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Equity

9 Months Ended

Sep. 30, 2021

12. Equity

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

During the three and nine months ended September 30, 2021, the Company repurchased 500 thousand and 765 thousand outstanding shares of common stock in open market transactions at a net cost of $44 million and $68 million, respectively. During the three and nine months ended September 30, 2020, the Company did not repurchase shares of common stock.

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


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(in millions)		2021			2020			2021			2020
Stock options:
Pre-tax compensation expense		$	1		$	1		$	3		$	3
Income tax benefit			—			—			—			—
Stock option expense, net of income taxes			1			1			3			3

Restricted stock units ("RSUs"):
Pre-tax compensation expense			2			3			8			9
Income tax benefit			—			—			(1)			(1)
RSUs, net of income taxes			2			3			7			8

Performance shares and other share-based awards:
Pre-tax compensation expense			1			2			4			6
Income tax benefit			—			(1)			—			(1)
Performance shares and other share-based compensation expense, net of income taxes			1			1			4			5

Total share-based compensation:
Pre-tax compensation expense			4			6			15			18
Income tax benefit			—			(1)			(1)			(2)
Total share-based compensation expense, net of income taxes		$	4		$	5		$	14		$	16

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

The Company granted non-qualified options to purchase 358 thousand shares and 336 thousand shares for the nine months ended September 30, 2021 and 2020, 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 at the date of grant:


		Nine Months Ended September 30,
		2021			2020
Expected life (in years)		5.5			5.5
Risk-free interest rate		0.6	%		1.4	%
Expected volatility		23.2	%		19.8	%
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 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 yield is based on current dividend payments at the date of grant.

Stock option activity for the nine months ended September 30, 2021 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, 2020		2,238		$	86.55		5.15		$	14
Granted		358			87.12
Exercised		(200)			58.10
Cancelled		(102)			90.72
Outstanding as of September 30, 2021		2,294		$	89.15		5.36		$	18
Exercisable as of September 30, 2021		1,725		$	89.50		4.19		$	17

For the nine months ended September 30, 2021, cash received from the exercise of stock options was approximately $12 million. As of September 30, 2021, the unrecognized compensation cost related to non-vested stock options totaled $3 million, which is expected to be amortized over the weighted-average period of approximately 1.7 years.

Additional information pertaining to stock option activity is as follows for the periods presented:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(dollars in millions, except per share)		2021			2020			2021			2020
Weighted average grant date fair value of stock options granted (per share)		$	—		$	—		$	12.31		$	11.48
Total intrinsic value of stock options exercised		$	—		$	—		$	6		$	4

Restricted Stock Units: The Company 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 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 period 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 nine months ended September 30, 2021:


(RSUs in thousands)		Number of Restricted Shares		Weighted Average Fair Value per Share
Non-vested as of December 31, 2020		418		$	96.45
Granted		228			87.42
Vested		(90)			124.16
Cancelled		(69)			89.87
Non-vested as of September 30, 2021		487		$	88.07

As of September 30, 2021, the total remaining unrecognized compensation cost related to RSUs was $21 million, which will be amortized over a weighted average period of approximately 1.9 years.

Performance Shares: The Company has a long-term incentive plan for senior management in the form of performance shares. Historically these performance shares vested based solely on the Company’s total shareholder return as compared to the total shareholder return of its peer group over the three-year vesting period. Beginning with the 2019 performance share grants, the vesting of the performance shares is based on two performance metrics. Fifty percent of the performance shares awarded will vest based on the Company’s total shareholder return as compared to the total shareholder return of its peer group, and the remaining fifty percent will vest based on the calculation of the Company’s three-year average Adjusted Return on Invested Capital (“Adjusted ROIC”) against an established Adjusted ROIC target. The 2021 performance shares were granted in two tranches. Vesting for the first tranche was split evenly between the Company’s total shareholder return and Adjusted ROIC against the applicable target. The second tranche of performance share awards will vest 100% based on the calculation of Adjusted ROIC against the applicable target.

For the 2021 performance shares awarded based on the Company’s total shareholder return, the number of shares that ultimately vest can range from zero to 200% of the grant depending on the Company’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 2021 performance shares awarded based on Adjusted ROIC, the number of shares that ultimately vest can range from zero to 200% of the grant depending on the Company’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 the Company’s common stock on the date of the grant and the final number of shares that ultimately vest. The Company will estimate the potential share vesting at least annually to adjust the compensation expense for these awards over the vesting period to reflect the Company’s estimated Adjusted ROIC performance against the target. The total compensation expense for these awards is amortized over a three-year graded vesting schedule.

For the nine months ended September 30, 2021, the Company awarded 108 thousand performance shares at a weighted average fair value of $100.29 per share.

As of September 30, 2021, the unrecognized compensation cost related to these awards was $7 million, which will be amortized over the remaining requisite service period of 2.1 years.

The 2018 performance share awards vested during the nine months ended September 30, 2021, achieving a zero percent payout of the granted performance shares. Additionally, there were 26 thousand performance share cancellations during the nine months ended September 30, 2021.

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 nine months ended September 30, 2021 and 2020:


(in millions)		Cumulative Translation Adjustment			Hedging Activities			Pension and Postretirement Adjustment			Accumulated Other Comprehensive Loss
Balance, December 31, 2020		$	(1,114)		$	42		$	(61)		$	(1,133)
Other comprehensive (loss) gain before reclassification adjustments			(85)			211			—			126
Loss (gain) reclassified from accumulated OCL			311			(170)			—			141
Tax (provision)			—			(11)			—			(11)
Net other comprehensive income			226			30			—			256
Balance, September 30, 2021		$	(888)		$	72		$	(61)		$	(877)


(in millions)		Cumulative Translation Adjustment			Hedging Activities			Pension and Postretirement Adjustment			Accumulated Other Comprehensive Loss
Balance, December 31, 2019		$	(1,089)		$	(9)		$	(60)		$	(1,158)
Other comprehensive (loss) before reclassification adjustments			(105)			(50)			—			(155)
Loss reclassified from accumulated OCL			—			56			—			56
Tax (provision)			—			(2)			—			(2)
Net other comprehensive (loss) income			(105)			4			—			(101)
Balance, September 30, 2020		$	(1,194)		$	(5)		$	(60)		$	(1,259)

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


		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 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															(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
Net income attributable to Ingredion																		118
Net income attributable to non-controlling interests																					3						(2)
Dividends declared, common stock ($0.65/share)																		(43)
Dividends declared, non-controlling interests																					(3)
Repurchases of common stock												(44)
Share-based compensation, net of issuance									1			1												4
Other comprehensive income (loss)															229						(3)
Balance, September 30, 2021		$	—		$	1		$	1,155		$	(1,072)		$	(877)		$	3,877		$	19		$	32		$	68


		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, 2019		$	—		$	1		$	1,137		$	(1,040)		$	(1,158)		$	3,780		$	21		$	31		$	—
Net income attributable to Ingredion																		75
Net income attributable to non-controlling interests																					3
Dividends declared, common stock ($0.63/share)																		(42)
Share-based compensation, net of issuance									5			12												(8)
Other comprehensive loss															(164)						(3)
Balance, March 31, 2020		$	—		$	1		$	1,142		$	(1,028)		$	(1,322)		$	3,813		$	21		$	23		$	—
Net income attributable to Ingredion																		66
Net income attributable to non-controlling interests																					1
Dividends declared, common stock ($0.63/share)																		(43)
Dividends declared, non-controlling interests																					(3)
Share-based compensation, net of issuance									1			1												4
Other comprehensive income (loss)															15						1
Balance, June 30, 2020		$	—		$	1		$	1,143		$	(1,027)		$	(1,307)		$	3,836		$	20		$	27		$	—
Net income attributable to Ingredion																		92
Net income attributable to non-controlling interests																					3						(2)
Dividends declared, common stock ($0.64/share)																		(44)
Dividends declared, non-controlling interests																					(2)
Acquisition of redeemable non-controlling interests																											74
Share-based compensation, net of issuance									2															5
Other comprehensive income (loss)															48												2
Balance, September 30, 2020		$	—		$	1		$	1,145		$	(1,027)		$	(1,259)		$	3,884		$	21		$	32		$	74

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


		Three Months Ended September 30, 2021								Three Months Ended September 30, 2020
(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		$	118		67.0		$	1.76		$	92		67.2		$	1.37

Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards					0.6								0.4
Diluted EPS		$	118		67.6		$	1.75		$	92		67.6		$	1.36


		Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2020
(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		$	50		67.2		$	0.74		$	233		67.2		$	3.47

Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards					0.6								0.4
Diluted EPS		$	50		67.8		$	0.74		$	233		67.6		$	3.45

For the three and nine months ended September 30, 2021, approximately 1.6 million and 1.5 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 nine months ended September 30, 2020, approximately 1.7 million and 1.4 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.