UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2019


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

For the transition period from to

COMMISSION FILE NUMBER 1-13397

Ingredion Incorporated

(Exact name of Registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of incorporation or organization)

22-3514823

(I.R.S. Employer Identification Number)

5 WESTBROOK CORPORATE CENTER

WESTCHESTER, ILLINOIS

60154

(Address of principal executive offices)

(Zip Code)

(708) 551-2600

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	INGR	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~		Smaller reporting company ☐

		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


CLASS		OUTSTANDING AT ~~OCTOBER 31, 2017~~APRIL 30, 2019
Common Stock, $.01 par value		~~71,865,000~~66,687,329 shares

PART I FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Income

(Unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(in millions, except per share amounts)	2017		2016		2017		2016		2019		2018
Net sales before shipping and handling costs	$	1,574	$	1,569	$	4,653	$	4,537	$	1,536	$	1,581
Less: shipping and handling costs		89		80		258		233		116		112
Net sales		1,485		1,489		4,395		4,304		1,420		1,469
Cost of sales		1,097		1,120		3,282		3,241		1,104		1,115
Gross profit		388		369		1,113		1,063		316		354

Operating expenses		152		149		458		431		150		156
Other income, net		(4)		(3)		(7)		(2)
Other expense (income), net										1		(2)
Restructuring/impairment charges		7		2		23		15		4		3

Operating income		233		221		639		619		161		197

Financing costs, net		16		15		57		48		22		16
Other, non-operating income										-		(1)

Income before income taxes		217		206		582		571		139		182
Provision for income taxes		48		60		153		172		37		39
Net income		169		146		429		399		102		143
Less: Net income attributable to non-controlling interests		3		3		9		8		2		3
Net income attributable to Ingredion	$	166	$	143	$	420	$	391	$	100	$	140

Weighted average common shares outstanding:
Basic		71.9		72.5		72.0		72.2		66.8		72.3
Diluted		73.3		74.3		73.4		74.0		67.4		73.6

Earnings per common share of Ingredion:
Basic	$	2.31	$	1.98	$	5.83	$	5.42	$	1.50	$	1.94
Diluted	$	2.26	$	1.93	$	5.72	$	5.29	$	1.48	$	1.90

See Notes to Condensed Consolidated Financial Statements

PART I FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

Ingredion Incorporated (“Ingredion”)

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

(Unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(in millions)	2017		2016		2017		2016		2019		2018
Net income	$	169	$	146	$	429	$	399	$	102	$	143
Other comprehensive income:
Losses on cash-flow hedges, net of income tax effect of $6, $9, $2, and $9, respectively		(10)		(18)		(2)		(15)
Losses on cash-flow hedges reclassified to earnings, net of income tax effect of $1, $2, $- and $9, respectively		—		4		1		18
Actuarial gains (losses) on pension and other postretirement obligations, settlements and plan amendments, net of income tax effect of $-, $-, $- and $1, respectively		—		—		1		(4)
(Gains) losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect		—		—		(1)		1
Unrealized gains on investments, net of income tax effect		—		—		1		—
(Losses) gains on cash flow hedges, net of income tax effect of $3 and $5, respectively										(9)		17
Losses on cash flow hedges reclassified to earnings, net of income tax effect of $ — and $1, respectively										2		3
Actuarial (losses) on pension and other postretirement obligations, settlements and plan amendments, net of income tax effect of $ —										—		(1)
Unrealized gains on investments, net of income tax effect of $ —										—		1
Currency translation adjustment		30		9		62		68		1		21
Comprehensive income		189		141		491		467		96		184
Less: Comprehensive income attributable to non-controlling interests		3		3		9		8		2		1
Comprehensive income attributable to Ingredion	$	186	$	138	$	482	$	459	$	94	$	183

See Notes to Condensed Consolidated Financial Statements

PART I FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Balance Sheets


	September 30,		December 31,		March 31,		December 31,
(in millions, except share and per share amounts)	2017		2016		2019		2018
	(Unaudited)				(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	491	$	512	$	255	$	327
Short-term investments		14		4		4		7
Accounts receivable, net		901		923		1,013		951
Inventories		825		789		862		824
Prepaid expenses		35		24		36		29
Total current assets		2,266		2,252		2,170		2,138
Property, plant and equipment, net of accumulated depreciation of $2,980 and $2,826, respectively		2,186		2,116

Property, plant and equipment, net of accumulated depreciation of $2,963 and $2,915, respectively						2,208		2,198

Goodwill		803		784		815		791
Other intangible assets, net of accumulated amortization of $130 and $106, respectively		499		502
Other intangible assets, net of accumulated amortization of $174 and $167, respectively						453		460
Operating lease assets						146		—
Deferred income tax assets		7		7		11		10
Other assets		132		121		129		131
Total assets	$	5,893	$	5,782	$	5,932	$	5,728

Liabilities and equity
Current liabilities:
Short-term borrowings	$	153	$	106	$	153	$	169
Accounts payable and accrued liabilities		787		872		748		777
Total current liabilities		940		978		901		946

Non-current liabilities		180		158		203		217
Long-term debt		1,731		1,850		1,957		1,931
Non-current operating lease liabilities						113		—
Deferred income tax liabilities		154		171		193		189
Share-based payments subject to redemption		30		30		21		37

Ingredion stockholders’ equity:
Preferred stock — authorized 25,000,000 shares — $0.01 par value, none issued		—		—		—		—
Common stock — authorized 200,000,000 shares — $0.01 par value, 77,810,875 issued at September 30, 2017 and December 31, 2016, respectively		1		1
Common stock — authorized 200,000,000 shares — $0.01 par value, 77,810,875 issued at March 31, 2019 and December 31, 2018, respectively						1		1
Additional paid-in capital		1,140		1,149		1,137		1,096
Less: Treasury stock (common stock: 5,964,226 and 5,396,526 shares at September 30, 2017 and December 31, 2016, respectively) at cost		(504)		(413)
Less: Treasury stock (common stock: 11,131,668 and 11,284,681 shares at March 31, 2019 and December 31, 2018, respectively) at cost						(1,050)		(1,091)
Accumulated other comprehensive loss		(1,009)		(1,071)		(1,160)		(1,154)
Retained earnings		3,203		2,899		3,594		3,536
Total Ingredion stockholders’ equity		2,831		2,565		2,522		2,388
Non-controlling interests		27		30		22		20
Total equity		2,858		2,595		2,544		2,408
Total liabilities and equity	$	5,893	$	5,782	$	5,932	$	5,728

See Notes to Condensed Consolidated Financial Statements

PART I FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Equity and Redeemable Equity

(Unaudited)


	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, 2018	$	1	$	1,096	$	(1,091)	$	(1,154)	$	3,536	$	20	$	37
Net income attributable to Ingredion										100
Net income attributable to non-controlling interests												2
Dividends declared										(42)
Repurchases of common stock, net				32		31
Share-based compensation, net of issuance				9		10								(16)
Other comprehensive loss								(6)
Balance, March 31, 2019	$	1	$	1,137	$	(1,050)	$	(1,160)	$	3,594	$	22	$	21

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, 2016

$
1

$
1,149

$
(413)

$
(1,071)

$
2,899

$
30

$
30

Net income attributable to Ingredion

420

Net income attributable to non-controlling interests

9

Dividends declared

(116)

(12)

Repurchases of common stock

(123)

Share-based compensation, net of issuance

(9)

32

—

Other comprehensive income

62

Balance, September 30, 2017

$
1

$
1,140

$
(504)

$
(1,009)

$
3,203

$
27

$
30


	Total Equity												Share-based		Total Equity												Share-based
			Additional				Accumulated Other				Non-		Payments				Additional				Accumulated Other				Non-		Payments
	Common		Paid-In		Treasury		Comprehensive		Retained		Controlling		Subject to		Common		Paid-In		Treasury		Comprehensive		Retained		Controlling		Subject to
(in millions)	Stock		Capital		Stock		Loss		Earnings		Interests		Redemption		Stock		Capital		Stock		Loss		Earnings		Interests		Redemption
Balance, December 31, 2015	$	1	$	1,160	$	(467)	$	(1,102)	$	2,552	$	36	$	24
Balance, December 31, 2017															$	1	$	1,138	$	(494)	$	(1,013)	$	3,259	$	26	$	36
Net income attributable to Ingredion										391														140
Net income attributable to non-controlling interests												8														3
Dividends declared										(101)		(6)												(44)		(3)
Share-based compensation, net of issuance				(14)		53								3				(6)		18								(9)
Other comprehensive income								78				(10)
Balance, September 30, 2016	$	1	$	1,146	$	(414)	$	(1,024)	$	2,842	$	28	$	27
Other comprehensive income (loss)																						41				(2)
Balance, March 31, 2018															$	1	$	1,132	$	(476)	$	(972)	$	3,355	$	24	$	27

See Notes to Condensed Consolidated Financial Statements

PART I FINANCIAL INFORMATION

ITEM 1

FINANCIAL STATEMENTS

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended				Three Months Ended
	September 30,				March 31,
(in millions)	2017		2016		2019		2018
Cash provided by operating activities
Net income	$	429	$	399	$	102	$	143
Non-cash charges to net income:
Depreciation and amortization		156		146		51		54
Charge for fair value markup of acquired inventory		9		—
Mechanical stores expense						13		15
Deferred income taxes						5		8
Other		54		59		18		8
Changes in working capital:
Accounts receivable and prepaid expenses		15		(56)		(70)		(56)
Inventories		(33)		(8)		(34)		(21)
Accounts payable and accrued liabilities		(92)		18		(67)		(57)
Decrease in margin accounts		10		1
Margin accounts						1		16
Other		(24)		(17)		(1)		40
Cash provided by operating activities		524		542		18		150

Cash used for investing activities
Capital expenditures, net of proceeds on disposals		(222)		(197)
Capital expenditures and mechanical stores purchases						(80)		(95)
Payments for acquisitions, net of cash acquired of $4 and $ — , respectively						(41)		—
Short-term investments		(9)		(7)		3		3
Payments for acquisitions		(13)		—
Other						—		6
Cash used for investing activities		(244)		(204)		(118)		(86)

Cash used for financing activities
Cash provided by (used for) financing activities
Proceeds from borrowings		1,085		793		225		46
Payments on debt		(1,164)		(742)		(217)		(258)
Debt issuance costs		—		(4)
(Repurchase) issuance of common stock, net		(120)		21
Dividends paid (including to non-controlling interests)		(120)		(103)
Cash used for financing activities		(319)		(35)
Repurchases of common stock, net						63		—
Issuances of common stock for share-based compensation, net of settlements						(1)		(3)
Dividends paid, including to non-controlling interests						(42)		(46)
Cash provided by (used for) financing activities						28		(261)

Effects of foreign exchange rate changes on cash		18		14		—		3

(Decrease) increase in cash and cash equivalents		(21)		317
Decrease in cash and cash equivalents						(72)		(194)

Cash and cash equivalents, beginning of period		512		434		327		595

Cash and cash equivalents, end of period	$	491	$	751	$	255	$	401

See Notes to Condensed Consolidated Financial Statements

INGREDION INCORPORATED (“Ingredion”)

Notes to Condensed Consolidated Financial Statements

1. Interim Financial Statements

References to the “Company” are to Ingredion Incorporated (“Ingredion”) and its consolidated subsidiaries. These statements should be read in conjunction with the consolidated financial statements and the related notes to those statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

The unaudited Condensed Consolidated Financial Statements included herein were prepared by management on the same basis as the Company’s audited Consolidated Financial Statements for the year ended December 31, ~~2016~~2018 and reflect all adjustments (consisting solely of normal recurring items unless otherwise noted) which are, in the opinion of management, necessary for the fair presentation of results of operations and cash flows for the interim periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, and the financial position of the Company as of ~~September 30, 2017.~~March 31, 2019. The results for the interim periods are not necessarily indicative of the results expected for the full years.

2. ~~Recently Adopted~~Summary of Significant Accounting Standards and ~~New Accounting Standards~~Policies

For detailed information about the Company’s significant accounting standards, please refer to Note 2 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Except for the items listed below, there have been no other changes to the Company’s significant accounting policies for the three months ended March 31, 2019.

Recently Adopted Accounting ~~Standards:~~ ~~In July 2015, the Financial Accounting~~ Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This Update requires an entity to measure inventory at the lower of cost and net realizable value, removing the consideration of current replacement cost. It is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. We adopted this Update in the current year and it did not have a material impact on our audited Condensed Consolidated Financial Statements.

~~New Accounting Standards:~~ ~~In May 2014, the FASB issued~~ 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 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 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 changes to the recognition of revenue for existing customer contracts.842)

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. 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 ~~effective date. Adoption will require a~~ modified retrospective approach and the effective 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 $170 million of total operating lease liabilities and $161 million of net operating lease assets on the ~~guidance in this Update to have a material impact on our~~Condensed Consolidated Balance Sheet ~~as operating leases will be recognized both as assets and liabilities~~ on January 1, 2019. The standard did not materially impact the Condensed Consolidated ~~Balance Sheet. We~~Statement of Income or Condensed 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.~~Condensed 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.

~~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 Condensed Consolidated Statements of Income for the non-operating income (loss) components. Net income within the Condensed Consolidated Statements of Income will not change upon adoption of the Update.815)

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, with early adoption permitted. ~~We are in the process of assessing the effects~~The Company has completed its assessment of these updates, including potential changes to existing hedging ~~arrangement,~~arrangements, and has determined the adoption of the guidance did not have a material impact on the Company’s Condensed 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 Condensed 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. 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 ~~accounting~~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 ~~these changes.~~annual periods beginning after December 15, 2019, with early adoption permitted.

3. Acquisitions

On March ~~9, 2017,~~1, 2019, the Company completed its acquisition of ~~Sun Flour Industry Co.~~Western Polymer LLC (“Western Polymer”), ~~Ltd. (“Sun Flour”)~~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 $41 million, net of cash acquired of $4 million. Upon closing, the Company paid $13 million in cash and recorded $5 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~~North America business segment.

On December 29, 2016, the Company completed its acquisition of TIC Gums Incorporated (“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~~has elected to record the ~~acquisition with proceeds from borrowings under its revolving credit agreement. The~~ results of ~~the acquired operations are included in the Company’s consolidated results from the respective acquisition dates forward~~Western Polymer within the ~~North America and Asia Pacific business segments.~~Condensed Consolidated Financial Statements on a one-month lag.

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.

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.

The initial purchase accounting for ~~TIC Gums~~this acquisition is still ~~open, pending finalization~~in process and as of March 31, 2019, $22 million of goodwill and ~~taxes. All~~$19 million of ~~the recorded~~net tangible assets and liabilities, including working capital, property, plant and equipment (“PP&E”), goodwill, and intangibles, are open for performing purchase accounting adjustments for Sun Flour. Purchase accounting adjustments for Shandong Huanong remain open to finalize the valuation of intangible assets.

have preliminarily been recorded. Goodwill represents the amount by which the purchase price exceeds the estimated fair value of the net assets acquired. The goodwill results from synergies and other operational benefits expected to be derived from the acquisitions. The goodwill related to ~~TIC Gums and Shandong Huanong~~Western Polymer is 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 preliminary purchase price allocation for the acquisition of TIC Gums as of December 29, 2016:~~

Preliminary

(in millions)

TIC Gums

Working capital (excluding cash)

$
49

Property, plant and equipment

37

Identifiable intangible assets

133

Goodwill

177

Total purchase price, net of cash

$
396

The identifiable intangible assets for the acquisition of TIC Gums included items such as customer relationships, trade names, and proprietary technology. 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. 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

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

~~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 nine months ended September 30, 2017 was an increase in cost of sales of $9 million 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 three months ended September 30, 2017 had no effect on cost of sales.

Pro-forma results of operations for the ~~acquisitions~~acquisition made in ~~2017 and 2016~~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 $1 ~~million and $3~~ million of pre-tax acquisition and integration costs for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2019, associated with its recent ~~acquisitions. In 2016, the~~acquisition. The Company incurred ~~$2 million of~~immaterial pre-tax acquisition and integration costs for the ~~nine months ended September 30, 2016 associated with the 2015 acquisitions of Kerr Concentrates, Inc. and Penford Corporation. Pre-tax acquisition and integration costs incurred for the~~ three months ended ~~September 30, 2016 were not significant.~~March 31, 2018.

4. ~~Impairment and Restructuring Charges~~Revenue Recognition

~~For~~The Company applies the ~~three and nine months ended September 30, 2017,~~provisions of 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 ~~recorded $7 million and $23 million, respectively, of pre-tax restructuring charges. During the first quarter of 2017, the Company implemented an organizational restructuring effort in Argentina in~~expects to receive. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a ~~more competitive cost position.~~ customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Company ~~notified~~identified customer purchase orders, which in some cases are governed by a master sales agreement, as 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 Company finalized a new labor agreementcontracts with ~~the labor union in the second quarter, ending the strike on June 1, 2017.~~its customers. For ~~the nine months ended September 30, 2017,~~each contract, the Company ~~recorded total pre-tax restructuring-related charges in Argentina~~considers the transfer of ~~$17 million~~products, each of which is distinct, to be the identified performance obligation. In determining the transaction price for ~~employee-related severance~~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 ~~costs. No additional charges were recorded~~discount arrangements that reduce the transaction price. The reduction of the 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 ~~three months ended September 30, 2017.~~

transaction price have not materially differed. Volume

incentives and discounts are accrued at the satisfaction of the performance obligation and accounted for in Accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets. These amounts are not significant as of March 31, 2019 or December 31, 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.

~~During~~Revenue is recognized when the ~~second quarter of 2017,~~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 ~~announced~~considers if there is a ~~Finance Transformation initiative in North America~~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 presented as a reduction of net sales. Taxes assessed by governmental authorities and collected from customers are accounted for on a net basis and excluded from revenues. 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 ~~U.S.~~Company’s internal sales force compensation. Under the terms of these programs, these are generally earned and ~~Canada businesses~~the costs are recognized at the time the revenue is recognized.

From time to ~~strengthen organizational capabilities and drive efficiencies to support the growth strategy~~ ~~of the Company. For the three and nine months ended September 30, 2017,~~time the Company ~~recorded pre-tax restructuring charges of $4 million ($3 million of severance costs~~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 Accounts payable and ~~$1 million of other costs) and $5 million ($3 million of severance costs and $2 million of other costs), respectively, related to this initiative. The Company expects to incur between $~~3 ~~million and $~~5 ~~million of employee-related severance and other costs~~accrued liabilities in the ~~fourth quarter of 2017 and between $1 million and $2 million in 2018 related to this initiative.~~

Additionally, for the three months ended September 30, 2017, the Company recorded $3 million of other pre-tax restructuring costs including employee-related severance costs in North America. For the nine months ended September 30, 2017, the Company recorded $1 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.

During the third quarter of 2016, the Company recorded $2 million of restructuring charges for employee-related severance and other costs due to the execution of global information technology (“IT”) outsourcing contracts. For the nine months ended September 30, 2016, the Company recorded $15 million of restructuring charges consisting of $10 million of employee-related severance and other costs due to the execution of global IT outsourcing contracts, $3 million of employee-related severance costs associated with the Company’s optimization initiative in South America and $2 million of costs attributable to the 2015 Port Colborne plant sale.

~~A summary of the Company’s severance accrual~~Condensed Consolidated Balance Sheets. There were no significant contract assets or liabilities as of ~~September 30, 2017 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

2

Prior year restructuring activities

(2)

Payments made to terminated employees

(14)

Balance in severance accrual as of September 30, 2017

$
11

~~Of the $11 million severance accrual as of September 30, 2017, $9 million is expected to be paid in the next 12 months.~~

5. ~~Segment Information~~March 31, 2019 or December 31, 2018.

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~~Asia-Pacific and Europe, Middle East and Africa (“EMEA”). ~~Its North America segment includes businesses in~~The nature, amount, timing and uncertainty of 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, China, Japan, Indonesia, the Philippines, Singapore, Malaysia, India, Australia and New Zealand. The Company’s EMEA segment includes businesses in Germany, the United Kingdom, Pakistan, South Africa and Kenya. The Company does not aggregate its operating segments when determining its reportable segments. Net sales are managed by the Company primarily based on its geographic segments. Each region’s product sales are ~~not presented because~~unique to ~~do so would be impracticable.~~each region and have unique risks.


		Three Months Ended
		March 31,
(in millions)	2019		2018
Net sales to unaffiliated customers:
North America:
Net sales before shipping and handling costs	$	951	$	958
Less: shipping and handling costs		91		84
Net sales	$	860	$	874

South America:
Net sales before shipping and handling costs	$	228	$	262
Less: shipping and handling costs		10		13
Net sales	$	218	$	249

Asia-Pacific:
Net sales before shipping and handling costs	$	203	$	203
Less: shipping and handling costs		9		9
Net sales	$	194	$	194

EMEA:
Net sales before shipping and handling costs	$	154	$	158
Less: shipping and handling costs		6		6
Net sales	$	148	$	152

109

5. Restructuring and Impairment Charges

For the three months ended March 31, 2019 and 2018, the Company recorded $4 million and $3 million of pre-tax restructuring charges, respectively. During 2018, the Company introduced its Cost Smart program, designed to improve profitability, further streamline its global business and deliver increased value to shareholders through anticipated savings in cost of sales, including freight, and SG&A. For the three months ended March 31, 2019, the Company recorded $3 million of employee-related severance and other costs in the South America and North America segments as part of its Cost Smart SG&A program, including $1 million of other costs associated with the Finance Transformation initiative in Latin America. The Company expects to incur less than $1 million in other costs during the remainder of 2019 related to this Finance Transformation initiative. Additionally, the Company recorded $1 million of other costs as part of the Cost Smart cost of sales program in relation to the prior year cessation of wet-milling at the Stockton, California plant. The Company expects to incur approximately $1 million of additional costs during the remainder of 2019 to complete this project.

For the three months ended March 31, 2018, the Company recorded $2 million of other costs related to the North America Finance Transformation initiative and $1 million of other restructuring costs related to the leaf extraction process in Brazil, both of which were announced in 2017.

A summary of the Company’s employee-related severance accrual as of March 31, 2019 is as follows (in millions):

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2017

2016

2017

2016

Net sales to unaffiliated customers:

North America

$
903

$
899

$
2,689

$
2,634

South America

257

276

740

731

Asia Pacific

189

185

555

534

EMEA

136

129

411

405

Total

$
1,485

$
1,489

$
4,395

$
4,304

Operating income:

North America

$
179

$
164

$
520

$
474

South America

26

27

44

59

Asia Pacific

29

29

88

87

EMEA

26

25

83

80

Corporate

(19)

(22)

(61)

(64)

Subtotal

241

223

674

636

Restructuring charges

(7)

(2)

(23)

(15)

Acquisition/integration costs

(1)

—

(3)

(2)

Charge for fair value markup of acquired inventory

—

—

(9)

—

Total

$
233

$
221

$
639

$
619


Balance in severance accrual as of December 31, 2018	$	10
Cost Smart cost of sales and SG&A		2
Payments made to terminated employees		(5)
Balance in severance accrual as of March 31, 2019	$	7

As of

As of

(in millions)

September 30, 2017

December 31, 2016

Total assets

North America

$
3,699

$
3,796

South America

877

809

Asia Pacific

796

697

EMEA

521

480

Total

$
5,893

$
5,782

Of the $7 million severance accrual as of March 31, 2019, $6 million is expected to be paid in the next 12 months.

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~~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 Treasury lock agreements (“T-Locks”).~~swaps.

Commodity price 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, ~~in North America,~~ the Company uses corn futures and options contracts that trade on regulated commodity exchanges to lock-in its corn costs associated with ~~firm-priced~~fixed-priced customer sales contracts. The Company uses over-the-counter natural gas swaps 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 and~~purchases. A majority of corn derivatives have been designated as ~~cash-flow hedges.~~cash flow hedging instruments. The Company also enters into futures contracts to hedge price risk associated with fluctuations in the market price of ~~ethanol. Unrealized~~ethanol and soybean oil. The Company’s natural gas, ethanol and soybean oil derivatives have been designated as cash flow hedging instruments.

The Company enters into certain corn derivative instruments that are not designated as hedging instruments as defined by ASC 815, Derivatives and Hedging. Therefore, the realized and unrealized gains and losses from these instruments are recognized in cost of 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 Condensed Consolidated Balance Sheets as part of accumulated other comprehensive income/loss (“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~~Gains and losses from cash flow hedging instruments reclassified from AOCI to earnings are reported as Cash provided by operating activities on the ~~ineffectiveness~~Condensed Consolidated Statements of ~~these cash-flow hedges are not significant.~~Cash Flows.

~~At September 30, 2017,~~As of March 31, 2019, AOCI included $5$11 million of losses (net of income taxes of $4$5 million), pertaining to commodities-related derivative instruments designated as ~~cash-flow~~cash flow hedges. AtAs of December 31, ~~2016, the amount~~2018, AOCI included ~~in AOCI~~$2 million of losses (net of tax of $2 million), pertaining to ~~these~~ commodities-related derivative instruments designated as ~~cash-flow hedges was not significant.~~cash flow hedges.

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 risk management control systems 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 ~~agreements~~agreement that effectively ~~convert~~converts the interest rates on $200 million of its $400 million of 4.625 percent senior notes due November 1, 2020, to variable rates. ~~These~~This swap ~~agreements call~~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~~ LIBOR ~~rate~~ plus a spread. The Company has designated ~~these~~this interest rate swap ~~agreements~~agreement as ~~hedges~~a hedge of the changes in fair value of the underlying debt obligations attributable to changes in interest rates and accounts for ~~them~~it as ~~fair-value hedges. Changes~~a fair value hedging instrument. The change in ~~the~~ fair value of an interest rate ~~swaps~~swap designated as a hedging ~~instruments~~instrument that effectively ~~offset~~offsets the variability in the fair value of outstanding debt obligations ~~are~~is reported in earnings. ~~These amounts offset~~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. The fair value of ~~these~~the interest rate swap ~~agreements at September 30, 2017 and December~~agreement as of March 31, ~~2016~~2019 was $3less than a $1 million ~~and $3 million, respectively,~~gain, and is reflected in the Condensed Consolidated Balance Sheets within ~~other assets,~~Non-current liabilities, with an offsetting amount recorded in ~~long-term~~Long-term debt to adjust the carrying amount of the hedged debt obligations. As of December 31, 2018, the fair value of the interest rate swap agreement was a $1 million loss, and is reflected in the Condensed Consolidated Balance Sheets within Non-current liabilities, with an offsetting amount recorded in Long-term debt to adjust the carrying amount of hedged debt obligations.

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 did not have any T-Locks outstanding ~~at September 30, 2017~~as of March 31, 2019 or December 31, ~~2016.~~

~~At September 30, 2017,~~2018. As of March 31, 2019, AOCI included $3$2 million of losses (net of income taxes of $2$1 million), related to settled T-Locks. AtAs of December 31, ~~2016,~~2018, AOCI included $4$2 million of losses (net of income taxes of $2$1 million), related to settled T-Locks. These deferred losses are being amortized to ~~financing~~Financing costs, net over the terms of the senior notes with which they are associated.

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. At September 30, 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 $173 million that hedged transactional exposures. At 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 Company ~~also has~~enters into foreign currency derivative instruments that hedge certain foreign currency transactional exposures and are designated as cash-flow hedges. At September 30, 2017, AOCI included an insignificant amount of losses relating to these hedges. At December 31, 2016, AOCI included $3 million of losses, net of tax, relating to these hedges.

1211

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. The Company enters into both of these hedge types 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 volume of the Company’s foreign currency derivatives not designated as hedging instruments included forward sales contracts of $866 million and $621 million as well as forward purchase contracts worth $406 million and $165 million as of March 31, 2019 and December 31, 2018, respectively.

The Company’s foreign currency derivatives designated as cash flow hedging instruments include a $1 million gain (net of income taxes of $1 million) in AOCI as of March 31, 2019. The amount included in AOCI related to these hedges at December 31, 2018 was not significant. The notional volume of the Company’s foreign currency cash flow hedging instruments included forward sales contracts of $274 million and $345 million as well as forward purchase contracts of $227 million and $275 million as of March 31, 2019 and December 31, 2018, respectively.

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

Fair Value of Derivative Instruments

Fair Value

Fair Value

Derivatives designated as

   As of

   As of

   As of

   As of

hedging instruments:

Balance Sheet

September 30,

December 31,

Balance Sheet

September 30,

December 31,

(in millions)

Location

2017

2016

Location

2017

2016

Commodity and foreign currency

Accounts receivable, net

$
14

$
31

Accounts payable and accrued liabilities

$
28

$
25

Commodity, foreign currency, and interest rate contracts

Other assets

7

8

Non-current liabilities

7

2

Total

$
21

$
39

$
35

$
27


	Fair value of hedging instruments as of March 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	$	2	$	2	$	—	$	4	$	—	$	7	$	—	$	7
Other assets		—		—		—		—		—		1		—		1
Assets		2		2		—		4		—		8		—		8
Accounts payable and accrued liabilities		12		—		—		12		4		7		—		11
Non-current liabilities		3		—		—		3		—		3		—		3
Liabilities		15		—		—		15		4		10		—		14
Net Assets/(Liabilities)	$	(13)	$	2	$	—	$	(11)	$	(4)	$	(2)	$	—	$	(6)


	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 Assets/(Liabilities)	$	(3)	$	1	$	(1)	$	(3)	$	(3)	$	4	$	—	$	1

~~At September 30, 2017,~~As of March 31, 2019, the Company had outstanding futures and option contracts that hedged the forecasted purchase of approximately 6577 million bushels of ~~corn and 20 million pounds of soybean oil.~~corn. The Company is unable to directly hedge price risk related to ~~co-product~~coproduct 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. As of March 31, 2019, the Company had outstanding futures or option contracts hedging approximately 22 million pounds of soybean oil. The Company also had outstanding swap and option contracts that hedged the forecasted purchase of approximately 2131 million mmbtu’s of natural gas at ~~September 30, 2017.~~March 31, 2019. Additionally, ~~at September 30, 2017,~~as of March 31, 2019, the Company had no outstanding ethanol futures ~~contracts that hedged~~contracts.

Additional information pertaining to the ~~forecasted sale of approximately 8 million gallons of ethanol.~~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	March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
Interest Rate Contracts:
Long-Term Debt	$	(200)	$	(199)	$	—	$	1

Additional information relating to the Company’s derivative instruments is presented below:


					Location of Gains									Location of Gains
	Amount of Gains (Losses)				(Losses)	Amount of Gains (Losses)				Amount of Gains (Losses)				(Losses)	Amount of Gains (Losses)
Derivatives in Cash-Flow	Recognized in OCI				Reclassified from	Reclassified from AOCI into Income				Recognized in OCI				Reclassified from	Reclassified from AOCI into Income
Hedging Relationships	Three Months Ended		Three Months Ended		AOCI	Three Months Ended		Three Months Ended		Three Months Ended March 31,				AOCI	Three Months Ended March 31,
(in millions, pre-tax)	September 30, 2017		September 30, 2016		into Income	September 30, 2017		September 30, 2016		2019		2018		into Income	2019		2018
Commodity contracts	$	(18)	$	(27)	Cost of sales	$	—	$	(5)	$	(10)	$	20	Cost of sales	$	2	$	(5)
Foreign currency contracts		2		—	Net sales/Cost of sales		1		—		(2)		2	Net sales/Cost of sales		(3)		1
Interest rate contracts		—		—	Financing costs, net		—		(1)		—		—	Financing costs, net		(1)		—
Total	$	(16)	$	(27)		$	1	$	(6)	$	(12)	$	22		$	(2)	$	(4)


	For the three months ended March 31, 2019
Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships (in millions, pre-tax)	Net sales before shipping and handling costs			Cost of Sales		Financing costs, net
Income (expense) reported in earnings	$	1,536	$	(1,104)	$	(22)
Gains or (losses) on fair value hedging relationships:
Interest Rate Contracts:
Hedged Items	$	—	$	—	$	—
Derivatives designated as hedging instruments		—		—		—
Gains or (losses) on cash flow hedging relationships:
Commodity Contracts:
Gain/(loss) reclassified from other comprehensive income into earnings	$	—	$	2	$	—
Foreign Exchange Contracts:
Gain/(loss) reclassified from other comprehensive income into earnings		(3)		—		—
Interest Rate Contracts:
Gain/(loss) reclassified from other comprehensive income into earnings		—		—		(1)

	For the three months ended March 31, 2018
Location and Amount of Gain or (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships (in millions, pre-tax)	Net sales before shipping and handling costs			Cost of Sales		Financing costs, net
Income (expense) reported in earnings	$	1,581	$	(1,115)	$	(16)
Gains or (losses) on fair value hedging relationships:
Interest Rate Contracts:
Hedged Items	$	—	$	—	$	(2)
Derivatives designated as hedging instruments		—		—		2
Gains or (losses) on cash flow hedging relationships:
Commodity Contracts:
Gain/(loss) reclassified from other comprehensive income into earnings	$	—	$	(5)	$	—
Foreign Exchange Contracts:
Gain/(loss) reclassified from other comprehensive income into earnings		1		—		—
Interest Rate Contracts:
Gain/(loss) reclassified from other comprehensive income into earnings		—		—		—

Location of Gains

Amount of Gains (Losses)

(Losses)

Amount of Gains (Losses)

Derivatives in Cash-Flow

Recognized in OCI

Reclassified from

Reclassified from AOCI into Income

Hedging Relationships

Nine Months Ended

Nine Months Ended

AOCI

Nine Months Ended

Nine Months Ended

(in millions, pre-tax)

September 30, 2017

September 30, 2016

into Income

September 30, 2017

September 30, 2016

Commodity contracts

$
(7)

$
(25)

Cost of sales

$
(1)

$
(25)

Foreign currency contracts

3

1

Net sales/Cost of sales

1

(1)

Interest rate contracts

—

—

Financing costs, net

(1)

(1)

Total

$
(4)

$
(24)

$
(1)

$
(27)

~~At September 30, 2017,~~

As of March 31, 2019, AOCI included $5$10 million of losses (net of income taxes of $3 million) on commodities-related derivative instruments designated as ~~cash-flow~~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 12 months that will necessitate reclassifying these derivative losses to earnings include the sale of finished goods inventory, which includes previously hedged purchases of corn and natural gas. The Company expects the losses to be offset by changes in the underlying commodities costs. ~~The Company also has~~Additionally, as of March 31, 2019, AOCI included $1 million of losses (net of an insignificant amount of taxes) on settled T-Locks and $2 million of gains (net of ~~income taxes~~an insignificant amount of ~~$1 million) recorded in AOCI at September 30, 2017,~~taxes) related to foreign currency hedges which are expected to be reclassified into earnings during the next 12 months. ~~Additionally, at September 30, 2017, AOCI included an insignificant amount of losses related to foreign currency hedges that are expected to be reclassified into earnings during the next 12 months.~~

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


	As of September 30, 2017								As of December 31, 2016								As of March 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 )		Total		Level 1 (a)		Level 2 (b)		Level 3 (c)		Total		Level 1 (a)		Level 2 (b)		Level 3 (c)
Available for sale securities	$	9	$	9	$	—	$	—	$	7	$	7	$	—	$	—	$	10	$	10	$	—	$	—	$	11	$	11	$	—	$	—
Derivative assets		21		4		17		—		39		6		33		—		12		1		11		—		24		4		20		—
Derivative liabilities		35		9		26		—		27		11		16		—		29		14		15		—		26		6		20		—
Long-term debt		1,832		—		1,832		—		1,929		—		1,929		—		1,969		—		1,969		—		1,954		—		1,954		—

(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 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 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. ~~At September 30, 2017,~~As of March 31, 2019, the carrying value and fair value of the Company’s Long-term debt was $2.0 billion.

7. Debt

As of March 31, 2019 and December 31, 2018, the Company’s total debt consisted of the following:


	As of		As of
(in millions)	March 31, 2019		December 31, 2018
3.2% senior notes due October 1, 2026	$	496	$	496
4.625% senior notes due November 1, 2020		399		399
6.625% senior notes due April 15, 2037		254		254
5.62% senior notes due March 25, 2020		200		200
Term loan credit agreement due April 12, 2021		165		165
Revolving credit facility		443		418
Fair value adjustment related to hedged fixed rate debt instruments		-		(1)
Long-term debt		1,957		1,931
Short-term borrowings		153		169
Total debt	$	2,110	$	2,100

The Company’s long-term debt ~~were $1,731~~as of March 31, 2019 includes the Term Loan Credit Agreement (“Term Loan”) of $165 million that was due in April 2019. On April 12, 2019, the Company amended and ~~$1,832~~restated the Term Loan to establish a 24-month senior unsecured term loan credit facility (“Amended Term Loan”) in an amount of up to $500 million ~~respectively.~~ that matures on April 12, 2021. The indebtedness outstanding under the Term Loan as of April 12, 2019, in the aggregate outstanding principal amount of $165 million, will continue as indebtedness under the Amended Term Loan. Borrowings under the Amended Term Loan are to be used for general corporate purposes. This borrowing is included in

the long-term debt as the Company has the ability and intent to refinance it on a long-term basis prior to the maturity date.

7.8. ~~Share-Based Compensation~~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 Condensed Consolidated Balance Sheets. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at 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 also includes in its calculation any prepaid lease payments made and excludes any lease incentives received from the arrangement. 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 impractical 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, office space, warehouses, and machinery & equipment. The commencement date used for the calculation of the lease obligation 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 it is reasonably certain that the Company will exercise the option. The Company has certain leases that have variable payments based solely on output or usage of the leased asset. These variable operating lease assets are excluded from the Company’s balance sheet presentation and expensed as incurred. Leases with an initial term of 12 months or less are not material. The Company currently has no finance leases.

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


Lease Cost	Three Months Ended March 31,
(in millions)	2019
Operating lease cost	$	13
Variable operating lease cost		6
Lease cost	$	19

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


Operating Leases		As of
(in millions)		March 31, 2019
2019 (Excluding the three months ended March 31, 2019)	$	41
2020		43
2021		32
2022		23
2023		18
Thereafter		33
Total future lease payments		190
Less imputed interest		35
Present value of future lease payments		155
Less current lease liabilities		42
Non-current operating lease liabilities	$	113
Operating lease assets	$	146

Additional information related to the Company’s operating leases was as follows:

(a)


Other Information	Three Months Ended March 31,
($ in millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	15
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	161
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 for operating leases under ASC Topic 840 on December 31, 2018:


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

9. Taxes

In January 2019, the Company’s Brazilian subsidiary received a favorable decision from the Federal Court of Appeals in Sao Paulo, Brazil, related to the overpayment of certain indirect taxes in prior years. As a result of this decision, the Company expects to be entitled to credits against various Brazilian federal tax payments in 2019 and future years. The Company is currently calculating the amount of the credits and interest related to this court decision. The credit calculations, which span a period from 2005 to April 2018, are complex and there are pending decisions with the Brazilian courts that may result in changes to the calculations and the timing of the receipt of benefits. The Company anticipates completing its credit calculations later in 2019.

10. Net Periodic Pension and Postretirement Benefit Costs

For detailed information about the Company’s pension and postretirement benefit plans, please refer to Note 10 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The following table sets forth the components of net periodic benefit cost of the U.S. and non-U.S. defined benefit pension plans for the periods presented:


	Three Months Ended March 31,
	U.S. Plans				Non-U.S. Plans
(in millions)	2019		2018		2019		2018
Service cost	$	1	$	1	$	1	$	1
Interest cost		4		3		3		3
Expected return on plan assets		(5)		(5)		(2)		(2)
Net periodic benefit cost (a)	$	—	$	(1)	$	2	$	2

The Company currently anticipates that it will make approximately $4 million in cash contributions to its pension plans in 2019, consisting of $3 million to its non-U.S. pension plans and $1 million to its U.S. pension plans. For the three

months ended March 31, 2019,cash contributions of approximately $1 million were made to the non-U.S. plans and less than $1 million to the U.S. plans.

The following table sets forth the components of net postretirement benefit cost for the periods presented:


	Three Months Ended March 31,
(in millions)	2019		2018
Service cost	$	—	$	—
Interest cost		1		1
Amortization of prior service credit		(1)		(1)
Net periodic benefit cost (a)	$	—	$	—

(a)

The service cost component of net periodic benefit cost is presented within either cost of sales or operating expenses on the Condensed Consolidated Statements of Income. The interest cost, expected return on plan assets, amortization of 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 Condensed Consolidated Statements of Income.

11. Inventories

Inventories are summarized as follows:


	As of		As of
(in millions)	March 31, 2019		December 31, 2018
Finished and in process	$	512	$	522
Raw materials		296		250
Manufacturing supplies and other		54		52
Total inventories	$	862	$	824

12. Equity

Treasury stock: On October 22, 2018, the Board of Directors authorized a new stock repurchase program permitting the Company to purchase up to an additional 8 million of its outstanding common shares from November 5, 2018 through December 31, 2023. On December 12, 2014, the Board of Directors authorized a stock repurchase program permitting the Company to purchase up to 5 million of its outstanding common shares from January 1, 2015, through December 12, 2019. 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 4.0 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 ASR 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 4.0 million 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.

Shared-based payments:The following table summarizes the components of the Company’s share-based compensation expense:


	Three Months Ended
	March 31,
(in millions)	2019		2018
Stock options:
Pre-tax compensation expense	$	1	$	1
Income tax benefit		—		—
Stock option expense, net of income taxes		1		1

Restricted stock units ("RSUs"):
Pre-tax compensation expense		2		3
Income tax benefit		—		(1)
RSUs, net of income taxes		2		2

Performance shares and other share-based awards:
Pre-tax compensation expense		1		1
Income tax benefit		—		—
Performance shares and other share-based compensation expense, net of income taxes		1		1

Total share-based compensation:
Pre-tax compensation expense		4		5
Income tax benefit		—		(1)
Total share-based compensation expense, net of income taxes	$	4	$	4

Stock Options:Under the Company’s stock incentive plan, stock options are granted at exercise prices that equal the market value of the underlying common stock on the date of grant. The options have a 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 ~~during~~for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 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 Nine Months Ended
	September 30,				Three Months Ended March 31,
	2017		2016		2019		2018
Expected life (in years)	5.5		5.5		5.5		5.5
Risk-free interest rate	1.93	%	1.36	%	2.5	%	2.5	%
Expected volatility	22.50	%	23.40	%	19.7	%	19.8	%
Expected dividend yield	1.68	%	1.80	%	2.7	%	1.8	%

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.

1418

Stock option activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 was as follows:


		Weighted					Number of Options (in thousands)	Weighted Average Exercise Price per Share		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
		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
Outstanding as of December 31, 2018							2,079	$	80.25	5.51	$	42
Granted	278		117.65				247		91.85
Exercised	(299)		46.10				(60)		32.99
Cancelled	(21)		87.50				(22)		121.87
Outstanding as of September 30, 2017	2,239	$	70.17	5.94	$	113
Exercisable as of September 30, 2017	1,671	$	58.04	5.33	$	105
Outstanding as of March 31, 2019							2,244	$	82.38	5.83	$	43
Exercisable as of March 31, 2019							1,783	$	75.57	5.16	$	42

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, cash received from the exercise of stock options was ~~$14~~$2 million. ~~At September 30, 2017,~~As of March 31, 2019, the ~~total remaining~~ unrecognized compensation cost related to non-vested stock options ~~was~~totaled $5 million, which ~~will~~is expected to be amortized over ~~a weighted average~~the weighted-average period of approximately ~~1.4~~1.8 years.

Additional information pertaining to stock option activity is as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(dollars in millions, except per share)	2017		2016		2017		2016		2019		2018
Weighted average grant date fair value of stock options granted (per share)	$	—	$	—	$	23.90	$	18.73	$	14.02	$	24.01
Total intrinsic value of stock options exercised		11		21		23		45	$	4	$	8

Restricted Stock Units: The Company has granted ~~restricted stock units (“RSUs”)~~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 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 aton the date of the grant.

The following table summarizes RSU activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2019:


		Weighted
		Average
	Number of	Fair Value
(RSUs in thousands)	RSUs	per Share		Number of RSUs	Weighted Average Fair Value per Share
Non-vested as of December 31, 2016	429	$	81.04
Non-vested as of December 31, 2018				341	$	115.06
Granted	121		119.24	148		91.94
Vested	(148)		64.94	(123)		100.20
Cancelled	(13)		93.70	(15)		121.62
Non-vested as of September 30, 2017	389	$	99.77
Non-vested as of March 31, 2019				351	$	110.25

~~At September 30, 2017,~~As of March 31, 2019, the total remaining unrecognized compensation cost related to RSUs was ~~$17~~$23 million, which will be amortized over a weighted average period of approximately ~~1.8~~2.2 years.

Performance Shares: The Company has a long-term incentive plan for senior management in the form of performance ~~shares. The ultimate payments for~~shares. Historically these performance shares awarded and vested ~~will be~~were based solely on the Company’s stock performance as compared to the stock performance of its peer ~~group. The~~group over the three-year vesting period. Now beginning with the 2019 performance share grants, the performance shares will have two performance metrics that the granted performance shares will be awarded and vested upon. Fifty percent of the performance shares awarded and vested will be based on the Company’s stock performance as compared to the stock performance of its peer group, and the remaining fifty percent will be based on the calculation of the Company’s three-year average Return on Invested Capital (“ROIC”) against the set ROIC target.

For the 2019 performance shares awarded based on the Company’s stock performance, the number of shares that ultimately vest can range from zero 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 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. 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 2019 performance shares awarded based on ROIC, the number of shares that ultimately vest can range from zero 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.

For the three months ended March 31, 2019, the Company awarded 70 thousand performance shares at a weighted average fair value of $92.57 per share.

As of March 31, 2019, the unrecognized compensation cost related to these awards was $7 million, which will be amortized over the remaining requisite service period of 2.3 years.

The 2016 performance share awards vested in the first quarter of 2019, achieving a 0 percent pay out of the granted performance shares. Additionally, there were 3 thousand performance share cancellations during the three months ended March 31, 2019.

Accumulated Other Comprehensive Loss: The following is a summary of net changes in Accumulated other comprehensive loss by component and net of tax for the three months ended March 31, 2019 and 2018:


(in millions)	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, 2018	$	(1,080)	$	(5)	$	(69)	$	—	$	(1,154)
Other comprehensive income (loss) before reclassification adjustments		1		(12)		—		—		(11)
Amount reclassified from accumulated OCI		—		2		—		—		2
Tax benefit		—		3		—		—		3
Net other comprehensive income (loss)		1		(7)		—		—		(6)
Balance, March 31, 2019	$	(1,079)	$	(12)	$	(69)	$	—	$	(1,160)


(in millions)	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, 2017	$	(951)	$	(13)	$	(51)	$	2	$	(1,013)
Other comprehensive income (loss) before reclassification adjustments		21		22		(1)		1		43
Amount reclassified from accumulated OCI		—		4		—		—		4
Tax provision		—		(6)		—		—		(6)
Net other comprehensive income (loss)		21		20		(1)		1		41
Balance, March 31, 2018	$	(930)	$	7	$	(52)	$	3	$	(972)

1520

~~For~~Supplemental Information: The following Condensed Consolidated Statements of Equity and Redeemable Equity provide the ~~nine months ended September 30, 2017, the Company awarded 38 thousand share units at a weighted average fair value of $114.08~~dividends per share ~~unit.~~for Common stock for the periods presented:


	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, 2018	$	1	$	1,096	$	(1,091)	$	(1,154)	$	3,536	$	20	$	37
Net income attributable to Ingredion										100
Net income attributable to non-controlling interests												2
Dividends declared, common stock ($0.625/share)										(42)
Repurchases of common stock				32		31
Share-based compensation, net of issuance				9		10								(16)
Other comprehensive loss								(6)
Balance, March 31, 2019	$	1	$	1,137	$	(1,050)	$	(1,160)	$	3,594	$	22	$	21

The 2014 performance share award vested in the first quarter of 2017, achieving a 200 percent pay out of the grant, or 115 thousand total vested shares. There were no performance share cancellations during the nine months ended September 30, 2017.

~~As of September 30, 2017, the unrecognized compensation cost related to these awards was $4 million, which will be amortized over the remaining requisite service periods of 1.8 years.~~

~~The following table summarizes the components of the Company’s share-based compensation expense:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2017

2016

2017

2016

Stock options:

Pre-tax compensation expense

$
2

$
2

$
6

$
7

Income tax benefit

(1)

(1)

(2)

(3)

Stock option expense, net of income taxes

1

1

4

4

RSUs:

Pre-tax compensation expense

4

3

10

9

Income tax benefit

(2)

(1)

(4)

(3)

RSUs, net of income taxes

2

2

6

6

Performance shares and other share-based awards:

Pre-tax compensation expense

1

2

4

5

Income tax benefit

(1)

(1)

(2)

(2)

Performance shares and other share-based compensation expense, net of income taxes

—

1

2

3

Total share-based compensation:

Pre-tax compensation expense

7

7

20

21

Income tax benefit

(4)

(3)

(8)

(8)

Total share-based compensation expense, net of income taxes

$
3

$
4

$
12

$
13


	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, 2017	$	1	$	1,138	$	(494)	$	(1,013)	$	3,259	$	26	$	36
Net income attributable to Ingredion										140
Net income attributable to non-controlling interests												3
Dividends declared, common stock ($0.60/share)										(44)
Dividends declared, non-controlling interests												(3)
Share-based compensation, net of issuance				(6)		18								(9)
Other comprehensive income (loss)								41				(2)
Balance, March 31, 2018	$	1	$	1,132	$	(476)	$	(972)	$	3,355	$	24	$	27

8. Supplemental Information:~~Net Periodic Pension and Postretirement Benefit Costs~~

~~The following table sets forth the components of net periodic benefit cost of the U.S. and non-U.S. defined benefit pension plans for the periods presented:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

U.S. Plans

Non-U.S. Plans

U.S. Plans

Non-U.S. Plans

(in millions)

2017

2016

2017

2016

2017

2016

2017

2016

Service cost

$
1

$
2

$
1

$
1

$
4

$
5

$
3

$
2

Interest cost

3

3

3

3

9

10

8

8

Expected return on plan assets

(5)

(5)

(3)

(3)

(15)

(15)

(8)

(8)

Amortization of actuarial loss

—

—

—

—

—

—

1

1

Settlement loss

—

—

—

—

—

—

—

2

Net periodic benefit cost

$
(1)

$
—

$
1

$
1

$
(2)

$
—

$
4

$
5

The Company currently anticipates that it will make approximately $5 million in cash contributions to its pension plans in 2017, consisting of $4 million to its non-U.S. pension plans and $1 million to its U.S. pension plans. For the nine

~~months ended September 30, 2017,cash contributions of approximately $3 million were made to the non-U.S. plans and $1 million to the U.S. plans.~~

~~The following table sets forth the components of net postretirement benefit cost for the periods presented:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2017

2016

2017

2016

Service cost

$
1

$
—

$
1

$
1

Interest cost

—

1

2

2

Amortization of prior service credit

—

(1)

(2)

(3)

Net periodic benefit cost

$
1

$
—

$
1

$
—

9. ~~Earnings per Common Share~~

The following table provides the computation of basic and diluted earnings per common share ("EPS") for the periods presented:


	Three Months Ended September 30, 2017					Three Months Ended September 30, 2016
	Net Income					Net Income
	Available		Weighted	Per Share		Available		Weighted	Per Share		Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
(in millions, except per share amounts)	to Ingredion		Average Shares	Amount		to Ingredion		Average Shares	Amount		Net Income Available to Ingredion		Weighted Average Shares	Per Share Amount		Net Income Available to Ingredion		Weighted Average Shares	Per Share Amount

Basic EPS	$	166	71.9	$	2.31	$	143	72.5	$	1.98	$	100	66.8	$	1.50	$	140	72.3	$	1.94

Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards			1.4					1.8					0.6					1.3

Diluted EPS	$	166	73.3	$	2.26	$	143	74.3	$	1.93	$	100	67.4	$	1.48	$	140	73.6	$	1.90

Nine Months Ended September 30, 2017

Nine Months Ended September 30, 2016

Net Income

Net Income

Available

Weighted

Per Share

Available

Weighted

Per Share

(in millions, except per share amounts)

to Ingredion

Average Shares

Amount

to Ingredion

Average Shares

Amount

Basic EPS

$
420

72.0

$
5.83

$
391

72.2

$
5.42

Effect of Dilutive Securities:

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

1.4

1.8

Diluted EPS

$
420

73.4

$
5.72

$
391

74.0

$
5.29

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and 2018, approximately ~~0.3~~1.0 million and 0.3 million share-based awards of common stock, respectively, were excluded from the calculation of diluted EPS as the impact of their inclusion would have been anti-dilutive. ~~For both the three and nine months ended September 30, 2016, the number of share-based awards of common stock excluded from the calculation of diluted EPS was not material.~~

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 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, China, Japan, Indonesia, the Philippines, Singapore, Malaysia, India, Australia and New Zealand. The Company’s EMEA segment includes businesses in Germany, the United Kingdom, Pakistan and South Africa. 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.


	Three Months Ended
	March 31,
(in millions)	2019		2018
Net sales to unaffiliated customers:
North America:
Net sales before shipping and handling costs	$	951	$	958
Less: shipping and handling costs		91		84
Net sales	$	860	$	874

South America:
Net sales before shipping and handling costs	$	228	$	262
Less: shipping and handling costs		10		13
Net sales	$	218	$	249

Asia-Pacific:
Net sales before shipping and handling costs	$	203	$	203
Less: shipping and handling costs		9		9
Net sales	$	194	$	194

EMEA:
Net sales before shipping and handling costs	$	154	$	158
Less: shipping and handling costs		6		6
Net sales	$	148	$	152

1722

~~10.~~ ~~Inventories~~

~~Inventories are summarized as follows:~~

As of September 30,

As of December 31,

(in millions)

2017

2016

Finished and in process

$
497

$
478

Raw materials

274

260

Manufacturing supplies and other

54

51

Total inventories

$
825

$
789

~~11.~~ ~~Debt~~

~~As of September 30, 2017 and December 31, 2016, the Company’s total debt consisted of the following:~~

As of September 30,

As of December 31,

(in millions)

2017

2016

3.2% senior notes due October 1, 2026

$
496

$
496

4.625% senior notes due November 1, 2020

398

398

1.8% senior notes due September 25, 2017

—

299

6.625% senior notes due April 15, 2037

254

254

6.0% senior notes due April 15, 2017

—

200

5.62% senior notes due March 25, 2020

200

200

Term loan credit agreement due April 25, 2019

380

—

Revolving credit facility

—

—

Fair value adjustment related to hedged fixed rate debt instruments

3

3

Long-term debt

$
1,731

$
1,850

Short-term borrowings

153

106

Total debt

$
1,884

$
1,956

~~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, the Company entered into a new Term Loan Credit Agreement (“Term Loan”) to establish a senior unsecured term loan credit facility. Under the Term Loan, the Company is allowed three borrowings in an amount of up to $500 million total. The Term Loan matures 18 months from the date of the final borrowing. As of September 30, 2017, the Company had initiated two borrowings under the Term Loan totaling $380 million. 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. On October 25, 2017, the Company initiated its third and final borrowing under the Term Loan of $40 million, bringing the total outstanding Term Loan to $420 million, due April 25, 2019.

All borrowings under the term loan 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. The Term Loan Credit Agreement contains customary representations, warranties, covenants, events of default, terms and conditions, including limitations on liens, incurrence of debt, mergers and significant asset dispositions. The Company must also comply with a leverage ratio and interest coverage ratio. The occurrence of an event of default under the 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.


	Three Months Ended
	March 31,
(in millions)	2019		2018
Operating income:
North America	$	125	$	143
South America		18		26
Asia-Pacific		20		23
EMEA		24		31
Corporate		(21)		(23)
Subtotal		166		200
Restructuring/impairment charges (a)		(4)		(3)
Acquisition/integration costs		(1)		—
Total operating income	$	161	$	197

~~12.~~ ~~Accumulated Other Comprehensive Loss~~

~~The following is a summary of net changes in accumulated other comprehensive loss by component and net of tax for the three and nine months ended September 30, 2017 and 2016:~~

Deferred

Unrealized

Accumulated

Cumulative

Gain (Loss)

Pension and

Gain

Other

Translation

on Hedging

Postretirement

on

Comprehensive

(in millions)

Adjustment

Activities

Adjustment

Investment

Loss

Balance, December 31, 2016

$
(1,008)

$
(7)

$
(56)

$
—

$
(1,071)

Other comprehensive income (loss) before reclassification adjustments

62

(4)

1

1

60

Amount reclassified from accumulated OCI

—

1

(1)

—

—

Tax benefit

—

2

—

—

2

Net other comprehensive income (loss)

62

(1)

—

1

62

Balance, September 30, 2017

$
(946)

$
(8)

$
(56)

$
1

$
(1,009)

Deferred

Unrealized

Accumulated

Cumulative

Gain (Loss)

Pension and

Loss

Other

Translation

on Hedging

Postretirement

on

Comprehensive

(in millions)

Adjustment

Activities

Adjustment

Investment

Loss

Balance, December 31, 2015

$
(1,025)

$
(29)

$
(47)

$
(1)

$
(1,102)

Other comprehensive income (loss) before reclassification adjustments

78

(24)

(5)

—

49

Amount reclassified from accumulated OCI

—

27

1

—

28

Tax benefit

—

—

1

—

1

Net other comprehensive income (loss)

78

3

(3)

—

78

Balance, September 30, 2016

$
(947)

$
(26)

$
(50)

$
(1)

$
(1,024)

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

Amount

Amount

Reclassified from

Reclassified from

AOCI

AOCI

Three Months Ended

Nine Months Ended

Affected Line Item in

Details about AOCI Components

September 30,

September 30,

Condensed Consolidated

(in millions)

2017

2016

2017

2016

Statements of Income

Gains (losses) on cash-flow hedges:

Commodity contracts

$
—

$
(6)

$
(1)

$
(25)

Cost of sales

Foreign currency contracts

1

—

1

(1)

Net sales/Cost of sales

Interest rate contracts

—

—

(1)

(1)

Financing costs, net

Gains (losses) related to pension and other postretirement obligations

—

—

1

(1)

(a)

Total before-tax reclassifications

$
1

$
(6)

$
—

$
(28)

Tax (provision) benefit

(1)

2

—

9

Total after-tax reclassifications

$
—

$
(4)

$
—

$
(19)

(a)

~~This component is included~~During the first quarter in 2019, the ~~computation~~Company recorded $4 million of ~~net periodic benefit cost~~pre-tax restructuring charges, comprised of $3 million of employee-related severance and ~~affects both~~other costs as part of the Cost Smart SG&A program and $1 million in other costs as part of the Cost Smart cost of sales ~~and operating expenses on~~program in relation to the ~~Condensed Consolidated Statements~~cessation of ~~Income~~.wet-milling at the Stockton, California plant.


	As of		As of
(in millions)	March 31, 2019		December 31, 2018
Total assets:
North America (a)	$	3,919	$	3,737
South America		711		711
Asia-Pacific		806		792
EMEA		496		488
Total	$	5,932	$	5,728

(a)

For purposes of presentation, North America includes Corporate assets.

1923

ITEM 2

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 4446 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~~nutrition industries, among others.

Our ~~Strategic Blueprint continues to guide our decision-making~~bold new strategic growth roadmap is based on the following five growth platforms and ~~strategic choices with an emphasis on value-added ingredient solutions for our customers. The foundation of our Strategic Blueprint~~ is operating excellence, which includes our focus on safety, quality and continuous improvement. We see growth opportunities in three areas. First is organic growth as we work to expand our current business. 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 isdesigned to deliver ~~increased~~ shareholder ~~value.~~value by accelerating customer co-creation and enabling consumer-preferred innovation. Our first platform is starch-based texturizers, the second platform is clean and simple ingredients, the third platform is plant-based proteins, the fourth platform is sugar reduction and specialty sweeteners, and finally, our fifth platform is value-added food systems.

~~We had a solid third quarter and nine~~For the three months ended ~~September 30, 2017 as~~March 31, 2019, operating income, net income and diluted earnings per ~~common~~ share ~~grew~~declined from the comparable ~~2016 periods.~~2018 period. Our ~~earnings growth was driven principally by continued strong operating results~~decline in ~~our North America segment during the year, and partially offset by lower~~ earnings in our South America segment due to continued difficult macroeconomic conditions and increased costs in Argentina. The Company implemented an organizational restructuring effort in Argentina during the first quarter of 2017 to achieve a more competitive cost position in the region. We 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. We finalized a new labor agreement with the labor union in the second quarter, ending the strike on June 1, 2017. The Company recorded total pre-tax employee-related severance and other costs in Argentina of $17 million for the ~~nine~~three months ended ~~September 30, 2017, related~~March 31, 2019 was largely attributable to ~~the workforce reduction. Operating income also grew in our EMEA~~higher raw material and ~~Asia Pacific segments.~~production costs, and continued foreign exchange impacts.

~~During~~For the ~~second quarter of 2017, the Company announced a Finance Transformation initiative in the North America for the U.S.~~three months ended March 31, 2019 and ~~Canada businesses to strengthen organizational capabilities and drive efficiencies to support the growth strategy~~ ~~of the Company. The Company~~2018, we recorded $4 million ~~of employee-related severance~~ and ~~other restructuring costs during the third quarter of 2017 related to this initiative. We expect to incur between~~ $3 million of pre-tax restructuring charges, respectively. During 2018, we introduced our Cost Smart program, designed to improve profitability, further streamline our global business and $5deliver increased value to shareholders through anticipated savings in cost of sales, including freight, and SG&A. For the three months ended March 31, 2019, we recorded $3 million of ~~additional~~ employee-related severance and other costs in the ~~fourth quarter~~South America and North America segments as part of ~~2017 and between~~our Cost Smart SG&A program, including $1 million ~~and~~of other costs associated with the Finance Transformation initiative in Latin America. Additionally, we recorded $1 million of other costs as part of the Cost Smart cost of sales program in relation to the prior year cessation of wet-milling at the Stockton, California plant. For the three months ended March 31, 2018, we recorded $2 million ~~in 2018~~of other costs related to ~~this initiative.~~the North America Finance Transformation initiative and $1 million of other restructuring costs related to the leaf extraction process in Brazil, both of which were announced in 2017.

Our cash provided by operating activities decreased to ~~$524~~$18 million for the ~~nine months ended September 30, 2017~~first quarter of 2019 from ~~$542~~$150 million in the year-earlier period, primarily driven by ~~an increase of cash outflow~~our decrease in earnings and changes in working capital primarily due to the outflow in accounts payable and accrued 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. This outflow was partially offset by increased earnings in the period.capital. Our cash ~~used for~~provided by financing activities ~~increased during the nine months ended September 30, 2017, primarily due to the repurchase~~ of ~~approximately one million shares of our common stock in open market transactions for $123~~$28 million during the first quarter of ~~2017. During the second and third quarters, we also refinanced a total~~2019 compared to cash used for financing activities of ~~$500~~$261 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, the Company completed its acquisition~~first quarter of ~~Sun Flour Industry Co., Ltd. (“Sun Flour”) in Thailand for $18 million. Upon closing, the Company paid $13 million in cash and recorded $5 million in accrued liabilities for deferred payments~~2018 changed primarily due to higher proceeds from debt borrowing and cash inflow on February 6, 2019 from the ~~previous owner. The acquisition~~settlement of ~~Sun Flour adds a fourth manufacturing facility~~the difference of the initial price per share to ~~our operations in Thailand. Sun Flour produces rice-based ingredients used primarily in~~ the food industry. This transaction will enhance our global supply chain and leverage other capital investments that we have made in Thailand to grow our specialty ingredients and service customers aroundfinal average daily volume weighted average price (“VWAP”) per share for the ~~world. The acquisition did not have a material impact on our financial condition, results of operations or cash flows in the third quarter of 2017.~~

Variable Timing Accelerated Share Repurchase (“ASR”).

Looking ahead, ~~we anticipate that our full year 2017 operating income and net income will grow compared to 2016. In~~in North America, we expect full year operating income to ~~increase driven~~be flat to down versus the prior year assuming current market values for corn and corn by-products, which have been negatively impacted by ~~improved product mix~~crop inventory imbalances arising from a U.S. and ~~margins.~~China trade dispute. In South America, we believe that full year operating income will be down compared to 2016 driven by temporary higher-than-normal costs related to the interruption of manufacturing activities in Argentina and the restructuring charges incurred to improve the cost position of the operation in Argentina. We will continue to focus on network optimization and cost improvement in this segment for the remainder of the year. In the longer term, we believe that the underlying business demographics for our South American segment are positive. We expect ~~full-year~~ operating income to ~~grow in EMEA principally driven by improved price/product mix from our specialty ingredient product portfolio, volume~~be flat versus the prior year due to persistent macroeconomic challenges. We expect flat to modest growth ~~and effective cost control. In Asia Pacific, we expect full-year~~for operating income ~~to increase, driven by volume growth~~in Asia-Pacific and ~~effective cost control.~~EMEA.

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. The impact of foreign currency exchange rate changes, where significant, is provided below.

We acquired Shandong Huanong Specialty Corn Development Co., Ltd. (“Shandong Huanong”), TIC Gums Incorporated (“TIC Gums”) and Sun Flour on November 29, 2016, December 29, 2016 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 the impact of the acquisitions and the results of the acquired businesses, where appropriate, to provide a more comparable and meaningful analysis.

~~For the Three and Nine Months Ended September 30, 2017~~

~~With Comparatives for the Three and Nine Months Ended September 30, 2016~~

~~Net Income attributable to Ingredion~~. Net income for the third quarter of 2017 increased by 16 percent to $166 million, or $2.26 per diluted common share, from $143 million, or $1.93 per diluted common share, a year ago. Net income for the nine months ended September 30, 2017 increased by 7 percent to $420 million, or $5.72 per diluted common share, from $391 million, or $5.29 per diluted common share, in the nine months ended September 30, 2016.

Results for the third quarter of 2017 include a tax benefit of $10 million ($0.14 per diluted common share) due to a deductible foreign exchange loss resulting from the tax settlement between the U.S. and Canada, partially offset by after-tax costs of $5 million ($0.07 per diluted common share) of net restructuring costs primarily associated with the Finance Transformation initiative, and $1 million ($0.01 per diluted common share) associated with the integration of acquired operations. Results for the third quarter of 2016 include after-tax costs of $2 million ($0.02 per diluted common share) consisting of employee-related severance and other costs associated with the execution of global information technology (“IT”) outsourcing contracts.

Results for the nine months ended September 30, 2017 include after-tax costs of $21 million ($0.29 per diluted common share) of net restructuring costs primarily associated with our restructuring effort in Argentina and employee-related severance and other costs associated with the Finance Transformation initiative, $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 $2 million ($0.03 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 a deductible foreign exchange loss resulting from the tax settlement between the U.S. and Canada. Results for the nine months ended September 30, 2016 include after-tax costs of $12 million ($0.16 per diluted common share) consisting of employee-related severance and other costs associated with the execution of IT outsourcing contracts, employee-related severance costs associated with our optimization initiative in South America, and costs attributable to the 2015 sale of the Port Colborne plant~~. Additionally, our results for the nine months ended September 30, 2016 include $1 million ($0.01 per diluted common share) associated with the integration of acquired operations.~~

Without the acquisition and integration, restructuring, inventory markup, and tax settlement, net income for the three and nine months ended September 30, 2017 would have grown 12 percent and 9 percent, respectively, from the comparable prior periods, while diluted earnings per share would have grown 13 percent and 10 percent, respectively, from the comparable prior periods. These increases for the three and nine months ended September 30, 2017 primarily reflect continued strong operating results in our North America segment during the year, partially offset by lower earnings in our South America segment due to continued difficult macroeconomic conditions and increased costs in Argentina. The increase for the nine months ended September 30, 2017 was partially offset by higher net financing costs.

~~Net Sales~~. Net sales for the third quarter of 2017 were flat from $1.49 billion a year ago. Volume growth of 2 percent, which was comprised of 2 percent growth from recent acquisitions, was offset by a 2 percent decrease in price/product mix driven by lower raw material costs. Net sales for the nine months ended September 30, 2017 increased 2 percent to $4.40 billion from $4.30 billion for the nine months ended September 30, 2016. The increase was driven by volume growth of 3 percent, which was comprised of 2 percent growth from recent acquisitions and 1 percent increase in organic volume growth, and favorable currency translation of 1 percent reflecting a stronger Brazilian real, partially offset by a 2 percent decrease in price/product mix.

~~North America’s net sales for the third quarter of 2017 were relatively flat at $903 million from $899 million a year ago.~~Volume growth of 1 percent, which was comprised of 4 percent growth from the TIC Gums acquisition and a 3 percent decline in organic volume due largely to customer shifts in the brewing industry in Mexico and supply chain interruptions caused by natural disasters that affected both our customers and us. This was offset by a 1 percent decrease in price/product mix driven by lower raw material costs. North America’s net sales for the nine months ended September 30, 2017 increased 2 percent to $2.69 billion from $2.63 billion for the nine months ended September 30, 2016.~~This increase was driven by volume growth of 3 percent primarily from the TIC Gums acquisition, partially offset by a 1 percent decrease in price/product mix driven by lower raw material costs.~~

South America’s net sales for third quarter of 2017 decreased 7 percent to $257 million from $276 million a year ago. This decrease was primarily driven by an 8 percent decrease in price/product mix due to lower raw material costs in Brazil and unfavorable currency translation of 2 percent reflecting a weaker Argentine peso in the quarter, partially offset by a volume increase of 3 percent. South America’s net sales for the nine months ended September 30, 2017 increased 1 percent to $740 million from $731 million for the nine months ended September 30, 2016. This increase was driven by favorable currency translation of 5 percent primarily reflecting a stronger Brazilian real, partially offset by a 3 percent decrease in price/product mix due to lower raw material costs in Brazil and a volume decrease of 1 percent, primarily due to difficult macroeconomic conditions and the interruption of manufacturing activities in Argentina.

Asia Pacific’s net sales for the third quarter of 2017 increased 2 percent to $189 million from $185 million a year ago. This increase was driven by volume growth of 8 percent, which was comprised of 7 percent organic volume growth and 1 percent growth from our recent acquisitions in the region, partially offset by a 6 percent decrease in price/product mix due to core customer mix diversification and pass through of lower raw material costs. Asia Pacific’s net sales for the nine months ended September 30, 2017 increased 4 percent to $555 million from $534 million for the nine months ended September 30, 2016. This increase was driven by volume growth of 9 percent, which was comprised of 8 percent organic volume growth and 1 percent volume increase from our recent acquisitions in the region, and favorable currency translation of 1 percent primarily reflecting a stronger Korean won. The increase in volume was partially offset by a 6 percent decrease in price/product mix due to core customer mix diversification.

EMEA’s net sales for the third quarter of 2017 increased 5 percent to $136 million from $129 million a year ago. This increase was driven by a 2 percent increase in price/product mix, favorable currency translation of 2 percent primarily reflecting a stronger Euro in the quarter, and a volume increase of 1 percent. EMEA’s net sales for the nine months ended September 30, 2017 increased 1 percent to $411 million from $405 million a year ago. This increase was driven by a 2 percent increase in price/product mix and volume growth of 1 percent, partially offset by unfavorable currency translation of 2 percent, primarily reflecting a weaker British Pound sterling.

~~Cost of Sales and Operating Expenses.~~ Cost of sales for the third quarter of 2017 decreased 2 percent to $1.10 billion from $1.12 billion a year ago. Our gross profit margin was 26 percent for the third quarter of 2017, up from 25 percent last year. The decline in cost of sales and improvement in gross profit margin are primarily driven by overall lower raw material costs and improved operational efficiencies. Operating expenses for the third quarter of 2017 increased to $152 million from $149 million last year. This increase was primarily driven by the incremental operating expenses of

~~acquired operations. Operating expenses, as a percentage of gross profit, were 39 percent for the third quarter of 2017 as compared to 40 percent a year ago.~~

Cost of sales for the nine months ended September 30, 2017 increased 1 percent to $3.28 billion from $3.24 billion a year ago. This increase was primarily driven by an increase of 2 percent in net sales volume. Our gross profit margin was 25 percent for the nine months ended September 30, 2017, flat with 25 percent last year. The gross profit margin remained flat due to higher operating costs as a result of the temporary manufacturing interruption in Argentina offset by overall lower raw material cost and improved operational efficiencies in North America. Operating expenses for the nine months ended September 30, 2017 increased to $458 million from $431 million last year. This increase was primarily driven by the incremental operating expenses of acquired operations. Operating expenses, as a percentage of gross profit, were 41 percent for the third quarter of 2017 as compared to 41 percent a year ago.

~~Operating Income.~~ Third quarter of 2017 operating income increased 5 percent to $233 million from $221 million a year ago. Operating income for the third quarter of 2017 includes pre-tax net restructuring costs of $7 million consisting of $4 million of other restructuring costs associated with a Finance Transformation initiative and $3 million of other pre-tax restructuring costs including employee-related severance costs in North America. Additionally, the third quarter results include $1 million of costs associated with the integration of acquired operations. Operating income for third quarter of 2016 includes pre-tax costs of $2 million consisting of employee-related severance and other costs associated with the execution of IT outsourcing contracts. Without the restructuring and acquisition-related charges, our ~~third~~ ~~quarter of 2017 operating income would have grown 8 percent from the~~ ~~third~~ quarter of 2016. The increase primarily reflects operating income growth in North America. Currency translation had a net favorable impact of $2 million, reflecting the movements of the Canadian dollar, Brazilian real, and Argentine peso during the quarter.

Operating income for the nine months ended September 30, 2017 increased 3 percent to $639 million from $619 million for the nine months ended September 30, 2016. Operating income for the nine months ended September 30, 2017 includes pre-tax net restructuring costs of $23 million consisting of $17 million of employee-related severance and other costs associated with our restructuring effort in Argentina, $5 million of other restructuring costs associated with a Finance Transformation initiative, and $1 million of other pre-tax restructuring charges that including employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities. Additionally, the nine months ended September 30, 2017 results include $9 million of costs primarily associated with the TIC Gums inventory that was adjusted to fair value at the acquisition date, and $3 million of costs associated with the integration of acquired operations. Operating income for the nine months ended September 30, 2016 includes pre-tax costs of $15 million consisting of employee-related severance and other costs associated with the execution of IT outsourcing contracts and $2 million of costs associated with the integration of acquired operations. Without the restructuring and acquisition-related charges, our operating income for the nine months ended September 30, 2017 would have grown 6 percent from the prior year period. The increase primarily reflects operating income growth in North America, partially offset by an operating income decrease in South America. Currency translation had a net favorable impact of $8 million, reflecting the movements of the Brazilian real, Argentine peso, and Canadian dollar.

North America’s third quarter of 2017 operating income increased 9 percent to $179 million from $164 million a year ago. This increase was primarily driven by net margin improvement from favorable raw material costs and operational efficiencies, partially offset by a decrease in price/product mix. North America’s operating income for the nine months ended September 30, 2017 increased 10 percent to $520 million from $474 million for the nine months ended September 30, 2016. This increase was primarily driven by net margin improvement from favorable raw material costs and operational efficiencies, in addition to organic and acquisition-related volume growth compared to the prior period, and partially offset by a decrease in price/product mix.

South America’s third quarter 2017 operating income decreased 4 percent to $26 million from $27 million a year ago. This decrease was primarily driven by a decrease in price/product mix and partially offset by a margin improvement due to favorable raw material costs. South America’s operating income for the nine months ended September 30, 2017 decreased 25 percent to $44 million from $59 million for the nine months ended September 30, 2016. This decrease was primarily driven by difficult macroeconomic conditions in the region, interruption of manufacturing activities resulting in temporary higher operating costs in Argentina during the second quarter, and unfavorable price/product mix. This decrease was partially offset by a net margin improvement from favorable raw material costs and an $8 million favorable currency translation impact reflecting the movements of the Brazilian real and Argentine peso.

Asia Pacific’s third quarter 2017 operating income was flat from $29 million a year ago. Volume growth and improved operational efficiencies were offset by a decrease in price/product mix due to core customer mix diversification. Asia Pacific’s operating income for the nine months ended September 30, 2017 increased 1 percent to $88 million from $87 million for the nine months ended September 30, 2016. This increase was driven by volume growth, improved operational efficiencies, and a net margin improvement due to favorable raw material costs, offset by a decrease in price/product mix due to core customer mix diversification.

EMEA’s third quarter 2017 operating income increased 4 percent to $26 million from $25 million a year ago. This increase was primarily driven by favorable price/product mix and volume growth during the period, partially offset by increased operating costs. EMEA’s operating income for the nine months ended September 30, 2017 increased 4 percent to $83 million from $80 million for the nine months ended September 30, 2016. This increase was primarily driven by favorable price/product mix and volume growth, partially offset by increased operational costs and a net margin decrease due to unfavorable raw material costs.

~~Financing Costs, net~~. Financing costs for the third quarter of 2017 increased to $16 million from $15 million in the prior-year period. This increase was primarily driven by higher weighted average short-term borrowing costs and an increase in short-term borrowings.

Financing costs for the nine months ended September 30, 2017 increased to $57 million from $48 million for the nine months ended September 30, 2016. This increase was due to higher weighted average short-term borrowing costs and an increase in short-term borrowings. Additionally, an increase in foreign currency transaction losses contributed to the increase.

~~Provision for Income Taxes~~. Our effective income tax rate for the third quarter of 2017 decreased to 22.1 percent from 29.2 percent a year ago. The effective income tax rate for the nine months ended September 30, 2017 was 26.3 percent compared to 30.1 percent a year ago.

We use the U.S. dollar as the functional currency for our subsidiaries in Mexico. For the three and nine months ended September 30, 2017, the effective tax rates were reduced by 1.0 percent and 1.7 percent, respectively, due to the revaluation of the Mexican peso versus the U.S. dollar.

In addition, we increased the valuation allowance on the net deferred tax assets of a foreign subsidiary. As a result, for the three and nine months ended September 30, 2017, the effective tax rates were increased by 2.0 percent and 1.8 percent, respectively.

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, last year 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. For the three and nine months ended September 30, 2017, the effective tax rates were reduced by 4.9 percent and 1.8 percent, respectively, due to the foreign exchange loss deduction. The foreign exchange loss was not recognized in income before taxes because it arose from the terms of the agreement.

The above discrete tax items were partially offset by individually insignificant discrete items. Without these items, the rate for the three and nine months ended September 30, 2017 would have been approximately 27.3 percent and 28.1 percent, respectively.

Our effective income tax rates for the three and nine months ended September 30, 2016 were increased by 2.3 percent and 2.5 percent, respectively, due to the devaluation of the Mexican peso versus the U.S. dollar. The impact of the Mexican peso was partially offset by individually insignificant factors. Without these items, the rates for the three and nine months ended September 30, 2016 would have been approximately 27.4 percent and 28.3 percent, respectively.

~~Comprehensive Income Attributable to Ingredion~~. Comprehensive income for the third quarter of 2017 increased to $186 million from $138 million a year ago. The increase reflects an increase in net income, favorable variances due to losses resulting from cash-flow hedging activities, and favorable currency translation adjustments.

For the Three Months Ended March 31, 2019

~~Comprehensive income~~With Comparatives for the ~~nine~~Three Months Ended March 31, 2018


	Three Months Ended March 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales	$	1,420	$	1,469	$	(49)	(3)	%
Cost of sales		1,104		1,115		11	1	%
Gross profit		316		354		(38)	(11)	%

Operating expenses		150		156		6	4	%
Other expense (income), net		1		(2)		(3)	(150)	%
Restructuring/impairment charges		4		3		(1)	(33)	%

Operating income		161		197		(36)	(18)	%

Financing costs, net		22		16		(6)	(38)	%
Other, non-operating income		-		(1)		(1)	(100)	%

Income before income taxes		139		182		(43)	(24)	%
Provision for income taxes		37		39		2	5	%
Net income		102		143		(41)	(29)	%
Less: Net income attributable to non-controlling interests		2		3		1	33	%
Net income attributable to Ingredion	$	100	$	140	$	(40)	(29)	%

Net income attributable to Ingredion. Net income attributable to Ingredion for the three months ended ~~September 30, 2017 increased~~March 31, 2019 decreased by 29 percent to ~~$482~~$100 million from ~~$459~~$140 million for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2018.

Results for the first quarter of 2019 include after-tax costs of $3 million of net restructuring costs primarily associated with our Cost Smart cost of sales and SG&A programs and $1 million of acquisition/integration costs related to the acquisition and integration of the business acquired from Western Polymer, LLC. Results for the first quarter of 2018 include after-tax restructuring costs of $3 million consisting of $2 million of costs associated with the North America Finance Transformation and $1 million of costs related to our leaf extraction process in Brazil.

Net sales. Our net sales for the first quarter of 2019 of $1.4 billion decreased by 3 percent compared to the three months ended March 31, 2018. The decrease was driven primarily by unfavorable foreign currency exchange rates of 6 percent and lower core volumes of 2 percent, partly offset by increased price/product mix primarily due to raw material and foreign exchange pricing pass-throughs of 5 percent.

Cost of sales. Cost of sales was $1.1 billion for the three months ended March 31, 2019 and 2018. Our gross profit margin was 22 percent for the three months ended March 31, 2019, down from 24 percent for the three months ended March 31, 2018. Gross profit margin decreased primarily due to unfavorable currency translation and higher raw material and production costs in our North America segment.

Operating expenses. Operating expenses for the first quarter of 2019 decreased to $150 million from $156 million last year. This ~~increase reflects an~~decrease was primarily driven by favorable expenses in North America as a result of the Finance Transformation cost reduction initiative and by favorable foreign currency translation. Operating expenses, as a percentage of net sales were flat at 11 percent for the three months ended March 31, 2019 and 2018.

Financing costs, net. Financing costs for the three months ended March 31, 2019 increased to $22 million from $16 million for the three months ended March 31, 2018, primarily driven by higher net debt and interest rates.

Provision for income taxes. Our effective income tax rate for the first quarter of 2019 increased to 26.6 percent from 21.4 percent a year ago.

The increase in the effective income tax rate was driven by a reduced excess tax benefit related to share-based payment awards and an increased valuation allowance on the net ~~income, favorable variances due to losses resulting from cash-flow hedging activities,~~deferred tax assets of a foreign subsidiary. These items were partially offset by a reduction in our global intangible low-taxed income (“GILTI”).

Segment Results

North America


	Three Months Ended March 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	860	$	874	$	(14)	(2)	%
Operating income		125		143		(18)	(13)	%

Net sales. Our decrease in net sales of 2 percent for the first quarter of 2019, as compared to the three months ended March 31, 2018, was primarily driven by a 2 percent unfavorable impact in volume and 1 percent unfavorable foreign currency, partly offset by a 1 percent favorable impact from price/product mix.

Operating income.Our decrease in operating income of $18 million for the three months ended March 31, 2019, as compared to the three months ended March 31, 2018, was primarily driven by higher inventory and production costs, higher net corn costs, and a modest impact from the extreme weather in the U.S. and Canada.

South America


	Three Months Ended March 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	218	$	249	$	(31)	(12)	%
Operating income		18		26		(8)	(31)	%

Net sales. Our decrease in net sales of 12 percent for the first quarter of 2019, as compared to the three months ended March 31, 2018, was primarily driven by unfavorable foreign currency of 25 percent driven by the weaker Argentine peso and Brazilian real and a 6 percent decline in volume, partly offset by a 19 percent favorable impact from price/product mix.

Operating income.Our decrease in operating income of $8 million for the first quarter of 2019 compared to the three months ended March 31, 2018, was primarily driven by unfavorable currency translation ~~adjustments.~~and lower volumes in Argentina and Brazil, partly offset by pricing actions.

Asia-Pacific


	Three Months Ended March 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	194	$	194	$	—	—	%
Operating income		20		23		(3)	(13)	%

Net sales. Our net sales remained flat for the first quarter of 2019 compared to the three months ended March 31, 2018. A 6 percent increase in price/product mix was offset by a 2 percent decline in volume and unfavorable currency translation of 4 percent.

Operating income. Our decrease in operating income of $3 million for the first quarter of 2019, as compared to the three months ended March 31, 2018, was primarily driven by higher regional corn costs and unfavorable currency translation, partly offset by specialty volume growth and improved price/product mix.

EMEA


	Three Months Ended March 31,				Favorable (Unfavorable)		Favorable (Unfavorable)
(in millions)	2019		2018		Variance		Percentage
Net sales to unaffiliated customers	$	148	$	152	$	(4)	(3)	%
Operating income		24		31		(7)	(23)	%

Net sales. Our decrease in net sales of 3 percent for the first quarter of 2019 compared to the three months ended March 31, 2018 primarily reflects unfavorable currency translation of 14 percent, partly offset by a 7 percent increase in price/product mix and volume growth of 4 percent.

Operating income. Our decrease in operating income of $7 million for the first quarter of 2019 compared to the three months ended March 31, 2018, primarily reflects unfavorable currency translation and higher raw material costs, partly offset by specialty and core volume growth and improved price/product mix.

Liquidity and Capital Resources

Cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 was ~~$524~~$18 million, as compared to ~~$542~~$150 million ~~a year ago.~~for the three months ended March 31, 2018. The decrease in operating cash flow primarily reflects a decrease in our net income and the changes in our working ~~capital, partially offset by an increase in our net income.~~capital.

Capital expenditures and mechanical stores purchases of ~~$222~~$80 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 are in line with our capital spending plan for the year. We anticipate that our capital expenditures and mechanical stores purchases will be approximately ~~$300~~$330 million to ~~$325~~$360 million for ~~2017. During the first quarter of 2017, we repurchased approximately 1 million shares of our common stock in open market transactions for $123 million.~~2019.

~~On August 18, 2017,~~As of March 31, 2019 and December 31, 2018, we had total debt outstanding of $2.1 billion. As of March 31, 2019 our total debt consists of the ~~Company entered into a new~~following:


(in millions)
3.2% senior notes due October 1, 2026	$	496
4.625% senior notes due November 1, 2020		399
6.625% senior notes due April 15, 2037		254
5.62% senior notes due March 25, 2020		200
Term loan credit agreement due April 12, 2021		165
Revolving credit facility		443
Fair value adjustment related to hedged fixed rate debt instruments		-
Long-term debt		1,957
Short-term borrowings		153
Total debt	$	2,110

As of March 31, 2019, there were borrowings of $165 million outstanding under the Term Loan that was due in April 2019, and borrowings of $443 million outstanding under the revolving credit facility (the “Revolving Credit ~~Agreement (“~~Agreement”). On April 12, 2019, we amended and restated the Term ~~Loan”)~~Loan to establish a 24-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 the date of the final borrowing. As of September 30, 2017, the Company had initiated two borrowings under the Term Loan totaling $380 million. 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. On October 25, 2017, the Company initiated its third and final borrowing under the Term Loan of $40 million, bringing the total outstanding Term Loan to $420 million, due April 25, 2019. See also Note 11 of the Condensed Consolidated Financial Statements.

~~As of September 30, 2017, there were borrowings of $380 million~~indebtedness outstanding under the Term Loan as of April 12, 2019, in the aggregate outstanding principal amount of $165 million, will continue as indebtedness under the Amended Term Loan Credit Agreement ~~and no borrowings outstanding~~(“Amended Term Loan”). Borrowings under the ~~Revolving Credit Facility.~~Amended Term Loan are to be used for general corporate purposes. In addition to the borrowing availability under the Revolving Credit Agreement, we have approximately ~~$493~~$526 million of unused operating lines of credit in the various foreign countries in which we operate.

~~As of September 30, 2017, we had total debt outstanding of $1,884 million, compared to $1,956 million at December 31, 2016. As of September 30, 2017 our total debt consists of the following:~~

As of

(in millions)

September 30, 2017

3.2% senior notes due October 1, 2026

$
496

4.625% senior notes due November 1, 2020

398

6.625% senior notes due April 15, 2037

254

5.62% senior notes due March 25, 2020

200

Term loan credit agreement due April 25, 2019

380

Revolving credit facility

—

Fair value adjustment related to hedged fixed rate debt instruments

3

Long-term debt

$
1,731

Short-term borrowings

153

Total debt

$
1,884

The weighted average interest rate on our total indebtedness was approximately ~~4.1~~4.6 percent for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, compared to ~~3.9~~4.5 percent in the ~~comparable prior-year period.~~three months ended March 31, 2018.

On ~~September 15, 2017,~~March 20, 2019, our Board of Directors declared a quarterly cash dividend of ~~$0.60~~$0.625 per share of common stock. This dividend was paid on ~~October~~April 25, ~~2017~~2019 to stockholders of record at the close of business on ~~October 2, 2017.~~April 1, 2019.

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.

We have not provided foreign withholding taxes, state income taxes, and federal and state ~~income~~ 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 ~~$484~~$231 million of the total ~~$505~~$259 million of cash and cash equivalents and short-term investments at ~~September 30, 2017~~March 31, 2019 was 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 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 Condensed 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”). ~~At September 30, 2017,~~As of March 31, 2019, our accumulated other comprehensive loss account (“AOCI”) included $5$11 million of losses ~~net~~(net of income taxes of ~~$4 million,~~$5 million) related to these derivative instruments. It is anticipated that $10 million of these losses (net of income taxes of $3 million) will be reclassified into earnings during the next 12 months. We expect the 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 exchange rates. As a result, we have exposure to translational foreign exchange risk when our foreign operations’ 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 primarily use derivative financial instruments such as foreign currency forward contracts, swaps and options to manage our foreign currency transactional exchange risk. ~~At September 30, 2017,~~We 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 March 31, 2019, we had foreign currency forward sales contracts ~~that are designated as fair value hedges~~ with an aggregate notional amount of ~~$447~~$866 million and foreign currency forward purchase contracts with an aggregate notional amount of ~~$173~~$406 million ~~that hedged transactional exposures.~~ not designated as hedging instruments.

~~We also have~~As of March 31, 2019, we had foreign currency ~~derivative instruments that hedge certain~~forward sales contracts with an aggregate notional amount of $274 million and foreign currency ~~transactional exposures and are~~forward purchase contracts with an aggregate notional amount of $227 million designated as ~~cash-flow hedges. At September 30, 2017,~~cash flow hedging instruments. The amount included in AOCI ~~included an insignificant amount of losses, net~~relating to these hedges at March 31, 2019, was a $1 million gain (net of income taxes ~~relating to these hedges.~~of $1 million).

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. (“Argentina”). Under highly inflationary accounting, Argentina’s functional currency becomes the U.S. dollar, and its income statement and balance sheet will be measured in ~~place by the Argentine government, a parallel market exists for exchanging Argentine pesos to~~ U.S. dollars atusing both current and historical rates ~~less favorable than the official rate, although the difference~~of exchange. The effect of changes in exchange rates ~~has decreased from past levels.~~ on Argentine peso-denominated monetary assets and liabilities will be 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 ~~September 30, 2017.~~ March 31, 2019.

As of ~~September 30, 2017,~~March 31, 2019, our AOCI account included $3$2 million of losses (net of income taxes of $2$1 million) 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 losses (net of ~~income taxes~~an insignificant amount of ~~$1 million)~~taxes) will be reclassified into earnings during the next 12 months.

As of ~~September 30, 2017,~~March 31, 2019, we have an interest rate swap ~~agreements~~agreement that effectively ~~convert~~converts the interest rates on $200 million of our $400 million of 4.625 percent senior notes due November 1, 2020, to variable rates. ~~These~~This swap ~~agreements call~~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 ~~these~~this interest rate swap ~~agreements~~agreement as ~~hedges~~a hedge of the changes in fair value of the underlying debt ~~obligations~~obligation attributable to changes in interest rates and account for ~~them~~it as ~~fair-value hedges.~~a fair value hedge. The fair value of ~~these~~the interest rate swap ~~agreements~~agreement as of March 31, 2019 was $3less than a $1 million ~~at September 30, 2017~~gain, and is reflected in the Condensed Consolidated Balance Sheets within ~~other assets,~~Non-current liabilities, with an offsetting amount recorded in long-term debt to adjust the carrying amount of the hedged debt obligations.

Key Financial Performance Metrics

We use certain key financial metrics to monitor our progress towards achieving our long-term strategic business objectives. In addition to the key financial metrics listed in our 2018 Form 10-K, as of January 2019, we have added the financial metric, Return on Invested Capital (“ROIC”). ROIC is a measure of the profitability and value-creating potential that considers the amount of initial capital invested. In 2019, fifty percent of the current year performance share awards granted from our Stock Incentive Plan are based on this metric. The performance share awards are more fully described in Note 12 of the Notes to the Condensed Consolidated Financial Statements.

The metric below includes certain information (including adjusted operating income, net of tax and Net Debt) that is not calculated in accordance with GAAP. Management uses non-GAAP financial measures internally for strategic decision-making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to 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 a more complete understanding of factors and trends affecting our business.

Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies. 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. A reconciliation of non-GAAP historical financial measures to the most comparable GAAP measure is provided in our 2018 Form 10-K.


Return on Invested Capital (dollars in millions)	2018		2017
Adjusted operating income, net of tax (a)	$	569	$	627

Net Debt		1,766		1,260
Equity and share-based payments subject to redemption		2,445		2,953
Total	$	4,211	$	4,213

Average (b)	$	4,212	$	4,139

Return on Invested Capital (a ÷ b)		13.5%		15.1%

ROIC: Our long-term objective is to maintain a ROIC in excess of our cost of capital. For the year 2018, we achieved a ROIC of 13.5%. The ratio is calculated by dividing adjusted operating income, net of tax by the book value of both Net Debt and Equity. The decrease in ROIC percent is primarily a result of lower operating income in 2018.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2016~~2018 Annual Report on Form 10-K. See Note 2 of the Notes to the Condensed Consolidated Financial Statements for additional information regarding the Company’s significant accounting policies. There have been no other changes to our critical accounting policies and estimates during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2019.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, 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,”~~“outlook”, “propels,” “opportunities, “potential,” ~~“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 ininto 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 the effects of global economic conditions, including, particularly, ~~continuation or worsening of the current~~ economic, currency and political conditions in South America and economic and political conditions in Europe, and their impact on our sales volumes and pricing of our ~~products,~~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, market and weather conditions in the various geographic regions and countries in which we buy our raw materials or manufacture or sell our products; future financial performance of major industries which we serve, including, without limitation, the food, ~~and~~ beverage, paper ~~corrugated~~and corrugating, and brewing industries; energy costs and ~~availability,~~availability; freight and shipping ~~costs,~~costs; and changes in regulatory controls regarding ~~quotas,~~quotas; tariffs, duties, taxes and income tax rates, particularly United States tax ~~reform;~~reform enacted in 2017; operating difficulties; availability of raw materials, including potato starch, tapioca, gum ~~arabic,~~Arabic and the specific varieties of corn upon which some of our products are based; our ability to develop or acquire new products and services at ~~a rate~~rates or of ~~a quality~~qualities sufficient to meet expectations; energy issues in Pakistan; boiler reliability; our ability to effectively

integrate and operate acquired businesses; our ability to achieve budgets and to realize expected synergies; our ability to achieve expected savings under our Cost Smart program;our ability to complete planned maintenance and investment projects successfully and on budget; labor disputes; genetic 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 the outbreak or continuation of serious communicable disease or hostilities including acts of terrorism. Factors relating 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 may be materially delayed or may be more costly or difficult than expected.

Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement as a result of new information or future events or developments. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections. For a further description of these and other risks, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 and subsequent reports on Forms 10-Q and 8-K.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See the discussion set forth in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk at pages 5031 to 5132 in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, for a discussion as to how we address risks with respect to interest rates, raw material and energy costs and foreign currencies. There have been no material changes in the information that would be provided with respect to those disclosures from December 31, ~~2016~~2018 to ~~September 30, 2017.~~March 31, 2019.

ITEM 4

CONTROLS AND PROCEDURES

Our management, including our Chief Executive Officer and our Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2019. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures (a) are effective in providing reasonable assurance that all information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, has been recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (b) are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In the fourth quarter of 2016, we acquired Shandong Huanong Specialty Corn Development Co., Ltd. in Pingyuan County, Shandong Province, China (“Shandong Huanong”) and TIC Gums Incorporated (“TIC Gums”). In the first quarter of 2017, we acquired Sun Flour Industry Co., Ltd. (“Sun Flour”) in Thailand. 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 ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2831

PART II OTHER INFORMATION

ITEM 1

LEGAL PROCEEDINGS

We are a party to a large number of labor claims relating to our Brazilian operations. We have reserved an aggregate of approximately $5 million as of September 30, 2017 in respect of these claims. These labor claims primarily relate to dismissals, severance, health and safety, work schedules and salary adjustments.

~~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 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities:


				Maximum Number
				(or Approximate
			Total Number of	Dollar Value) of
	Total	Average	Shares Purchased as	Shares ~~that may yet~~That May Yet
	Number	Price	~~part~~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~~End of ~~period~~Period
~~July~~January 1 – ~~July~~January 31, ~~2017~~	—	—	—	~~3,702 shares~~
~~August 1 – August 31, 2017~~2019	—	—	—	~~3,702~~5,855 shares
~~September~~February 1 – ~~September 30, 2017~~February 28, 2019	—	—	—	~~3,702~~5,855 shares
March 1 – March 31, 2019	—	—	—	5,855 shares
Total	—	—	—

On December 12, 2014, the Board of Directors authorized a stock repurchase program permitting ~~the Company~~us to purchase up to 55.0 million of ~~its~~our outstanding common shares from January 1, 2015, through December 31, 2019. ~~At September 30, 2017,~~On October 22, 2018, the Board of Directors authorized a new stock repurchase program permitting the Company to purchase up to an additional 8.0 million of its outstanding common shares from November 5, 2018 through December 31, 2023. As of March 31, 2019, we have ~~3.7~~5.9 million shares available for repurchase under the stock repurchase ~~program.~~programs.

2932

ITEM 6

EXHIBITS

a) Exhibits

Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index hereto.

All other items hereunder are omitted because either such item is inapplicable or the response is negative.

EXHIBIT INDEX


Number		Description of Exhibit
10.11	~~4.1~~	Form of Performance Share Award Agreement for use in connection with awards under the Stock Incentive Plan.

10.12		~~Term Loan Credit~~Form of Stock Option Award Agreement ~~dated as~~for use in connection with awards under the Stock Incentive Plan.

10.13		Form of ~~August 18, 2017, among Ingredion Incorporated,~~Restricted Stock Units Award Agreement for use in connection with awards under the lenders signatory 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 to the Company’s Current Report on Form 8-K dated August 18, 2017, filed on August 24, 2016) (File No. 1-13397)Stock Incentive Plan.

31.1		CEO Section 302 Certification Pursuant to the Sarbanes-Oxley Act of 2002

31.2		CFO Section 302 Certification Pursuant to the Sarbanes-Oxley Act of 2002

32.1		CEO Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code as created by the Sarbanes-Oxley Act of 2002

32.2		CFO Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code as created by the Sarbanes-Oxley Act of 2002

101		The following financial information from Ingredion Incorporated’s Quarterly Report on Form 10-Q for the quarterly period ended ~~September 30, 2017~~March 31, 2019 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Equity and Redeemable Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to the Condensed Consolidated Financial Statements.

3033

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		INGREDION INCORPORATED


DATE:	~~November~~May 3, ~~2017~~2019	By	/s/ James D. Gray
		James D. Gray
		Executive Vice President and Chief Financial Officer


DATE:	~~November~~May 3, ~~2017~~2019	By	/s/ Stephen K. Latreille
		Stephen K. Latreille
		Vice President and Corporate Controller

3134



		Preliminary
(in millions)		TIC Gums
Working capital (excluding cash)	$	49
Property, plant and equipment		37
Identifiable intangible assets		133
Goodwill		177
Total purchase price, net of cash	$	396



				Estimated
	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


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		2
Prior year restructuring activities		(2)
Payments made to terminated employees		(14)
Balance in severance accrual as of September 30, 2017	$	11


	Fair Value of Derivative Instruments
		Fair Value					Fair Value
Derivatives designated as		As of		As of			As of		As of
hedging instruments:	Balance Sheet	September 30,		December 31,		Balance Sheet	September 30,		December 31,
(in millions)	Location	2017		2016		Location	2017		2016

Commodity and foreign currency	Accounts receivable, net	$	14	$	31	Accounts payable and accrued liabilities	$	28	$	25

Commodity, foreign currency, and interest rate contracts	Other assets		7		8	Non-current liabilities		7		2

Total		$	21	$	39		$	35	$	27


	Nine Months Ended September 30, 2017					Nine Months Ended September 30, 2016
	Net Income					Net Income
	Available		Weighted	Per Share		Available		Weighted	Per Share
(in millions, except per share amounts)	to Ingredion		Average Shares	Amount		to Ingredion		Average Shares	Amount

Basic EPS	$	420	72.0	$	5.83	$	391	72.2	$	5.42

Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards			1.4					1.8

Diluted EPS	$	420	73.4	$	5.72	$	391	74.0	$	5.29


	As of September 30,		As of December 31,
(in millions)	2017		2016
Finished and in process	$	497	$	478
Raw materials		274		260
Manufacturing supplies and other		54		51
Total inventories	$	825	$	789


			Deferred				Unrealized		Accumulated
	Cumulative		Gain (Loss)		Pension and		Gain		Other
	Translation		on Hedging		Postretirement		on		Comprehensive
(in millions)	Adjustment		Activities		Adjustment		Investment		Loss
Balance, December 31, 2016	$	(1,008)	$	(7)	$	(56)	$	—	$	(1,071)
Other comprehensive income (loss) before reclassification adjustments		62		(4)		1		1		60
Amount reclassified from accumulated OCI		—		1		(1)		—		—
Tax benefit		—		2		—		—		2
Net other comprehensive income (loss)		62		(1)		—		1		62
Balance, September 30, 2017	$	(946)	$	(8)	$	(56)	$	1	$	(1,009)