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Equity

12 Months Ended

Dec. 31, 2021

NOTE 12 – Equity

Preferred stock: Ingredion has authorized 25 million shares of $0.01 par value preferred stock, none of which were issued or outstanding at December 31, 2021 and 2020.

Treasury stock: On October 22, 2018, the Board of Directors authorized a 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.

On November 5, 2018, Ingredion entered into a Variable Timing Accelerated Share Repurchase (“ASR”) program with JPMorgan (“JPM”). Under the ASR program, Ingredion paid $455 million on November 5, 2018 and acquired 4 million shares of its common stock having an approximate value of $423 million on that date. On February 5, 2019, Ingredion and JPM settled the difference between the initial price and average daily volume-weighted average price (“VWAP”) less the agreed upon discount during the term of the agreement. The final VWAP was $98.04 per share, which was less than originally paid. Ingredion settled the difference in cash, resulting in JPM returning $63 million of the upfront payment to Ingredion on February 6, 2019, which lowered the total cost of repurchasing the 4 million shares of common stock to $392 million. Ingredion adjusted Additional paid-in capital and Treasury stock by $32 million and $31 million, respectively, in 2019 for this inflow of cash.

During 2021, Ingredion repurchased 765 thousand shares of common stock in open market transactions at a net cost of $68 million. Ingredion did not repurchase any shares of common stock in open market transactions in 2020.

Set forth below is a reconciliation of common stock share activity for 2021, 2020 and 2019:


(Shares of common stock, in thousands)		Issued		Held in Treasury		Outstanding
Balance at December 31, 2018		77,811		11,285		66,526
Issuance of restricted stock units as compensation		—		(105)		105
Performance shares and other share-based awards		—		(5)		5
Stock options exercised		—		(182)		182
Purchase/acquisition of treasury stock		—		—		—
Balance at December 31, 2019		77,811		10,993		66,818
Issuance of restricted stock units as compensation		—		(69)		69
Performance shares and other share-based awards		—		(5)		5
Stock options exercised		—		(124)		124
Purchase/acquisition of treasury stock		—		—		—
Balance at December 31, 2020		77,811		10,795		67,016
Issuance of restricted stock units as compensation		—		(69)		69
Performance shares and other share-based awards		—		(6)		6
Stock options exercised		—		(331)		331
Purchase/acquisition of treasury stock		—		765		(765)
Balance at December 31, 2021		77,811		11,154		66,657

Share-based payments: The following table summarizes the components of Ingredion’s share-based compensation expense for the years ended December 31, 2021, 2020 and 2019:


(in millions)		2021			2020			2019
Stock options:
Pre-tax compensation expense		$	3		$	4		$	3
Income tax benefit			—			—			—
Stock option expense, net of income taxes			3			4			3

Restricted stock units ("RSUs"):
Pre-tax compensation expense			12			12			10
Income tax benefit			(1)			(1)			(2)
RSUs, net of income taxes			11			11			8

Performance shares and other share-based awards:
Pre-tax compensation expense			8			7			5
Income tax benefit			(1)			(1)			—
Performance shares and other share-based compensation expense, net of income taxes			7			6			5

Total share-based compensation:
Pre-tax compensation expense			23			23			18
Income tax benefit			(2)			(2)			(2)
Total share-based compensation expense, net of income taxes		$	21		$	21		$	16

Ingredion has a stock incentive plan (“SIP”) administered by the People, Culture and Compensation Committee (“Compensation Committee”) of its Board of Directors that provides for the granting of stock options, restricted stock, restricted stock units and other share-based awards to certain key employees. A maximum of 8 million shares were originally authorized for awards under the SIP. On May 19, 2021, Ingredion’s stockholders approved an increase in the number of shares then available under the SIP by 2.5 million shares. As of December 31, 2021, 3.8 million shares were available for future grants under the SIP. Shares covered by awards that expire, terminate or lapse will again be available for the grant of awards under the SIP.

Stock Options: Under Ingredion’s 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.

Ingredion granted non-qualified options to purchase 358 thousand, 336 thousand and 247 thousand shares for the years ended December 31, 2021, 2020 and 2019, respectively. The fair value of each option grant was estimated using the Black-Scholes option-pricing model with the following assumptions:


		For the Year Ended December 31,
		2021			2020			2019
Expected life (in years)		5.5			5.5			5.5
Risk-free interest rate		0.6	%		1.4	%		2.5	%
Expected volatility		23.2	%		19.8	%		19.7	%
Expected dividend yield		2.9	%		2.9	%		2.7	%

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 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.

A summary of stock option transactions in 2021 is 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		(331)			62.05
Cancelled		(111)			91.39
Outstanding as of December 31, 2021		2,154		$	90.39		5.26		$	26
Exercisable as of December 31, 2021		1,591		$	91.21		4.09		$	21

For 2021, 2020 and 2019, cash received from the exercise of stock options was $21 million, $6 million and $6 million, respectively. As of December 31, 2021, the unrecognized compensation cost related to non-vested stock options totaled $2 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:


		Year Ended December 31,
(dollars in millions, except per share)		2021			2020			2019
Weighted average grant date fair value of stock options granted (per share)		$	12.31		$	11.48		$	14.02
Total intrinsic value of stock options exercised			10			5			10

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 2021:


				Weighted
		Number of		Average
		Restricted		Fair Value
(shares in thousands)		Shares		per Share
Non-vested at December 31, 2020		418		$	96.45
Granted		239			87.79
Vested		(95)			121.80
Cancelled		(76)			89.52
Non-vested at December 31, 2021		486		$	88.34

The total fair value of RSUs that vested in 2021, 2020 and 2019 was $12 million, $17 million and $16 million, respectively.

At December 31, 2021, the total remaining unrecognized compensation cost related to RSUs was $17 million, which will be amortized on a weighted-average basis over approximately 1.8 years. Recognized compensation cost related to unvested RSUs is included in Share-based payments subject to redemption in the Consolidated Balance Sheets and totaled $25 million and $23 million at December 31, 2021 and 2020, respectively.

Performance Shares: Ingredion has a long-term incentive plan for senior management in the form of performance shares. Historically these performance shares vested based solely on Ingredion’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 are 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 (“ROIC”) against an established ROIC target. The 2021 performance shares were granted in two tranches. Vesting for the first tranche was split evenly between Ingredion’s total shareholder return and Adjusted ROIC against the applicable target. The second tranche of performance share awards vest 100 percent based on the calculation of Adjusted ROIC against the applicable target.

For the 2021 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 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 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 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.

Ingredion awarded 108 thousand, 81 thousand and 70 thousand performance shares in 2021, 2020 and 2019, respectively. The weighted average fair value of the shares granted during the 2021, 2020 and 2019 was $100.29, $94.48 and $92.57, respectively.

The 2018 performance share awards that vested during 2021 achieved a zero percent payout of the granted performance shares. As of December 31, 2021, the 2019 performance share awards are estimated to pay out at zero percent. Additionally, there were 27 thousand shares cancelled during 2021.

As of December 31, 2021, the unrecognized compensation cost relating to these plans was $7 million, which will be amortized over the remaining requisite service periods of 1.9 years. Recognized compensation cost related to these unvested awards is included in share-based payments subject to redemption in the Consolidated Balance Sheets and totaled $11 million and $7 million at December 31, 2021 and 2020, respectively.

Other share-based awards under the SIP: Under the compensation agreement with the Board of Directors, $130,000 of a non-employee director’s annual retainer and 50 percent of the additional retainers paid to the Lead Director and the Chairs of committees of the Board of Directors are awarded in shares of common stock or, if a director elects to defer all or a portion of their common stock or cash compensation, in shares of restricted stock units. These restricted units may not be transferred until a date not less than six months after the director’s termination of service from the Board of Directors, at which time the restricted units will be settled by delivering shares of common stock with fractional shares to be paid in cash. The compensation expense relating to this plan included in the Consolidated Statements of Income was approximately $2 million for 2021 and 2020, as well as $1 million for 2019. At December 31, 2021, there were approximately 253 thousand restricted stock units outstanding under this plan at a carrying value of approximately $17 million.

Accumulated Other Comprehensive Loss: A summary of accumulated other comprehensive income (loss) for 2021, 2020 and 2019, is presented below:


(in millions)		Cumulative Translation Adjustment			Hedging Activities			Pension and Postretirement Adjustment			AOCL
Balance, December 31, 2018		$	(1,080)			(5)			(69)			(1,154)
Other comprehensive (loss) income before reclassification adjustments			(9)			(19)			11			(17)
Amount reclassified from accumulated OCL			—			14			—			14
Tax benefit (provision)			—			1			(2)			(1)
Net other comprehensive (loss) income			(9)			(4)			9			(4)
Balance, December 31, 2019			(1,089)			(9)			(60)			(1,158)
Other comprehensive (loss) income before reclassification adjustments			(25)			5			(2)			(22)
Amount reclassified from accumulated OCL			—			65			—			65
Tax (provision) benefit			—			(19)			1			(18)
Net other comprehensive (loss) income			(25)			51			(1)			25
Balance, December 31, 2020		$	(1,114)		$	42		$	(61)		$	(1,133)
Other comprehensive (loss) gain before reclassification adjustments			(100)			218			28			146
Loss (gain) reclassified from accumulated OCL			311			(209)			—			102
Tax (provision)			—			(3)			(9)			(12)
Net other comprehensive income			211			6			19			236
Balance, December 31, 2021		$	(903)		$	48		$	(42)		$	(897)

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


			2021									2020									2019
			Net Income			Weighted			Per			Net Income			Weighted			Per			Net Income			Weighted			Per
			Available			Average			Share			Available			Average			Share			Available			Average			Share
(in millions, except per share amounts)			to Ingredion			Shares			Amount			to Ingredion			Shares			Amount			to Ingredion			Shares			Amount
Basic EPS		$	117			67.1		$	1.74		$	348			67.2		$	5.18		$	413			66.9		$	6.17

Effect of Dilutive Securities:
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards						0.7									0.4									0.5
Diluted EPS		$	117			67.8		$	1.73		$	348			67.6		$	5.15		$	413			67.4		$	6.13

Approximately 0.9 million, 1.7 million and 1.1 million share-based awards of common stock were excluded in 2021, 2020 and 2019, respectively, from the calculation of the weighted average number of shares outstanding for diluted EPS because their effects were anti-dilutive.