Equity

6 Months Ended

Jun. 30, 2022

Equity

Equity

12. Equity

Treasury stock: On October 22, 2018, the Board of Directors authorized a new stock repurchase program permitting Ingredion to purchase up to 8 million of its outstanding shares of common stock from November 5, 2018 through December 31, 2023. The parameters of Ingredion’s stock repurchase program are not established solely with reference to the dilutive impact of shares issued under Ingredion’s stock incentive plan. However, Ingredion expects that, over time, share repurchases will offset the dilutive impact of shares issued under the stock incentive plan.

During the three and six months ended June 30, 2022, we repurchased 502 thousand and 957 thousand outstanding shares of common stock in open market transactions at a net cost of $44 million and $83 million, respectively. During the three and six months ended June 30, 2021, we repurchased 107 thousand and 265 thousand outstanding shares of common stock in open market transactions at a net cost of $10 million and $24 million, respectively.

Share-based payments: The following table summarizes the components of Ingredion’s share-based compensation expense for the periods presented:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)	2022		2021		2022		2021
Stock options:
Pre-tax compensation expense	$	1	$	1	$	2	$	2
Income tax benefit		—		—		—		—
Stock option expense, net of income taxes		1		1		2		2
Restricted stock units ("RSUs"):
Pre-tax compensation expense		3		3		6		6
Income tax benefit		(1)		(1)		(1)		(1)
RSUs, net of income taxes		2		2		5		5
Performance shares and other share-based awards:
Pre-tax compensation expense		4		2		7		3
Income tax benefit		—		—		(1)		—
Performance shares and other share-based compensation expense, net of income taxes		4		2		6		3
Total share-based compensation:
Pre-tax compensation expense		8		6		15		11
Income tax benefit		(1)		(1)		(2)		(1)
Total share-based compensation expense, net of income taxes	$	7	$	5	$	13	$	10

Stock Options: Under Ingredion’s stock incentive plan, stock options are granted at exercise prices that equal the market value of the underlying common stock on the date of grant. The options have a 10-year term and are exercisable upon vesting, which occurs over a three-year period at the anniversary dates of the date of grant. Compensation expense is generally recognized on a straight-line basis for all awards over the employee’s vesting period or over a one-year required service period for certain retirement-eligible executive level employees. Ingredion estimates a forfeiture rate at the time of grant and updates the estimate throughout the vesting period of the stock options within the amount of compensation costs recognized in each period.

Ingredion granted non-qualified options to purchase 281 thousand shares and 358 thousand shares for the first six months ended June 30, 2022 and 2021, respectively. The fair value of each option grant for the periods presented was estimated using the Black-Scholes option-pricing model with the following assumptions:

	Six Months Ended June 30,
	2022		2021
Expected life (in years)	5.5		5.5
Risk-free interest rate	2.0	%	0.6	%
Expected volatility	23.8	%	23.2	%
Expected dividend yield	2.9	%	2.9	%

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 Ingredion’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 Ingredion’s common stock. Dividend yields are based on Ingredion’s dividend yield at the date of issuance.

Stock option activity for the six months ended June 30, 2022 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, 2021	2,154	$	90.39	5.26	$	26
Granted	281		88.66
Exercised	(45)		59.12
Cancelled	(23)		104.71
Outstanding as of June 30, 2022	2,367	$	90.65	5.42	$	13
Exercisable as of June 30, 2022	1,795	$	91.48	4.29	$	12

For the six months ended June 30, 2022, cash received from the exercise of stock options was approximately $3 million. As of June 30, 2022, 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 for the periods presented:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(dollars in millions, except per share)	2022		2021		2022		2021
Weighted average grant date fair value of stock options granted (per share)	$	—	$	—	$	15.04	$	12.31
Total intrinsic value of stock options exercised	$	1	$	1	$	2	$	6

Restricted Stock Units: Ingredion has granted restricted stock units (“RSUs”) to certain key employees. The RSUs are primarily subject to cliff vesting, generally after three years, provided the employee remains in the service of Ingredion. The fair value of the RSUs is determined based upon the number of shares granted and the quoted market price of Ingredion’s common stock at the date of the grant.

The following table summarizes RSU activity in 2022:

(RSUs in thousands)	Number of Restricted Shares	Weighted Average Fair Value per Share
Non-vested as of December 31, 2021	486	$	88.34
Granted	203		88.86
Vested	(126)		91.28
Cancelled	(34)		86.85
Non-vested as of June 30, 2022	529	$	87.94

As of June 30, 2022, the total remaining unrecognized compensation cost related to RSUs was $26 million, which will be amortized on a weighted-average basis over approximately 2.0 years.

Performance Shares: Ingredion has a long-term incentive plan for senior management in the form of performance shares. The vesting of the performance shares is generally based on two performance metrics. Fifty percent of the performance shares awarded vest based on Ingredion’s total shareholder return as compared to the total shareholder return of its peer group and the remaining fifty percent vest based on the calculation of Ingredion’s three-year average Adjusted Return on Invested Capital (“Adjusted ROIC”) against an established ROIC target.

For the 2022 performance shares awarded based on Ingredion’s total shareholder return, the number of shares that ultimately vest can range from zero to 200 percent of the grant depending on Ingredion’s total shareholder return as compared to the total shareholder return of its 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 People, Culture and Compensation Committee of the Board of Directors. Compensation expense is based on the fair value of the performance shares at the grant date, established using a Monte Carlo simulation model. The total compensation expense for these awards is amortized over a three-year graded vesting schedule.

For the 2022 performance shares awarded based on Adjusted ROIC, the number of shares that ultimately vest can range from zero to 200 percent of the grant depending on Ingredion’s Adjusted ROIC performance against the target. The share award vesting will be calculated at the end of the three-year period and is subject to approval by management and the People, Culture and Compensation Committee. Compensation expense is based on the market price of our common stock on the date of the grant and the final number of shares that ultimately vest. Ingredion will estimate the potential share vesting at least annually to adjust the compensation expense for these awards over the vesting period to reflect Ingredion’s estimated Adjusted ROIC performance against the target. The total compensation expense for these awards is amortized over a three-year graded vesting schedule.

For the six months ended June 30, 2022, Ingredion awarded 86 thousand performance shares at a weighted average fair value of $138.85 per share. As of June 30, 2022, the unrecognized compensation cost related to these awards was $14 million, which will be amortized over the remaining requisite service period of 2.1 years. The 2019 performance share awards, whose three-year performance period has ended, achieved a zero percent payout of granted performance shares. There were one thousand performance shares cancelled during 2022.

Accumulated Other Comprehensive Loss: The following is a summary of Accumulated other comprehensive loss for the six months ended June 30, 2022 and 2021:

(in millions)	Cumulative Translation Adjustment		Hedging Activities		Pension and Postretirement Adjustment		AOCL
Balance, December 31, 2021	$	(903)	$	48	$	(42)	$	(897)
Other comprehensive (loss) gain before reclassification adjustments		(81)		179		—		98
(Gain) reclassified from accumulated OCL		—		(128)		—		(128)
Tax (provision)		—		(13)		—		(13)
Net other comprehensive (loss) income		(81)		38		—		(43)
Balance, June 30, 2022	$	(984)	$	86	$	(42)	$	(940)

(in millions)	Cumulative Translation Adjustment		Hedging Activities		Pension and Postretirement Adjustment		AOCL
Balance, December 31, 2020	$	(1,114)	$	42	$	(61)	$	(1,133)
Other comprehensive (loss) gain before reclassification adjustments		(22)		176		—		154
(Gain) reclassified from accumulated OCL		—		(110)		—		(110)
Tax (provision)		—		(17)		—		(17)
Net other comprehensive (loss) income		(22)		49		—		27
Balance, June 30, 2021	$	(1,136)	$	91	$	(61)	$	(1,106)

Supplemental Information: The following Condensed Consolidated Statements of Equity and Redeemable Equity present the dividends per share for common stock for the periods indicated:

	Total Equity
													Non-
									Accumulated				Redeemable		Share-based		Redeemable
					Additional				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, 2021	$	—	$	1	$	1,158	$	(1,061)	$	(897)	$	3,899	$	18	$	36	$	71
Net income attributable to Ingredion												130
Net income attributable to non-controlling interests														3
Dividends declared, common stock ($0.65/share)												(43)
Repurchases of common stock								(39)
Share-based compensation, net of issuance						2		9								(5)
Other comprehensive income (loss)										134				(2)
Balance, March 31, 2022	$	—	$	1	$	1,160	$	(1,091)	$	(763)	$	3,986	$	19	$	31	$	71
Net income attributable to Ingredion												142
Net income attributable to non-controlling interests														2				1
Dividends declared, common stock ($0.65/share)												(43)
Dividends declared, non-controlling interests														(4)
Repurchases of common stock								(44)
Share-based compensation, net of issuance						2		2								6
Fair market value adjustment to non-controlling interests						(29)												29
Non-controlling interest purchases																		(27)
Other comprehensive (loss)										(177)				(2)				(4)
Balance, June 30, 2022	$	—	$	1	$	1,133	$	(1,133)	$	(940)	$	4,085	$	15	$	37	$	70

	Total Equity
													Non-
									Accumulated				Redeemable		Share-based		Redeemable
					Additional				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												(246)
Net income (loss) attributable to non-controlling interests														4				(1)
Dividends declared, common stock ($0.64/share)												(44)
Repurchases of common stock								(14)
Share-based compensation, net of issuance						5		16								(9)
Other comprehensive (loss) income										(31)				1				1
Balance, March 31, 2021	$	—	$	1	$	1,155	$	(1,022)	$	(1,164)	$	3,667	$	26	$	21	$	70
Net income attributable to Ingredion												178
Net income attributable to non-controlling interests														3
Dividends declared, common stock ($0.64/share)												(43)
Dividends declared, non-controlling interests														(7)
Repurchases of common stock								(10)
Share-based compensation, net of issuance						(1)		3								7
Other comprehensive income										58
Balance, June 30, 2021	$	—	$	1	$	1,154	$	(1,029)	$	(1,106)	$	3,802	$	22	$	28	$	70

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

	Three Months Ended June 30, 2022					Three Months Ended June 30, 2021
(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	$	142	66.4	$	2.14	$	178	67.2	$	2.65
Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards			0.7					0.7
Diluted EPS	$	142	67.1	$	2.12	$	178	67.9	$	2.62

	Six Months Ended June 30, 2022					Six Months Ended June 30, 2021
(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	$	272	66.6	$	4.08	$	(68)	67.3	$	(1.01)
Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards			0.7					—
Diluted EPS	$	272	67.3	$	4.04	$	(68)	67.3	$	(1.01)

Approximately 1.5 million and 1.4 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 for the three and six months ended June 30, 2022, respectively. For the three and six months ended June 30, 2021, approximately 1.4 million and 2.1 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.