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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

or

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

For the transition period from  to  

Commission File Number 1-13397

Ingredion Incorporated

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

22-3514823

(I.R.S. Employer Identification Number)

5 Westbrook Corporate Center

WestchesterIllinois

60154

(Address of principal executive offices)

(Zip Code)

(708) 551-2600

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value per share

INGR

New York Stock Exchange

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

Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

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

Class

Outstanding at July 31, 2021

Common Stock, $.01 par value

67,005,068 shares

Table of Contents

INGREDION INCORPORATED

FORM 10-Q

TABLE OF CONTENTS

Page

Part I

Item 1

Financial Statements

3

Condensed Consolidated Statements of Income (Loss)

3

Condensed Consolidated Statements of Comprehensive Income (Loss)

4

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Equity and Redeemable Equity

6

Condensed Consolidated Statements of Cash Flows

7

Notes to Condensed Consolidated Financial Statements

8

Item 2

Management’s discussion and analysis of financial condition and results of operations

28

Item 3

Quantitative and qualitative disclosures about market risk

39

Item 4

Controls and procedures

39

Part II

Item 1

Legal proceedings

40

Item 2

Unregistered sales of equity securities and use of proceeds

40

Item 6

Exhibits

41

Signatures

42

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Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

Three Months Ended 

Six Months Ended 

June 30, 

June 30, 

(in millions, except per share amounts)

    

2021

    

2020

    

2021

    

2020

Net sales

$

1,762

$

1,349

$

3,376

$

2,892

Cost of sales

1,395

1,078

2,658

2,298

Gross profit

367

271

718

594

Operating expenses

167

147

320

301

Other (income) expense, net

(26)

(28)

2

Restructuring/impairment charges

4

11

374

25

Operating income

222

113

52

266

Financing costs, net

19

19

38

37

Other, non-operating (income), net

(2)

(3)

(1)

Income before income taxes

205

94

17

230

Provision for income taxes

24

27

79

85

Net income (loss)

181

67

(62)

145

Less: Net income attributable to non-controlling interests

3

1

6

4

Net income (loss) attributable to Ingredion

$

178

$

66

$

(68)

$

141

Weighted average common shares outstanding:

Basic

67.2

67.2

67.3

67.2

Diluted

67.9

67.6

67.3

67.7

Earnings (Loss) per common share of Ingredion:

Basic

$

2.65

$

0.98

$

(1.01)

$

2.10

Diluted

$

2.62

$

0.98

$

(1.01)

$

2.08

See Notes to Condensed Consolidated Financial Statements

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Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

Three Months Ended 

Six Months Ended 

June 30, 

June 30, 

(in millions)

    

2021

    

2020

    

2021

    

2020

 

Net income (loss)

  

$

181

  

$

67

  

$

(62)

$

145

Other comprehensive income:

Gains (losses) on cash flow hedges, net of income tax effect of $40, $4, $47 and $16, respectively

107

(16)

129

(50)

(Gains) losses on cash flow hedges reclassified to earnings, net of income tax effect of $30, $4, $30 and $6, respectively

(79)

15

(80)

19

Currency translation adjustment

30

16

(22)

(118)

Comprehensive income (loss)

239

82

(35)

(4)

Less: Comprehensive income attributable to non-controlling interests

3

2

8

2

Comprehensive income (loss) attributable to Ingredion

$

236

$

80

$

(43)

$

(6)

See Notes to Condensed Consolidated Financial Statements

4

Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Balance Sheets

June 30, 

December 31, 

(in millions, except share and per share amounts)

    

2021

    

2020

 

(Unaudited)

Assets

  

  

Current assets:

Cash and cash equivalents

$

542

$

665

Short-term investments

7

Accounts receivable, net

1,140

1,011

Inventories

1,054

917

Prepaid expenses

70

54

Total current assets

2,813

2,647

Property, plant and equipment, net of accumulated depreciation of $3,225 and $3,175, respectively

2,386

2,455

Goodwill

913

902

Other intangible assets, net of accumulated amortization of $240 and $229, respectively

431

444

Operating lease assets

189

173

Deferred income tax assets

27

23

Other assets

339

214

Total assets

$

7,098

$

6,858

Liabilities and equity

Current liabilities:

Short-term borrowings

$

72

$

438

Accounts payable and accrued liabilities

1,029

1,020

Total current liabilities

1,101

1,458

Non-current liabilities

225

227

Long-term debt

2,129

1,748

Non-current operating lease liabilities

152

136

Deferred income tax liabilities

214

217

Liabilities held for sale

335

Total liabilities

4,156

3,786

Share-based payments subject to redemption

28

30

Redeemable non-controlling interests

70

70

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, 2021 and December 31, 2020, respectively

1

1

Additional paid-in capital

1,154

1,150

Less: Treasury stock (common stock: 10,808,504 and 10,795,346 shares at June 30, 2021 and December 31, 2020, respectively) at cost

(1,029)

(1,024)

Accumulated other comprehensive loss

(1,106)

(1,133)

Retained earnings

3,802

3,957

Total Ingredion stockholders’ equity

2,822

2,951

Non-redeemable non-controlling interests

22

21

Total equity

2,844

2,972

Total liabilities and equity

$

7,098

$

6,858

See Notes to Condensed Consolidated Financial Statements

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Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Equity and Redeemable Equity

(Unaudited)

Total Equity

Non-

Redeemable

Share-based

Redeemable

Additional

Accumulated Other

Non-

Payments

Non-

Preferred

Common

Paid-In

Treasury

Comprehensive

Retained

Controlling

Subject to

Controlling

(in millions)

    

Stock

Stock

    

Capital

    

Stock

    

Loss

    

Earnings

    

Interests

    

Redemption

    

Interests

 

Balance, December 31, 2020

$

$

1

$

1,150

$

(1,024)

$

(1,133)

$

3,957

$

21

$

30

$

70

Net (loss) attributable to Ingredion

(68)

Net income (loss) attributable to non-controlling interests

7

(1)

Dividends declared

(87)

(7)

Repurchases of common stock, net

(24)

Share-based compensation, net of issuance

4

19

(2)

Other comprehensive (loss) income

27

1

1

Balance, June 30, 2021

$

$

1

$

1,154

$

(1,029)

$

(1,106)

$

3,802

$

22

$

28

$

70

Total Equity

 

Non-

Redeemable

Share-based

Redeemable

Additional

Accumulated Other

Non-

Payments

Non-

 

Preferred

Common

Paid-In

Treasury

Comprehensive

Retained

Controlling

Subject to

Controlling

 

(in millions)

    

Stock

Stock

    

Capital

    

Stock

    

Loss

    

Earnings

    

Interests

    

Redemption

    

Interests

 

Balance, December 31, 2019

 

$

$

1

$

1,137

$

(1,040)

$

(1,158)

$

3,780

$

21

$

31

$

Net income attributable to Ingredion

141

Net income attributable to non-controlling interests

4

Dividends declared

(85)

(3)

Share-based compensation, net of issuance

6

13

(4)

Other comprehensive income (loss)

(149)

(2)

Balance, June 30, 2020

$

$

1

 

$

1,143

 

$

(1,027)

 

$

(1,307)

 

$

3,836

 

$

20

 

$

27

 

$

See Notes to Condensed Consolidated Financial Statements

6

Table of Contents

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended

June 30, 

(in millions)

    

2021

    

2020

Cash provided by operating activities

Net (loss) income

$

(62)

$

145

Non-cash charges to net (loss) income:

Depreciation and amortization

103

106

Mechanical stores expense

27

26

Deferred income taxes

(21)

(2)

Assets held for sale impairment

360

Other

(5)

25

Changes in working capital:

Accounts receivable and prepaid expenses

(118)

64

Inventories

(165)

(31)

Accounts payable and accrued liabilities

62

(21)

Margin accounts

(20)

(18)

Other

(32)

Cash provided by operating activities

129

294

Cash used for investing activities

Capital expenditures and mechanical stores purchases, net of proceeds on disposals

(102)

(175)

Payments for acquisitions, net of cash acquired of $2 and $ —, respectively

(40)

Investment in non-consolidated affiliates

(11)

(6)

Short-term investments

(4)

3

Cash used for investing activities

(157)

(178)

Cash (used for) provided by financing activities

Proceeds from borrowings

430

1,486

Payments on debt

(416)

(709)

Payments for debt issuance costs

(9)

Repurchases of common stock, net

(24)

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

9

2

Dividends paid, including to non-controlling interests

  

(93)

  

(87)

Cash (used for) provided by financing activities

(94)

683

Effects of foreign exchange rate changes on cash

(1)

(16)

(Decrease) increase in cash and cash equivalents

(123)

783

Cash and cash equivalents, beginning of period

665

264

Cash and cash equivalents, end of period

$

542

$

1,047

See Notes to Condensed Consolidated Financial Statements

7

Table of Contents

INGREDION INCORPORATED (“Ingredion”)

Notes to Condensed Consolidated Financial Statements

1. Interim Financial Statements

References to the “Company” are to Ingredion Incorporated (“Ingredion”) and its consolidated subsidiaries. These statements should be read in conjunction with the consolidated financial statements and the related notes to those statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The unaudited Condensed Consolidated Financial Statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 included herein were prepared by management on the same basis as the Company’s audited Consolidated Financial Statements for the year ended December 31, 2020 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 the Condensed Consolidated Statements of Income (Loss), Condensed Consolidated Statements of Comprehensive  Income (Loss), Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Equity and Redeemable Equity, and Condensed Consolidated Statements of Cash Flows. The results for the interim period are not necessarily indicative of the results expected for the full year or any other future period.

2.     Summary of Significant Accounting Standards and Policies

For detailed information about the Company’s significant accounting standards and policies, see Note 2 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to the Company’s significant accounting standards and policies for the three and six months ended June 30, 2021.

3. Acquisitions

Acquisitions

On April 1, 2021, the Company acquired KaTech, a privately-held company headquartered in Germany. KaTech provides advanced texture and stabilization solutions to the food and beverage industry. To complete the closing, the Company made a total cash payment of $40 million, net of $2 million of cash acquired, which it funded from cash on hand. The results of KaTech are reported on a one-month lag within the Company’s Condensed Consolidated Financial Statements during the integration process of the companies. KaTech’s operational results are recorded in the Company’s Europe, Middle East and Africa (“EMEA”) reportable business segment.

On November 3, 2020, the Company acquired the remaining 80% of the outstanding shares of Verdient Foods, Inc. (“Verdient”), as well as the leased land and buildings not owned by Verdient. To complete the closing, the Company made a total cash payment of CAD $33 million (USD $26 million), which it funded from cash on hand. The Company had previously entered into an equity method investment with Verdient by acquiring 20% of its outstanding shares. Verdient is a Canada-based producer of pulse-based protein concentrates and flours from peas, lentils, and fava beans for human food applications.  The results of the acquired operation are included in the Company’s consolidated results from the acquisition date within the North America reportable business segment.

On July 1, 2020, the Company completed its acquisition of a controlling interest in PureCircle Limited (“PureCircle”). PureCircle is one of the leading producers and innovators of plant-based stevia sweeteners for the global food and beverage industries. To complete the closing, the Company made a total cash payment of $208 million, net of $14 million of cash acquired, which it funded from cash on hand. After the closing, the Company owns 75% of PureCircle, with the remaining 25% owned by former PureCircle shareholders. PureCircle is consolidated by Ingredion for financial reporting purposes, with a corresponding redeemable non-controlling interest of $74 million recorded for the portion not owned by the Company at the time of acquisition. The results of PureCircle are reported on a one-month lag within the Company’s Condensed Consolidated Financial Statements during the integration process of the companies. The results of the acquired operations are included in the Company’s consolidated results from the acquisition date within the Asia-Pacific reportable business segment.

A preliminary allocation of the purchase price to the assets acquired and liabilities assumed was made based on available information and incorporating management’s best estimates.  The assets acquired and liabilities assumed in the

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transaction for each acquisition are generally recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisitions are expensed as incurred.  

The acquisitions of KaTech and Verdient added a total of $36 million of goodwill and $35 million of tangible assets as of their respective acquisition dates. The purchase accounting for the assets acquired and liabilities assumed for KaTech and Verdient is preliminarily recorded based on available information and incorporating management’s best estimates.

The purchase accounting for the assets acquired and liabilities assumed for PureCircle is complete, except for goodwill and taxes, which are preliminarily recorded based on available information and incorporating management’s best estimates. The purchase accounting for taxes remains preliminary pending receipt of certain information required to finalize the determination of fair value.

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 acquisition. The goodwill related to PureCircle is not tax-deductible due to the structure of the acquisition.

The following table summarizes the preliminary purchase price allocations for the PureCircle acquisition as of June 30, 2021:

(in millions)

    

PureCircle

Working capital (excluding cash)

$

68

Property, plant and equipment

 

91

Other, net

(22)

Identifiable intangible assets

 

68

Goodwill

 

77

Total fair value, net of cash

282

Less: Non-redeemable non-controlling interests

74

Total purchase price, net of cash

 

$

208

The identifiable intangible assets for the acquisition of a controlling interest in PureCircle include customer relationships, tradenames, and proprietary technology. The fair values of these intangible assets were determined to be Level 3 under the fair value hierarchy. Level 3 inputs are unobservable inputs for an asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for fair value estimates to be made in situations in which there is little, if any, market activity for an asset or liability at the measurement date. For more information on the fair value hierarchy, see Note 6 of the Notes to the Condensed Consolidated Financial Statements.

Pro-forma results of operation for any of the foregoing acquisitions have not been presented as the effect of each acquisition individually and in the aggregate with other acquisitions would not be material to the Company’s results of operations for any periods presented.

The Company incurred $5 million and $6 million of pre-tax acquisition and integration costs for the three and six months ended June 30, 2021, respectively. The Company incurred $3 million of pre-tax acquisition and integration costs for the three and six months ended June 30, 2020.

Equity Method Investments

On June 1, 2021, the Company and certain of its subsidiaries entered into an agreement with Amyris, Inc. (“Amyris”) for certain exclusive commercialization rights to Amyris’ rebaudioside M by fermentation (“Reb M”) product; the exclusive licensing of Amyris’ Reb M sweetener manufacturing technology; and a 31% ownership stake in a Reb M joint venture. In exchange for its ownership interest in the joint venture, Ingredion contributed $28 million of total consideration including $10 million of cash and non-exclusive intellectual property licenses and other consideration valued at $18 million. The transaction resulted in $8 million of Other (income) expense, net recorded in the Condensed Consolidated Statements of Income (Loss) during the three months ended June 30, 2021. The $8 million gain includes $18 million of other income related to non-exclusive intellectual property licenses and other consideration contributed by

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Ingredion for the Company’s stake in the joint venture, offset by a $10 million cash payment made by a subsidiary of Ingredion to Amyris for the exclusive right to the Reb M sweetener manufacturing technology license from Amyris. 

The Company incurred $1 million of pre-tax direct transaction costs to acquire the investment for the three and six months ended June 30, 2021.

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 identifies 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 the transaction price is estimated using the expected value method based on an analysis of historical volume incentives or discounts, over a period of time considered adequate to account for current pricing and business trends. Historically, actual volume incentives and discounts relative to those estimated and included when determining the transaction price have not materially differed. Volume incentives and discounts are accrued at the satisfaction of the performance obligation and accounted for in Accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets. These amounts were not significant as of June 30, 2021 or December 31, 2020. The product price as specified in the contract, net of any discounts, is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Payment is received shortly after the performance obligation is satisfied; therefore, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

Revenue is recognized when the Company’s performance obligation is satisfied and control is transferred to the customer, which occurs at a point in time, either upon delivery to an agreed upon location or to the customer. Further, in determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.

Shipping and handling activities related to contracts with customers represent fulfillment costs and are recorded in Cost of sales. Taxes assessed by governmental authorities and collected from customers are accounted for on a net basis and excluded from revenues.  The Company applies a practical expedient to expense costs to obtain a contract as incurred as most contracts are one year or less. These costs primarily include the Company’s internal sales force compensation. Under the terms of these programs, such costs 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, 2021 or December 31, 2020.

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.  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.

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Three Months Ended

Six Months Ended

June 30, 

June 30, 

(in millions)

    

2021

    

2020

2021

    

2020

    

Net sales to unaffiliated customers:

North America

$

1,068

$

848

$

2,013

$

1,811

South America

268

182

541

419

Asia-Pacific

248

187

483

376

EMEA

178

132

339

286

Total net sales

$

1,762

$

1,349

$

3,376

$

2,892

5. Restructuring and Impairment Charges

For the three and six months ended June 30, 2021, the Company recorded $4 million and $374 million of pre-tax impairment and restructuring charges, respectively. For the three months ended June 30, 2021, these charges included pre-tax restructuring charges of $4 million primarily related to the Company’s Cost Smart program. For the six months ended June 30, 2021, the Company recorded impairment charges of $360 million related to held for sale treatment of net assets expected to be contributed to an unconsolidated joint venture in the third quarter of 2021, as described below, and pre-tax restructuring charges of $14 million primarily related to the Company’s Cost Smart program.

For the three months and six months ended June 30, 2020, the Company recorded $11 million and $25 million of pre-tax restructuring and impairment charges. For the three months ended June 30, 2020, these charges included $6 million of pre-tax restructuring and impairment charges for the Company’s Cost Smart Cost of sales program, and $5 million of pre-tax restructuring and impairment charges for the Company’s Cost Smart selling, general, and administrative expense (“SG&A”) program. For the six months ended June 30, 2020, the Company recorded $15 million of pre-tax restructuring and impairment charges related to its Cost Smart Cost of sales program, and $10 million of pre-tax restructuring and impairment charges related to its Cost Smart SG&A program.