		127
Total accrued liabilities	$	381	$	325
Non-current liabilities:
Employees’ pension, indemnity, and postretirement		132		122
Other		88		95
Total non-current liabilities	$	220	$	217

Table of Contents

Consolidated Statements of Income


(in millions)	2019		2018		2017
Other income, net:
Brazil tax matter	$	22	$	—	$	—
Insurance settlement		—		—		9
Value-added tax recovery		—		5		6
Other		(3)		5		3
Other income, net	$	19	$	10	$	18


(in millions)	2019		2018		2017
Financing costs, net:
Interest expense, net of amounts capitalized (a)	$	84	$	81	$	79
Interest income		(7)		(9)		(11)
Foreign currency transaction losses		4		14		5
Financing costs, net	$	81	$	86	$	73

(a)

Interest capitalized amounted to $5 million, $3 million, and $4 million in the years ended December 31, 2019, 2018, and 2017, respectively.

Consolidated Statements of Cash Flow


(in millions)	2019		2018		2017
Other non-cash charges to net income:
Share-based compensation expense	$	18	$	21	$	26
Other		15		18		13
Total other non-cash charges to net income	$	33	$	39	$	39


(in millions)	2019		2018		2017
Interest paid	$	80	$	73	$	77
Income taxes paid		145		231		289

Quarterly Financial Data (Unaudited)

Summarized quarterly financial data is as follows:


(in millions, except per share amounts)	1^st QTR (a)		2^nd QTR (b)		3^rd QTR (c)		4^th QTR (d)
2019
Net sales	$	1,536	$	1,550	$	1,574	$	1,549
Gross profit		316		329		344		323
Net income attributable to Ingredion		100		105		99		109
Basic earnings per common share of Ingredion		1.50		1.57		1.48		1.63
Diluted earnings per common share of Ingredion		1.48		1.56		1.47		1.61
Per share dividends declared	$	0.625	$	0.625	$	0.63	$	0.63


(in millions, except per share amounts)	1^st QTR (e)		2^nd QTR (f)		3^rd QTR (g)		4^th QTR (h)
2018
Net sales	$	1,581	$	1,608	$	1,563	$	1,537
Gross profit		354		360		334		320
Net income attributable to Ingredion		140		114		95		94
Basic earnings per common share of Ingredion		1.94		1.59		1.33		1.38
Diluted earnings per common share of Ingredion		1.90		1.57		1.32		1.36
Per share dividends declared	$	0.60	$	0.60	$	0.625	$	0.625

(in millions, except per share amounts)

1st QTR (a)

2nd QTR (b)

3rd QTR (c)

4th QTR (d)

2017

Net sales before shipping and handling costs

$
1,537

$
1,542

$
1,574

$
1,527

Less: shipping and handling costs

84

85

89

90

Net sales

1,453

1,457

1,485

1,437

Gross profit

352

373

388

360

Net income attributable to Ingredion

124

130

166

99

Basic earnings per common share of Ingredion

1.72

1.81

2.31

1.37

Diluted earnings per common share of Ingredion

1.68

1.78

2.26

1.35

Per share dividends declared

$
0.50

$
0.50

$
0.60

$
0.60

(in millions, except per share amounts)

1st QTR (e)

2nd QTR (f)

3rd QTR (g)

4th QTR (h)

2016

Net sales before shipping and handling costs

$
1,434

$
1,533

$
1,569

$
1,484

Less: shipping and handling costs

74

78

80

85

Net sales

1,360

1,455

1,489

1,399

Gross profit

339

355

369

339

Net income attributable to Ingredion

130

117

143

94

Basic earnings per common share of Ingredion

1.81

1.62

1.98

1.29

Diluted earnings per common share of Ingredion

1.77

1.58

1.93

1.26

Per share dividends declared

$
0.45

$
0.45

$
0.50

$
0.50

(a)

In the first quarter of ~~2017,~~2019, the Company recorded ~~$11 million in after-tax, net restructuring costs, $3 million in after-tax non-cash inventory charges related to the TIC acquisition, and $1 million in after-tax acquisition and integration costs.~~

~~(b)~~

~~In the second quarter of 2017, the Company recorded $5~~$3 million in after-tax, net restructuring costs and $3$1 million in after-tax, ~~non-cash inventory charges.~~

net acquisition/integration costs.

~~(c)~~

(b)

In the second quarter of 2019, the Company recorded $7 million in after-tax, net restructuring costs.

(c)

In the third quarter of ~~2017,~~2019, the Company recorded ~~a $10~~ $22 million ~~gain~~in after-tax, net restructuring cost and $2 million in after-tax charges for other tax matters.

(d)

In the fourth quarter of 2019, the Company recorded $13 million in after-tax, other income related to ~~an income tax settlement, $5~~other matters, $12 million in after-tax, net restructuring costs, and $1$1 million in after-tax, ~~acquisition and~~ acquisition/integration costs.

Table of Contents

~~(d)~~

(e)

In the ~~fourth~~first quarter of ~~2017,~~2018, the Company recorded ~~a $23~~$3 million in after-tax, ~~charge~~net restructuring costs.

(f)

In the second quarter of 2018, the Company recorded $5 million in after-tax, net restructuring costs and $2 million in after-tax,interest penalty related to an income tax settlement.

(g)

In the third quarter of 2018, the Company recorded $27 million in after-tax, net restructuring costs, $2 million in after-tax charges for the refinement of provisional charges related to the enactment of the TCJA, ~~$10~~and $2 million after-tax gain related to a refinement of reserve for an income tax settlement.

(h)

In the fourth quarter of 2018, the Company recorded $16 million in after-tax, net restructuring costs ~~a $6 million after-tax gain related to insurance settlement,~~ and $1$1 million in after-tax ~~acquisition and integration costs.~~

~~(e)~~

Incharges for the ~~first quarter~~refinement of ~~2016, the Company recorded $1 million in after-tax acquisition and integration costs.~~

~~(f)~~

~~In the second quarter of 2016, the Company recorded $10 million in after-tax, net restructuring costs.~~

~~(g)~~

~~In the third quarter of 2016, the Company recorded $2 million in after-tax, net restructuring costs.~~

~~(h)~~

~~In the fourth quarter of 2016, the Company recorded a $27 million charge~~provisional charges related to ~~an income tax settlement, $2 million in after-tax, net restructuring charges, and $1 million in after-tax acquisition and integration costs.~~

the enactment of the TCJA.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

~~Not applicable.~~None.

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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, ~~2017.~~2019. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2019, our disclosure controls and procedures (a) are effective in providing reasonable assurance that all material information required to be filed in this report has been recorded, processed, summarized and reported within the time periods specified in the SEC’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.

In the first quarter of 2017, we acquired Sun Flour in Thailand. In conducting our evaluation of the effectiveness of internal control over financial reporting, we have elected to exclude Sun Flour from our evaluation as of December 31, 2017, as permitted by the Securities and Exchange Commission. We are currently in the process of evaluating and integrating the acquired operations, processes, and internal controls. See Note 3 of the Notes to the Consolidated Financial Statements for additional information regarding the acquisitions. There have been no ~~other~~ changes in our internal control over financial reporting during the quarter ended December 31, ~~2017,~~2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s 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 controls is designed to provide reasonable assurance that assets are safeguarded and transactions are properly recorded and executed in accordance with management’s authorization.

Internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets.

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with accounting principles generally accepted in the U.S., and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors.

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework of Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The scope of the assessment included all of the subsidiaries of the Company except for Sun Flour, which was acquired in the first quarter of 2017. The consolidated net sales of the Company for the year ended December 31, 2017 were $5.8 billion of which Sun Flour represented less than $1 million. The consolidated total assets of the Company at December 31, 2017 were $6.1 billion of which Sun Flour represented $20 million.Company. Based on the evaluation, management concluded that our internal control over financial reporting was effective as of December 31, ~~2017.~~2019. 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 ~~attestation~~ report included ~~herein.~~in the Consolidated Financial Statements filed with this report.

ITEM 9B. OTHER INFORMATION

None.

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PART III

~~PART III~~

ITEM 10. ~~DIRECTORS,~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

~~The information contained under the headings “Proposal 1. Election of Directors,” “The Board and Committees” and “Section 16(a) Beneficial Ownership Reporting Compliance” in~~Information required by this Item 10 is incorporated herein by reference to the Company’s definitive proxy statement for the Company’s ~~2018~~2020 Annual Meeting of Stockholders (the “Proxy Statement”) ~~is incorporated herein by reference.~~, including the information in the Proxy Statement appearing under the headings “Proposal 1. Election of Directors” and “The Board and Committees.” The information regarding executive officers ~~called for~~required by Item 401 of Regulation S-K is included in Part 1 of this report under the heading ~~“Executive Officers of the Registrant.~~“Information about our Executive Officers.”

The Company 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 the Company’s Internet website, which is found at www.ingredion.com. The Company intends to ~~include~~disclose on its website, within any period that may be required under SEC rules, any amendments to, or waivers ~~from,~~under, a provision of its code of ethics that applies to the Company’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

~~The~~Information required by this Item 11 is incorporated herein by reference to the Proxy Statement, including the information ~~contained~~in the Proxy Statement appearing under the headings “Executive Compensation,” “Compensation Committee Report,” “Director Compensation” and “Compensation Committee Interlocks and Insider ~~Participation” in the Proxy Statement is incorporated herein by reference.~~Participation.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

~~The~~Information required by this Item 12 is incorporated herein by reference to the Proxy Statement, including the information ~~contained~~in the Proxy Statement appearing under the headings “Equity Compensation Plan Information as of December 31, ~~2017”~~2019” and “Security Ownership of Certain Beneficial Owners and ~~Management” in the Proxy Statement is incorporated herein by reference.~~Management.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

~~The~~Information required by this Item 13 is incorporated herein by reference to the Proxy Statement, including the information ~~contained~~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”~~Members.”

ITEM 14. PRINCIPAL ACCOUNTING 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 ~~is incorporated herein by reference.~~

~~ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

~~The information contained~~appearing under the heading ~~“2017~~“2019 and ~~2016~~2018 Audit Firm Fee ~~Summary” in the Proxy Statement is incorporated herein by reference.~~Summary.”

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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 5751 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.


Exhibit No.		Description
~~Exhibit No.~~		~~Description~~


3.1		Amended and Restated Certificate of Incorporation of ~~the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 filed on September 19, 1997) (File No. 1-13397).~~Ingredion Incorporated, as amended.

3.2		Certificate of Elimination of Series A Junior Participating Preferred Stock of Corn Products International, Inc. (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K dated May 19, 2010, filed on May 25, 2010) (File No. 1-13397).

~~3.3~~		Amendments to Amended and Restated Certificate of Incorporation (incorporated by reference to Appendix A to the Company’s Proxy Statement for its 2010 Annual Meeting of Stockholders filed on April 9, 2010) (File No. 1-13397).

~~3.4~~		Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 28, 2013) (File No. 1-13397).

~~3.5~~		Amended By-Laws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated December 9, 2016, filed on December 14, 2016) (File No. 1-13397).

4.1	Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

4.2	Private Shelf Agreement, dated as of March 25, 2010, by and between Corn Products International, Inc. and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 4.10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed on May 5, 2010) (File No. 1-13397).

4.3	Amendment No. 1 to Private Shelf Agreement, dated as of February 25, 2011, by and between Corn Products International, Inc. and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 4.11 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed on May 6, 2011) (File No. 1-13397).

4.4	Amendment No. 2 to Private Shelf Agreement, dated as of December 21, 2012, by and between Ingredion Incorporated and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 28, 2013) (File No. 1-13397).

4.5	Indenture dated as of August 18, 1999, between the Company and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3, filed on September 19, 2019) (File No. 333-233854).

4.6	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 the Company’s Current Report on Form 8 K dated April 10, 2007, filed on April 10, 2007) (File No. 1-13397).

4.7	Sixth 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 4.2 to the Company’s Current Report on Form 8-K dated September 14, 2010, filed on September 20, 2010) (File No. 1-13397).

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4.8	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 the Company’s Current Report on Form 8-K dated September 14, 2010, filed on September 20, 2010) (File No. 1-13397).

4.9	Ninth Supplemental Indenture, dated as of September 22, 2016, between the Company 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 the Company’s Current Report on Form 8-K dated September 22, 2016, filed on September 22, 2016) (File No. 1-13397).
10.1*	Stock Incentive Plan as effective February 7, 2017 (the "Stock Incentive Plan") (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 7, 2017, filed on February 14, 2017) (File No. 1-13397).

10.2*	Form of Indemnification Agreement entered into by each of the members of the Company’s Board of Directors and the Company’s executive officers (incorporated by reference to Exhibit 10.14 to the Company’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*	Form of Indemnification Agreement entered into by each of the members of the Company’s Board of Directors and the Company’s executive officers (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997, filed on March 31, 1998) (File No. 1-13397).

10.4*	Supplemental Executive Retirement Plan as effective July 18, 2012 (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed on November 2, 2012) (File No. 1-13397).

10.5*	Executive Life Insurance Plan (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997, filed on March 31, 1998) (File No. 1-13397).

10.6*	Deferred Compensation Plan, as amended by Amendment No. 1 (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2001, filed on June 26, 2002) (File No. 1-13397).

10.7*	Annual Incentive Plan as effective July 18, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed on November 2, 2012) (File No. 1-13397).

10.8*	Executive Life Insurance Plan, Compensation Committee Summary (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 11, 2005) (File No. 1-13397).

10.9*	Form of Performance Share Award Agreement for use in connection with awards under the Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 6, 2018, filed on February 12, 2018) (File No. 1-13397).

10.10*	Form of Stock Option Award Agreement for use in connection with awards under the Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 6, 2018, filed on February 12, 2018) (File No. 1-13397).

10.11*	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 the Company’s Current Report on Form 8-K dated February 6, 2018, filed on February 12, 2018) (File No. 1-13397).

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10.12*	Form of Executive Severance Agreement entered into by certain executive officers of the Company (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, filed on August 3, 2018) (File No. 1-13397).

10.13*	Form of Executive Severance Agreement entered into by certain executive officers of the Company (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, filed on August 3, 2018) (File No. 1-13397).

10.14	Letter of Agreement, dated as of November 10, 2016, between the Company and Jorgen Kokke (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 22, 2017) (File No. 1-13397).

10.15*	Letter of Agreement, dated as of December 1, 2017, between the Company and Jorgen Kokke (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed on February 21, 2018) (File No, 1-13397).

10.16*	Letter of Agreement, dated as of January 11, 2018 between the Company and Elizabeth Adefioye (incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed on May 4, 2018) (File No. 1-13397).

10.17*	Revolving Credit Agreement, dated as of October 11, 2016, by and among Ingredion Incorporated, the lenders signatory thereto, any subsidiary borrowers that may become party thereto from time to time, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., as Syndication Agent, and Branch Banking and Trust Company, Bank of Montreal, Wells Fargo Bank, National Association, Mizuho Bank, Ltd., HSBC Bank USA, N.A., Citibank, N.A., ING Capital LLC and PNC Bank, National Association, as Co-Documentation Agents (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated October 11, 2016, filed on October 17, 2016) (File No. 1-13397).

~~4.2~~	10.18*	~~Private Shelf Agreement, dated as of March 25, 2010 by~~Amended and between Corn Products International, Inc. and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 4.10 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2010, filed on May 5, 2010) (File No. 1-13397).

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~~4.3~~			Amendment No. 1 to Private Shelf Agreement, dated as of February 25, 2011 by and between Corn Products International, Inc. and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 4.11 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2011, filed on May 6, 2011) (File No. 1-13397) .

~~4.4~~			Amendment No. 2 to Private Shelf Agreement, dated as of December 21, 2012 by and between Ingredion Incorporated and Prudential Investment Management, Inc. (incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 28, 2013) (File No. 1-13397).

~~4.5~~			Indenture Agreement dated as of August 18, 1999 between the Company and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on August 27, 1999) (File No. 1-13397).

~~4.6~~			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 the Company’s Current Report on Form 8-K dated April 10, 2007, filed on April 10, 2007) (File No. 1-13397).

~~4.7~~			Sixth Supplemental Indenture, dated 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 4.2 to the Company’s Current Report on Form 8-K dated September 14, 2010, filed on September 20, 2010) (File No. 1-13397).

~~4.8~~			Seventh Supplemental Indenture, dated 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 the Company’s Current Report on Form 8-K dated September 14, 2010, filed on September 20, 2010) (File No. 1-13397).

~~4.9~~			Ninth Supplemental Indenture, dated as of September 22, 2016, between the Company 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 the Company’s Current Report on Form 8-K dated September 22, 2016, filed on September 22, 2016) (File No. 1-13397)
~~4.10~~			Restated Term Loan Credit Agreement, dated as of ~~August 18, 2017,~~April 12, 2019, among Ingredion Incorporated, the lenders ~~signatory~~party thereto, Bank of America, N.A., as Administrative Agent, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Bookrunner and Sole Lead Arranger (incorporated by reference to Exhibit ~~4.1~~4.10 to the Company’s Current Report on Form 8-K dated ~~August 18, 2017,~~April 12, 2019, filed on ~~August 24, 2017~~April 18, 2019 (File No. 1-13397).

10.1*			Stock Incentive Plan as effective February 7, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 7, 2017, filed on February 14, 2017) (File No. 1-13397).

10.2*	10.19*	~~Form~~Summary of Executive Severance Agreement entered into by Ilene S. Gordon and Jack C. Fortnum (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2008, filed on May 6, 2008) (File No. 1-13397).Non-Employee Director Compensation.

10.3*	10.20*	Form of Indemnification Agreement entered into by each of the members of the Company’s Board of Directors and the Company’s executive officers (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997 filed on March 31, 1998) (File No. 1-13397).

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10.4*			Deferred Compensation Plan for Outside Directors of the Company (Amended and Restated as of September 19, 2001), filed on December 21, 2001 as Exhibit 4(d) to the Company’s Registration Statement on Form S-8, File No. 333-75844, as amended by Amendment No. 1 dated December 1, 2004 (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 11, 2005) (File No. 1-13397).

10.5*			Supplemental Executive Retirement Plan as effective July 18, 2012 (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2012, filed on November 2, 2012) (File No. 1-13397).

10.6*			Executive Life Insurance Plan (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997, filed on March 31, 1998) (File No. 1-13397).

10.7*			Deferred Compensation Plan, as amended by Amendment No. 1 (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2001, filed on June 26, 2002) (File No. 1-13397).

10.8*			Annual Incentive Plan as effective July 18, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2012, filed on November 2, 2012) (File No. 1-13397).

10.9*			Executive Life Insurance Plan, Compensation Committee Summary (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 11, 2005) (File No. 1-13397).

10.10*			Form of Executive Life Insurance Plan Participation Agreement and Collateral Assignment entered into by Jack C. Fortnum (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 11, 2005) (File No. 1-13397).

10.11*			Form of Performance Share Award Agreement for use in connection with awards under the Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 6, 2018, filed on February 12, 2018) (File No. 1-13397).

10.12*			Form of Stock Option Award Agreement for use in connection with awards under the Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 6, 2018, filed on February 12, 2018) (File No. 1-13397).

10.13*			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 the Company’s Current Report on Form 8-K dated February 6, 2018, filed on February 12, 2018) (File No. 1-13397).

~~10.14~~			Natural Gas Purchase and Sale Agreement between Corn Products Brasil-Ingredientes Industrias Ltda. and Companhia de Ga de Sao Paulo-Comgas (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 9, 2006) (File No. 1-13397).

10.15*			Letter of Agreement, dated as of ~~April 2, 2009~~January 28, 2019, between the Company and ~~Ilene S. Gordon (incorporated by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2009, filed on August 6, 2009) (File No. 1-13397).~~Janet M. Bawcom.

10.16*	10.21*	Letter of Agreement, dated as of ~~April 2, 2010~~February 1, 2019, between the Company and ~~Diane Frisch (incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2010, filed on August 6, 2010) (File No. 1-13397).~~

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10.17*			~~Form of Executive Severance Agreement entered into by James Zallie, Christine~~Janet M. Castellano, Anthony P. DeLio and Robert F. Stefansic (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 24, 2014) (File No. 1-13397).Bawcom.

10.18*			Form of Executive Severance Agreement entered into by Jorgen Kokke (incorporated by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed on May 2, 2014) (File No. 1-13397).

10.19*			Letter of Agreement dated as of November 10, 2016 between the Company and Jorgen Kokke (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K, for the year ended December 31, 2016, filed on February 22, 2017) (File No. 1-13397).

10.20*			Confidentiality Agreement dated March 1, 2017 between the Company and Jack C. Fortnum (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2017, filed on May 5, 2017) (File No. 1-13397).

10.21*			Non-Compete Agreement dated March 1, 2017 between the Company and Jack C. Fortnum (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2017, filed on May 5, 2017) (File No, 1-13397)
10.22*			~~Executive Severance~~Relocation Expense Repayment Agreement, dated ~~March~~as of February 1, ~~2017~~2019, between the Company and ~~James D. Gray (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2017, filed on May 5, 2017) (File No, 1-13397)~~
10.23*			~~Letter of Agreement dated as of December 1, 2017 between the Company and Jorgen Kokke.~~
10.24*			~~Executive Severance Agreement and Non-Competition Agreement dated February 1, 2016 between Ingredion Brasil- Ingredientes Industrias Ltda. and Ernesto Pousada~~
10.25*			~~Executive Severance Agreement dated March 1, 2016 between the Company and Stephen K. Latreille~~
~~12.1~~			~~Computation of Ratio of Earnings to Fixed Charges~~Janet M. Bawcom.

21.1			Subsidiaries of the Registrant.

23.1			Consent of Independent Registered Public Accounting Firm.

24.1			Power of Attorney.

31.1			~~CEO~~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 ~~Certification Pursuant to~~of the Sarbanes-Oxley Act of ~~2002~~2002.

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31.2		~~CFO~~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 ~~Certification Pursuant to~~of the Sarbanes-Oxley Act of ~~2002~~2002.

32.1		~~CEO~~ Certification ~~Pursuant~~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 ~~created by~~adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.

32.2		~~CFO~~ Certification ~~Pursuant~~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 ~~created by~~adopted pursuant to Section 906 of the ~~Sarbanes-Oxley~~Sarbanes Oxley Act of ~~2002~~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	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104	Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document, which is contained in Exhibit 101).

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The following financial information from the Ingredion Incorporated Annual Report on Form 10-K for the year ended December 31, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Equity and Redeemable Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to the Consolidated Financial Statements.

* 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.

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SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly ~~authorized, on the 21st day of February, 2018.~~authorized.


			INGREDION INCORPORATED
	~~INGREDION INCORPORATED~~


Date: February 19, 2020	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~~report has been signed below by the following persons on behalf of the ~~Registrant,~~registrant, in the capacities indicated and on the ~~21st day of February, 2018.~~dates indicated.


Signature	Title		Date
~~Signature~~	~~Title~~


/s/ James P. Zallie	President, Chief Executive Officer, and Director		February 19, 2020
James P. Zallie	(Principal executive officer)

/s/ James D. Gray	Chief Financial Officer		February 19, 2020
James D. Gray	(Principal financial officer)

/s/ Stephen K. Latreille	Controller		February 19, 2020
Stephen K. Latreille	(Principal accounting officer)
*Ilene S. Gordon		~~Director~~
~~Ilene S. Gordon~~*Luis Aranguren-Trellez	Director		February 19, 2020
*Luis Aranguren-Trellez Luis Aranguren-Trellez		~~Director~~

*David B. Fischer	Director		February 19, 2020
David B. Fischer

*Paul Hanrahan	Director		February 19, 2020
Paul Hanrahan

*Rhonda L. Jordan	Director		February 19, 2020
Rhonda L. Jordan

*Gregory B. Kenny	Director		February 19, 2020
Gregory B. Kenny

*Barbara A. Klein	Director		February 19, 2020
Barbara A. Klein

*Victoria J. Reich	Director		February 19, 2020
Victoria J. Reich

*Stephan B. Tanda	Director		February 19, 2020
Stephan B. Tanda

* Jorge A. Uribe	Director		February 19, 2020
Jorge A. Uribe

*Dwayne A. Wilson	Director		February 19, 2020
Dwayne A. Wilson


*By:	~~/s/ Christine~~/s/ Janet M. ~~Castellano~~Bawcom
	~~Christine~~Janet M. ~~Castellano~~Bawcom
	Attorney-in-fact
	Date: February 19, 2020

~~(Being the principal executive officer, the principal financial officer, the principal accounting officer, and a majority of the directors of Ingredion Incorporated)~~

~~108~~102


Delaware		22-3514823
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)		(I.R.S. Employer
		Identification No.)

5 Westbrook Corporate Center, Westchester, Illinois		60154
(Address of ~~Principal Executive Offices)~~principal executive offices)		(Zip Code)


Title��of each class	Trading Symbol(s)	Name of each exchange on which registered
~~Title of Each Class~~Common Stock, par value $0.01 per share	~~Name of Each Exchange on Which Registered~~
~~Common Stock, $.01 par value per share~~INGR	New York Stock Exchange


Large accelerated filer ~~[X]~~☒		Accelerated filer ☐

Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~		Smaller reporting company ☐ Emerging growth company ☐


		Page
Part I

Item 1.	Business	3
~~Item 1A.~~	~~Risk Factors~~	19
~~Item 1B.~~	~~Unresolved Staff Comments~~	25
~~Item 2.~~	~~Properties~~	26
~~Item 3.~~	~~Legal Proceedings~~	27
~~Item 4.~~	~~Mine Safety Disclosures~~	27

~~Part II~~Item 1A.	Risk Factors
		15
Item 5.1B.	Unresolved Staff Comments	21
Item 2.	Properties	22
Item 3.	Legal Proceedings	23
Item 4.	Mine Safety Disclosures	23

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28 24
Item 6.	Selected Financial Data	29 25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30 27
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	55 49
Item 8.	Financial Statements and Supplementary Data	57 51
Item 9.	Changes Inin and Disagreements With Accountants on Accounting and Financial Disclosure	~~100~~
~~Item 9A.~~	~~Controls and Procedures~~	~~101~~
~~Item 9B.~~	~~Other Information~~	~~101~~
		96
~~Part III~~Item 9A.	Controls and Procedures
		96
Item ~~10.~~9B.	Other Information	96

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	~~102~~ 97
Item 11.	Executive Compensation	~~102~~ 97
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~102~~ 97
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~102~~
~~Item 14.~~	~~Principal Accountant Fees and Services~~	~~102~~
		97
~~Part IV~~Item 14.	Principal Accounting Fees and Services	97

~~Item 15.~~Part IV	~~Exhibits and Financial Statement Schedules~~	~~103~~

~~Signatures~~Item 15.	~~108~~ Exhibits, Financial Statement Schedules	98
Item 16.	Form 10-K Summary	101

Signatures		102


	Total		North		South

											Total		North		South		Asia
Industries Served	Company		America		America		APAC		EMEA		Company		America		America		Pacific		EMEA

Food	53	%	51	%	47	%	64	%	66	%	54	%	50	%	47	%	66	%	69	%
Beverage	12		15		9		6		1		10		14		7		6		1
Brewing											8		8		16		3		—
Food and Beverage Ingredients											72		72		70		75		70

Animal Nutrition	10		10		14		5		8		9		10		14		5		8
Paper and Corrugating	10		11		8		14		5
Brewing	7		7		15		4		—
Other	8		6		7		7		20		19		18		16		20		22
Total	100	%	100	%	100	%	100	%	100	%
Total Net sales											100	%	100	%	100	%	100	%	100	%

Elizabeth Adefioye

~~Elected to serve as~~ 51

Senior Vice President and Chief Human Resources Officer ~~of Company effective~~since March 1, 2018. Prior to assuming her current position, Ms. Adefioye ~~is presently serving~~served as Vice President, Human Resources, North America and Global Specialties, a position she ~~has~~ held ~~since~~from September 12, 2016. ~~Prior to that she~~She previously served as Vice President Human Resources Americas of Janssen Pharmaceutical, a subsidiary of Johnson & Johnson, with responsibilities for the strategic talent agenda, employee engagement and organizational capabilities efforts with respect to more than 5,000 employees from June 2015 to September 2016. From February 2013 to June 2015, she served as Worldwide Vice President Human Resources, Cardiovascular and Specialty Solutions of Johnson & Johnson Medical Devices Sector. ~~Prior thereto,~~ Ms. Adefioye served as Vice President Human Resources Global Manufacturing and Supply of Novartis Consumer Health from February 2012 to January ~~2013. Prior to that she served~~2013, and as Vice President, Human Resources, North America ~~of Novartis Consumer Health~~ of Novartis Consumer Health from September 2008 to January 2012. Ms. Adefioye served as Region Head, Human Resources Emerging Markets of Novartis OTC, from January 2007 to September 2008. Previously, she served as Regional Human Resources Director – Central and Eastern Europe, Greece & Israel of Medtronic plc. from February 2001 to December 2006. She served as Senior Human Resources Manager of Bristol-Myers Squibb UK from January 2000 to January 2001. Ms. Adefioye holds a ~~Bachelor's~~bachelor's degree in chemistry from Lagos State University in Lagos, Nigeria and a postgraduate diploma in human resources management from the University of Westminster in London, England, United Kingdom. She also received a diploma in building leadership capability from Glasgow Caledonian University in Glasgow, Scotland, United Kingdom. ~~While in the United Kingdom,~~ Ms. Adefioye served as a Fellow of the Chartered Institute of Personnel Development and is a member of the Society for Human Resources Management.

Valdirene Bastos-Licht

~~Elected to serve as~~ 52

Senior Vice President and President, Asia-Pacific ~~of Company effective~~since March 1, 2018. 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 ~~Rhodia~~Care Chemicals Division – South America. Ms. Bastos-Licht holds both a ~~Bachelor's~~bachelor's and a licensing degree in mathematics from Fundacao Santo Andre in Brazil and a ~~Master's~~Master of Science degree in management from the MIT Sloan School of Management.