Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 31, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | Ingredion Inc | |
Entity Central Index Key | 1,046,257 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
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 | 71,027,153 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Consolidated Statements of Income | ||||
Net sales before shipping and handling costs | $ 1,608 | $ 1,558 | $ 3,189 | $ 3,110 |
Less: Shipping and handling costs | 112 | 101 | 224 | 200 |
Net sales | 1,496 | 1,457 | 2,965 | 2,910 |
Cost of sales | 1,136 | 1,084 | 2,251 | 2,186 |
Gross profit | 360 | 373 | 714 | 724 |
Operating expenses | 161 | 158 | 317 | 308 |
Other income, net | (2) | (1) | (4) | (3) |
Restructuring/impairment charges | 8 | 6 | 11 | 16 |
Operating expenses | 158 | 308 | ||
Operating income | 193 | 210 | 390 | 403 |
Financing costs, net | 25 | 20 | 41 | 41 |
Other, non-operating income | (1) | (1) | (2) | (3) |
Income before income taxes | 169 | 191 | 351 | 365 |
Provision for income taxes | 53 | 58 | 92 | 105 |
Net income | 116 | 133 | 259 | 260 |
Less: Net income attributable to non-controlling interests | 2 | 3 | 5 | 6 |
Net income attributable to Ingredion | $ 114 | $ 130 | $ 254 | $ 254 |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 71.9 | 71.8 | 72.1 | 72 |
Diluted (in shares) | 72.8 | 73.2 | 73.2 | 73.4 |
Earnings per common share of Ingredion: | ||||
Basic (in dollars per share) | $ 1.59 | $ 1.81 | $ 3.52 | $ 3.53 |
Diluted (in dollars per share) | $ 1.57 | $ 1.78 | $ 3.47 | $ 3.46 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 116 | $ 133 | $ 259 | $ 260 |
Other comprehensive (loss) income: | ||||
(Losses) gains on cash flow hedges, net of income tax effect of $5, $1, $- and $4, respectively | (16) | 3 | 1 | 8 |
(Gains) losses on cash flow hedges reclassified to earnings, net of income tax effect of $-, $-, $1 and $1, respectively | (1) | (2) | 2 | 1 |
Actuarial gains (losses) on pension and other postretirement obligations, settlements and plan amendments, net of income tax effect of $- | 1 | (1) | 1 | |
Gains related to pension and other postretirement obligations reclassified to earnings, net of income tax effect of $- | (1) | (1) | ||
Unrealized gains on investments, net of income tax effect of $- | 1 | 1 | 1 | |
Currency translation adjustment | (117) | (8) | (96) | 32 |
Comprehensive (loss) income | (18) | 127 | 166 | 302 |
Less: Comprehensive income attributable to non-controlling interests | 3 | 1 | 6 | |
Comprehensive (loss) income attributable to Ingredion | $ (18) | $ 124 | $ 165 | $ 296 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
(Losses) gains on cash-flow hedges, income tax effect | $ (5) | $ 1 | $ 4 | |
(Gains) losses on cash-flow hedges reclassified to earnings, income tax effect | $ 1 | $ 1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 359 | $ 595 |
Short-term investments | 6 | 9 |
Accounts receivable, net | 909 | 961 |
Inventories | 866 | 823 |
Prepaid expenses | 30 | 27 |
Total current assets | 2,170 | 2,415 |
Property, plant and equipment, net of accumulated depreciation of $3,003 and $2,991, respectively | 2,161 | 2,217 |
Goodwill | 794 | 803 |
Other intangible assets, net of accumulated amortization of $153 and $139, respectively | 476 | 493 |
Deferred income tax assets | 10 | 9 |
Other assets | 137 | 143 |
Total assets | 5,748 | 6,080 |
Current liabilities: | ||
Short-term borrowings | 133 | 120 |
Accounts payable and accrued liabilities | 749 | 837 |
Total current liabilities | 882 | 957 |
Non-current liabilities | 247 | 227 |
Long-term debt | 1,530 | 1,744 |
Deferred income tax liabilities | 202 | 199 |
Share-based payments subject to redemption | 31 | 36 |
Ingredion stockholders’ equity: | ||
Preferred stock — authorized 25,000,000 shares — $0.01 par value, none issued | ||
Common stock — authorized 200,000,000 shares — $0.01 par value, 77,810,875 issued at June 30, 2018 and December 31, 2017, respectively | 1 | 1 |
Additional paid-in capital | 1,128 | 1,138 |
Less: Treasury stock (common stock: 6,791,995 and 5,815,904 shares at June 30, 2018 and December 31, 2017, respectively) at cost | (615) | (494) |
Accumulated other comprehensive loss | (1,106) | (1,013) |
Retained earnings | 3,426 | 3,259 |
Total Ingredion stockholders’ equity | 2,834 | 2,891 |
Non-controlling interests | 22 | 26 |
Total equity | 2,856 | 2,917 |
Total liabilities and equity | $ 5,748 | $ 6,080 |
Condensed Consolidated Balance6
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Condensed Consolidated Balance Sheets | ||
Property, plant and equipment, Accumulated depreciation | $ 3,003 | $ 2,991 |
Other intangible assets - accumulated amortization (in dollars) | $ 153 | $ 139 |
Preferred stock, authorized shares | 25,000,000 | 25,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
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 | 6,791,995 | 5,815,904 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Equity - USD ($) $ in Millions | Common Stock | Additional Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Non-controlling Interests | Total |
Balance at Dec. 31, 2016 | $ 1 | $ 1,149 | $ (413) | $ (1,071) | $ 2,899 | $ 30 | |
Increase (Decrease) in Stockholders' Equity | |||||||
Net income attributable to Ingredion | 254 | $ 254 | |||||
Net income attributable to non-controlling interests | 6 | (6) | |||||
Dividends declared | (73) | (11) | |||||
Repurchase of common stock | (123) | ||||||
Share-based compensation, net of issuance | (8) | 21 | (3) | ||||
Other comprehensive income (loss) | 42 | ||||||
Balance at Jun. 30, 2017 | 1 | 1,141 | (515) | (1,029) | 3,080 | 25 | |
Balance at Dec. 31, 2017 | 1 | 1,138 | (494) | (1,013) | 3,259 | 26 | 2,917 |
Increase (Decrease) in Stockholders' Equity | |||||||
Net income attributable to Ingredion | 254 | 254 | |||||
Net income attributable to non-controlling interests | 5 | (5) | |||||
Dividends declared | (88) | (4) | |||||
Repurchase of common stock | (141) | ||||||
Share-based compensation, net of issuance | (6) | 20 | (5) | ||||
Other comprehensive income (loss) | (93) | (4) | |||||
Other | (4) | 1 | (1) | ||||
Balance at Jun. 30, 2018 | $ 1 | $ 1,128 | $ (615) | $ (1,106) | $ 3,426 | $ 22 | $ 2,856 |
Condensed Consolidated Stateme8
Condensed Consolidated Statement of Redeemable Equity $ in Millions | USD ($) |
Beginning Balance at Dec. 31, 2016 | $ 30 |
Condensed Consolidated Statements of Equity and Redeemable Equity | |
Share-based compensation, net of issuance | (3) |
Ending Balance at Jun. 30, 2017 | 27 |
Beginning Balance at Dec. 31, 2017 | 36 |
Condensed Consolidated Statements of Equity and Redeemable Equity | |
Share-based compensation, net of issuance | (5) |
Ending Balance at Jun. 30, 2018 | $ 31 |
Condensed Consolidated Stateme9
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash provided by operating activities | ||
Net income | $ 259 | $ 260 |
Non-cash charges to net income: | ||
Depreciation and amortization | 107 | 103 |
Mechanical stores expense | 29 | 28 |
Deferred income taxes | 8 | (2) |
Charge for fair value markup of acquired inventory | 9 | |
Other | 21 | 23 |
Changes in working capital: | ||
Accounts receivable and prepaid expenses | (3) | 7 |
Inventories | (73) | (36) |
Accounts payable and accrued liabilities | (23) | (92) |
Margin accounts | (4) | 13 |
Other | 31 | (11) |
Cash provided by operating activities | 352 | 302 |
Cash used for investing activities | ||
Capital expenditures and mechanical stores purchases, net proceeds on disposals | (160) | (144) |
Payments for acquisitions | (13) | |
Short-term investments | 3 | (8) |
Other | 2 | |
Cash used for investing activities | (155) | (165) |
Cash used for financing activities | ||
Proceeds from borrowings | 131 | 585 |
Payments on debt | (319) | (592) |
Repurchases of common stock | (141) | (133) |
Issuances of common stock for share-based compensation, net of settlements | (3) | 5 |
Dividends paid, including to non-controlling interests | (92) | (83) |
Cash used for financing activities | (424) | (218) |
Effects of foreign exchange rate changes on cash | (9) | 10 |
Decrease in cash and cash equivalents | (236) | (71) |
Cash and cash equivalents, beginning of period | 595 | 512 |
Cash and cash equivalents, end of period | $ 359 | $ 441 |
Interim Financial Statements
Interim Financial Statements | 6 Months Ended |
Jun. 30, 2018 | |
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, 2017. The unaudited Condensed Consolidated Financial Statements included herein were prepared by management on the same basis as the Company’s audited Consolidated Financial Statements for the year ended December 31, 2017 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 June 30, 2018 and 2017, and the financial position of the Company as of June 30, 2018. The results for the interim periods are not necessarily indicative of the results expected for the full years. |
Recently Adopted and New Accoun
Recently Adopted and New Accounting Standards | 6 Months Ended |
Jun. 30, 2018 | |
Recently Adopted and New Accounting Standards | |
Recently Adopted and New Accounting Standards | 2. Recently Adopted and New Accounting Standards Recently Adopted Accounting Standards ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606): 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 introduced a 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. The ASU requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The FASB also issued additional ASUs to provide further updates and clarification to this Update, including ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. As of January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , and all the related amendments (“new revenue standard”). The Company performed detailed procedures to review its revenue contracts held with its customers and did not identify any changes to the nature, amount, timing or uncertainty of revenue and cash flows arising from the contracts with customers as a result of the new revenue standard. The new revenue standard requires the Company to recognize revenue under the core principle to depict the transfer of products to customers in an amount reflecting the consideration the Company expects to receive. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company identified customer purchase orders, which in some cases are governed by a master sales agreement, as the contracts with its customers. For each contract, the Company considers the transfer of products, each of which is distinct, to be the identified performance obligation. In determining the transaction price for the performance obligation, the Company evaluates whether the price is subject to adjustment to determine the consideration to which the Company expects to be entitled. The pricing model can be fixed or variable within the contract. The variable pricing model is based on historical commodity pricing and is determinable prior to completion of the performance obligation. Additionally, the Company has certain sales adjustments for volume incentive discounts and other discount arrangements that reduce the transaction price. The reduction of transaction price is estimated using the expected value method based on an analysis of historical volume incentives or discounts, over a period of time considered adequate to account for current pricing and business trends. Historically, actual volume incentives and discounts relative to those estimated and included when determining the transaction price have not materially differed. The product price as specified in the contract, net of any discounts, is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Payment is received shortly after the performance obligation is satisfied, therefore, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. Revenue is recognized when the Company’s performance obligation is satisfied and control is transferred to the customer, which occurs at a point in time, either upon delivery to an agreed upon location or to the customer. Further, in determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. Historically, the Company included warehousing costs as a reduction of net sales before shipping and handling costs. In connection with the adoption of the new revenue standard, the Company determined these warehousing costs which were previously included as a reduction in net sales before shipping and handling costs are more appropriately classified as fulfillment activities. Therefore, upon adoption of the new revenue standard, the Company elected to include these costs within shipping and handling costs. The Company has elected to continue to classify shipping and handling costs as a reduction of net sales after implementing the new revenue standard consistent with its historical presentation. The Company has elected to make this adjustment on a retrospective basis, resulting in the change to the Condensed Consolidated Statements of Income shown below. The Company notes that the reclassification does not change reported net sales. Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (in millions) As Reported As Adjusted As Reported As Adjusted Condensed Consolidated Statements of Income: Net sales before shipping and handling costs $ 1,542 $ 1,558 $ 3,079 $ 3,110 Less: shipping and handling costs 85 101 169 200 Net sales $ 1,457 $ 1,457 $ 2,910 $ 2,910 The Company used the full retrospective method, which requires the restatement of all previously presented financial results. The adoption of the new standard did not result in any retrospective changes to the Company’s Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Equity and Redeemable Equity, or the Condensed Consolidated Statements of Cash Flows. For detailed information about the Company’s revenue recognition refer to Note 4 of the Notes to the Condensed Consolidated Financial Statements. ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . This Update requires an entity to change the classification of the net periodic benefit cost for pension and postretirement plans within the statement of income by eliminating the ability to net all of the components of the costs together within operating income. The Update requires the service cost component to continue to be presented within operating income, classified within either cost of sales or operating expenses depending on the employees covered within the plan. The remaining components of the net periodic benefit cost, however, must be presented in the statement of income as a non-operating income (loss) below operating income. The Update was effective for annual periods beginning after December 15, 2017. As of January 1, 2018, the Company adopted the amendments to ASC 715. The Company retrospectively adopted the presentation of service cost separate from the other components of net periodic costs for all periods presented. The interest cost, expected return on assets, amortization of prior service costs, net remeasurement, and other costs have been reclassified from cost of sales and operating expenses to other, non-operating income . The Company elected to apply the practical expedient which allows it to reclassify amounts disclosed previously in the retirement benefits note as the basis for applying retrospective presentation for comparative periods as it is impracticable to determine the disaggregation of the cost components for amounts capitalized and amortized in those periods. On a prospective basis, the other components of net periodic benefit costs will not be included in amounts capitalized in inventory. The adoption of the new standard did not result in any retrospective changes to the Company’s Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Equity and Redeemable Equity, or the Condensed Consolidated Statements of Cash Flows. The adoption of the new standard impacted the presentation of the Company’s previously reported results in the Condensed Consolidated Statements of Income and Note 6 of the Condensed Consolidated Financial Statements as follows: Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (in millions) As Reported As Adjusted As Reported As Adjusted Condensed Consolidated Statements of Income: Cost of sales $ 1,084 $ 1,084 $ 2,185 $ 2,186 Gross profit 373 373 725 724 Operating expenses 157 158 306 308 Operating income 211 210 406 403 Other, non-operating income — (1) — (3) Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (in millions) As Reported As Adjusted As Reported As Adjusted Operating income: North America $ 181 $ 180 $ 341 $ 338 South America 4 4 18 19 Asia Pacific 29 30 59 60 EMEA 29 29 57 57 Corporate (22) (23) (42) (44) Subtotal 221 220 433 430 Total operating income $ 211 $ 210 $ 406 $ 403 Adoption of Highly Inflationary Accounting in Argentina ASC 830, Foreign Currency Matters requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100 percent. The Company has been closely monitoring the inflation data and currency volatility in Argentina, where there are multiple data sources for measuring and reporting inflation. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, indicated that the three-year cumulative inflation in that country exceeded 100 percent as of June 30, 2018. As a result, the Company elected to adopt highly inflationary accounting as of July 1, 2018 for its affiliate, Ingredion Argentina S.A. (“Argentina”). Under highly inflationary accounting, Argentina’s functional currency becomes the U.S. dollar, and its income statement and balance sheet will be measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on Argentine peso-denominated monetary assets and liabilities will be reflected in earnings in financing costs. As of June 30, 2018, Argentina had a small net peso monetary liability position. Net sales of Argentina were less than four percent of the Company’s consolidated net sales for the six months ended June 30, 2018. New Accounting Standards In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases . This Update increases the transparency and comparability of organizations by recognizing lease assets and lease liabilities on the balance sheet for leases longer than 12 months and disclosing key information about leasing arrangements. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed. The FASB also issued ASU 2018-11 to provide further updates and clarification to this Update. This Update is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company currently plans to adopt the standard on January 1, 2019. Adoption will require a modified retrospective approach for the transition. The Company expects the adoption of the guidance in this Update to have a material impact on its Consolidated Balance Sheets as operating leases will be recognized both as assets and liabilities on the Consolidated Balance Sheets. The Company’s adoption process is ongoing, including evaluating and quantifying the impact on its consolidated financial statements, identifying the population of leases (and embedded leases), implementing a selected technology solution and collecting and validating lease data. In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This Update simplifies the subsequent measurement of goodwill as the Update eliminates Step 2 from the goodwill impairment test. Instead, under the Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss recognized not to exceed the total amount of goodwill allocated to that reporting unit. This Update is effective for annual periods beginning after December 15, 2019, with early adoption permitted. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This Update modifies accounting guidance for hedge accounting by making more hedge strategies eligible for hedge accounting, amending presentation and disclosure requirements, and changing how companies assess ineffectiveness. The intent is to simplify the application of hedge accounting and increase transparency of information about an entity’s risk management activities. The amended guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of assessing the effects of these updates including potential changes to existing hedging arrangements, as well as the implementation approach for accounting for these changes. The Company intends to adopt this standard on January 1, 2019. In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This Update allows for the reclassification of stranded tax effects on items resulting from the Tax Cuts and Jobs Act (“TCJA”) from accumulated other comprehensive income to retained earnings. Tax effects unrelated to the 2017 Tax Act are released from AOCI using either the specific identification approach or the portfolio approach based on the nature of the underlying item. The guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact. The Company anticipates adopting this guidance at the earlier of January 1, 2019 or upon finalization of provisional amounts related to the TCJA. |
Acquisitions
Acquisitions | 6 Months Ended |
Jun. 30, 2018 | |
Acquisitions | |
Acquisitions | 3. Acquisitions On March 9, 2017, the Company completed its acquisition of Sun Flour Industry Co., Ltd. (“Sun Flour”) in Thailand for $18 million. As of June 30, 2018, the Company has paid $16 million in cash and recorded $2 million in accrued liabilities for deferred payments due to the previous owner. The Company funded the acquisition primarily with cash on-hand. The acquisition of Sun Flour added a fourth manufacturing facility to the Company’s operations in Thailand. Sun Flour produces rice-based ingredients used primarily in the food industry. The results of the acquired operation are included in the Company’s consolidated results from the acquisition date forward within the Asia Pacific business segment, and $14 million of goodwill was allocated to that segment. The Company finalized the purchase price allocation for all areas for the Sun Flour acquisition during the first quarter of 2018. The finalization of goodwill and intangible assets did not have a significant impact on previously estimated amounts. The acquisition of Sun Flour added $15 million to goodwill and identifiable intangible assets and $3 million to net tangible assets as of the acquisition date. Goodwill represents the amount by which the purchase price exceeds the estimated fair value of the net assets acquired. The goodwill results from synergies and other operational benefits expected to be derived from the acquisitions. The goodwill related to Sun Flour is not tax deductible. Pro-forma results of operations for the acquisition made in 2017 has not been presented as the effect of the acquisition would not be material to the Company’s results of operations for any periods presented. The Company incurred immaterial pre-tax acquisition and integration costs for the six months ended June 30, 2018. The Company incurred $2 million of pre-tax acquisition and integration costs for the six months ended June 30, 2017 associated with its recent acquisitions. |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2018 | |
Revenue Recognition | |
Revenue Recognition | 4. Revenue Recognition The Company applies the provisions of ASC 606-10, Revenue from Contracts with Customers . The Company recognizes revenue under the core principle to depict the transfer of products to customers in an amount reflecting the consideration the Company expects to receive. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company identified customer purchase orders, which in some cases are governed by a master sales agreement, as the contracts with its customers. For each contract, the Company considers the transfer of products, each of which is distinct, to be the identified performance obligation. In determining the transaction price for the performance obligation, the Company evaluates whether the price is subject to adjustment to determine the consideration to which the Company expects to be entitled. The pricing model can be fixed or variable within the contract. The variable pricing model is based on historical commodity pricing and is determinable prior to completion of the performance obligation. Additionally, the Company has certain sales adjustments for volume incentive discounts and other discount arrangements that reduce the transaction price. The reduction of transaction price is estimated using the expected value method based on an analysis of historical volume incentives or discounts, over a period of time considered adequate to account for current pricing and business trends. Historically, actual volume incentives and discounts relative to those estimated and included when determining the transaction price have not materially differed. Volume incentives and discounts are accrued at the satisfaction of the performance obligation and accounted for in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets. These amounts are not significant as of June 30, 2018 and December 31, 2017. The product price as specified in the contract, net of any discounts, is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Payment is received shortly after the performance obligation is satisfied, therefore, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. Revenue is recognized when the Company’s performance obligation is satisfied and control is transferred to the customer, which occurs at a point in time, either upon delivery to an agreed upon location or to the customer. Further, in determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. Shipping and handling activities related to contracts with customers represent fulfillment costs and are presented as a reduction of net sales. Taxes assessed by governmental authorities and collected from customers are accounted for on a net basis and excluded from revenues. The Company applies a practical expedient to expense costs to obtain a contract as incurred as most contracts are one year or less. These costs are comprised primarily from the Company’s internal sales force compensation program. Under the terms of these programs these are generally earned and the costs are recognized at the time the revenue is recognized. From time to time the Company may enter into long term contracts with its customers. Historically, the contracts entered into by the Company do not result in significant contract assets or liabilities. Any such arrangements are accounted for in other assets or accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets. There were no significant contract assets or liabilities as of June 30, 2018 and December 31, 2017. 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”). The nature, amount, timing and uncertainty of the Company’s net sales are managed by the Company primarily based on its geographic segments. Each region’s product sales are unique to each region and have unique risks. Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Net sales to unaffiliated customers: North America $ 916 $ 905 $ 1,790 $ 1,786 South America 232 228 481 483 Asia Pacific 201 187 395 366 EMEA 147 137 299 275 Total $ 1,496 $ 1,457 $ 2,965 $ 2,910 Additionally, the nature, amount, timing and uncertainty of the Company’s net sales are managed based on its global customer mix. The Company sells to customers in a broad range of industries and evaluates the economic factors impacting its net sales through consideration of the industries into which its products are sold. Four distinct industries it focuses on are food, beverage, brewing (collectively, food & beverage ingredients) and animal nutrition. The following table, which is gathered using customer industry classifications, disaggregates the Company’s net sales by industry served: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Food $ $ $ $ Beverage Brewing Food and Beverage Ingredients Animal Nutrition Other Total Net sales $ $ $ $ |
Impairment and Restructuring Ch
Impairment and Restructuring Charges | 6 Months Ended |
Jun. 30, 2018 | |
Impairment and Restructuring Charges | |
Impairment and Restructuring Charges | 5. Impairment and Restructuring Charges For the three and six months ended June 30, 2018, the Company recorded $8 million and $11 million of pre-tax restructuring charges, respectively. During the second quarter of 2018, the Company introduced its Cost Smart program, designed to improve profitability, further streamline its global business and deliver increased value to shareholders through anticipated savings in cost of sales, including freight, and SG&A. The Company recorded $6 million of employee-related severance costs related to its Cost Smart SG&A program for the three and six months ended June 30, 2018 in its South America and North America segments. The Company also recorded other costs related to the Finance Transformation initiative of $2 million and $4 million for the three and six months ended June 30, 2018, respectively. In addition, there were other restructuring costs related to the leaf extraction process in Brazil of $1 million for the six months ended June 30, 2018. For the three and six months ended June 30, 2017, the Company recorded $6 million and $16 million, respectively, of net restructuring charges. For the three and six months ended June 30, 2017, the Company recorded total pre-tax restructuring-related charges in Argentina of $6 million and $17 million, respectively, for employee-related severance and other costs related to an organizational restructuring effort. The Company recorded $1 million of other costs related to the Finance Transformation initiative in the three and six months ended June 30, 2017, respectively. Additionally, for the three and six months ended June 30, 2017, the Company recorded a reduction in employee severance costs of $1 million and $2 million, respectively, related to the refinement of estimates for prior year restructuring activities. A summary of the Company’s employee-related severance accrual as of June 30, 2018 is as follows (in millions): Balance in employee-related severance accrual as of December 31, 2017 $ 11 Cost Smart severance 6 Payments made to terminated employees (4) Foreign exchange translation (2) Balance in employee-related severance accrual as of June 30, 2018 $ 11 Of the $11 million severance accrual as of June 30, 2018, $10 million is expected to be paid in the next 12 months. On July 11, 2018, the Board of Directors authorized the cessation of wet-milling at the Stockton, California plant and the establishment of a shipping distribution station at that facility by the end of 2018, as part of the Cost Smart cost of sales program. The Company expects the cessation of wet-milling at the Stockton plant to result in up to $53 million of pre-tax restructuring-related charges in 2018. The Company expects fixed asset accelerated depreciation of $38 million and mechanical stores write-downs of up to $8 million to be incurred in the third and fourth quarters of 2018 as the manufacturing operations are wound down. Estimated pre-tax, employee-related severance and other restructuring costs associated with the closure are approximately $7 million, including employee-related severance of $3 million and other closing costs of $4 million. There were no restructuring charges related to the Stockton plant for the three or six months ended June 30, 2018. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2018 | |
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 EMEA. Its North America segment includes businesses in the U.S., Canada and Mexico. The Company’s South America segment includes businesses in Brazil, Colombia, Ecuador and the Southern Cone of South America, which includes Argentina, Chile, Peru and Uruguay. Its Asia Pacific segment includes businesses in South Korea, Thailand, China, Japan, Indonesia, the Philippines, Singapore, Malaysia, India, Australia and New Zealand. The Company’s EMEA segment includes businesses in Germany, the United Kingdom, Pakistan, South Africa and Kenya. The Company does not aggregate its operating segments when determining its reportable segments. Net sales by product are not presented because to do so would be impracticable. Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Net sales to unaffiliated customers: North America $ 916 $ 905 $ 1,790 $ 1,786 South America 232 228 481 483 Asia Pacific 201 187 395 366 EMEA 147 137 299 275 Total $ 1,496 $ 1,457 $ 2,965 $ 2,910 Operating income: North America $ 150 $ 180 $ 293 $ 338 South America 20 4 46 19 Asia Pacific 27 30 50 60 EMEA 29 29 60 57 Corporate (25) (23) (48) (44) Subtotal 201 220 401 430 Restructuring/impairment charges (6) (11) (16) Acquisition/integration costs — — — (2) Charge for fair value markup of acquired inventory — (4) — (9) Total operating income $ 193 $ 210 $ 390 $ 403 As of As of (in millions) June 30, 2018 December 31, 2017 Total assets North America $ 3,728 $ 3,967 South America 694 812 Asia Pacific 798 774 EMEA 528 527 Total $ 5,748 $ 6,080 |
Financial Instruments, Derivati
Financial Instruments, Derivatives and Hedging Activities | 6 Months Ended |
Jun. 30, 2018 | |
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-related futures, options and swap contracts, foreign currency-related forward contracts, interest rate swaps and Treasury lock agreements (“T-Locks”). Commodity price hedging : The Company’s principal use of derivative financial instruments is to manage commodity price risk in North America relating to anticipated purchases of corn and natural gas to be used in the manufacturing process, generally over the next 12 to 24 months. The Company maintains a commodity-price risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by commodity-price volatility. For example, the manufacturing of the Company’s products requires a significant volume of corn and natural gas. Price fluctuations in corn and natural gas cause the actual purchase price of corn and natural gas to differ from anticipated prices. To manage price risk related to corn purchases in North America, the Company uses corn futures and options contracts that trade on regulated commodity exchanges to lock-in its corn costs associated with fixed-priced customer sales contracts. The Company uses over-the-counter natural gas swaps to hedge a portion of its natural gas usage in North America. 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. The Company also enters into futures contracts to hedge price risk associated with fluctuations in the market price 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. As of June 30, 2018, AOCI included $7 million of losses (net of income taxes of $5 million), pertaining to commodities-related derivative instruments designated as cash flow hedges. As of December 31, 2017, AOCI included $12 million of losses (net of tax of $7 million), pertaining to commodities-related derivative instruments designated as cash flow hedges. Interest rate hedging : The Company assesses its exposure to variability in interest rates by identifying and monitoring changes in interest rates that may adversely impact future cash flows and the fair value of existing debt instruments, and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate risk attributable to both the Company’s outstanding and forecasted debt obligations as well as the Company’s offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including sensitivity analysis, to estimate the expected impact of changes in interest rates on future cash flows and the fair value of the Company’s outstanding and forecasted debt instruments. Derivative financial instruments that have been used by the Company to manage its interest rate risk consist of interest rate swaps and T-Locks. The Company periodically enters into T-Locks to hedge its exposure to interest rate changes. The T-Locks are designated as hedges of the variability in cash flows associated with future interest payments caused by market fluctuations in the benchmark interest rate until the fixed interest rate is established, and are accounted for as cash flow hedges. Accordingly, changes in the fair value of the T-Locks are recorded to AOCI until the consummation of the underlying debt offering, at which time any realized gain (loss) is amortized to earnings over the life of the debt. The Company also has an interest rate swap agreement that effectively converts the interest rates on $200 million of its $400 million of 4.625 percent senior notes due November 1, 2020, to variable rates. This swap agreement calls for the Company to receive interest at the fixed coupon rate of the respective notes and to pay interest at a variable rate based on the six-month U.S. LIBOR rate plus a spread. The Company has designated this interest rate swap agreement as a hedge of the changes in fair value of the underlying debt obligations attributable to changes in interest rates and accounts for it as a fair value hedge. The change in fair value of an interest rate swap designated as a hedging instrument that effectively offsets the variability in the fair value of outstanding debt obligations is reported in earnings. This amount offsets the gain or loss (the change in fair value) of the hedged debt instrument that is attributable to changes in interest rates (the hedged risk), which is also recognized in earnings. The fair value of the interest rate swap agreement as of June 30, 2018, was a $3 million loss, and is reflected in the Condensed Consolidated Balance Sheets within non-current liabilities, with an offsetting amount recorded in long-term debt to adjust the carrying amount of the hedged debt obligations. As of December 31, 2017, the fair value of the interest rate swap agreement was a $1 million gain, and is reflected in the Condensed Consolidation Balance Sheets within other assets, with an offsetting amount recorded in long-term debt to adjust the carrying amount of hedged debt obligations. The Company did not have any T-Locks outstanding as of June 30, 2018 or December 31, 2017. As of June 30, 2018, AOCI included $2 million of losses (net of income taxes of $1 million) related to settled T-Locks. As of December 31, 2017, AOCI included $2 million of losses (net of income taxes of $1 million) related to settled T-Locks. These deferred losses are being amortized to financing costs over the terms of the senior notes with which they are associated. Foreign currency hedging : Due to the Company’s global operations, including operations in many emerging markets, it is exposed to fluctuations in foreign currency exchange rates. As a result, the Company has exposure to translational foreign exchange risk when the results of its foreign operations are translated to U.S. dollars and to transactional foreign exchange risk when transactions not denominated in the functional currency are revalued. The Company primarily uses derivative financial instruments such as foreign currency forward contracts, swaps and options to manage its transactional foreign exchange risk. As of June 30, 2018, the Company had foreign currency forward sales contracts that are designated as fair value hedges with an aggregate notional amount of $426 million and foreign currency forward purchase contracts with an aggregate notional amount of $135 million that hedged transactional exposures. As of December 31, 2017, the Company had foreign currency forward sales contracts with an aggregate notional amount of $447 million and foreign currency forward purchase contracts with an aggregate notional amount of $121 million that hedged transactional exposures. The Company also has foreign currency derivative instruments that hedge certain foreign currency transactional exposures and are designated as cash flow hedges. As of June 30, 2018, AOCI included $1 million of losses (net of an insignificant amount of tax) related to foreign currency derivative instruments. As of December 31, 2017, AOCI included $1 million of gains (net of income taxes of $1 million) related to these hedges. The fair value and balance sheet location of the Company’s derivative instruments, presented gross in the Condensed Consolidated Balance Sheets, are reflected below: Fair Value of Derivative Instruments as of June 30, 2018 Derivatives Designated as Hedging Instruments (in millions): Balance Sheet Location Fair Value Balance Sheet Location Fair Value Commodity and foreign currency Accounts receivable, net $ 12 Accounts payable and accrued liabilities $ 22 Commodity, foreign currency and interest rate contracts Other assets 1 Non-current liabilities 11 $ 13 $ 33 Fair Value of Derivative Instruments as of December 31, 2017 Derivatives Designated as Hedging Instruments (in millions): Balance Sheet Location Fair Value Balance Sheet Location Fair Value Commodity and foreign currency Accounts receivable, net $ 11 Accounts payable and accrued liabilities $ 23 Commodity, foreign currency and interest rate contracts Other assets 3 Non-current liabilities 8 $ 14 $ 31 As of June 30, 2018, the Company had outstanding futures and option contracts that hedged the forecasted purchase of approximately 61 million bushels of corn. 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. As of June 30, 2018, the Company had no outstanding future or option contracts for soybean oil. The Company also had outstanding swap and option contracts that hedged the forecasted purchase of approximately 32 million mmbtu’s of natural gas at June 30, 2018. Additionally, as of June 30, 2018, the Company had outstanding ethanol futures contracts that hedged the forecasted sale of approximately 6 million gallons of ethanol. Additional information relating to the Company’s derivative instruments is presented below: Location of Gains Amount of Gains (Losses) (Losses) Amount of Gains (Losses) Derivatives in Cash-Flow Recognized in OCI Reclassified from Reclassified from AOCI into Income Hedging Relationships Three Months Ended Three Months Ended AOCI Three Months Ended Three Months Ended (in millions, pre-tax) June 30, 2018 June 30, 2017 into Income June 30, 2018 June 30, 2017 Commodity contracts $ (17) $ 4 Cost of sales $ 2 $ 2 Foreign currency contracts (4) — Net sales/Cost of sales — — Interest rate contracts — — Financing costs, net (1) — Total $ (21) $ 4 $ 1 $ 2 Location of Gains Amount of Gains (Losses) (Losses) Amount of Gains (Losses) Derivatives in Cash-Flow Recognized in OCI Reclassified from Reclassified from AOCI into Income Hedging Relationships Six Months Ended Six Months Ended AOCI Six Months Ended Six Months Ended (in millions, pre-tax) June 30, 2018 June 30, 2017 into Income June 30, 2018 June 30, 2017 Commodity contracts $ 3 $ 11 Cost of sales $ (3) $ (1) Foreign currency contracts (2) 1 Net sales/Cost of sales 1 — Interest rate contracts — — Financing costs, net (1) (1) Total $ 1 $ 12 $ (3) $ (2) As of June 30, 2018, AOCI included $6 million of losses (net of income taxes of $2 million) on commodities-related derivative instruments designated as cash flow hedges that are expected to be reclassified into earnings during the next 12 months. Transactions and events expected to occur over the next 12 months that will necessitate reclassifying these derivative gains to earnings include the sale of finished goods inventory, which includes previously hedged purchases of corn, natural gas, and ethanol. The Company expects the losses to be offset by changes in the underlying commodities costs. Additionally, as of June 30, 2018, AOCI included $1 million of losses (net of an insignificant amount of taxes) on settled T-Locks and an insignificant amount of losses related to foreign currency hedges which are expected to be reclassified into earnings during the next 12 months. Presented below are the fair values of the Company’s financial instruments and derivatives for the periods presented: As of June 30, 2018 As of December 31, 2017 (in millions) Total Level 1 (a) Level 2 (b) Level 3 (c) Total Level 1 (a) Level 2 (b) Level 3 (c) Available for sale securities $ 10 $ 10 $ — $ — $ 10 $ 10 $ — $ — Derivative assets 13 2 11 — 14 3 11 — Derivative liabilities 33 14 19 — 31 11 20 — Long-term debt 1,592 — 1,592 — 1,845 — 1,845 — (a) Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets or liabilities. (b) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability or can be derived principally from or corroborated by observable market data. (c) Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. The carrying values of cash equivalents, short-term investments, accounts receivable, accounts payable and short-term borrowings approximate fair values. Commodity futures, options and swap contracts are recognized at fair value. Foreign currency forward contracts, swaps and options are also recognized at fair value. The fair value of the Company’s long-term debt is estimated based on quotations of major securities dealers who are market makers in the securities. As of June 30, 2018, the carrying value and fair value of the Company’s long-term debt were $1.5 billion and $1.6 billion, respectively. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 30, 2018 | |
Share-Based Compensation | |
Share-Based Compensation | 8. Share-Based Compensation Stock Options: Under the Company’s stock incentive plan (“SIP”), stock options are granted at exercise prices that equal the market value of the underlying common stock on the date of grant. The options have a 10-year term and are exercisable upon vesting, which occurs over a three-year period at the anniversary dates of the date of grant. Compensation expense is generally recognized on a straight-line basis for all awards over the employee’s vesting period or over a one-year required service period for certain retirement eligible executive level employees. The Company estimates a forfeiture rate at the time of grant and updates the estimate throughout the vesting of the stock options within the amount of compensation costs recognized in each period. The Company granted non-qualified options to purchase 215 thousand shares and 278 thousand shares for the six months ended June 30, 2018 and 2017, respectively. The fair value of each option grant was estimated using the Black-Scholes option-pricing model with the following assumptions: Six Months Ended June 30, 2018 2017 Expected life (in years) 5.5 5.5 Risk-free interest rate 2.5 % 1.9 % Expected volatility 19.8 % 22.5 % Expected dividend yield 1.8 % 1.7 % The expected life of options represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the grant date for the period corresponding to the expected life of the options. Expected volatility is based on historical volatilities of the Company’s common stock. Dividend yields are based on current dividend payments. Stock option activity for the six months ended June 30, 2018 was as follows: Number of Options (in thousands) Weighted Average Exercise Price per Share Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions) Outstanding as of December 31, 2017 2,095 $ 71.81 5.87 $ 142 Granted 215 133.61 Exercised (122) 45.44 Cancelled (11) 82.53 Outstanding as of June 30, 2018 2,177 $ 79.34 5.94 $ 75 Exercisable as of June 30, 2018 1,688 $ 67.14 5.37 $ 74 For the six months ended June 30, 2018, cash received from the exercise of stock options was $6 million. As of June 30, 2018, the unrecognized compensation cost related to non-vested stock options totaled $5 million, which is expected to be amortized over the weighted-average period of approximately 1.8 years. Additional information pertaining to stock option activity is as follows: Three Months Ended Six Months Ended June 30, June 30, (dollars in millions, except per share) 2018 2017 2018 2017 Weighted average grant date fair value of stock options granted (per share) $ — $ — $ 24.01 $ 23.90 Total intrinsic value of stock options exercised 3 5 11 12 Restricted Stock Units: The Company has granted restricted stock units (“RSUs”) to certain key employees. The RSUs are subject to cliff vesting, generally after three years provided the employee remains in the service of the Company. Compensation expense is generally recognized on a straight-line basis for all awards over the employee’s vesting period or over a one-year required service period for certain retirement eligible executive level employees. The Company estimates a forfeiture rate at the time of grant and updates the estimate throughout the vesting of the RSUs within the amount of compensation costs recognized in each period. The fair value of the RSUs is determined based upon the number of shares granted and the market price of the Company’s common stock on the date of the grant. The following table summarizes RSU activity for the six months ended June 30, 2018: (RSUs in thousands) Number of RSUs Weighted Average Fair Value per Share Non-vested as of December 31, 2017 387 $ Granted 106 Vested (124) Cancelled (10) Non-vested as of June 30, 2018 359 $ As of June 30, 2018, the total remaining unrecognized compensation cost related to RSUs was $20 million, which will be amortized over a weighted average period of approximately 2.0 years. Performance Shares: The Company has a long-term incentive plan for senior management in the form of performance shares. The ultimate payments for performance shares awarded and vested will be based solely on the Company’s total shareholder return as compared to the total shareholder return of its peer group. The number of shares that ultimately vest can range from zero to 200 percent of the awarded grant depending on the Company’s total shareholder return as compared to the total shareholder return of the peer group. The share award vesting will be calculated at the end of the three-year period and is subject to approval by management and the Compensation Committee. Compensation expense is based on the fair value of the performance shares at the grant date, established using a Monte Carlo simulation model. The total compensation expense for these awards is amortized over a three-year graded vesting schedule. For the six months ended June 30, 2018 the Company awarded 27 thousand performance shares at a weighted average fair value of $141.91 per share, respectively. The 2015 performance share awards vested in the first quarter of 2018, achieving a 200 percent pay out of the grant, or 92 thousand total vested shares. There were four thousand performance share cancellations during the six months ended June 30, 2018. As of June 30, 2018, the unrecognized compensation cost related to these awards was $4 million, which will be amortized over the remaining requisite service periods of 1.9 years. The following table summarizes the components of the Company’s share-based compensation expense: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Stock options: Pre-tax compensation expense $ 2 $ 2 $ 3 $ 4 Income tax benefit (1) — (1) (1) Stock option expense, net of income taxes 1 2 2 3 RSUs: Pre-tax compensation expense 3 3 6 6 Income tax benefit — (1) (1) (2) RSUs, net of income taxes 3 2 5 4 Performance shares and other share-based awards: Pre-tax compensation expense 1 1 2 3 Income tax benefit — — — (1) Performance shares and other share-based compensation expense, net of income taxes 1 1 2 2 Total share-based compensation: Pre-tax compensation expense 6 6 11 13 Income tax benefit (1) (1) (2) (4) Total share-based compensation expense, net of income taxes $ 5 $ 5 $ 9 $ 9 |
Net Periodic Pension and Postre
Net Periodic Pension and Postretirement Benefit Costs | 6 Months Ended |
Jun. 30, 2018 | |
Net Periodic Pension and Postretirement Benefit Costs | |
Benefit plans | 9. Net Periodic Pension and Postretirement Benefit Costs For detailed information about the Company’s pension and postretirement benefit plans, please refer to Note 10 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. On January 1, 2018, the Company adopted ASU No. 2017-07, Compensation- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. As a result, the interest cost, expected return on plan assets and amortization of actuarial loss components of net periodic benefit cost for the Company’s pension plans and other postretirement plans are presented as other, non-operating income on the Condensed Consolidated Statements of Income. There is no change to the presentation of the service cost component of net periodic benefit cost. The following table sets forth the components of net periodic benefit cost of the U.S. and non-U.S. defined benefit pension plans for the periods presented: Three Months Ended June 30, Six Months Ended June 30, U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans (in millions) 2018 2017 2018 2017 2018 2017 2018 2017 Service cost $ $ $ $ $ $ $ $ Interest cost Expected return on plan assets Amortization of actuarial loss — — — — — Net periodic benefit cost $ — $ — $ $ $ $ $ $ The Company currently anticipates that it will make approximately $5 million in cash contributions to its pension plans in 2018, consisting of $3 million to its non-U.S. pension plans and $2 million to its U.S. pension plans. For the six months ended June 30, 2018, cash contributions of approximately $1 million were made to the non-U.S. plans and less than $1 million to the U.S. plans. The following table sets forth the components of net postretirement benefit cost for the periods presented: Three Months Ended June 30, Six Months Ended June 30, (in millions) 2018 2017 2018 2017 Service Cost $ — $ — $ — $ — Interest cost 1 1 2 2 Amortization of prior service credit — (1) (1) (2) Net periodic benefit cost $ 1 $ — $ 1 $ — |
Earnings per Common Share
Earnings per Common Share | 6 Months Ended |
Jun. 30, 2018 | |
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 June 30, 2018 Three Months Ended June 30, 2017 (in millions, except per share amounts) Net Income Available to Ingredion Weighted Average Shares Per Share Amount Net Income Available to Ingredion Weighted Average Shares Per Share Amount Basic EPS $ 114 71.9 $ 1.59 $ 130 71.8 $ 1.81 Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards 0.9 1.4 Diluted EPS $ 114 72.8 $ 1.57 $ 130 73.2 $ 1.78 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 (in millions, except per share amounts) Net Income Available to Ingredion Weighted Average Shares Per Share Amount Net Income Available to Ingredion Weighted Average Shares Per Share Amount Basic EPS $ 254 72.1 $ 3.52 $ 254 72.0 $ 3.53 Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards 1.1 1.4 Diluted EPS $ 254 73.2 $ 3.47 $ 254 73.4 $ 3.46 For the three and six months ended June 30, 2018, approximately 0.6 million and 0.3 million share-based awards of common stock, respectively, were excluded from the calculation of diluted EPS as the impact of their inclusion would have been anti-dilutive. For the three and six months ended June 30, 2017, approximately 0.3 million share-based awards of common stock were excluded from the calculation of diluted EPS as the impact of their inclusion would have been anti-dilutive. |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2018 | |
Inventories | |
Inventories | 11. Inventories Inventories are summarized as follows: As of As of (in millions) June 30, 2018 December 31, 2017 Finished and in process $ 506 $ 495 Raw materials 309 278 Manufacturing supplies and other 51 50 Total inventories $ 866 $ 823 |
Debt
Debt | 6 Months Ended |
Jun. 30, 2018 | |
Debt | |
Debt | 12. Debt As of June 30, 2018 and December 31, 2017, the Company’s total debt consisted of the following: As of As of (in millions) June 30, 2018 December 31, 2017 3.2% senior notes due October 1, 2026 $ 496 $ 496 4.625% senior notes due November 1, 2020 399 398 6.625% senior notes due April 15, 2037 254 254 5.62% senior notes due March 25, 2020 200 200 Term loan credit agreement due April 25, 2019 165 395 Revolving credit facility 19 — Fair value adjustment related to hedged fixed rate debt instruments (3) 1 Long-term debt 1,530 1,744 Short-term borrowings 133 120 Total debt $ 1,663 $ 1,864 The Company’s long-term debt as of June 30, 2018 includes the Term Loan Credit Agreement (“Term Loan”) of $165 million that matures on April 25, 2019. This borrowing is included in the long-term debt as the Company has the ability and intent to refinance it on a long-term basis prior to the maturity date. The Company paid $230 million towards the Term Loan in the six months ended June 30, 2018. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | 13. Income Taxes The Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017. The TCJA introduced numerous changes in the U.S. federal tax laws. Changes that have a significant impact on the Company’s effective tax rate are a reduction in the U.S. corporate tax rate from 35 percent to 21 percent and the imposition of a U.S. tax on its global intangible low-taxed income (“GILTI”). The TCJA also provides for a one-time transition tax on the deemed repatriation of cumulative foreign earnings as of December 31, 2017, and eliminates the tax on dividends from the Company’s foreign subsidiaries by allowing a 100 percent dividends received deduction. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to provide guidance on the application of U.S. Generally Accepted Accounting Principles (“GAAP”) to situations in which the registrant does not have all the necessary information available, prepared or analyzed (including computations) in sufficient detail to complete the accounting for the income tax effects of the TCJA. The Company has calculated what it believes is a reasonable estimate of the impact of the TCJA in accordance with SAB 118 and its understanding of the TCJA, including published guidance as of the date of this filing. In the fourth quarter of 2017, the Company recorded $23 million of provisional income tax expense related to the TCJA. The provisional amount of $23 million is composed of the following items: (in millions) One-time transition tax $ 21 Remeasurement of deferred tax assets and liabilities (38) Net impact of provision for taxes on unremitted earnings 33 Other items, net 7 Net impact of the TCJA on 2017 income tax expense $ 23 The Company may update its estimate in 2018 as additional information, including guidance from federal and state regulatory agencies, becomes available and the Company finalizes its computations, which are complex and subject to interpretation. Any adjustment to these provisional tax amounts will be recorded in the quarter of 2018 in which its analysis is completed. The Company has not made any adjustments to the provisional tax amounts for the three and six months ended June 30, 2018. Because of the complexity of the new GILTI rules, the Company is continuing to evaluate this provision of the TCJA for the application of ASC 740. Under GAAP, the Company is allowed to make an accounting policy choice of either treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or factoring such amounts into its measurement of its deferred taxes (the “deferred method”). The Company has not made any adjustments related to potential GILTI tax in its financial statements, as it has not made a policy decision regarding whether to record deferred taxes on GILTI. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jun. 30, 2018 | |
Accumulated Other Comprehensive Loss. | |
Accumulated Other Comprehensive Loss | 14. Accumulated Other Comprehensive Loss The following is a summary of net changes in accumulated other comprehensive loss by component and net of tax for the six months ended June 30, 2018 and 2017: (in millions) Cumulative Translation Adjustment Deferred (Loss) Gain on Hedging Activities Pension and Postretirement Adjustment Unrealized (Loss) Gain on Investment Accumulated Other Comprehensive Loss Balance, December 31, 2017 $ (951) $ (13) $ (51) $ 2 $ (1,013) Other comprehensive (loss) income before reclassification adjustments (96) 1 (1) 1 (95) Amount reclassified from accumulated OCI — 3 — — 3 Tax provision — (1) — — (1) Net other comprehensive (loss) income (96) 3 (1) 1 (93) Balance, June 30, 2018 $ (1,047) $ (10) $ (52) $ 3 $ (1,106) (in millions) Cumulative Translation Adjustment Deferred (Loss) Gain on Hedging Activities Pension and Postretirement Adjustment Unrealized (Loss) Gain on Investment Accumulated Other Comprehensive Loss Balance, December 31, 2016 $ (1,008) $ (7) $ (56) $ — $ (1,071) Other comprehensive income before reclassification adjustments 32 12 1 1 46 Amount reclassified from accumulated OCI — 2 (1) — 1 Tax provision — (5) — — (5) Net other comprehensive income 32 9 — 1 42 Balance, June 30, 2017 $ (976) $ 2 $ (56) $ 1 $ (1,029) The following table provides detail pertaining to reclassifications from AOCI into net income for the periods presented: Three Months Ended Six Months Ended Affected Line Item in June 30, June 30, Condensed Consolidated (in millions) 2018 2017 2018 2017 Statements of Income Gains (losses) on cash flow hedges: Commodity contracts $ 2 $ 2 $ (3) $ (1) Cost of sales Foreign currency contracts — — 1 — Net sales/cost of sales Interest rate contracts (1) — (1) (1) Financing costs, net Gains related to pension and other postretirement obligations — 1 — 1 Total before-tax reclassifications $ 1 $ 3 $ (3) $ (1) Tax provision — — 1 1 Total after-tax reclassifications $ 1 $ 3 $ (2) $ — |
Recently Adopted and New Acco24
Recently Adopted and New Accounting Standards (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
ASU 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] | Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (in millions) As Reported As Adjusted As Reported As Adjusted Condensed Consolidated Statements of Income: Net sales before shipping and handling costs $ 1,542 $ 1,558 $ 3,079 $ 3,110 Less: shipping and handling costs 85 101 169 200 Net sales $ 1,457 $ 1,457 $ 2,910 $ 2,910 |
ASU 2017-07 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] | Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (in millions) As Reported As Adjusted As Reported As Adjusted Condensed Consolidated Statements of Income: Cost of sales $ 1,084 $ 1,084 $ 2,185 $ 2,186 Gross profit 373 373 725 724 Operating expenses 157 158 306 308 Operating income 211 210 406 403 Other, non-operating income — (1) — (3) Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 (in millions) As Reported As Adjusted As Reported As Adjusted Operating income: North America $ 181 $ 180 $ 341 $ 338 South America 4 4 18 19 Asia Pacific 29 30 59 60 EMEA 29 29 57 57 Corporate (22) (23) (42) (44) Subtotal 221 220 433 430 Total operating income $ 211 $ 210 $ 406 $ 403 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Revenue Recognition | |
Schedule of disaggregation of net sales by industry served | Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Food $ $ $ $ Beverage Brewing Food and Beverage Ingredients Animal Nutrition Other Total Net sales $ $ $ $ Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Net sales to unaffiliated customers: North America $ 916 $ 905 $ 1,790 $ 1,786 South America 232 228 481 483 Asia Pacific 201 187 395 366 EMEA 147 137 299 275 Total $ 1,496 $ 1,457 $ 2,965 $ 2,910 |
Impairment and Restructuring 26
Impairment and Restructuring Charges (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Impairment and Restructuring Charges | |
Summary of restructuring reserve | A summary of the Company’s employee-related severance accrual as of June 30, 2018 is as follows (in millions): Balance in employee-related severance accrual as of December 31, 2017 $ 11 Cost Smart severance 6 Payments made to terminated employees (4) Foreign exchange translation (2) Balance in employee-related severance accrual as of June 30, 2018 $ 11 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Information | |
Schedule of segment reporting of net sales, operating income and total assets | Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Net sales to unaffiliated customers: North America $ 916 $ 905 $ 1,790 $ 1,786 South America 232 228 481 483 Asia Pacific 201 187 395 366 EMEA 147 137 299 275 Total $ 1,496 $ 1,457 $ 2,965 $ 2,910 Operating income: North America $ 150 $ 180 $ 293 $ 338 South America 20 4 46 19 Asia Pacific 27 30 50 60 EMEA 29 29 60 57 Corporate (25) (23) (48) (44) Subtotal 201 220 401 430 Restructuring/impairment charges (6) (11) (16) Acquisition/integration costs — — — (2) Charge for fair value markup of acquired inventory — (4) — (9) Total operating income $ 193 $ 210 $ 390 $ 403 As of As of (in millions) June 30, 2018 December 31, 2017 Total assets North America $ 3,728 $ 3,967 South America 694 812 Asia Pacific 798 774 EMEA 528 527 Total $ 5,748 $ 6,080 |
Financial Instruments, Deriva28
Financial Instruments, Derivatives and Hedging Activities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Financial Instruments, Derivatives and Hedging Activities | |
Schedule of location and amount of assets and liabilities reported in balance sheet | Fair Value of Derivative Instruments as of June 30, 2018 Derivatives Designated as Hedging Instruments (in millions): Balance Sheet Location Fair Value Balance Sheet Location Fair Value Commodity and foreign currency Accounts receivable, net $ 12 Accounts payable and accrued liabilities $ 22 Commodity, foreign currency and interest rate contracts Other assets 1 Non-current liabilities 11 $ 13 $ 33 Fair Value of Derivative Instruments as of December 31, 2017 Derivatives Designated as Hedging Instruments (in millions): Balance Sheet Location Fair Value Balance Sheet Location Fair Value Commodity and foreign currency Accounts receivable, net $ 11 Accounts payable and accrued liabilities $ 23 Commodity, foreign currency and interest rate contracts Other assets 3 Non-current liabilities 8 $ 14 $ 31 |
Schedule of amount of gains and losses recognized in OCI and location and amount of gains and losses reported in income statement | Location of Gains Amount of Gains (Losses) (Losses) Amount of Gains (Losses) Derivatives in Cash-Flow Recognized in OCI Reclassified from Reclassified from AOCI into Income Hedging Relationships Three Months Ended Three Months Ended AOCI Three Months Ended Three Months Ended (in millions, pre-tax) June 30, 2018 June 30, 2017 into Income June 30, 2018 June 30, 2017 Commodity contracts $ (17) $ 4 Cost of sales $ 2 $ 2 Foreign currency contracts (4) — Net sales/Cost of sales — — Interest rate contracts — — Financing costs, net (1) — Total $ (21) $ 4 $ 1 $ 2 Location of Gains Amount of Gains (Losses) (Losses) Amount of Gains (Losses) Derivatives in Cash-Flow Recognized in OCI Reclassified from Reclassified from AOCI into Income Hedging Relationships Six Months Ended Six Months Ended AOCI Six Months Ended Six Months Ended (in millions, pre-tax) June 30, 2018 June 30, 2017 into Income June 30, 2018 June 30, 2017 Commodity contracts $ 3 $ 11 Cost of sales $ (3) $ (1) Foreign currency contracts (2) 1 Net sales/Cost of sales 1 — Interest rate contracts — — Financing costs, net (1) (1) Total $ 1 $ 12 $ (3) $ (2) |
Schedule of fair value of financial instruments and derivatives | As of June 30, 2018 As of December 31, 2017 (in millions) Total Level 1 (a) Level 2 (b) Level 3 (c) Total Level 1 (a) Level 2 (b) Level 3 (c) Available for sale securities $ 10 $ 10 $ — $ — $ 10 $ 10 $ — $ — Derivative assets 13 2 11 — 14 3 11 — Derivative liabilities 33 14 19 — 31 11 20 — Long-term debt 1,592 — 1,592 — 1,845 — 1,845 — (a) Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets or liabilities. (b) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability or can be derived principally from or corroborated by observable market data. (c) Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Share-Based Compensation | |
Schedule of valuation assumptions for stock options | Six Months Ended June 30, 2018 2017 Expected life (in years) 5.5 5.5 Risk-free interest rate 2.5 % 1.9 % Expected volatility 19.8 % 22.5 % Expected dividend yield 1.8 % 1.7 % |
Schedule of stock option activity | Number of Options (in thousands) Weighted Average Exercise Price per Share Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions) Outstanding as of December 31, 2017 2,095 $ 71.81 5.87 $ 142 Granted 215 133.61 Exercised (122) 45.44 Cancelled (11) 82.53 Outstanding as of June 30, 2018 2,177 $ 79.34 5.94 $ 75 Exercisable as of June 30, 2018 1,688 $ 67.14 5.37 $ 74 |
Schedule of additional information pertaining to stock option activity | Three Months Ended Six Months Ended June 30, June 30, (dollars in millions, except per share) 2018 2017 2018 2017 Weighted average grant date fair value of stock options granted (per share) $ — $ — $ 24.01 $ 23.90 Total intrinsic value of stock options exercised 3 5 11 12 |
Schedule of restricted unit activity | (RSUs in thousands) Number of RSUs Weighted Average Fair Value per Share Non-vested as of December 31, 2017 387 $ Granted 106 Vested (124) Cancelled (10) Non-vested as of June 30, 2018 359 $ |
Schedule of components of share based compensation expense | Three Months Ended Six Months Ended June 30, June 30, (in millions) 2018 2017 2018 2017 Stock options: Pre-tax compensation expense $ 2 $ 2 $ 3 $ 4 Income tax benefit (1) — (1) (1) Stock option expense, net of income taxes 1 2 2 3 RSUs: Pre-tax compensation expense 3 3 6 6 Income tax benefit — (1) (1) (2) RSUs, net of income taxes 3 2 5 4 Performance shares and other share-based awards: Pre-tax compensation expense 1 1 2 3 Income tax benefit — — — (1) Performance shares and other share-based compensation expense, net of income taxes 1 1 2 2 Total share-based compensation: Pre-tax compensation expense 6 6 11 13 Income tax benefit (1) (1) (2) (4) Total share-based compensation expense, net of income taxes $ 5 $ 5 $ 9 $ 9 |
Net Periodic Pension and Post30
Net Periodic Pension and Postretirement Benefit Costs (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Pension Plan | |
Pension and postretirement benefit plans | |
Components of net periodic benefit cost | Three Months Ended June 30, Six Months Ended June 30, U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans (in millions) 2018 2017 2018 2017 2018 2017 2018 2017 Service cost $ $ $ $ $ $ $ $ Interest cost Expected return on plan assets Amortization of actuarial loss — — — — — Net periodic benefit cost $ — $ — $ $ $ $ $ $ |
Postemployment Retirement Benefits | |
Pension and postretirement benefit plans | |
Components of net periodic benefit cost | Three Months Ended June 30, Six Months Ended June 30, (in millions) 2018 2017 2018 2017 Service Cost $ — $ — $ — $ — Interest cost 1 1 2 2 Amortization of prior service credit — (1) (1) (2) Net periodic benefit cost $ 1 $ — $ 1 $ — |
Earnings per Common Share (Tabl
Earnings per Common Share (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Earnings per Common Share | |
Schedule of basic and diluted earnings per common share | Three Months Ended June 30, 2018 Three Months Ended June 30, 2017 (in millions, except per share amounts) Net Income Available to Ingredion Weighted Average Shares Per Share Amount Net Income Available to Ingredion Weighted Average Shares Per Share Amount Basic EPS $ 114 71.9 $ 1.59 $ 130 71.8 $ 1.81 Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards 0.9 1.4 Diluted EPS $ 114 72.8 $ 1.57 $ 130 73.2 $ 1.78 Six Months Ended June 30, 2018 Six Months Ended June 30, 2017 (in millions, except per share amounts) Net Income Available to Ingredion Weighted Average Shares Per Share Amount Net Income Available to Ingredion Weighted Average Shares Per Share Amount Basic EPS $ 254 72.1 $ 3.52 $ 254 72.0 $ 3.53 Effect of Dilutive Securities: Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards 1.1 1.4 Diluted EPS $ 254 73.2 $ 3.47 $ 254 73.4 $ 3.46 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Inventories | |
Components of inventories | As of As of (in millions) June 30, 2018 December 31, 2017 Finished and in process $ 506 $ 495 Raw materials 309 278 Manufacturing supplies and other 51 50 Total inventories $ 866 $ 823 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt | |
Schedule of debt | As of As of (in millions) June 30, 2018 December 31, 2017 3.2% senior notes due October 1, 2026 $ 496 $ 496 4.625% senior notes due November 1, 2020 399 398 6.625% senior notes due April 15, 2037 254 254 5.62% senior notes due March 25, 2020 200 200 Term loan credit agreement due April 25, 2019 165 395 Revolving credit facility 19 — Fair value adjustment related to hedged fixed rate debt instruments (3) 1 Long-term debt 1,530 1,744 Short-term borrowings 133 120 Total debt $ 1,663 $ 1,864 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Schedule of impact of the TCJA on 2017 income tax expense | (in millions) One-time transition tax $ 21 Remeasurement of deferred tax assets and liabilities (38) Net impact of provision for taxes on unremitted earnings 33 Other items, net 7 Net impact of the TCJA on 2017 income tax expense $ 23 |
Accumulated Other Comprehensi35
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accumulated Other Comprehensive Loss. | |
Summary of net changes in accumulated other comprehensive loss | (in millions) Cumulative Translation Adjustment Deferred (Loss) Gain on Hedging Activities Pension and Postretirement Adjustment Unrealized (Loss) Gain on Investment Accumulated Other Comprehensive Loss Balance, December 31, 2017 $ (951) $ (13) $ (51) $ 2 $ (1,013) Other comprehensive (loss) income before reclassification adjustments (96) 1 (1) 1 (95) Amount reclassified from accumulated OCI — 3 — — 3 Tax provision — (1) — — (1) Net other comprehensive (loss) income (96) 3 (1) 1 (93) Balance, June 30, 2018 $ (1,047) $ (10) $ (52) $ 3 $ (1,106) (in millions) Cumulative Translation Adjustment Deferred (Loss) Gain on Hedging Activities Pension and Postretirement Adjustment Unrealized (Loss) Gain on Investment Accumulated Other Comprehensive Loss Balance, December 31, 2016 $ (1,008) $ (7) $ (56) $ — $ (1,071) Other comprehensive income before reclassification adjustments 32 12 1 1 46 Amount reclassified from accumulated OCI — 2 (1) — 1 Tax provision — (5) — — (5) Net other comprehensive income 32 9 — 1 42 Balance, June 30, 2017 $ (976) $ 2 $ (56) $ 1 $ (1,029) |
Schedule of reclassifications from AOCI into net income | Three Months Ended Six Months Ended Affected Line Item in June 30, June 30, Condensed Consolidated (in millions) 2018 2017 2018 2017 Statements of Income Gains (losses) on cash flow hedges: Commodity contracts $ 2 $ 2 $ (3) $ (1) Cost of sales Foreign currency contracts — — 1 — Net sales/cost of sales Interest rate contracts (1) — (1) (1) Financing costs, net Gains related to pension and other postretirement obligations — 1 — 1 Total before-tax reclassifications $ 1 $ 3 $ (3) $ (1) Tax provision — — 1 1 Total after-tax reclassifications $ 1 $ 3 $ (2) $ — |
Recently Adopted and New Acco36
Recently Adopted and New Accounting Standards (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales before shipping and handling costs | $ 1,608 | $ 1,558 | $ 3,189 | $ 3,110 |
Less: Shipping and handling costs | 112 | 101 | 224 | 200 |
Net sales | 1,496 | 1,457 | 2,965 | 2,910 |
Cost of sales | 1,136 | 1,084 | 2,251 | 2,186 |
Gross profit | 360 | 373 | 714 | 724 |
Operating expenses | 158 | 308 | ||
Operating income | 193 | 210 | 390 | 403 |
Other, non-operating income | (1) | (1) | $ (2) | (3) |
ARGENTINA | Maximum | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Percentage of total revenue | 4.00% | |||
North America | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 916 | 905 | $ 1,790 | 1,786 |
South America | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 232 | 228 | 481 | 483 |
Asia Pacific | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 201 | 187 | 395 | 366 |
EMEA | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 147 | 137 | 299 | 275 |
ASU 2014-09 | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales before shipping and handling costs | 1,542 | 3,079 | ||
Less: Shipping and handling costs | 85 | 169 | ||
Net sales | 1,457 | 2,910 | ||
ASU 2017-07 | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cost of sales | 1,084 | 2,185 | ||
Gross profit | 373 | 725 | ||
Operating expenses | 157 | 306 | ||
Operating income | 211 | 406 | ||
Operating Segments | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | 201 | 220 | 401 | 430 |
Operating Segments | North America | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 916 | 905 | 1,790 | 1,786 |
Operating income | 150 | 180 | 293 | 338 |
Operating Segments | South America | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 232 | 228 | 481 | 483 |
Operating income | 20 | 4 | 46 | 19 |
Operating Segments | Asia Pacific | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 201 | 187 | 395 | 366 |
Operating income | 27 | 30 | 50 | 60 |
Operating Segments | EMEA | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net sales | 147 | 137 | 299 | 275 |
Operating income | 29 | 29 | 60 | 57 |
Operating Segments | ASU 2017-07 | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | 221 | 433 | ||
Operating Segments | ASU 2017-07 | North America | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | 181 | 341 | ||
Operating Segments | ASU 2017-07 | South America | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | 4 | 18 | ||
Operating Segments | ASU 2017-07 | Asia Pacific | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | 29 | 59 | ||
Operating Segments | ASU 2017-07 | EMEA | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | 29 | 57 | ||
Corporate, Non -Segment | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | $ (25) | (23) | $ (48) | (44) |
Corporate, Non -Segment | ASU 2017-07 | As Reported | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating income | $ (22) | $ (42) |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Millions | Mar. 09, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 |
Acquisitions | ||||
Goodwill | $ 794 | $ 803 | ||
TIC Gums | ||||
Acquisitions | ||||
Pre-tax Acquisition and integration costs | $ 2 | |||
Sun Flour | ||||
Acquisitions | ||||
Total purchase consideration | $ 18 | |||
Cash consideration | 16 | |||
Accrued expenses | $ 2 | |||
Intangible Assets, Net (including goodwill) | 15 | |||
Tangible assets | 3 | |||
Asia Pacific | Sun Flour | ||||
Acquisitions | ||||
Goodwill | $ 14 |
Revenue Recognition (Details)
Revenue Recognition (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)segmentitem | Jun. 30, 2017USD ($) | |
Disaggregation of Revenue [Line Items] | ||||
Revenue, practical expedient incremental cost | true | |||
Number of reportable units | segment | 4 | |||
Number of Industries | item | 4 | |||
Net sales | $ 1,496 | $ 1,457 | $ 2,965 | $ 2,910 |
Food and Beverage Ingredients | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 1,078 | 1,046 | 2,131 | 2,080 |
Food | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 799 | 777 | 1,583 | 1,538 |
Beverage | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 165 | 168 | 331 | 329 |
Brewing | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 114 | 101 | 217 | 213 |
Animal Nutrition | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 153 | 146 | 303 | 295 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 265 | 265 | 531 | 535 |
North America | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 916 | 905 | 1,790 | 1,786 |
South America | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 232 | 228 | 481 | 483 |
Asia Pacific | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 201 | 187 | 395 | 366 |
EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | $ 147 | $ 137 | $ 299 | $ 275 |
Impairment and Restructuring 39
Impairment and Restructuring Charges (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2019 | |
Restructuring and asset impairment charges | ||||||
Restructuring charges | $ 8 | $ 6 | $ 11 | $ 16 | ||
Argentina employee-related severance | ||||||
Restructuring and asset impairment charges | ||||||
Restructuring charges | 6 | 17 | ||||
Finance Transformation Initiative | ||||||
Restructuring and asset impairment charges | ||||||
Restructuring charges | 2 | 1 | 4 | 1 | ||
Stevia Leaf Extraction Process in Brazil | ||||||
Restructuring and asset impairment charges | ||||||
Restructuring charges | 1 | |||||
Cost Smart Program | ||||||
Restructuring accrual | ||||||
Cost Smart severance | 6 | 6 | ||||
Cessation Of Wet-Milling At Stockton California | ||||||
Restructuring and asset impairment charges | ||||||
Restructuring charges | 0 | 0 | ||||
Cessation Of Wet-Milling At Stockton California | Forecast | ||||||
Restructuring and asset impairment charges | ||||||
Restructuring charges | $ 53 | |||||
Accelerated depreciation | 38 | |||||
Charges for impaired assets | 8 | |||||
Employee Severance related costs | ||||||
Restructuring and asset impairment charges | ||||||
Reduction in expected restructuring charges | $ 1 | $ 2 | ||||
Restructuring accrual | ||||||
Balance in employee-related severance accrual at December 31, 2017 | 11 | 11 | $ 11 | |||
Cost Smart severance | 6 | |||||
Payments made to terminated employees | (4) | |||||
Foreign exchange translation | (2) | |||||
Balance in employee-related severance accrual at June 30, 2018 | $ 11 | $ 11 | ||||
Employee Severance related costs | Forecast | ||||||
Restructuring accrual | ||||||
Payments made to terminated employees | $ (10) | |||||
Employee Severance related costs | Cessation Of Wet-Milling At Stockton California | Forecast | ||||||
Restructuring and asset impairment charges | ||||||
Restructuring charges | 3 | |||||
Other additional restructuring charges | 4 | |||||
Employee Severance And Other Costs | Cessation Of Wet-Milling At Stockton California | Forecast | ||||||
Restructuring and asset impairment charges | ||||||
Restructuring charges | $ 7 |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)segment | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Segment information | |||||
Number of reportable business segments | segment | 4 | ||||
Net sales | $ 1,496 | $ 1,457 | $ 2,965 | $ 2,910 | |
Restructuring / impairment charges | (8) | (6) | (11) | (16) | |
Charge for fair value markup of acquired inventory | (9) | ||||
Total operating income | 193 | 210 | 390 | 403 | |
Total Assets | 5,748 | 5,748 | $ 6,080 | ||
North America | |||||
Segment information | |||||
Net sales | 916 | 905 | 1,790 | 1,786 | |
South America | |||||
Segment information | |||||
Net sales | 232 | 228 | 481 | 483 | |
Asia Pacific | |||||
Segment information | |||||
Net sales | 201 | 187 | 395 | 366 | |
EMEA | |||||
Segment information | |||||
Net sales | 147 | 137 | 299 | 275 | |
Operating Segments | |||||
Segment information | |||||
Total operating income | 201 | 220 | 401 | 430 | |
Total Assets | 5,748 | 5,748 | 6,080 | ||
Operating Segments | North America | |||||
Segment information | |||||
Net sales | 916 | 905 | 1,790 | 1,786 | |
Total operating income | 150 | 180 | 293 | 338 | |
Total Assets | 3,728 | 3,728 | 3,967 | ||
Operating Segments | South America | |||||
Segment information | |||||
Net sales | 232 | 228 | 481 | 483 | |
Total operating income | 20 | 4 | 46 | 19 | |
Total Assets | 694 | 694 | 812 | ||
Operating Segments | Asia Pacific | |||||
Segment information | |||||
Net sales | 201 | 187 | 395 | 366 | |
Total operating income | 27 | 30 | 50 | 60 | |
Total Assets | 798 | 798 | 774 | ||
Operating Segments | EMEA | |||||
Segment information | |||||
Net sales | 147 | 137 | 299 | 275 | |
Total operating income | 29 | 29 | 60 | 57 | |
Total Assets | 528 | 528 | $ 527 | ||
Corporate, Non -Segment | |||||
Segment information | |||||
Restructuring / impairment charges | (8) | (6) | (11) | (16) | |
Acquisition / integration costs | (2) | ||||
Charge for fair value markup of acquired inventory | (4) | (9) | |||
Total operating income | $ (25) | $ (23) | $ (48) | $ (44) |
Financial Instruments, Deriva41
Financial Instruments, Derivatives and Hedging Activities (Details) gal in Millions, bu in Millions, MMBTU in Millions, $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018USD ($)MMBTUlbgalbu | Dec. 31, 2017USD ($) | |
Financial instruments, derivatives and hedging activities | ||
Accumulated gains (losses) from derivative instruments, net of tax effect | $ (1,106) | $ (1,013) |
Senior Notes 4.625 Percent Due November 1, 2020 | ||
Financial instruments, derivatives and hedging activities | ||
Debt, face amount | $ 400 | |
Commodity Contracts | Minimum | ||
Financial instruments, derivatives and hedging activities | ||
Maturity period of price risk derivative | 12 months | |
Commodity Contracts | Maximum | ||
Financial instruments, derivatives and hedging activities | ||
Maturity period of price risk derivative | 24 months | |
Corn Commodity | ||
Financial instruments, derivatives and hedging activities | ||
Futures contract (in bushels for corn and gallons for ethanol) | bu | 61 | |
Soy Bean Oil | ||
Financial instruments, derivatives and hedging activities | ||
Soybean oil futures contract (in pounds) | lb | 0 | |
Natural Gas Commodity | ||
Financial instruments, derivatives and hedging activities | ||
Natural gas futures contract (in mmbtu) | MMBTU | 32 | |
Ethanol Commodity | ||
Financial instruments, derivatives and hedging activities | ||
Futures contract (in bushels for corn and gallons for ethanol) | gal | 6 | |
Treasury Lock | ||
Foreign currency hedging | ||
Derivative notional amount | $ 0 | 0 |
Cash Flow Hedging | ||
Financial instruments, derivatives and hedging activities | ||
Accumulated gains (losses) from derivative instruments, net of tax effect | (1) | 1 |
Tax effect on gain (loss) on derivative instruments | 1 | |
Cash Flow Hedging | Commodity Contracts | ||
Financial instruments, derivatives and hedging activities | ||
Accumulated gains (losses) from derivative instruments, net of tax effect | (7) | (12) |
Tax effect on gain (loss) on derivative instruments | (5) | (7) |
Cash Flow Hedging | Treasury Lock | ||
Financial instruments, derivatives and hedging activities | ||
Accumulated gains (losses) from derivative instruments, net of tax effect | (2) | (2) |
Tax effect on gain (loss) on derivative instruments | (1) | (1) |
Fair Value Hedging | Interest Rate Swap | ||
Financial instruments, derivatives and hedging activities | ||
Increase (decrease) in fair value of instrument | (3) | 1 |
Fair Value Hedging | Interest Rate Swap | Senior Notes 4.625 Percent Due November 1, 2020 | ||
Financial instruments, derivatives and hedging activities | ||
Debt, face amount | $ 200 | |
Debt, fixed interest rate (as a percent) | 4.625% | |
Debt, floating rate of interest basis | six-month US dollar LIBOR | |
Fair Value Hedging | Foreign Exchange Forward | Short | ||
Foreign currency hedging | ||
Derivative notional amount | $ 426 | 447 |
Fair Value Hedging | Foreign Exchange Forward | Long | ||
Foreign currency hedging | ||
Derivative notional amount | $ 135 | $ 121 |
Financial Instruments, Deriva42
Financial Instruments, Derivatives and Hedging Activities Balance Sheet Location (Details) - Designated as Hedging Instrument - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Fair value of commodity contracts | ||
Fair value of assets | $ 13 | $ 14 |
Fair value of liabilities | 33 | 31 |
Commodity and Foreign Currency Contracts | Accounts Receivable, Net | ||
Fair value of commodity contracts | ||
Fair value of assets | 12 | 11 |
Commodity and Foreign Currency Contracts | Accounts Payable and Accrued Liabilities | ||
Fair value of commodity contracts | ||
Fair value of liabilities | 22 | 23 |
Commodity, foreign currency, and interest rate contracts | Other Assets | ||
Fair value of commodity contracts | ||
Fair value of assets | 1 | 3 |
Commodity, foreign currency, and interest rate contracts | Non Current Liabilities | ||
Fair value of commodity contracts | ||
Fair value of liabilities | $ 11 | $ 8 |
Financial Instruments, Deriva43
Financial Instruments, Derivatives and Hedging Activities Contracts (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Recognized in OCI on Derivatives | $ (21) | $ 4 | $ 1 | $ 12 |
Amount of Gains (Losses) Reclassified from AOCI into Income | 1 | 2 | (3) | (2) |
Commodity Contracts | Cost of Sales | ||||
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Recognized in OCI on Derivatives | (17) | 4 | 3 | 11 |
Amount of Gains (Losses) Reclassified from AOCI into Income | 2 | $ 2 | (3) | (1) |
Foreign Currency Contracts | Net sales | ||||
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Recognized in OCI on Derivatives | (4) | (2) | 1 | |
Amount of Gains (Losses) Reclassified from AOCI into Income | 1 | |||
Interest Rate Contract | Financing Costs, Net | ||||
Gains or losses on derivatives | ||||
Amount of Gains (Losses) Reclassified from AOCI into Income | (1) | (1) | $ (1) | |
Treasury Lock | ||||
Gains or losses on derivatives | ||||
Loss expected to be reclassified into earnings during the next twelve months on settled T-Locks, net of tax | (1) | (1) | ||
Cash Flow Hedging | Commodity Contracts | ||||
Gains or losses on derivatives | ||||
Loss expected to be reclassified into earnings during the next twelve months on settled commodity hedging contracts, net of tax | (6) | (6) | ||
Loss expected to be reclassified into earnings during the next twelve months on settled commodity hedging contracts, income tax effect | $ (2) | $ (2) |
Financial Instruments, Deriva44
Financial Instruments, Derivatives and Hedging Activities Recurring And Nonrecurring (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Fair value of assets and liabilities | ||
Long-term Debt | $ 1,530 | $ 1,744 |
Long-term debt | 1,600 | |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 | ||
Fair value of assets and liabilities | ||
available for sale securities | 10 | 10 |
Derivative assets | 2 | 3 |
Derivative liabilities | 14 | 11 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | ||
Fair value of assets and liabilities | ||
Derivative assets | 11 | 11 |
Derivative liabilities | 19 | 20 |
Long-term debt | 1,592 | 1,845 |
Fair Value, Measurements, Recurring | Estimate of Fair Value Measurement | ||
Fair value of assets and liabilities | ||
available for sale securities | 10 | 10 |
Derivative assets | 13 | 14 |
Derivative liabilities | 33 | 31 |
Long-term debt | $ 1,592 | $ 1,845 |
Share-Based Compensation Stock
Share-Based Compensation Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
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) | 2.50% | 1.90% | |||
Expected volatility (as a percent) | 19.80% | 22.50% | |||
Expected dividend yield (as a percent) | 1.80% | 1.70% | |||
Stock option activity | |||||
Outstanding at the beginning of the period (in shares) | 2,095 | ||||
Granted (in shares) | 215 | ||||
Exercised (in shares) | (122) | ||||
Cancelled (in shares) | (11) | ||||
Outstanding at the end of the period (in shares) | 2,177 | 2,177 | 2,095 | ||
Exercisable at the end of the period (in shares) | 1,688 | 1,688 | |||
Share options, weighted average exercise price per share | |||||
Outstanding at the beginning of the period (in dollars per share) | $ 71.81 | ||||
Granted (in dollars per share) | 133.61 | ||||
Exercised (in dollars per share) | 45.44 | ||||
Cancelled (in dollars per share) | 82.53 | ||||
Outstanding at the end of the period (in dollars per share) | $ 79.34 | 79.34 | $ 71.81 | ||
Exercisable at the end of the period (in dollars per share) | $ 67.14 | $ 67.14 | |||
Share options, aggregate intrinsic value | |||||
Options outstanding aggregate intrinsic value | $ 75 | $ 75 | $ 142 | ||
Stock options exercisable aggregate intrinsic value | $ 74 | $ 74 | |||
Options outstanding average remaining contractual life | 5 years 11 months 9 days | 5 years 10 months 13 days | |||
Stock options exercisable average remaining contractual life | 5 years 4 months 13 days | ||||
Additional information pertaining to stock options | |||||
Weighted average grant date fair value of stock options granted (per share) | $ 0 | $ 0 | $ 24.01 | $ 23.90 | |
Total intrinsic value of stock options exercised | $ 3 | $ 5 | $ 11 | $ 12 | |
Employee Non-Qualified Stock Option | |||||
Stock option activity | |||||
Granted (in shares) | 215 | 278 | |||
Employee Stock Option | |||||
Stock Options | |||||
Term of options | 10 years | ||||
Period of vesting | 3 years | ||||
Required service period | 1 year | ||||
Additional information pertaining to stock options | |||||
Cash received from exercise of stock options | $ 6 | ||||
Unrecognized compensation cost | $ 5 | $ 5 | |||
Weighted-average period for amortization of unrecognized compensation cost | 1 year 9 months 18 days |
Share-Based Compensation Restri
Share-Based Compensation Restricted Stock (Details) - Restricted Stock Units (RSUs) $ / shares in Units, shares in Thousands, $ in Millions | 6 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Stock Options | |
Vesting terms | 3 years |
Service period over which compensation expense would be amortized | 1 year |
Restricted stock unit activity | |
Non-vested at the beginning of the period (in shares) | shares | 387 |
Granted (in shares) | shares | 106 |
Vested (in shares) | shares | (124) |
Cancelled (in shares) | shares | (10) |
Non-vested at the end of the period (in shares) | shares | 359 |
Weighted-average fair value per share | |
Non-vested at the beginning of the period (in dollars per share) | $ / shares | $ 100.13 |
Granted (in dollars per share) | $ / shares | 131 |
Vested (in dollars per share) | $ / shares | 83.37 |
Cancelled (in dollars per share) | $ / shares | 112.90 |
Non-vested at the end of the period (in dollars per share) | $ / shares | $ 114.57 |
Unrecognized compensation cost | $ | $ 20 |
Weighted-average period for amortization of unrecognized compensation cost | 2 years |
Share-Based Compensation Perfor
Share-Based Compensation Performance Shares (Details) - Performance Shares $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 6 Months Ended |
Mar. 31, 2018shares | Jun. 30, 2018USD ($)$ / sharesshares | |
Other disclosures | ||
Vesting terms | 3 years | |
Service period over which compensation expense would be amortized | 3 years | |
Vested (in shares) | 92 | |
Award payout achieved (as a percent) | 200 | |
Cancelled (in shares) | 4 | |
Unrecognized compensation cost | $ | $ 4 | |
Remaining requisite service period (in years) | 1 year 10 months 24 days | |
Minimum | ||
Other disclosures | ||
Performance shares available for vesting (as a percent) | 0.00% | |
Maximum | ||
Other disclosures | ||
Performance shares available for vesting (as a percent) | 200.00% | |
Long Term Incentive Plan | ||
Other disclosures | ||
Granted (in shares) | 27 | |
Granted (in dollars per share) | $ / shares | $ 141.91 |
Share-Based Compensation Expens
Share-Based Compensation Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Share-based compensation expense | ||||
Pre-tax compensation expense | $ 6 | $ 6 | $ 11 | $ 13 |
Income tax benefit | (1) | (1) | (2) | (4) |
Total share-based compensation expense, net of income taxes | 5 | 5 | 9 | 9 |
Employee Stock Option | ||||
Share-based compensation expense | ||||
Pre-tax compensation expense | 2 | 2 | 3 | 4 |
Income tax benefit | (1) | (1) | (1) | |
Total share-based compensation expense, net of income taxes | 1 | 2 | 2 | 3 |
Restricted Stock Units (RSUs) | ||||
Share-based compensation expense | ||||
Pre-tax compensation expense | 3 | 3 | 6 | 6 |
Income tax benefit | (1) | (1) | (2) | |
Total share-based compensation expense, net of income taxes | 3 | 2 | 5 | 4 |
Performance shares and other share-based awards | ||||
Share-based compensation expense | ||||
Pre-tax compensation expense | 1 | 1 | 2 | 3 |
Income tax benefit | (1) | |||
Total share-based compensation expense, net of income taxes | $ 1 | $ 1 | $ 2 | $ 2 |
Net Periodic Pension and Post49
Net Periodic Pension and Postretirement Benefit Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2018 | |
Pension Plan | Forecast | |||||
Anticipated cash contributions | |||||
Anticipated cash contributions to pension plans in 2018 | $ 5 | ||||
Pension Plan | US | |||||
Components of Net Periodic Benefit Costs | |||||
Service cost | $ 2 | $ 2 | $ 3 | $ 3 | |
Interest cost | 3 | 3 | 6 | 6 | |
Expected return on plan assets | (5) | (5) | (10) | (10) | |
Net periodic benefit cost/Net postretirement benefit costs | (1) | (1) | |||
Employer Contributions | |||||
Cash contributions to defined benefit pension plan | 1 | ||||
Pension Plan | US | Forecast | |||||
Anticipated cash contributions | |||||
Anticipated cash contributions to pension plans in 2018 | 2 | ||||
Pension Plan | Non-US | |||||
Components of Net Periodic Benefit Costs | |||||
Service cost | 1 | 1 | 2 | 2 | |
Interest cost | 2 | 3 | 5 | 5 | |
Expected return on plan assets | (3) | (2) | (5) | (5) | |
Amortization of actuarial loss | 1 | 1 | 1 | ||
Net periodic benefit cost/Net postretirement benefit costs | 1 | 2 | 3 | 3 | |
Employer Contributions | |||||
Cash contributions to defined benefit pension plan | 1 | ||||
Pension Plan | Non-US | Forecast | |||||
Anticipated cash contributions | |||||
Anticipated cash contributions to pension plans in 2018 | $ 3 | ||||
Postemployment Retirement Benefits | |||||
Components of Net Periodic Benefit Costs | |||||
Interest cost | 1 | 1 | 2 | 2 | |
Amortization of prior service credit | $ (1) | (1) | $ (2) | ||
Net periodic benefit cost/Net postretirement benefit costs | $ 1 | $ 1 |
Earnings per Common Share (Deta
Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Basic EPS: | ||||
Net Income Available to Ingredion - basic | $ 114 | $ 130 | $ 254 | $ 254 |
Weighted average number of shares outstanding, basic | 71.9 | 71.8 | 72.1 | 72 |
Basic earnings per common share of Ingredion (in dollars per share) | $ 1.59 | $ 1.81 | $ 3.52 | $ 3.53 |
Effect of Dilutive Securities: | ||||
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards | 0.9 | 1.4 | 1.1 | 1.4 |
Diluted EPS: | ||||
Net Income Available to Ingredion - diluted | $ 114 | $ 130 | $ 254 | $ 254 |
Weighted Average Number of Shares Outstanding, Diluted, Total | 72.8 | 73.2 | 73.2 | 73.4 |
Diluted earnings per common share of Ingredion (in dollars per share) | $ 1.57 | $ 1.78 | $ 3.47 | $ 3.46 |
Antidilutive securities excluded in calculation of diluted EPS: | ||||
Antidilutive securities excluded from computation of earnings per share amount | 0.6 | 0.3 | 0.3 | 0.3 |
Inventory (Details)
Inventory (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Inventories | ||
Finished and in process | $ 506 | $ 495 |
Raw materials | 309 | 278 |
Manufacturing supplies and other | 51 | 50 |
Total inventories | $ 866 | $ 823 |
Debt (Details)
Debt (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Debt | ||
Fair value adjustment related to hedged fixed rate debt | $ (3) | $ 1 |
Long-term debt | 1,530 | 1,744 |
Short-term borrowings | 133 | 120 |
Total debt | 1,663 | 1,864 |
Senior Notes 3.2 Percent Due October 1, 2026 | ||
Debt | ||
Long-term debt | $ 496 | $ 496 |
Debt, interest rate (as a percent) | 3.20% | 3.20% |
Senior Notes 4.625 Percent Due November 1, 2020 | ||
Debt | ||
Long-term debt | $ 399 | $ 398 |
Debt, interest rate (as a percent) | 4.625% | 4.625% |
Senior Notes 6.625 Percent Due April 15, 2037 | ||
Debt | ||
Long-term debt | $ 254 | $ 254 |
Debt, interest rate (as a percent) | 6.625% | 6.625% |
Senior Notes 5.62 Percent Due March 25, 2020 | ||
Debt | ||
Long-term debt | $ 200 | $ 200 |
Debt, interest rate (as a percent) | 5.62% | 5.62% |
Term loan credit agreement due April 25, 2019 | ||
Debt | ||
Long-term debt | $ 165 | $ 395 |
Repayments of long-term debt | 230 | |
Revolving credit facility | ||
Debt | ||
Long-term debt | $ 19 |
Income Taxes - Tax Cuts and Job
Income Taxes - Tax Cuts and Jobs Act (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Jun. 30, 2018 | Dec. 31, 2017 | |
Income Taxes | |||
Provision for tax at statutory rate (as a percent) | 21.00% | 35.00% | |
Foreign subsidiary dividends received deduction percentage | 100.00% | ||
One-time transition tax | $ 21 | ||
Remeasurement of deferred tax assets and liabilities | (38) | ||
Net impact of provision for taxes on unremitted earnings | $ 23 | 33 | |
Other items, net | 7 | ||
Net impact of the TCJA on 2017 income tax expense | $ 23 |
Accumulated Other Comprehensi54
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | $ (1,013) | |||
Amount reclassified from accumulated OCI | $ (1) | $ (3) | 3 | $ 1 |
Tax provision | 1 | 1 | ||
Balance at end of the period | (1,106) | (1,106) | ||
Cumulative Translation Adjustment | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (951) | (1,008) | ||
Other comprehensive (loss) income before reclassification adjustments | (96) | 32 | ||
Net other comprehensive (loss) income | (96) | 32 | ||
Balance at end of the period | (1,047) | (976) | (1,047) | (976) |
Deferred (Loss) Gain on Hedging Activities | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (13) | (7) | ||
Other comprehensive (loss) income before reclassification adjustments | 1 | 12 | ||
Amount reclassified from accumulated OCI | 3 | 2 | ||
Tax provision | (1) | (5) | ||
Net other comprehensive (loss) income | 3 | 9 | ||
Balance at end of the period | (10) | 2 | (10) | 2 |
Pension and Postretirement Adjustment | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (51) | (56) | ||
Other comprehensive (loss) income before reclassification adjustments | (1) | 1 | ||
Amount reclassified from accumulated OCI | (1) | |||
Net other comprehensive (loss) income | (1) | |||
Balance at end of the period | (52) | (56) | (52) | (56) |
Unrealized (Loss) Gain on Investment | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | 2 | |||
Other comprehensive (loss) income before reclassification adjustments | 1 | 1 | ||
Net other comprehensive (loss) income | 1 | 1 | ||
Balance at end of the period | 3 | 1 | 3 | 1 |
Accumulated Other Comprehensive Loss | ||||
Accumulated Other Comprehensive Loss | ||||
Balance at the beginning of the period | (1,013) | (1,071) | ||
Other comprehensive (loss) income before reclassification adjustments | (95) | 46 | ||
Amount reclassified from accumulated OCI | 3 | 1 | ||
Tax provision | (1) | (5) | ||
Net other comprehensive (loss) income | (93) | 42 | ||
Balance at end of the period | $ (1,106) | $ (1,029) | $ (1,106) | $ (1,029) |
Accumulated Other Comprehensi55
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Net sales | $ 1,496 | $ 1,457 | $ 2,965 | $ 2,910 |
Cost of sales | 1,136 | 1,084 | 2,251 | 2,186 |
Financing costs, net | 25 | 20 | 41 | 41 |
Gains related to pension and other postretirement obligations | 1 | 1 | ||
Total before tax reclassifications | 1 | 3 | (3) | (1) |
Tax provision | 1 | 1 | ||
Total after-tax reclassifications | 1 | 3 | (2) | |
Reclassification out of Accumulated Other Comprehensive Income | Commodity Contracts | ||||
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Cost of sales | 2 | $ 2 | (3) | (1) |
Reclassification out of Accumulated Other Comprehensive Income | Foreign Currency Contracts | ||||
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Net sales | 1 | |||
Reclassification out of Accumulated Other Comprehensive Income | Interest Rate Contract | ||||
Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Financing costs, net | $ (1) | $ (1) | $ (1) |