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Equity | 3 Months Ended
--- | ---
Mar. 31, 2024
Stockholders' Equity Note [Abstract] |
Equity | 9. Equity Treasury Stock: On September 26, 2022, the Board of Directors approved a stock repurchase program authorizing us to purchase up to 6.0 million shares of our outstanding common stock until December 31, 2025. We may repurchase shares from time to time in the open market, in privately negotiated transactions, or otherwise, at prices we deem appropriate. We are not obligated to repurchase any shares under the authorization, and the repurchase program may be suspended, discontinued, or modified at any time, for any reason and without notice. The parameters of our stock repurchase program are not established solely with reference to the dilutive impact of shares issued under our stock incentive plan. However, we expect that, over time, share repurchases will offset the dilutive impact of shares issued under the stock incentive plan. During the first quarter of 2024, we repurchased approximately 5 thousand shares of common stock in open market transactions at a net cost of $1 million. During the first quarter of 2023, we did not repurchase any shares of common stock. Share-based Payments: Share-based compensation expense for the periods presented is as follows:
|  | Three Months Ended March 31,
|  | 2024 |  | 2023
Stock options: |  |  |  |
Pre-tax compensation expense |  | $ | 2 |  |  | $ | 1 |
Income tax benefit |  | — |  |  | — |
Stock option expense, net of income taxes |  | 2 |  |  | 1 |
Restricted stock units (“RSUs”): |  |  |  |
Pre-tax compensation expense |  | 7 |  |  | 4 |
Income tax benefit |  | (1) |  |  | (1) |
RSU expenses, net of income taxes |  | 6 |  |  | 3 |
Performance shares and other share-based awards: |  |  |  |
Pre-tax compensation expense |  | 4 |  |  | 4 |
Income tax benefit |  | — |  |  | — |
Performance shares and other share-based compensation expense, net of income taxes |  | 4 |  |  | 4 |
Total share-based compensation: |  |  |  |
Pre-tax compensation expense |  | 13 |  |  | 9 |
Income tax benefit |  | (1) |  |  | (1) |
Total share-based compensation expense, net of income taxes |  | $ | 12 |  |  | $ | 8 |
Stock Options: Under our 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. We generally recognize compensation expense on a straight-line basis for all awards over the employee’s vesting period. We estimate a forfeiture rate at the time of grant and update the estimate throughout the vesting period of the stock options within the amount of compensation costs recognized in each period. We granted non-qualified options to purchase 178 thousand shares and 197 thousand shares for the first quarter of 2024 and 2023. We estimated the fair value of each option grant by using the Black-Scholes option-pricing model with the following assumptions:
|  | Three Months Ended March 31,
|  | 2024 |  | 2023
Expected life (in years) |  | 5.5 |  | 5.5
Risk-free interest rate |  | 4.2% |  | 4.0%
Expected volatility |  | 28.1% |  | 28.3%
Expected dividend yield |  | 2.9% |  | 2.9%
The expected life of options represents the weighted average period that we expect options granted to be outstanding giving consideration to vesting schedules and our 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 our common stock, and dividend yields are based on our dividend yield at the date of issuance. Stock option activity for the first quarter of 2024 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, 2023 |  | 1,953 |  | $ | 96.61 |  |  | 4.97 |  | $ | 29 |
Granted |  | 178 |  | 108.38 |  |  |  |  |
Exercised |  | (165) |  | 79.87 |  |  |  |  |
Cancelled |  | (21) |  | 103.69 |  |  |  |  |
Outstanding as of March 31, 2024 |  | 1,945 |  | $ | 99.03 |  |  | 5.44 |  | $ | 38 |
Exercisable as of March 31, 2024 |  | 1,573 |  | $ | 98.53 |  |  | 4.56 |  | $ | 32 |
For the first quarter of 2024, cash received from the exercise of stock options was approximately $13 million. As of March 31, 2024, the unrecognized compensation cost related to non-vested stock options totaled $6 million, which we expect to amortize over the weighted-average period of approximately 1.5 years. Additional information pertaining to stock option activity is as follows:
|  | Three Months Ended March 31,
|  | 2024 |  | 2023
Weighted average grant date fair value of stock options granted (per share) |  | $ | 26.33 |  |  | $ | 23.80 |
Total intrinsic value of stock options exercised |  | 5 |  |  | 6 |
RSUs: We have granted RSUs to certain key employees. The RSUs are primarily subject to cliff vesting, generally after three years, provided the employee remains in our service. The fair value of the RSUs is determined based upon the number of shares granted and the quoted market price of our common stock at the grant date. The following table summarizes RSU activity in 2024:
|  | Number of Restricted Shares (in thousands) |  | Weighted Average Fair Value per Share
Non-vested as of December 31, 2023 |  | 552 |  | $ | 92.05 |
Granted |  | 191 |  | 107.65 |
Vested |  | (161) |  | 87.15 |
Cancelled |  | (18) |  | 92.77 |
Non-vested as of March 31, 2024 |  | 564 |  | $ | 98.84 |
As of March 31, 2024, the total remaining unrecognized compensation cost related to RSUs was $32 million, which will be amortized on a weighted-average basis over approximately 2.0 years. Performance Shares: We have 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 our total shareholder return as compared to the total shareholder return of our peer group, and the remaining fifty percent vest based on the calculation of our three-year average Adjusted Return on Invested Capital (“Adjusted ROIC”) against an established ROIC target. For the 2024 performance shares awarded based on our total shareholder return, the number of shares that ultimately vest can range from zero to 200 percent of the grant depending on our total shareholder return as compared to the total shareholder return of our 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 (“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. We amortize the total compensation expense for these awards over a three-year graded vesting schedule. For the 2024 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 our 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. We base compensation expense on the market price of our common stock on the grant date and the final number of shares that ultimately vest. We estimate the potential share vesting at least annually to adjust the compensation expense for these awards over the vesting period to reflect our estimated Adjusted ROIC performance against the target. We amortize the total compensation expense for these awards over a three-year graded vesting schedule. For the first quarter of 2024, we awarded 86 thousand performance shares at a weighted average fair value of $127.97 per share. As of March 31, 2024, the unrecognized compensation cost related to these awards was $20 million, which we will amortize over the remaining service period of 2.4 years. The 2021 performance share awards that vested in February 2024 achieved a 200 percent payout of the granted performance shares. As of March 31, 2024, we estimated the 2022 performance share awards will pay out at 200 percent. For the first quarter of 2024, one thousand performance shares were cancelled. Accumulated Other Comprehensive Loss: The following is a summary of accumulated other comprehensive (loss) for the first quarter of 2024 and 2023:
|  | Cumulative Translation Adjustment |  | Hedging Activities |  | Pension and Postretirement Adjustment |  | AOCL
Balance as of December 31, 2023 |  | $ | (961) |  |  | $ | (48) |  |  | $ | (47) |  |  | $ | (1,056) |
Other comprehensive (loss) before reclassification adjustments |  | — |  |  | (41) |  |  | — |  |  | (41) |
Loss reclassified from AOCL |  | — |  |  | 33 |  |  | 1 |  |  | 34 |
Tax benefit |  | — |  |  | 1 |  |  | — |  |  | 1 |
Net other comprehensive (loss) income |  | — |  |  | (7) |  |  | 1 |  |  | (6) |
Balance as of March 31, 2024 |  | $ | (961) |  |  | $ | (55) |  |  | $ | (46) |  |  | $ | (1,062) |
|  | Cumulative Translation Adjustment |  | Hedging Activities |  | Pension and Postretirement Adjustment |  | AOCL
Balance as of December 31, 2022 |  | $ | (1,008) |  |  | $ | 6 |  |  | $ | (46) |  |  | $ | (1,048) |
Other comprehensive gain (loss) before reclassification adjustments |  | 6 |  |  | (58) |  |  | — |  |  | (52) |
(Gain) reclassified from AOCL |  | — |  |  | (18) |  |  | — |  |  | (18) |
Tax benefit |  | — |  |  | 20 |  |  | — |  |  | 20 |
Net other comprehensive income (loss) |  | 6 |  |  | (56) |  |  | — |  |  | (50) |
Balance as of March 31, 2023 |  | $ | (1,002) |  |  | $ | (50) |  |  | $ | (46) |  |  | $ | (1,098) |
Supplemental Information: The following table provides the computation of basic and diluted earnings per common share (“EPS”) for the periods presented.
|  | Three Months Ended March 31, 2024 |  | Three Months Ended March 31, 2023
|  | Net Income Available to Ingredion |  | Weighted Average Shares |  | Per Share Amount |  | Net Income Available to Ingredion |  | Weighted Average Shares |  | Per Share Amount
Basic EPS |  | $ | 216 |  |  | 65.7 |  | $ | 3.29 |  |  | $ | 191 |  |  | 66.1 |  | $ | 2.89 |
Effect of Dilutive Securities: |  |  |  |  |  |  |  |  |  |  |  |
Incremental shares from assumed exercise of dilutive stock options and vesting of dilutive RSUs and other awards |  |  |  | 1.1 |  |  |  |  |  | 1.0 |  |
Diluted EPS |  | $ | 216 |  |  | 66.8 |  | $ | 3.23 |  |  | $ | 191 |  |  | 67.1 |  | $ | 2.85 |
Approximately 0.5 million and 0.7 million share-based awards of common stock were excluded for the first quarter of 2024 and 2023 from the calculation of the weighted average number of shares outstanding for diluted EPS because their effects were anti-dilutive.

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 505 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//505/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//718/tableOfContent + Details
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