Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 29, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | Ingredion Inc | |
Entity Central Index Key | 1,046,257 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 71,545,000 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Condensed Consolidated Statements of Income | ||||
Net sales before shipping and handling costs | $ 1,524 | $ 1,544.8 | $ 4,469.6 | $ 4,547.8 |
Less: shipping and handling costs | 87.3 | 84.5 | 253.8 | 247.7 |
Net sales | 1,436.7 | 1,460.3 | 4,215.8 | 4,300.1 |
Cost of sales | 1,106.8 | 1,162.7 | 3,286.6 | 3,456.8 |
Gross profit | 329.9 | 297.6 | 929.2 | 843.3 |
Operating expenses | 139.2 | 129.1 | 415.5 | 398.6 |
Other (income) expense, net | 1.9 | (9.6) | 2.5 | (18.4) |
Impairment/restructuring charges | 13.8 | 24.2 | ||
Operating income | 175 | 178.1 | 487 | 463.1 |
Financing costs, net | 13.8 | 15.1 | 44.2 | 49 |
Income before income taxes | 161.2 | 163 | 442.8 | 414.1 |
Provision for income taxes | 51.2 | 42.6 | 138.3 | 113.9 |
Net income | 110 | 120.4 | 304.5 | 300.2 |
Less: Net income attributable to non-controlling interests | 2.1 | 1.8 | 6.3 | 6.4 |
Net income attributable to Ingredion | $ 107.9 | $ 118.6 | $ 298.2 | $ 293.8 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 71.6 | 73 | 71.6 | 74.2 |
Diluted (in shares) | 72.9 | 74.3 | 72.9 | 75.5 |
Earnings per common share of Ingredion: | ||||
Basic (in dollars per share) | $ 1.51 | $ 1.62 | $ 4.17 | $ 3.96 |
Diluted (in dollars per share) | $ 1.48 | $ 1.60 | $ 4.09 | $ 3.89 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 110 | $ 120.4 | $ 304.5 | $ 300.2 |
Other comprehensive income (loss): | ||||
Losses on cash-flow hedges, net of income tax effect of $7, $23, $8 and $21, respectively | (15) | (48) | (18) | (47) |
Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $3, $5, $10 and $11, respectively | 7 | 11 | 23 | 24 |
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, net of income tax effect of $2 | 6 | |||
Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect | 1 | 1 | 3 | |
Currency translation adjustment | (157) | (121) | (283) | (116) |
Comprehensive income (loss) | (55) | (37) | 34 | 164 |
Comprehensive income attributable to non-controlling interests | (2) | (2) | (6) | (6) |
Comprehensive income (loss) attributable to Ingredion | $ (57) | $ (39) | $ 28 | $ 158 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Losses on cash-flow hedges, income tax effect | $ (7) | $ (23) | $ (8) | $ (21) |
Amount of losses on cash-flow hedges reclassified to earnings, income tax effect | $ (3) | $ (5) | (10) | $ (11) |
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, income tax effect | $ 2 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 722 | $ 580 |
Short-term investments | 9 | 34 |
Accounts receivable - net | 779 | 762 |
Inventories | 718 | 699 |
Prepaid expenses | 25 | 21 |
Deferred income taxes | 39 | 48 |
Total current assets | 2,292 | 2,144 |
Property, plant and equipment - net of accumulated depreciation of $2,737 and $2,813, respectively | 2,002 | 2,073 |
Goodwill | 601 | 478 |
Other intangible assets - net of accumulated amortization of $76 and $62, respectively | 417 | 290 |
Deferred income taxes | 4 | 4 |
Other assets | 128 | 102 |
Total Assets | 5,444 | 5,091 |
Current liabilities | ||
Short-term borrowings | 24 | 23 |
Accounts payable and accrued liabilities | 646 | 698 |
Total current liabilities | 670 | 721 |
Non-current liabilities | 182 | 157 |
Long-term debt | 2,243 | 1,804 |
Deferred income taxes | 181 | 180 |
Share-based payments subject to redemption | $ 21 | $ 22 |
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 shares issued at September 30, 2015 and December 31, 2014 | $ 1 | $ 1 |
Additional paid-in capital | 1,160 | 1,164 |
Less: Treasury stock (common stock; 6,302,515 and 6,488,605 shares at September 30, 2015 and December 31, 2014, respectively) at cost | (475) | (481) |
Accumulated other comprehensive loss | (1,053) | (782) |
Retained earnings | 2,481 | 2,275 |
Total Ingredion stockholders' equity | 2,114 | 2,177 |
Non-controlling interests | 33 | 30 |
Total equity | 2,147 | 2,207 |
Total liabilities and equity | $ 5,444 | $ 5,091 |
Condensed Consolidated Balance6
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Condensed Consolidated Balance Sheets | ||
Property, plant and equipment - accumulated depreciation (in dollars) | $ 2,737 | $ 2,813 |
Other intangible assets - accumulated amortization (in dollars) | $ 76 | $ 62 |
Preferred stock, authorized shares | 25,000,000 | 25,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, issued shares | 0 | 0 |
Common stock, authorized shares | 200,000,000 | 200,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued | 77,810,875 | 77,810,875 |
Treasury stock, shares | 6,302,515 | 6,488,605 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Equity and Redeemable Equity - USD ($) $ in Millions | Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Non-controlling Interests | Share-based Payments Subject to Redemption | Total |
Balance at Dec. 31, 2013 | $ 1 | $ 1,166 | $ (225) | $ (583) | $ 2,045 | $ 25 | ||
Balance Share-based Payments Subject to Redemption at Dec. 31, 2013 | $ 24 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income attributable to Ingredion | 294 | $ 293.8 | ||||||
Net income attributable to non-controlling interests | 6 | (6.4) | ||||||
Dividends declared | (94) | (3) | ||||||
Losses on cash-flow hedges, net of income tax effect of $8 and $21 | (47) | (47) | ||||||
Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $10 and $11 | (24) | (24) | ||||||
Repurchases of common stock | (63) | (241) | ||||||
Issuance of common stock on exercise of stock options | (16) | 33 | ||||||
Share-based compensation | 20 | 2 | (4) | |||||
Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect | 3 | 3 | ||||||
Currency translation adjustment | (116) | (116) | ||||||
Balance at Sep. 30, 2014 | 1 | 1,107 | (431) | (719) | 2,245 | 28 | ||
Balance Share-based Payments Subject to Redemption at Sep. 30, 2014 | 20 | |||||||
Balance at Dec. 31, 2014 | 1 | 1,164 | (481) | (782) | 2,275 | 30 | 2,207 | |
Balance Share-based Payments Subject to Redemption at Dec. 31, 2014 | 22 | 22 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Net income attributable to Ingredion | 298 | 298.2 | ||||||
Net income attributable to non-controlling interests | 6 | (6.3) | ||||||
Dividends declared | (92) | (3) | ||||||
Losses on cash-flow hedges, net of income tax effect of $8 and $21 | (18) | (18) | ||||||
Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $10 and $11 | (23) | (23) | ||||||
Repurchases of common stock | (6) | (34) | ||||||
Issuance of common stock on exercise of stock options | (12) | 30 | ||||||
Share-based compensation | 14 | 10 | (1) | |||||
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, net of income tax effect of $2 | 6 | 6 | ||||||
Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect | 1 | 1 | ||||||
Currency translation adjustment | (283) | (283) | ||||||
Balance at Sep. 30, 2015 | $ 1 | $ 1,160 | $ (475) | $ (1,053) | $ 2,481 | $ 33 | 2,147 | |
Balance Share-based Payments Subject to Redemption at Sep. 30, 2015 | $ 21 | $ 21 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Equity and Redeemable Equity (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Condensed Consolidated Statements of Equity and Redeemable Equity | ||||
Losses on cash-flow hedges, income tax effect | $ (7) | $ (23) | $ (8) | $ (21) |
Amount of losses on cash-flow hedges reclassified to earnings, income tax effect | $ (3) | $ (5) | (10) | $ (11) |
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, income tax effect | $ 2 |
Condensed Consolidated Stateme9
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash provided by operating activities: | ||
Net income | $ 304.5 | $ 300.2 |
Non-cash charges to net income: | ||
Depreciation and amortization | 145 | 147 |
Write-off of impaired assets | 10 | |
Charge for fair value mark-up of acquired inventory | 8 | |
Other | 72 | 49 |
Changes in working capital: | ||
Accounts receivable and prepaid items | (40) | (19) |
Inventories | 21 | (15) |
Accounts payable and accrued liabilities | (40) | 8 |
Increase in margin accounts | (7) | (11) |
Other | 7 | 3 |
Cash provided by operating activities | 481 | 462 |
Cash used for investing activities: | ||
Payments for acquisition, net of cash acquired of $16 | (434) | |
Capital expenditures, net of proceeds on disposals | (193) | (187) |
Short-term investments | 24 | (1) |
Proceeds from sale of investment | 11 | |
Cash used for investing activities | (603) | (177) |
Cash used for financing activities: | ||
Proceeds from borrowings | 997 | 227 |
Payments on debt | (558) | (118) |
Repurchases of common stock | (40) | (304) |
Issuance of common stock | 18 | 17 |
Dividends paid (including to non-controlling interests) | (94) | (97) |
Excess tax benefit on share-based compensation | 6 | 5 |
Cash provided by (used for) financing activities | 329 | (270) |
Effect of foreign exchange rate changes on cash | (65) | (24) |
Increase (decrease) in cash and cash equivalents | 142 | (9) |
Cash and cash equivalents, beginning of period | 580 | 574 |
Cash and cash equivalents, end of period | $ 722 | $ 565 |
Condensed Consolidated Statem10
Condensed Consolidated Statements of Cash Flows (Parenthetical) $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Condensed Consolidated Statements of Cash Flows | |
Cash acquired from acquisition | $ 16 |
Interim Financial Statements
Interim Financial Statements | 9 Months Ended |
Sep. 30, 2015 | |
Interim Financial Statements | |
Interim 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, 2014. The unaudited condensed consolidated interim 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, 2014 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, 2015 and 2014, and the financial position of the Company as of September 30, 2015. The results for the interim periods are not necessarily indicative of the results expected for the full years. |
New Accounting Standards
New Accounting Standards | 9 Months Ended |
Sep. 30, 2015 | |
New Accounting Standards | |
New Accounting Standards | 2. New Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The standard will allow various transition approaches upon adoption. The Company is assessing the impacts of this new standard; however, the adoption of the guidance in this Update is not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements. In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30), for the purpose of simplifying the presentation of debt issuance costs. This standard requires that debt issuance costs associated with a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt in the balance sheet, consistent with the recording of debt discounts. The amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and require an entity to apply the guidance on a retrospective basis. Early adoption of the amendments in this Update is permitted for financial statements that have not been previously issued. The Company intends to adopt the amendments of the Update in the fourth quarter of 2015. The adoption of the guidance in this Update is not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements. In July 2015, the FASB issued 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. The Company does not expect that the adoption of the guidance in this Update will have a material impact on the Company’s Condensed Consolidated Financial Statements. In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement — Period Adjustments. This Update requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this Update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this Update with earlier application permitted for financial statements that have not been issued. The Company adopted the amendments of this Update in the third quarter of 2015. The adoption of the guidance in this Update did not have a material impact on the Company’s Condensed Consolidated Financial Statements. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2015 | |
Acquisitions | |
Acquisitions | 3. Acquisitions On March 11, 2015, the Company completed its acquisition of Penford Corporation (“Penford”), a manufacturer of specialty starches that was headquartered in Centennial, Colorado. Total purchase consideration for Penford was $332 million, which included the extinguishment of $93 million in debt in conjunction with the acquisition. The acquisition of Penford provides the Company with, among other things, an expanded specialty ingredient product portfolio consisting of potato starch-based offerings. Penford had net sales of $444 million for the fiscal year ended August 31, 2014 and operates six manufacturing facilities in the United States, all of which manufacture specialty starches. On August 3, 2015, the Company completed its acquisition of Kerr Concentrates, Inc. (“Kerr”), a privately held producer of natural fruit and vegetable concentrates for approximately $102 million in cash, subject to certain post-closing adjustments. Kerr employs approximately 80 people and serves major food and beverage companies, flavor houses and ingredient producers from its manufacturing locations in Oregon and California. The acquisition of Kerr provides the Company with the opportunity to expand its product portfolio. The Company funded these acquisitions 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 within the North America business segment. With these acquisitions, the Company now employs approximately 11,900 people world-wide. For the Penford acquisition, the Company has finalized the purchase price allocation for all areas with the exception of income taxes. The finalization of the valuation of tangible and intangible assets and liabilities did not have a significant impact on previously estimated amounts. The Company expects to finalize the purchase price allocation for Penford in the fourth quarter of 2015. For the Kerr acquisition, 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. Assets acquired and liabilities assumed in the transactions were generally recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition were expensed as incurred. The Company is currently in the process of finalizing the valuation of the assets acquired and liabilities assumed related to this acquisition, primarily related to the valuation of tangible and identifiable intangible assets acquired. As such, the actual allocation of the final purchase price and the resulting effect on net income may differ from the preliminary amounts included herein. The Company expects to finalize the purchase price allocation for Kerr in the fourth quarter of 2015. Goodwill represents the amount by which the purchase price exceeds the estimated fair value of the net assets acquired. Goodwill related to the Penford acquisition is not tax deductible for the Company. The goodwill related to Kerr is tax deductible due to the structure of this acquisition. The preliminary goodwill of $119 million for Penford and $27 million for Kerr result from synergies and other operational benefits expected to be derived from the acquisitions. The following table summarizes the preliminary purchase price allocations for Penford and Kerr as of March 11, 2015 and August 3, 2015, respectively, for the acquisitions: (in millions) Penford Kerr Working capital (excluding cash) $ $ Property, plant and equipment Other assets — Identifiable intangible assets Goodwill Non-current liabilities assumed ) — Total preliminary purchase price $ $ The identifiable intangible assets for the Penford acquisition include items such as customer relationships, proprietary technology, tradenames, and noncompetition agreements. The fair values of these intangible assets were determined to be Level 3 under the fair value hierarchy. Level 3 inputs are unobservable inputs for an asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for 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 for these Level 3 measurements (dollars in millions): Estimated Remaining Fair Value Valuation Technique Useful Life Customer Relationships $ Multi-period excess earnings method 15 - 22 years Trade names $ Relief-from-royalty method 10 years to indefinite Technology $ Relief-from-royalty method 6 - 11 years Noncompetition Agreements $ Income Approach 2 years The fair value of customer relationships, trade names, technology and noncompetition were determined through the valuation techniques described above using various judgmental assumptions such as discount rates and customer attrition rates. The fair values of property, plant and equipment associated with the Penford acquisition was determined to be Level 3 under the fair value hierarchy. Property, plant and equipment values were estimated using either the cost or market approach. Included in the results of the acquired businesses for the three and nine months ended September 30, 2015 were increases in cost of sales of $2 million (Kerr) and $8 million (Penford for $6 million and Kerr for $2 million), respectively, relating to the sale of inventory that was adjusted to fair value at the acquisition dates in accordance with business combination accounting rules. The Company also incurred $2 million and $9 million of pre-tax acquisition and integration costs for the three and nine months ended September 30, 2015, respectively, associated with the Penford and Kerr transactions. |
Sale of Canadian Plant
Sale of Canadian Plant | 9 Months Ended |
Sep. 30, 2015 | |
Sale of Canadian Plant | |
Sale of Canadian Plant | 4. Sale of Canadian Plant On July 7, 2015, the Company entered into a definitive agreement to sell its manufacturing assets in Port Colborne, Ontario, Canada for approximately $30 million. The sale is expected to close in the fourth quarter of 2015 and is currently expected to result in a pre-tax gain of approximately $10 million in that quarter. In the third quarter of 2015, the Company recorded a pre-tax restructuring charge of $2 million associated with the sale of the plant as described below. Additionally, the Company could incur pension-related charges in the first half of 2016 related to the plant sale. Such charges, if any, are not expected to be significant. |
Impairment and Restructuring Ch
Impairment and Restructuring Charges | 9 Months Ended |
Sep. 30, 2015 | |
Impairment and Restructuring Charges | |
Impairment and Restructuring Charges | 5. Impairment and Restructuring Charges On September 8, 2015, the Company announced that that it plans to consolidate its manufacturing network in Brazil. Plants in Trombudo Central and Conchal will be closed and production will be moved to plants in Balsa Nova and Mogi Guaçu, respectively. The consolidation will begin early in 2016 and should be complete by the end of that year. In the third quarter of 2015, the Company recorded total pre-tax restructuring-related charges of $12 million related to these plant closures, consisting of a $10 million charge for impaired assets and $2 million of employee severance-related costs. Additional restructuring costs, although not expected to be significant, could be incurred in the future as part of the plant shutdowns. Also, in the third quarter of 2015, the Company recorded a pre-tax restructuring charge of $2 million for estimated employee severance-related costs associated with the Port Colborne plant sale. In the first quarter of 2015, the Company recorded a pre-tax restructuring charge of $10 million for employee severance-related costs associated with the Penford acquisition. A summary of the Company’s restructuring reserve at September 30, 2015 is as follows (in millions): Restructuring charge for employee severance costs-Penford acquisition $ —Brazil plant shut-downs —Port Colborne plant sale Sub-total $ Payments made to terminated employees ) Balance in restructuring reserve at September 30, 2015 $ The majority of the severance reserve is expected to be paid within the next twelve months. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2015 | |
Segment Information | |
Segment Information | 6. Segment Information The Company is principally engaged in the production and sale of starches and sweeteners for a wide range of industries, and is managed geographically on a regional basis. The Company’s operations are classified into four reportable business segments: North America, South America, Asia Pacific and Europe, Middle East and Africa (“EMEA”). Its North America segment includes businesses in the United States, Canada and Mexico. The Company’s South America segment includes businesses in Brazil, Colombia, Ecuador and the Southern Cone of South America, which includes Argentina, Chile, Peru and Uruguay. Its Asia Pacific segment includes businesses in South Korea, Thailand, Malaysia, China, Japan, Indonesia, the Philippines, Singapore, India, Australia and New Zealand. The Company’s EMEA segment includes businesses in the United Kingdom, Germany, South Africa, Pakistan and Kenya. Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2015 2014 2015 2014 Net Sales North America $ $ $ $ South America Asia Pacific EMEA Total $ $ $ $ Operating Income North America $ $ $ $ South America Asia Pacific EMEA Corporate (a) ) ) ) ) Sub - total $ $ $ $ Impairment/restructuring charges ) — ) — Acquisition/integration costs ) — ) — Charge for fair value markup of acquired inventory ) — ) — Total $ $ $ $ (a) Includes $4 million of expense relating to a tax indemnification agreement with offsetting income of $4 million recorded in the provision for income taxes for the three and nine months ended September 30, 2015. For the three and nine months ended September 30, 2014, includes $7 million of income relating to this tax indemnification agreement with an offsetting expense of $7 million recorded in the provision for income taxes. See Note 14 for additional information. (in millions) At Sept. 30, 2015 At Dec. 31, 2014 Total Assets North America $ $ South America Asia Pacific EMEA Total $ $ |
Financial Instruments, Derivati
Financial Instruments, Derivatives and Hedging Activities | 9 Months Ended |
Sep. 30, 2015 | |
Financial Instruments, Derivatives and Hedging Activities | |
Financial Instruments, Derivatives and Hedging Activities | 7. Financial Instruments, Derivatives and Hedging Activities The Company is exposed to market risk stemming from changes in commodity prices (primarily corn and natural gas), foreign currency exchange rates and interest rates. In the normal course of business, the Company actively manages its exposure to these market risks by entering into various hedging transactions, authorized under established policies that place clear controls on these activities. These transactions utilize exchange-traded derivatives or over-the-counter derivatives with investment grade counterparties. Derivative financial instruments currently used by the Company consist of commodity futures, options and swap contracts, foreign currency forward contracts and swaps, and interest rate 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 twelve to twenty-four months. 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 customer sales contracts. The Company uses over-the-counter gas swaps to hedge a portion of its natural gas usage in North America. These derivative financial instruments limit the impact that volatility resulting from fluctuations in market prices will have on corn and natural gas purchases and have been designated as cash-flow hedges. Effective with the acquisition of Penford, the Company now produces and sells ethanol. The Company now enters into swap contracts to hedge price risk associated with fluctuations in market prices of ethanol. 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 the ineffectiveness of these cash-flow hedges are not significant. At September 30, 2015, AOCI included $7 million of losses, net of tax of $3 million, pertaining to commodities-related derivative instruments designated as cash-flow hedges. At December 31, 2014, AOCI included $13 million of losses, net of tax of $6 million, pertaining to commodities-related derivative instruments designated as cash-flow hedges. Interest rate hedging : Derivative financial instruments that have been used by the Company to manage its interest rate risk consist of Treasury Lock agreements (“T-Locks”) and interest rate swaps. The Company did not have any T-locks outstanding at September 30, 2015 or December 31, 2014. The Company has interest rate swap agreements that effectively convert the interest rates on its 3.2 percent $350 million senior notes due November 1, 2015, its 6.0 percent $200 million senior notes due April 15, 2017, its 1.8 percent $300 million senior notes due September 25, 2017 and on $200 million of its $400 million 4.625 percent senior notes due November 1, 2020, to variable rates. These swap agreements call for the Company to receive interest at the fixed coupon rate of the respective notes and to pay interest at a variable rate based on the six-month US dollar LIBOR rate plus a spread. The Company has designated these interest rate swap agreements as hedges of the changes in fair value of the underlying debt obligations attributable to changes in interest rates and accounts for them as fair-value hedges. Changes in the fair value of interest rate swaps designated as hedging instruments that effectively offset the variability in the fair value of outstanding debt obligations are reported in earnings. These amounts offset the gain or loss (that is, the change in fair value) of the hedged debt instrument that is attributable to changes in interest rates (that is, the hedged risk), which is also recognized in earnings. The fair value of these interest rate swap agreements at September 30, 2015 and December 31, 2014 was $19 million and $13 million, respectively, and is reflected in the Condensed Consolidated Balance Sheets within other assets, with an offsetting amount recorded in long-term debt to adjust the carrying amount of the hedged debt obligations. At September 30, 2015 and December 31, 2014, AOCI included $5 million of losses (net of income taxes of $3 million) and $7 million of losses (net of income taxes of $4 million), respectively, related to settled T-Locks. These deferred losses are being amortized to financing costs over the terms of the senior notes with which they are associated. 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 US dollars and to transactional foreign exchange risk when transactions not denominated in the functional currency of an operating unit 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, 2015, the Company had foreign currency forward sales contracts with an aggregate notional amount of $390 million and foreign currency forward purchase contracts with an aggregate notional amount of $47 million that hedged transactional exposures. At December 31, 2014, the Company had foreign currency forward sales contracts with an aggregate notional amount of $150 million and foreign currency forward purchase contracts with an aggregate notional amount of $70 million that hedged transactional exposures. The fair value of these derivative instruments are assets of $5 million and $1 million at September 30, 2015 and December 31, 2014, respectively. The Company also has foreign currency derivative instruments that hedge certain foreign currency transactional exposures and are designated as cash-flow hedges. The amount included in AOCI relating to these hedges at both September 30, 2015 and December 31, 2014 was not significant. The fair value and balance sheet location of the Company’s derivative instruments, accounted for as cash-flow hedges and presented gross in the Condensed Consolidated Balance Sheets, are reflected below: Fair Value of Derivative Instruments Derivatives designated as Fair Value Fair Value cash-flow hedging instruments: (in millions) Balance Sheet Location At Sept. 30, 2015 At December 31, 2014 Balance Sheet Location At Sept. 30, 2015 At December 31, 2014 Commodity and foreign currency contracts Accounts receivable-net $ $ Accounts payable and accrued liabilities $ $ Commodity and foreign currency contracts Other assets Non-current liabilities Total $ $ $ $ At September 30, 2015, the Company had outstanding futures and option contracts that hedged the forecasted purchase of approximately 77 million bushels of corn. The Company also had outstanding swap and option contracts that hedged the forecasted purchase of approximately 19 million mmbtu’s of natural gas at September 30, 2015. Additionally at September 30, 2015, the Company had outstanding ethanol swap contracts that hedged the forecasted sale of approximately 9 million gallons of ethanol. The Company is unable to directly hedge price risk related to co-product sales; however, it occasionally enters into hedges of soybean oil (a competing product to corn oil) in order to mitigate the price risk of corn oil sales. The Company did not have any soybean oil hedges at September 30, 2015. Additional information relating to the Company’s derivative instruments is presented below (in millions, pre-tax): Amount of Gains (Losses) Recognized in OCI on Derivatives Location of Amount of Gains (Losses) Reclassified from AOCI into Income Derivatives in Cash-Flow Hedging Relationships Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Gains (Losses) Reclassified from AOCI into Income Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Commodity and foreign currency contracts $ ) $ ) Cost of sales $ ) $ ) Interest rate contracts — — Financing costs, net ) ) Total $ ) $ ) $ ) $ ) Amount of Gains (Losses) Recognized in OCI on Derivatives Location of Amount of Gains (Losses) Reclassified from AOCI into Income Derivatives in Cash-Flow Hedging Relationships Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Gains (Losses) Reclassified from AOCI into Income Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Commodity and foreign currency contracts $ ) $ ) Cost of sales $ ) $ ) Interest rate contracts — — Financing costs, net ) ) Total $ ) $ ) $ ) $ ) At September 30, 2015, AOCI included $8 million of losses (net of income taxes of $3 million) on commodities-related derivative instruments designated as cash-flow hedges that are expected to be reclassified into earnings during the next twelve months. The Company expects the losses to be offset by changes in the underlying commodities costs. The Company also has $2 million of losses on settled T-Locks (net of income taxes of $1 million) recorded in AOCI at September 30, 2015, which are expected to be reclassified into earnings during the next twelve months. Additionally, at September 30, 2015, AOCI included an insignificant amount of losses related to foreign currency hedges that are expected to be reclassified into earnings during the next twelve months. Presented below are the fair values of the Company’s financial instruments and derivatives for the periods presented: At September 30, 2015 At December 31, 2014 (in millions) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Available for sale securities $ $ $ — $ — $ $ $ — $ — Derivative assets — — Derivative liabilities — — Long-term debt — — — — Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability or can be derived principally from or corroborated by observable market data. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs 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 debt is estimated based on quotations of major securities dealers who are market makers in the securities. At September 30, 2015, the carrying value and fair value of the Company’s long-term debt were $2.24 billion and $2.36 billion, respectively. |
Share-Based Compensation
Share-Based Compensation | 9 Months Ended |
Sep. 30, 2015 | |
Share-Based Compensation | |
Share-Based Compensation | 8. Share-Based Compensation 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 recognized on a straight-line basis for all awards. The Company granted non-qualified options to purchase 336 thousand shares and 715 thousand shares of the Company’s common stock during the nine months ended September 30, 2015 and 2014, 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, 2015 2014 Expected life (in years) Risk-free interest rate % % Expected volatility % % Expected dividend yield % % 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 US 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 historical dividend payments. Stock option activity for the nine months ended September 30, 2015 was as follows: (dollars and options in thousands, except per share amounts) Number of Options Weighted Average Exercise Price per Share Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at December 31, 2014 $ Granted Exercised ) Cancelled ) Outstanding at September 30, 2015 $ Exercisable at September 30, 2015 $ For the nine months ended September 30, 2015, cash received from the exercise of stock options was $18 million. At September 30, 2015, the total remaining unrecognized compensation cost related to stock options approximated $9 million, which will be amortized over a weighted-average period of approximately 1.8 years. Additional information pertaining to stock option activity is as follows: Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except per share) 2015 2014 2015 2014 Weighted average grant date fair value of stock options granted (per share) $ — $ — $ $ Total intrinsic value of stock options exercised $ $ $ $ Restricted Shares of Common Stock and Restricted Stock Units: The Company has granted shares of restricted common stock (“RSAs”) and restricted stock units (“RSUs”) to certain key employees. The RSAs and RSUs are subject to cliff vesting, generally after three to five years provided the employee remains in the service of the Company. The fair value of the RSAs and RSUs is determined based upon the number of shares granted and the quoted market price of the Company’s common stock at the date of the grant. The following table summarizes RSA and RSU activity for the nine months ended September 30, 2015: RSAs RSUs Weighted Weighted Average Average (in thousands, except per share Number of Fair Value Number of Fair Value amounts) RSAs per Share RSUs per Share Non-vested at December 31, 2014 $ $ Granted — — Vested ) ) Cancelled — — ) Non-vested at September 30, 2015 At September 30, 2015, the total remaining unrecognized compensation cost related to RSUs was $16 million, which will be amortized over a weighted-average period of approximately 2.0 years. Unrecognized compensation cost related to RSAs was insignificant at September 30, 2015. 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) 2015 2014 2015 2014 Stock options: Pre-tax compensation expense $ $ $ $ Income tax benefit ) ) ) ) Stock option expense, net of income taxes RSUs, RSAs and other share-based compensation: Pre-tax compensation expense Income tax benefit ) ) ) ) RSUs, RSAs and other share-based compensation expense, net of income taxes Total share-based compensation: Pre-tax compensation expense Income tax benefit ) ) ) ) Total share-based compensation expense, net of income taxes $ $ $ $ |
Net Periodic Pension and Postre
Net Periodic Pension and Postretirement Benefit Costs | 9 Months Ended |
Sep. 30, 2015 | |
Net Periodic Pension and Postretirement Benefit Costs | |
Net Periodic Pension and Postretirement Benefit Costs | 9. Net Periodic Pension and Postretirement Benefit Costs For detailed information about the Company’s pension and postretirement benefit plans, please refer to Note 9 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, 2014. The following table sets forth the components of net periodic benefit cost of the US and non-US defined benefit pension plans for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, US Plans Non-US Plans US Plans Non-US Plans (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Service cost $ $ $ $ $ $ $ $ Interest cost Expected return on plan assets ) ) ) ) ) ) ) ) Amortization of net actuarial loss Amortization of prior service credit — — — — — — ) ) Amortization of transition obligation — — — — Settlement — — — — — — Net pension cost (credit) $ ) $ $ $ $ ) $ $ $ For the nine months ended September 30, 2015, cash contributions of approximately $10 million and $1 million were made to the US and non-US plans, respectively. No significant contributions are expected to be made in the fourth quarter of 2015. During the first quarter of 2015, the Company amended one of its pension plans in Canada to eliminate future benefit accruals for the plan effective April 30, 2015. This plan curtailment resulted in an improvement in the funded status of the plan by approximately $9 million in the first quarter. The impact of this plan curtailment on net periodic benefit cost for the nine months ended September 30, 2015 was not significant. The following table sets forth the components of net postretirement benefit cost for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2015 2014 2015 2014 Service cost $ $ $ $ Interest cost Amortization of net actuarial loss Amortization of prior service credit ) — ) — Net postretirement benefit cost $ $ $ $ |
Earnings per Common Share
Earnings per Common Share | 9 Months Ended |
Sep. 30, 2015 | |
Earnings per Common Share | |
Earnings per Common Share | 10. 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, 2015 Three Months Ended September 30, 2014 Net Income Net Income Available Weighted Available Weighted to Ingredion Average Shares Per Share to Ingredion Average Shares Per Share (in millions, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS $ $ $ $ Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs, RSAs and other awards Diluted EPS $ $ $ $ Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Net Income Net Income Available Weighted Available Weighted to Ingredion Average Shares Per Share to Ingredion Average Shares Per Share (in millions, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS $ $ $ $ Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs, RSAs and other awards Diluted EPS $ $ $ $ For both the third quarter and first nine months of 2015, options to purchase approximately 0.3 million shares of common stock were excluded from the calculation of diluted EPS as the impact of their inclusion would have been anti-dilutive. For the first nine months of 2014, options to purchase approximately 0.4 million shares of common stock were excluded from the calculation of diluted EPS as the impact of their inclusion would have been anti-dilutive. The number of anti-dilutive options excluded from the calculation of diluted EPS for the third quarter of 2014 was not material. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2015 | |
Inventories | |
Inventories | 11. Inventories Inventories are summarized as follows: (in millions) At September 30, 2015 At December 31, 2014 Finished and in process $ $ Raw materials Manufacturing supplies and other Total inventories $ $ |
Debt
Debt | 9 Months Ended |
Sep. 30, 2015 | |
Debt | |
Debt | 12. Debt The Company had total debt outstanding of $2.27 billion and $1.83 billion at September 30, 2015 and December 31, 2014, respectively. The increase primarily reflects borrowings to fund the acquisitions of Penford and Kerr. On July 10, 2015, the Company entered into a new Term Loan Credit Agreement to establish an18-month $350 million multi-currency senior unsecured term loan credit facility. All borrowings under the term loan facility 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. Proceeds of $350 million from the new Term Loan Credit Agreement were used to repay borrowings outstanding under our Revolving Credit Agreement. 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. Borrowings outstanding under the Company’s $1 billion Revolving Credit Agreement were $169 million and $87 million at September 30, 2015 and December 31, 2014, respectively. The Company’s long-term debt at September 30, 2015 and December 31, 2014 includes $350 million of 3.2 percent senior notes that mature November 1, 2015. These borrowings are included in long-term debt as the Company has the ability and intent to refinance the notes on a long-term basis. The Company intends to repay the $350 million of 3.2 percent notes with proceeds from borrowings under its $1 billion Revolving Credit Agreement. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Sep. 30, 2015 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | 13. Accumulated Other Comprehensive Loss A summary of accumulated other comprehensive loss for the nine months ended September 30, 2015 and 2014 is provided below: Deferred Unrealized Accumulated Cumulative Gain/(Loss) Pension/ Loss Other Translation on Hedging Postretirement on Comprehensive (in millions) Adjustment Activities Adjustment Investment Loss Balance, December 31, 2014 $ ) $ ) $ ) $ ) $ ) Losses on cash-flow hedges, net of income tax effect of $8 ) ) Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $10 Actuarial gains on pension and postretirement obligations, settlements and plan amendments, net of income tax effect of $2 Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect Currency translation adjustment ) ) Balance, September 30, 2015 $ ) $ ) $ ) $ ) $ ) Deferred Unrealized Accumulated Cumulative Gain/(Loss) Pension/ Loss Other Translation on Hedging Postretirement on Comprehensive (in millions) Adjustment Activities Adjustment Investment Loss Balance, December 31, 2013 $ ) $ ) $ ) $ ) $ ) Losses on cash-flow hedges, net of income tax effect of $21 ) ) Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $11 Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect Currency translation adjustment ) ) Balance, September 30, 2014 $ ) $ ) $ ) $ ) $ ) The following table provides detail pertaining to reclassifications from AOCI into net income for the periods presented: Amount Reclassified from AOCI Three Months ended Nine Months ended Affected Line Item in Details about AOCI Components September 30, September 30, Condensed Consolidated (in millions) 2015 2014 2015 2014 Statements of Income Gains (losses) on cash-flow hedges: Commodity and foreign currency contracts $ ) $ ) $ ) $ ) Cost of sales Interest rate contracts ) ) ) ) Financing costs, net Losses related to pension and other postretirement obligations — ) ) ) (a) Total before tax reclassifications $ ) $ ) $ ) $ ) Income tax benefit Total after-tax reclassifications $ ) $ ) $ ) $ ) (a) This component is included in the computation of net periodic benefit cost and affects both cost of sales and operating expenses on the Condensed Consolidated Statements of Income. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Taxes | |
Income Taxes | 14. Income Taxes The Company’s effective income tax rate for the third quarter of 2015 was 31.8 percent compared to 26.1 percent a year ago. The effective income tax rate for the first nine months of 2015 was 31.2 percent compared to 27.5 percent a year ago. The third quarter and first nine months of 2015 include favorable impacts related to the recognition of previously unrecognized tax benefits due to the lapsing of statute of limitations of approximately 0.6 percentage points and 0.5 percentage points, respectively. In addition, the Company uses the US dollar as the functional currency for its subsidiaries in Mexico. Because of the continued decline in the value of the Mexican peso versus the US dollar, our tax provision for the third quarter and first nine months of 2015 was unfavorably impacted by 5.4 percentage points and 3.0 percentage points, respectively. Finally, during the third quarter of 2015, based on the final settlement of an audit matter, the Company reversed $4 million of the $7 million income tax expense and other income recorded in the third quarter of 2014 (see below). As a result, the effective income tax rate for the quarter and first nine months of the year is favorably impacted by 2.4 percentage points and 0.9 percentage points, respectively. Without these items, the Company’s effective income tax rate for both the third quarter and first nine months of 2015 would have been approximately 29 percent. The Company’s effective income tax rate for the third quarter of 2014 included two discrete tax adjustments that partially offset each other. First, the effective tax rate reflects a favorable impact of 5.3 percentage points that relates to the recognition of previously unrecognized tax benefits due to the lapsing of the statute of limitations. Second, an unfavorable impact of $7 million (4.5 percentage points) was recognized in third quarter 2014 for an unfavorable audit result in a National Starch subsidiary related to a pre-acquisition period for which we are indemnified by Akzo Nobel N.V. (“Akzo”). The $7 million expense incurred by the acquired subsidiary was recorded in the tax provision, while the reimbursement from Akzo under the indemnification was recorded as other income. As the Company is fully indemnified for this pre-acquisition obligation, the impact on net income is zero. Without the discrete tax adjustments and the indemnification income, the Company’s effective income tax rate for both the third quarter and first nine months of 2014 would have been approximately 28 percent. |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Acquisitions | |
Summary of preliminary purchase price allocations for Penford and Kerr | The following table summarizes the preliminary purchase price allocations for Penford and Kerr as of March 11, 2015 and August 3, 2015, respectively, for the acquisitions: (in millions) Penford Kerr Working capital (excluding cash) $ $ Property, plant and equipment Other assets — Identifiable intangible assets Goodwill Non-current liabilities assumed ) — Total preliminary purchase price $ $ |
Schedule of fair values, valuation techniques and estimated remaining useful life of acquired intangible assets | The following table presents the fair values, valuation techniques, and estimated remaining useful life for these Level 3 measurements (dollars in millions): Estimated Remaining Fair Value Valuation Technique Useful Life Customer Relationships $ Multi-period excess earnings method 15 - 22 years Trade names $ Relief-from-royalty method 10 years to indefinite Technology $ Relief-from-royalty method 6 - 11 years Noncompetition Agreements $ Income Approach 2 years |
Impairment and Restructuring 26
Impairment and Restructuring Charges (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Impairment and Restructuring Charges | |
Summary of restructuring reserve | A summary of the Company’s restructuring reserve at September 30, 2015 is as follows (in millions): Restructuring charge for employee severance costs-Penford acquisition $ —Brazil plant shut-downs —Port Colborne plant sale Sub-total $ Payments made to terminated employees ) Balance in restructuring reserve at September 30, 2015 $ |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Information | |
Schedule of segment reporting of net sales, operating income and total assets | Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2015 2014 2015 2014 Net Sales North America $ $ $ $ South America Asia Pacific EMEA Total $ $ $ $ Operating Income North America $ $ $ $ South America Asia Pacific EMEA Corporate (a) ) ) ) ) Sub - total $ $ $ $ Impairment/restructuring charges ) — ) — Acquisition/integration costs ) — ) — Charge for fair value markup of acquired inventory ) — ) — Total $ $ $ $ (a) Includes $4 million of expense relating to a tax indemnification agreement with offsetting income of $4 million recorded in the provision for income taxes for the three and nine months ended September 30, 2015. For the three and nine months ended September 30, 2014, includes $7 million of income relating to this tax indemnification agreement with an offsetting expense of $7 million recorded in the provision for income taxes. See Note 14 for additional information. (in millions) At Sept. 30, 2015 At Dec. 31, 2014 Total Assets North America $ $ South America Asia Pacific EMEA Total $ $ |
Financial Instruments, Deriva28
Financial Instruments, Derivatives and Hedging Activities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Financial Instruments, Derivatives and Hedging Activities | |
Schedule of location and amount of assets and liabilities reported in balance sheet | Fair Value of Derivative Instruments Derivatives designated as Fair Value Fair Value cash-flow hedging instruments: (in millions) Balance Sheet Location At Sept. 30, 2015 At December 31, 2014 Balance Sheet Location At Sept. 30, 2015 At December 31, 2014 Commodity and foreign currency contracts Accounts receivable-net $ $ Accounts payable and accrued liabilities $ $ Commodity and foreign currency contracts Other assets Non-current liabilities Total $ $ $ $ |
Schedule of amount of gains and losses recognized in OCI and location and amount of gains and losses reported in income statement | Additional information relating to the Company’s derivative instruments is presented below (in millions, pre-tax): Amount of Gains (Losses) Recognized in OCI on Derivatives Location of Amount of Gains (Losses) Reclassified from AOCI into Income Derivatives in Cash-Flow Hedging Relationships Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Gains (Losses) Reclassified from AOCI into Income Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Commodity and foreign currency contracts $ ) $ ) Cost of sales $ ) $ ) Interest rate contracts — — Financing costs, net ) ) Total $ ) $ ) $ ) $ ) Amount of Gains (Losses) Recognized in OCI on Derivatives Location of Amount of Gains (Losses) Reclassified from AOCI into Income Derivatives in Cash-Flow Hedging Relationships Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Gains (Losses) Reclassified from AOCI into Income Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Commodity and foreign currency contracts $ ) $ ) Cost of sales $ ) $ ) Interest rate contracts — — Financing costs, net ) ) Total $ ) $ ) $ ) $ ) |
Schedule of fair value of financial instruments and derivatives | At September 30, 2015 At December 31, 2014 (in millions) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Available for sale securities $ $ $ — $ — $ $ $ — $ — Derivative assets — — Derivative liabilities — — Long-term debt — — — — |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Share-Based Compensation | |
Schedule of valuation assumptions for stock options | For the Nine Months Ended September 30, 2015 2014 Expected life (in years) Risk-free interest rate % % Expected volatility % % Expected dividend yield % % |
Schedule of stock option activity | (dollars and options in thousands, except per share amounts) Number of Options Weighted Average Exercise Price per Share Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at December 31, 2014 $ Granted Exercised ) Cancelled ) Outstanding at September 30, 2015 $ Exercisable at September 30, 2015 $ |
Schedule of additional information pertaining to stock option activity | Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands, except per share) 2015 2014 2015 2014 Weighted average grant date fair value of stock options granted (per share) $ — $ — $ $ Total intrinsic value of stock options exercised $ $ $ $ |
Schedule of restricted share and restricted unit activity | RSAs RSUs Weighted Weighted Average Average (in thousands, except per share Number of Fair Value Number of Fair Value amounts) RSAs per Share RSUs per Share Non-vested at December 31, 2014 $ $ Granted — — Vested ) ) Cancelled — — ) Non-vested at September 30, 2015 |
Schedule of components of share based compensation expense | Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2015 2014 2015 2014 Stock options: Pre-tax compensation expense $ $ $ $ Income tax benefit ) ) ) ) Stock option expense, net of income taxes RSUs, RSAs and other share-based compensation: Pre-tax compensation expense Income tax benefit ) ) ) ) RSUs, RSAs and other share-based compensation expense, net of income taxes Total share-based compensation: Pre-tax compensation expense Income tax benefit ) ) ) ) Total share-based compensation expense, net of income taxes $ $ $ $ |
Net Periodic Pension and Post30
Net Periodic Pension and Postretirement Benefit Costs (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Pension Plans Defined Benefit | |
Pension and postretirement benefit plans | |
Components of Net Periodic Benefit Cost | Three Months Ended September 30, Nine Months Ended September 30, US Plans Non-US Plans US Plans Non-US Plans (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Service cost $ $ $ $ $ $ $ $ Interest cost Expected return on plan assets ) ) ) ) ) ) ) ) Amortization of net actuarial loss Amortization of prior service credit — — — — — — ) ) Amortization of transition obligation — — — — Settlement — — — — — — Net pension cost (credit) $ ) $ $ $ $ ) $ $ $ |
Other Postretirement Benefit Plans Defined Benefit | |
Pension and postretirement benefit plans | |
Components of Net Periodic Benefit Cost | Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2015 2014 2015 2014 Service cost $ $ $ $ Interest cost Amortization of net actuarial loss Amortization of prior service credit ) — ) — Net postretirement benefit cost $ $ $ $ |
Earnings per Common Share (Tabl
Earnings per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings per Common Share | |
Schedule of basic and diluted net income per share | Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Net Income Net Income Available Weighted Available Weighted to Ingredion Average Shares Per Share to Ingredion Average Shares Per Share (in millions, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS $ $ $ $ Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs, RSAs and other awards Diluted EPS $ $ $ $ Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Net Income Net Income Available Weighted Available Weighted to Ingredion Average Shares Per Share to Ingredion Average Shares Per Share (in millions, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS $ $ $ $ Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs, RSAs and other awards Diluted EPS $ $ $ $ |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Inventories | |
Components of inventories | (in millions) At September 30, 2015 At December 31, 2014 Finished and in process $ $ Raw materials Manufacturing supplies and other Total inventories $ $ |
Accumulated Other Comprehensi33
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accumulated Other Comprehensive Loss | |
Summary of accumulated other comprehensive loss | Deferred Unrealized Accumulated Cumulative Gain/(Loss) Pension/ Loss Other Translation on Hedging Postretirement on Comprehensive (in millions) Adjustment Activities Adjustment Investment Loss Balance, December 31, 2014 $ ) $ ) $ ) $ ) $ ) Losses on cash-flow hedges, net of income tax effect of $8 ) ) Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $10 Actuarial gains on pension and postretirement obligations, settlements and plan amendments, net of income tax effect of $2 Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect Currency translation adjustment ) ) Balance, September 30, 2015 $ ) $ ) $ ) $ ) $ ) Deferred Unrealized Accumulated Cumulative Gain/(Loss) Pension/ Loss Other Translation on Hedging Postretirement on Comprehensive (in millions) Adjustment Activities Adjustment Investment Loss Balance, December 31, 2013 $ ) $ ) $ ) $ ) $ ) Losses on cash-flow hedges, net of income tax effect of $21 ) ) Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $11 Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect Currency translation adjustment ) ) Balance, September 30, 2014 $ ) $ ) $ ) $ ) $ ) |
Schedule of reclassifications from AOCI into net income | Amount Reclassified from AOCI Three Months ended Nine Months ended Affected Line Item in Details about AOCI Components September 30, September 30, Condensed Consolidated (in millions) 2015 2014 2015 2014 Statements of Income Gains (losses) on cash-flow hedges: Commodity and foreign currency contracts $ ) $ ) $ ) $ ) Cost of sales Interest rate contracts ) ) ) ) Financing costs, net Losses related to pension and other postretirement obligations — ) ) ) (a) Total before tax reclassifications $ ) $ ) $ ) $ ) Income tax benefit Total after-tax reclassifications $ ) $ ) $ ) $ ) (a) This component is included in the computation of net periodic benefit cost and affects both cost of sales and operating expenses on the Condensed Consolidated Statements of Income. |
Acquisitions (Details)
Acquisitions (Details) $ in Millions | Aug. 03, 2015USD ($)item | Mar. 11, 2015USD ($)Plant | Sep. 30, 2015USD ($)employee | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)employee | Sep. 30, 2014USD ($) | Aug. 31, 2014USD ($) | Dec. 31, 2014USD ($) |
Business Acquisition [Line Items] | ||||||||
Net sales | $ 1,436.7 | $ 1,460.3 | $ 4,215.8 | $ 4,300.1 | ||||
Number of people | employee | 11,900 | 11,900 | ||||||
Preliminary purchase price allocation | ||||||||
Goodwill | $ 601 | $ 601 | $ 478 | |||||
Penford | ||||||||
Business Acquisition [Line Items] | ||||||||
Total purchase consideration | $ 332 | |||||||
Extinguishment of debt in conjunction with the acquisition | $ 93 | |||||||
Net sales | $ 444 | |||||||
Number of Plants | Plant | 6 | |||||||
Preliminary purchase price allocation | ||||||||
Working capital (excluding cash) | $ 68 | |||||||
Property, plant and equipment | 86 | |||||||
Other assets | 9 | |||||||
Identifiable intangible assets | 121 | |||||||
Goodwill | 119 | |||||||
Non-current liabilities assumed | (71) | |||||||
Total preliminary purchase price | $ 332 | |||||||
Kerr | ||||||||
Business Acquisition [Line Items] | ||||||||
Total purchase consideration | $ 102 | |||||||
Number of people | item | 80 | |||||||
Preliminary purchase price allocation | ||||||||
Working capital (excluding cash) | $ 38 | |||||||
Property, plant and equipment | 8 | |||||||
Identifiable intangible assets | 29 | |||||||
Goodwill | 27 | |||||||
Total preliminary purchase price | $ 102 |
Acquisitions (Details)35
Acquisitions (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2015USD ($) | Sep. 30, 2015USD ($) | |
Other disclosures | ||
Increase in cost of sales for fair value mark-up of acquired inventory | $ 2 | $ 8 |
Pre-tax acquisition and integration costs | 1.6 | 9.3 |
Penford And Kerr Acquisitions | ||
Other disclosures | ||
Pre-tax acquisition and integration costs | 2 | 9 |
Penford | ||
Other disclosures | ||
Increase in cost of sales for fair value mark-up of acquired inventory | $ 6 | |
Penford | Customer Relationships | Minimum | ||
Identifiable intangible assets | ||
Estimated Remaining Useful Life | 15 years | |
Penford | Customer Relationships | Maximum | ||
Identifiable intangible assets | ||
Estimated Remaining Useful Life | 22 years | |
Penford | Trade names | Minimum | ||
Identifiable intangible assets | ||
Estimated Remaining Useful Life | 10 years | |
Penford | Technology | Minimum | ||
Identifiable intangible assets | ||
Estimated Remaining Useful Life | 6 years | |
Penford | Technology | Maximum | ||
Identifiable intangible assets | ||
Estimated Remaining Useful Life | 11 years | |
Penford | Noncompetition Agreements | ||
Identifiable intangible assets | ||
Estimated Remaining Useful Life | 2 years | |
Kerr | ||
Other disclosures | ||
Increase in cost of sales for fair value mark-up of acquired inventory | 2 | $ 2 |
Level 3 | Penford | Customer Relationships | Multi-period excess earnings method | ||
Identifiable intangible assets | ||
Fair Value | 84 | 84 |
Level 3 | Penford | Trade names | Relief-from-royalty method | ||
Identifiable intangible assets | ||
Fair Value | 17 | 17 |
Level 3 | Penford | Technology | Relief-from-royalty method | ||
Identifiable intangible assets | ||
Fair Value | 17 | 17 |
Level 3 | Penford | Noncompetition Agreements | Income Approach | ||
Identifiable intangible assets | ||
Fair Value | $ 3 | $ 3 |
Sale of Canadian Plant (Details
Sale of Canadian Plant (Details) - Disposal Group, Not Discontinued Operations - Manufacturing assets in Port Colborne, Ontario, Canada - USD ($) $ in Millions | Oct. 30, 2015 | Sep. 30, 2015 | Jul. 07, 2015 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Consideration for the sale of assets | $ 30 | ||
Pre-tax restructuring-related charges with the sale of the plant | $ 2 | ||
Forecast | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Pre-tax gain on sale of plant | $ 10 |
Impairment and Restructuring 37
Impairment and Restructuring Charges (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2015 | |
Restructuring accrual | |||
Restructuring charge for employee severance costs | $ 14 | ||
Payments made to terminated employees | (2) | ||
Balance in restructuring reserve at the end of the period | $ 12 | $ 12 | |
Expected period of payment of severance costs | 12 months | ||
Manufacturing assets in Port Colborne, Ontario, Canada | |||
Restructuring accrual | |||
Restructuring charge for employee severance costs | 2 | $ 2 | |
Penford | |||
Restructuring accrual | |||
Restructuring charge for employee severance costs | $ 10 | 10 | |
Consolidation of manufacturing network , Brazil Plant | |||
Restructuring and asset impairment charges | |||
Pre-tax restructuring-related charges | 12 | ||
Charges for impaired assets | 10 | ||
Restructuring accrual | |||
Restructuring charge for employee severance costs | $ 2 | $ 2 |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)segment | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($) | |
Segment information | |||||
Net sales | $ 1,436.7 | $ 1,460.3 | $ 4,215.8 | $ 4,300.1 | |
Operating income | 175 | 178.1 | 487 | 463.1 | |
Impairment/restructuring charges | (13.8) | (24.2) | |||
Acquisition and integration costs | (1.6) | (9.3) | |||
Charge for fair value mark-up of acquired inventory | (2) | (8) | |||
Total Assets | 5,444 | 5,444 | $ 5,091 | ||
Provision for income taxes | 51.2 | 42.6 | $ 138.3 | 113.9 | |
Number of reportable business segments | segment | 4 | ||||
North America | |||||
Segment information | |||||
Net sales | 880 | 805.6 | $ 2,503.1 | 2,362 | |
Total Assets | 3,474 | 3,474 | 2,907 | ||
South America | |||||
Segment information | |||||
Net sales | 256.4 | 307.6 | 764.5 | 906.2 | |
Total Assets | 740 | 740 | 923 | ||
Asia Pacific | |||||
Segment information | |||||
Net sales | 174.4 | 205.8 | 553.1 | 594.3 | |
Total Assets | 719 | 719 | 711 | ||
EMEA | |||||
Segment information | |||||
Net sales | 125.9 | 141.3 | 395.1 | 437.6 | |
Total Assets | 511 | 511 | $ 550 | ||
Operating Segments | |||||
Segment information | |||||
Operating income | 192.4 | 178.1 | 528.9 | 463.1 | |
Operating Segments | North America | |||||
Segment information | |||||
Operating income | 133 | 113.1 | 362.2 | 288.7 | |
Operating Segments | South America | |||||
Segment information | |||||
Operating income | 28.4 | 27.4 | 73 | 73.8 | |
Operating Segments | Asia Pacific | |||||
Segment information | |||||
Operating income | 27.6 | 27 | 81.3 | 80.1 | |
Operating Segments | EMEA | |||||
Segment information | |||||
Operating income | 21.7 | 22.2 | 66.8 | 68.7 | |
Corporate, Non-Segment | |||||
Segment information | |||||
Operating income | (18.3) | (11.6) | (54.4) | (48.2) | |
Expense relating to tax indemnification agreement | 4 | 4 | |||
Provision for income taxes | $ (4) | 7 | $ (4) | 7 | |
Income relating to tax indemnification agreement | $ 7 | $ 7 |
Financial Instruments, Deriva39
Financial Instruments, Derivatives and Hedging Activities (Details) - USD ($) $ in Millions | 9 Months Ended | |||
Sep. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | |
Financial instruments, derivatives and hedging activities | ||||
Accumulated gains (losses) from derivative instruments, net of tax effect | $ (1,053) | $ (782) | $ (719) | $ (583) |
Senior Notes 3.20 Percent Due November 1, 2015 | ||||
Financial instruments, derivatives and hedging activities | ||||
Debt, face amount | 350 | 350 | ||
Senior Notes 4.625 Percent Due November 1, 2020 | ||||
Financial instruments, derivatives and hedging activities | ||||
Debt, face amount | $ 400 | |||
Commodity Contract | Minimum | ||||
Financial instruments, derivatives and hedging activities | ||||
Maturity period of price risk derivative | 12 months | |||
Commodity Contract | Maximum | ||||
Financial instruments, derivatives and hedging activities | ||||
Maturity period of price risk derivative | 24 months | |||
Cash Flow Hedging | Commodity Contract | ||||
Financial instruments, derivatives and hedging activities | ||||
Accumulated gains (losses) from derivative instruments, net of tax effect | $ (7) | (13) | ||
Accumulated gains (losses) from derivative instruments, net income tax effect | (3) | (6) | ||
Cash Flow Hedging | Treasury Lock | ||||
Financial instruments, derivatives and hedging activities | ||||
Accumulated gains (losses) from derivative instruments, net of tax effect | (5) | (7) | ||
Accumulated gains (losses) from derivative instruments, net income tax effect | (3) | (4) | ||
Fair value of interest rate derivatives | 0 | 0 | ||
Fair Value Hedging | Interest Rate Swap | ||||
Financial instruments, derivatives and hedging activities | ||||
Fair value of interest rate derivatives | $ 19 | 13 | ||
Debt, floating rate of interest basis | six-month US dollar LIBOR rate plus a spread | |||
Fair Value Hedging | Interest Rate Swap | Senior Notes 3.20 Percent Due November 1, 2015 | ||||
Financial instruments, derivatives and hedging activities | ||||
Debt, fixed interest rate (as a percent) | 3.20% | |||
Debt, face amount | $ 350 | |||
Fair Value Hedging | Interest Rate Swap | Senior Notes 6.0 Percent Due April 15, 2017 | ||||
Financial instruments, derivatives and hedging activities | ||||
Debt, fixed interest rate (as a percent) | 6.00% | |||
Debt, face amount | $ 200 | |||
Fair Value Hedging | Interest Rate Swap | Senior Notes 1.8 Percent Due September 25, 2017 | ||||
Financial instruments, derivatives and hedging activities | ||||
Debt, fixed interest rate (as a percent) | 1.80% | |||
Debt, face amount | $ 300 | |||
Fair Value Hedging | Interest Rate Swap | Senior Notes 4.625 Percent Due November 1, 2020 | ||||
Financial instruments, derivatives and hedging activities | ||||
Debt, fixed interest rate (as a percent) | 4.625% | |||
Debt, face amount | $ 200 | |||
Fair Value Hedging | Foreign Exchange Forward | ||||
Financial instruments, derivatives and hedging activities | ||||
Fair value of assets | 5 | 1 | ||
Fair Value Hedging | Foreign Exchange Forward | Short | ||||
Foreign currency hedging | ||||
Derivative notional amount | 390 | 150 | ||
Fair Value Hedging | Foreign Exchange Forward | Long | ||||
Foreign currency hedging | ||||
Derivative notional amount | $ 47 | $ 70 |
Financial Instruments, Deriva40
Financial Instruments, Derivatives and Hedging Activities (Details 2) gal in Millions, bu in Millions, MMBTU in Millions, $ in Millions | Sep. 30, 2015USD ($)MMBTUgalbu | Dec. 31, 2014USD ($) |
Corn Commodity | ||
Fair value of commodity contracts | ||
Futures contract (in bushels for corn and gallons for ethanol) | bu | 77 | |
Natural Gas Commodity | ||
Fair value of commodity contracts | ||
Natural gas futures contract (in mmbtu) | MMBTU | 19 | |
Ethanol Commodity | ||
Fair value of commodity contracts | ||
Futures contract (in bushels for corn and gallons for ethanol) | gal | 9 | |
Designated as Hedging Instrument | Cash Flow Hedging | ||
Fair value of commodity contracts | ||
Fair value of assets | $ 15 | $ 16 |
Fair value of liabilities | 14 | 24 |
Designated as Hedging Instrument | Commodity and Foreign Currency Contracts | Accounts Receivable, Net | Cash Flow Hedging | ||
Fair value of commodity contracts | ||
Fair value of assets | 8 | 15 |
Designated as Hedging Instrument | Commodity and Foreign Currency Contracts | Accounts Payable and Accrued Liabilities | Cash Flow Hedging | ||
Fair value of commodity contracts | ||
Fair value of liabilities | 11 | 18 |
Designated as Hedging Instrument | Commodity and Foreign Currency Contracts | Other Assets | Cash Flow Hedging | ||
Fair value of commodity contracts | ||
Fair value of assets | 7 | 1 |
Designated as Hedging Instrument | Commodity and Foreign Currency Contracts | Non Current Liabilities | Cash Flow Hedging | ||
Fair value of commodity contracts | ||
Fair value of liabilities | $ 3 | $ 6 |
Financial Instruments, Deriva41
Financial Instruments, Derivatives and Hedging Activities (Details 3) - Cash Flow Hedging - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Recognized in OCI on Derivatives | $ (22) | $ (71) | $ (26) | $ (68) |
Amount of Gains (Losses) Reclassified from AOCI into Income | (10) | (16) | (33) | (35) |
Cost of Sales | ||||
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Reclassified from AOCI into Income | (9) | (15) | (31) | (33) |
Financing Costs, Net | ||||
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Reclassified from AOCI into Income | (1) | (1) | (2) | (2) |
Commodity Contract | ||||
Gains or losses on derivatives | ||||
Losses expected to be reclassified into earnings during the next 12 months on commodity hedging contracts, net of tax | 8 | 8 | ||
Losses expected to be reclassified into earnings during the next 12 months on commodity hedging contracts, income tax effect | 3 | 3 | ||
Commodity and Foreign Currency Contracts | ||||
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Recognized in OCI on Derivatives | (22) | $ (71) | (26) | $ (68) |
Treasury Lock | ||||
Gains or losses on derivatives | ||||
Gains related to foreign currency hedges expected to be reclassified into earnings during the next twelve months, net of tax | (2) | (2) | ||
Gains related to foreign currency hedges expected to be reclassified into earnings during the next twelve months, income tax effect | $ (1) | $ (1) |
Financial Instruments, Deriva42
Financial Instruments, Derivatives and Hedging Activities (Details 4) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Fair value of assets and liabilities | ||
Long-term debt | $ 2,360 | |
Fair Value, Measurements, Recurring | Level 1 | ||
Fair value of assets and liabilities | ||
Available for sale securities | 6 | $ 5 |
Derivative assets | 7 | 12 |
Derivative liabilities | 3 | 6 |
Fair Value, Measurements, Recurring | Level 2 | ||
Fair value of assets and liabilities | ||
Derivative assets | 32 | 17 |
Derivative liabilities | 11 | 17 |
Long-term debt | 2,356 | 1,939 |
Fair Value, Measurements, Recurring | Total | ||
Fair value of assets and liabilities | ||
Available for sale securities | 6 | 5 |
Derivative assets | 39 | 29 |
Derivative liabilities | 14 | 23 |
Long-term debt | $ 2,356 | $ 1,939 |
Financial Instruments, Deriva43
Financial Instruments, Derivatives and Hedging Activities (Details 5) $ in Millions | Sep. 30, 2015USD ($) |
Financial Instruments, Derivatives and Hedging Activities | |
Carrying amount | $ 2,240 |
Long-term debt | $ 2,360 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - Stock Option Awards - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Equity stock-based compensation | ||||
Term of options | 10 years | |||
Period of vesting | 3 years | |||
Assumptions used to measure the fair value of awards | ||||
Expected life | 5 years 6 months | 5 years 6 months | ||
Risk-free interest rate (as a percent) | 1.36% | 1.63% | ||
Expected volatility (as a percent) | 25.19% | 30.28% | ||
Expected dividend yield (as a percent) | 2.04% | 2.82% | ||
Stock option activity | ||||
Outstanding at the beginning of the period (in shares) | 2,889 | |||
Granted (in shares) | 336 | 715 | ||
Exercised (in shares) | (476) | |||
Cancelled (in shares) | (15) | |||
Outstanding at the end of the period (in shares) | 2,734 | 2,734 | ||
Exercisable at the end of the period (in shares) | 1,837 | 1,837 | ||
Share options, weighted average exercise price per share | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 46.84 | |||
Granted (in dollars per share) | 82.28 | |||
Exercised (in dollars per share) | 38.28 | |||
Cancelled (in dollars per share) | 60.63 | |||
Outstanding at the end of the period (in dollars per share) | $ 52.49 | 52.49 | ||
Exercisable at the end of the period (in dollars per share) | $ 44.47 | $ 44.47 | ||
Share options, aggregate intrinsic value | ||||
Options outstanding average remaining contractual life | 6 years 1 month 17 days | |||
Options outstanding aggregate intrinsic value | $ 95,205 | $ 95,205 | ||
Stock options exercisable average remaining contractual life | 4 years 11 months 1 day | |||
Stock options exercisable aggregate intrinsic value | 78,712 | $ 78,712 | ||
Additional information pertaining to stock options | ||||
Cash received from exercise of stock options | 18,000 | |||
Unrecognized compensation cost | 9,000 | $ 9,000 | ||
Weighted-average period for amortization of unrecognized compensation cost | 1 year 9 months 18 days | |||
Weighted-average grant date fair value of stock options granted (in dollars per share) | $ 16.04 | $ 12.99 | ||
Total intrinsic value of stock options exercised | $ 10,860 | $ 6,416 | $ 22,064 | $ 21,339 |
Share-Based Compensation (Det45
Share-Based Compensation (Details 2) $ / shares in Units, shares in Thousands, $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
Restricted Stock Awards and Restricted Stock Units (RSUs) | Minimum | |
Equity stock-based compensation | |
Vesting terms | 3 years |
Restricted Stock Awards and Restricted Stock Units (RSUs) | Maximum | |
Equity stock-based compensation | |
Vesting terms | 5 years |
Restricted Stock | |
Restricted shares and unit activity | |
Non-vested at the beginning of the period (in shares) | shares | 16 |
Vested (in shares) | shares | (14) |
Non-vested at the end of the period (in shares) | shares | 2 |
Weighted-average fair value per share | |
Non-vested at the beginning of the period (in dollars per share) | $ 27.94 |
Vested (in dollars per share) | 28.75 |
Non-vested at the end of the period (in dollars per share) | $ 21.42 |
Restricted Stock Units (RSUs) | |
Restricted shares and unit activity | |
Non-vested at the beginning of the period (in shares) | shares | 434 |
Granted (in shares) | shares | 166 |
Vested (in shares) | shares | (142) |
Cancelled (in shares) | shares | (9) |
Non-vested at the end of the period (in shares) | shares | 449 |
Weighted-average fair value per share | |
Non-vested at the beginning of the period (in dollars per share) | $ 59.61 |
Granted (in dollars per share) | 82.23 |
Vested (in dollars per share) | 55.96 |
Cancelled (in dollars per share) | 64.51 |
Non-vested at the end of the period (in dollars per share) | $ 69.01 |
Unrecognized compensation cost | $ | $ 16 |
Weighted-average period for amortization of unrecognized compensation cost | 2 years |
Share-Based Compensation (Det46
Share-Based Compensation (Details 3) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Share-based compensation expense | ||||
Pre-tax compensation expense | $ 5.4 | $ 4.7 | $ 15.7 | $ 14.1 |
Income tax benefit | (2) | (1.7) | (5.8) | (5.2) |
Total share-based compensation expense, net of income taxes | 3.4 | 3 | 9.9 | 8.9 |
Stock Option Awards | ||||
Share-based compensation expense | ||||
Pre-tax compensation expense | 1.7 | 1.7 | 5.1 | 5.4 |
Income tax benefit | (0.6) | (0.6) | (1.9) | (2) |
Total share-based compensation expense, net of income taxes | 1.1 | 1.1 | 3.2 | 3.4 |
Restricted Stock Units, Restricted Stock Awards And Other Share Based Awards | ||||
Share-based compensation expense | ||||
Pre-tax compensation expense | 3.7 | 3 | 10.6 | 8.7 |
Income tax benefit | (1.4) | (1.1) | (3.9) | (3.2) |
Total share-based compensation expense, net of income taxes | $ 2.3 | $ 1.9 | $ 6.7 | $ 5.5 |
Net Periodic Pension and Post47
Net Periodic Pension and Postretirement Benefit Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
United States Pension Plan of US Entity, Defined Benefit | |||||
Components of Net Periodic Benefit Costs | |||||
Service cost | $ 2 | $ 1.8 | $ 5.8 | $ 5.3 | |
Interest cost | 3.7 | 3.3 | 10.6 | 9.8 | |
Expected return on plan assets | (6.3) | (5.2) | (18.2) | (15.7) | |
Amortization of net actuarial loss | 0.2 | 0.1 | 0.5 | 0.3 | |
Settlement | 0.4 | 0.4 | |||
Net pension cost (credit) / Net postretirement benefit cost | (0.4) | 0.4 | (1.3) | 0.1 | |
Employer Contributions | |||||
Cash contributions to defined benefit pension plan | 10 | ||||
Foreign Pension Plan, Defined Benefit | |||||
Components of Net Periodic Benefit Costs | |||||
Service cost | 1 | 1.5 | 3.4 | 4.4 | |
Interest cost | 2.8 | 3.7 | 8.8 | 11.1 | |
Expected return on plan assets | (3.2) | (3.6) | (10) | (10.7) | |
Amortization of net actuarial loss | 0.5 | 0.8 | 1.7 | 2.4 | |
Amortization of prior service credit | (0.1) | (0.1) | |||
Amortization of transition obligation | 0.1 | 0.1 | 0.2 | 0.2 | |
Net pension cost (credit) / Net postretirement benefit cost | 1.2 | 2.5 | 4 | 7.3 | |
Employer Contributions | |||||
Cash contributions to defined benefit pension plan | 1 | ||||
Canadian Plans | |||||
Components of Net Periodic Benefit Costs | |||||
Improvement in the funded status | $ 9 | ||||
Other Postretirement Benefit Plans Defined Benefit | |||||
Components of Net Periodic Benefit Costs | |||||
Service cost | 0.2 | 0.7 | 0.6 | 2.1 | |
Interest cost | 0.8 | 0.9 | 2.3 | 2.7 | |
Amortization of net actuarial loss | 0.1 | 0.1 | 0.4 | 0.3 | |
Amortization of prior service credit | (0.5) | (1.6) | |||
Net pension cost (credit) / Net postretirement benefit cost | $ 0.6 | $ 1.7 | $ 1.7 | $ 5.1 |
Earnings per Common Share (Deta
Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Basic EPS: | ||||
Net Income Available to Ingredion | $ 107.9 | $ 118.6 | $ 298.2 | $ 293.8 |
Weighted average number of shares outstanding, basic | 71.6 | 73 | 71.6 | 74.2 |
Basic earnings per common share of Ingredion (in dollars per share) | $ 1.51 | $ 1.62 | $ 4.17 | $ 3.96 |
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs, RSAs and other awards | 1.3 | 1.3 | 1.3 | 1.3 |
Diluted EPS: | ||||
Net Income Available to Ingredion | $ 107.9 | $ 118.6 | $ 298.2 | $ 293.8 |
Weighted average number of shares outstanding, diluted | 72.9 | 74.3 | 72.9 | 75.5 |
Diluted earnings per common share of Ingredion (in dollars per share) | $ 1.48 | $ 1.60 | $ 4.09 | $ 3.89 |
Antidilutive securities excluded in calculation of diluted EPS: | ||||
Antidilutive securities excluded from computation of earnings per share amount | 0.3 | 0.3 | 0.4 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Inventories | ||
Finished and in process | $ 449 | $ 428 |
Raw materials | 220 | 225 |
Manufacturing supplies and other | 49 | 46 |
Total inventories | $ 718 | $ 699 |
Debt (Details)
Debt (Details) - USD ($) $ in Millions | Jul. 10, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 |
Debt | ||||
Total debt | $ 2,270 | $ 1,830 | ||
Proceeds from borrowings | 997 | $ 227 | ||
Senior Notes 3.20 Percent Due November 1, 2015 | ||||
Debt | ||||
Debt, face amount | $ 350 | $ 350 | ||
Debt, interest rate (as a percent) | 3.20% | 3.20% | ||
US Revolving Credit Facility Due October 2017 | ||||
Debt | ||||
Maximum borrowing capacity | $ 1,000 | $ 1,000 | ||
Borrowings outstanding | $ 169 | $ 87 | ||
Term Loan Credit Agreement | ||||
Debt | ||||
Debt instrument term | 18 months | |||
Maximum borrowing capacity | $ 350 | |||
Proceeds from borrowings | $ 350 |
Accumulated Other Comprehensi51
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | $ (782) | $ (583) | ||
Losses on cash-flow hedges, net of income tax effect of $8 and $21 | $ (15) | $ (48) | (18) | (47) |
Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $10 and $11 | 7 | 11 | 23 | 24 |
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, net of income tax effect of $2 | 6 | |||
Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect | 1 | 1 | 3 | |
Currency translation adjustment | (157) | (121) | (283) | (116) |
Balance at end of the period | (1,053) | (719) | (1,053) | (719) |
Income tax effect of accumulated other comprehensive gain (loss) | ||||
Losses on cash-flow hedges, income tax effect | (7) | (23) | (8) | (21) |
Amount of losses on cash flow hedges reclassified to earnings, income tax effect | (3) | (5) | (10) | (11) |
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, income tax effect | 2 | |||
Cumulated Translation Adjustment | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (701) | (489) | ||
Currency translation adjustment | (283) | (116) | ||
Balance at end of the period | (984) | (605) | (984) | (605) |
Deferred Gain/(Loss) on Hedging Activities | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (19) | (40) | ||
Losses on cash-flow hedges, net of income tax effect of $8 and $21 | (18) | (47) | ||
Amount of losses on cash-flow hedges reclassified to earnings, net of income tax effect of $10 and $11 | 23 | 24 | ||
Balance at end of the period | (14) | (63) | (14) | (63) |
Income tax effect of accumulated other comprehensive gain (loss) | ||||
Losses on cash-flow hedges, income tax effect | (8) | (21) | ||
Amount of losses on cash flow hedges reclassified to earnings, income tax effect | (10) | (11) | ||
Pension/Postretirement Adjustment | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (61) | (53) | ||
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, net of income tax effect of $2 | 6 | |||
Losses related to pension and other postretirement obligations reclassified to earnings, net of income tax effect | 1 | 3 | ||
Balance at end of the period | (54) | (50) | (54) | (50) |
Income tax effect of accumulated other comprehensive gain (loss) | ||||
Actuarial gains on pension and postretirement obligations, settlements and plan amendments, income tax effect | 2 | |||
Unrealized Loss On Investment | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (1) | (1) | ||
Balance at end of the period | $ (1) | $ (1) | $ (1) | $ (1) |
Accumulated Other Comprehensi52
Accumulated Other Comprehensive Loss (Details 2) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Cost of sales | $ (1,106.8) | $ (1,162.7) | $ (3,286.6) | $ (3,456.8) |
Financing costs, net | (13.8) | (15.1) | (44.2) | (49) |
Before tax reclassifications | (10) | (17) | (34) | (39) |
Income tax benefit | 3 | 5 | 10 | 12 |
Total after-tax reclassifications | (7) | (12) | (24) | (27) |
Deferred Gain/(Loss) on Hedging Activities | Reclassification out of Accumulated Other Comprehensive Income | Commodity and Foreign Currency Contracts | ||||
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Cost of sales | (9) | (15) | (31) | (33) |
Deferred Gain/(Loss) on Hedging Activities | Reclassification out of Accumulated Other Comprehensive Income | Interest Rate Contract | ||||
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Financing costs, net | $ (1) | (1) | (2) | (2) |
Pension/Postretirement Adjustment | ||||
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Before tax reclassifications | $ (1) | $ (1) | $ (4) |
Income Taxes (Details)
Income Taxes (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($)item | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | |
Income Taxes | ||||
Effective income tax rate (as a percent) | 31.80% | 26.10% | 31.20% | 27.50% |
Reversal of previously unrecognized tax benefits due to lapsing of statute of limitations (as a percent) | 0.60% | 5.30% | 0.50% | |
Unfavorable impact of foreign currency exchange on tax provision (as a percent) | 5.40% | 3.00% | ||
Provision for (reversal of) income taxes | $ 51.2 | $ 42.6 | $ 138.3 | $ 113.9 |
Percentage points that relates to audit result related to a pre-acquisition period | (2.40%) | (0.90%) | ||
Effective income tax rate excluding significant adjustments (as a percent) | 29.00% | 28.00% | 29.00% | 28.00% |
Number of discrete tax adjustments | item | 2 | |||
Akzo Nobel NV | ||||
Income Taxes | ||||
Provision for (reversal of) income taxes | $ (4) | $ 7 | ||
Percentage points that relates to audit result related to a pre-acquisition period | 4.50% | |||
Other income | $ 7 | |||
Impact of pre-acquisition adjustment on net income | $ 0 |