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Exhibit 99

 

 

Ingredion Incorporated
5 Westbrook Corporate Center
Westchester, IL 60154

NEWS RELEASE

 

CONTACT:
Investors:  Heather Kos, 708-551-2592
Media:  Claire Regan, 708-551-2602

 

INGREDION INCORPORATED REPORTS STRONG SECOND QUARTER 2017 RESULTS

 

·                  Second quarter 2017 reported and adjusted EPS were $1.78 and $1.89, respectively, up from second quarter 2016 reported and adjusted EPS of $1.58 and $1.73, respectively

·                  Year-to-date 2017 reported and adjusted EPS were $3.46 and $3.77, respectively, up from $3.36 of reported EPS and $3.51 adjusted EPS in the year-ago period

·                  Company reiterates 2017 expected adjusted EPS guidance range of $7.50-$7.80

 

WESTCHESTER, Ill., August 1, 2017 — Ingredion Incorporated (NYSE: INGR), a leading global provider of ingredient solutions to diversified industries, today reported results for the second quarter 2017. The results reported in accordance with U.S. generally accepted accounting principles (“GAAP”) for 2017 and 2016 include items which are excluded from the non-GAAP financial measures which we present*.

 

“We continue to deliver shareholder value with another strong quarter, including solid operating income and earnings per share growth. Good operating efficiency, the impact of acquisitions, and higher specialty volumes more than offset headwinds in South America,” said Ilene Gordon, chairman, president and chief executive officer. “Operating income in North America reached record levels, but was lower in South America due to macroeconomic headwinds and the temporary interruption of manufacturing activities in Argentina associated with the implementation of a new labor agreement.”

 

“As in the past, our growth strategy and continuous improvement programs drove margin expansion. The integrations of TIC Gums, Shandong Huanong Specialty Corn, and the Sun Flour Industry rice business are progressing as planned.  We have completed an important organizational restructuring of our Argentina business and we will continue our disciplined approach to cost management. As we continue to execute our strategy, we expect another strong year and reiterate our anticipated 2017 adjusted EPS guidance in the range of $7.50 to $7.80,” Gordon added.

 


*Adjusted Diluted Earnings Per Share (“adjusted EPS”), adjusted operating income and adjusted effective income tax rate are non-GAAP financial measures.  See section II of the Supplemental Financial Information entitled “Non-GAAP Information” following the Condensed Consolidated Financial Statements included in this press release for a reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures.

 



 

Diluted Earnings Per Share (EPS)

 

 

 

2Q16

 

2Q17

 

YTD16

 

YTD17

 

Reported EPS

 

$

1.58

 

$

1.78

 

$

3.36

 

$

3.46

 

Acquisition/Integration Costs

 

 

$

0.04

 

$

0.01

 

$

0.09

 

Impairment/Restructuring Costs

 

$

0.14

 

$

0.07

 

$

0.14

 

$

0.22

 

Adjusted EPS**

 

$

1.73

 

$

1.89

 

$

3.51

 

$

3.77

 

 


**Totals may not foot due to rounding

 

Estimated factors affecting change in adjusted EPS

 

 

 

2Q17

 

YTD17

 

Margin

 

(0.01

)

(0.13

)

Volume

 

0.08

 

0.26

 

Foreign exchange

 

0.01

 

0.04

 

Other income/(expense)

 

0.01

 

0.02

 

Total operating items

 

0.09

 

0.19

 

 

 

 

 

 

 

Financing costs

 

(0.01

)

(0.07

)

Shares outstanding

 

0.02

 

0.02

 

Tax rate

 

0.06

 

0.12

 

Non-controlling interest

 

 

 

Total non-operating items

 

0.07

 

0.07

 

Total items affecting adjusted EPS

 

0.16

 

0.26

 

 

Financial Highlights

 

·                  At June 30, 2017, total debt and cash and short-term investments were $1.95 billion and $454 million, respectively, versus $1.96 billion and $516 million, respectively, at December 31, 2016. Cash and short-term investments were lower primarily driven by stock repurchases.

 

·                  During the second quarter of 2017, net financing costs were $20 million, or $1 million higher than the year-ago period, due to modestly higher interest rates and gross debt compared to the same period in 2016.

 

·                  For the second quarter of 2017, reported and adjusted effective tax rates were 30.4 percent and 29.9 percent, respectively, compared to reported and adjusted effective tax rates of 32.8 percent and 32.0 percent, respectively, in the year-ago period. The lower rates were largely driven by appreciation of the Mexican peso during the quarter and resultant valuation of U.S. dollar-denominated balances in Mexico, partially offset by a valuation allowance on the net deferred tax assets of a foreign subsidiary.

 

·                  Capital expenditures were $144 million for the first half of 2017, up $19 million from the year-ago period.

 

2



 

Business Review

 

Total Ingredion

 

$ in millions

 

2016 Net sales

 

FX Impact

 

Volume

 

Price/mix

 

2017 Net sales

 

% change

 

Second quarter

 

1,455

 

2

 

18

 

-18

 

1,457

 

0

%

Year-to-date

 

2,815

 

50

 

94

 

-49

 

2,910

 

3

%

 

Net Sales

 

·                  Second quarter net sales were flat compared to the year-ago period. Acquisition and specialty volume growth were offset by less favorable price/mix due to the pass through of lower raw material cost.

 

·                  Year-to-date net sales were up as a result of acquisition-, specialty- and core-related volume growth and changes in foreign currency exchange rates. These factors were partially offset by less favorable price/mix due to the pass through of lower raw material cost.

 

Operating income

 

·                  Second quarter reported and adjusted operating income were $211 million and $221 million, respectively.  These were six percent and five percent increases, respectively, compared to $198 million of reported operating income and $211 million of adjusted operating income in the second quarter of 2016. The increases in reported and adjusted operating income were primarily due to margin expansion driven by operational efficiencies as well as acquisition- and organic specialty-related volume growth. These positives were partially offset by difficult macroeconomic conditions in South America, the interruption of manufacturing activities in Argentina and resulting temporary higher costs.

 

·                  Year-to-date 2017 reported and adjusted operating income were $406 million and $433 million, respectively. These were two percent and five percent increases, respectively, compared to $398 million of reported operating income and $412 million of adjusted operating income year-to-date 2016. The increases in reported and adjusted operating income were primarily due to acquisition-, specialty- and core-related volume growth.  These positives were partially offset by difficult macroeconomic conditions in South America, the interruption of manufacturing activities in Argentina and resulting temporary higher costs.

 

·                  Second quarter reported operating income was lower than adjusted operating income by $10 million.  Restructuring actions in Argentina were $6 million and acquisition and integration costs associated with TIC Gums were $4 million.

 

·                  Year-to-date 2017 reported operating income was lower than adjusted operating income by $27 million. Restructuring actions in Argentina were $17 million and acquisition and integration costs associated with TIC Gums were $9 million.

 

3



 

North America

 

$ in millions

 

2016 Net sales

 

FX Impact

 

Volume

 

Price/mix

 

2017 Net sales

 

% change

 

Second quarter

 

895

 

-4

 

15

 

-1

 

905

 

1

%

Year-to-date

 

1,735

 

 

62

 

-11

 

1,786

 

3

%

 

Operating income

 

·                  Second quarter operating income increased from $160 million to $181 million while year-to-date operating income increased from $309 million to $341 million. In both periods, margin expansion driven by operational efficiencies and lapping plant maintenance from the prior year as well as volume growth from TIC Gums and specialty ingredients accounted for the increase.

 

South America

 

$ in millions

 

2016 Net sales

 

FX Impact

 

Volume

 

Price/mix

 

2017 Net sales

 

% change

 

Second quarter

 

240

 

8

 

-11

 

-9

 

228

 

-5

%

Year-to-date

 

455

 

54

 

-8

 

-18

 

483

 

6

%

 

Operating income

 

·                  Operating income in the second quarter was $4 million, down $10 million from a year ago. Year-to-date operating income was $18 million, down $13 million from a year ago. In both periods, the decrease was largely a result of Argentina’s difficult macroeconomic conditions, the interruption of manufacturing activities in Argentina and resulting temporary higher costs.

 

Asia Pacific

 

$ in millions

 

2016 Net sales

 

FX Impact

 

Volume

 

Price/mix

 

2017 Net sales

 

% change

 

Second quarter

 

180

 

2

 

18

 

-13

 

187

 

4

%

Year-to-date

 

349

 

5

 

37

 

-25

 

366

 

5

%

 

Operating income

 

·                  Second quarter operating income was $29 million, down less than $1 million from a year ago. Less favorable price/mix due to core customer mix diversification, more than offset volume growth.

 

·                  Year-to-date operating income was $59 million, up $1 million from a year ago. The increase was largely due to volume growth partially offset by less favorable price/mix due to core customer mix diversification.

 

4



 

Europe, Middle East, Africa (EMEA)

 

$ in millions

 

2016 Net sales

 

FX Impact

 

Volume

 

Price/mix

 

2017 Net sales

 

% change

 

Second quarter

 

140

 

-3

 

-4

 

4

 

137

 

-2

%

Year-to-date

 

276

 

-8

 

2

 

5

 

275

 

 

 

Operating income

 

·                  Second quarter operating income was $29 million, flat to a year ago. Margin expansion offset foreign exchange and volume impacts due to Ramadan timing.

 

·                  Year-to-date operating income was $57 million, up $2 million from a year ago. Volume growth more than offset foreign exchange impacts and higher input costs in Europe.

 

2017 Guidance

 

2017 adjusted EPS, excluding acquisition-related, integration, and restructuring costs, as well as any potential impairment costs, is expected to be in the range of $7.50 to $7.80 compared to adjusted EPS of $7.13 in 2016. The full-year guidance assumes, compared to last year: overall improvement in North America, Asia Pacific, and EMEA; South America flat to down; an adjusted effective tax rate of approximately 29 to 31 percent; and continued trade up in our portfolio, including higher-value specialty ingredients, leading to margin expansion.

 

In 2017, cash generated by operations is now expected to be in the range of $750 to $800 million, slightly lower than our previous estimate, due to the organizational restructuring actions in Argentina and the launch of a finance transformation project.  Capital expenditures are anticipated to be between $300 and $325 million.

 

Conference Call and Webcast

 

Ingredion will conduct a conference call today at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) to be hosted by Ilene Gordon, chairman, president and chief executive officer, and James Gray, executive vice president and chief financial officer.

 

The call will be webcast in real time, and will include a visual presentation accessible through the Ingredion website at www.ingredion.com. The presentation will be available to download a few hours prior to the start of the call. A replay of the webcast will be available for a limited time thereafter at www.ingredion.com.

 

ABOUT THE COMPANY

 

Ingredion Incorporated (NYSE: INGR) is a leading global ingredient solutions provider. We turn grains, fruits, vegetables and other plant materials into value-added ingredients and biomaterial solutions for the food,

 

5



 

beverage, paper and corrugating, brewing and other industries. Serving customers in over 100 countries, our ingredients make crackers crunchy, yogurts creamy, candy sweet, paper stronger and add fiber to nutrition bars. Visit www.ingredion.com to learn more.

 

Forward-Looking Statements

 

This news release contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends these forward-looking statements to be covered by the safe harbor provisions for such statements.

 

Forward-looking statements include, among other things, any statements regarding the Company’s prospects or future financial condition, earnings, revenues, tax rates, capital expenditures, expenses or other financial items, any statements concerning the Company’s prospects or future operations, including management’s plans or strategies and objectives therefor and any assumptions, expectations or beliefs underlying the foregoing.

 

These statements can sometimes be identified by the use of forward looking words such as “may,” “will,” “should,” “anticipate,” “assume”, “believe,” “plan,” “project,” “estimate,” “expect,” “intend,” “continue,” “pro forma,” “forecast,” “outlook,” “propels,” “opportunity,” “potential” or other similar expressions or the negative thereof. All statements other than statements of historical facts in this release or referred to in this release are “forward-looking statements.”

 

These statements are based on current circumstances or expectations, but are subject to certain inherent risks and uncertainties, many of which are difficult to predict and are beyond our control. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, stockholders are cautioned that no assurance can be given that our expectations will prove correct.

 

Actual results and developments may differ materially from the expectations expressed in or implied by these statements, based on various factors, including the effects of global economic conditions, including, particularly, continuation or worsening of the current economic, currency and political conditions in South America and economic conditions in Europe, and their impact on our sales volumes and pricing of our products, our ability to collect our receivables from customers and our ability to raise funds at reasonable rates; fluctuations in worldwide markets for corn and other commodities, and the associated risks of hedging against such fluctuations; fluctuations in the markets and prices for our co-products, particularly corn oil; fluctuations in aggregate industry supply and market demand; the behavior of financial markets, including foreign currency fluctuations and fluctuations in interest and exchange rates; volatility and turmoil in the capital markets; the commercial and consumer credit environment; general political, economic, business, market and weather conditions in the various geographic regions and countries in which we buy our raw materials or manufacture or sell our products; future financial performance of major industries which we serve, including, without limitation, the food and beverage, paper, corrugated, and brewing industries; energy costs and availability, freight and shipping costs, and changes in regulatory controls regarding quotas; tariffs, duties, taxes and income tax rates; particularly United States tax reform; operating difficulties; availability of raw materials, including potato starch, tapioca, gum arabic and the specific varieties of corn upon which our products are based; our ability to develop new products and a services at a rate or of a quality sufficient to meet expectations; energy issues in Pakistan; boiler reliability; our ability to effectively integrate and operate acquired businesses; our ability to achieve budgets and to realize expected synergies; our ability to complete planned maintenance and investment projects successfully and on budget; labor disputes; genetic and biotechnology issues; changing consumption preferences including those relating to high fructose corn syrup; increased competitive and/or customer pressure in the corn-refining industry; and the outbreak or continuation of serious communicable disease or hostilities including acts of terrorism.  Factors relating to the acquisition of TIC Gums that could cause actual results and developments to differ from expectations include:  the anticipated benefits of the acquisition, including synergies, may not be realized; and the integration of TIC Gum’s operations with those of Ingredion may be materially delayed or may be more costly or difficult than expected.

 

Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement as a result of new information or future events or developments. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections. For a further description of these and other risks, see “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent reports on Forms 10-Q and 8-K.

 

6



 

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Income

(Unaudited)

 

 

 

Three Months Ended 
June 30,

 

Change 

 

Six Months Ended 
June 30,

 

Change 

 

(in millions, except per share amounts)

 

2017

 

2016

 

%

 

2017

 

2016

 

%

 

Net sales before shipping and handling costs

 

$

1,542

 

$

1,533

 

1

%

$

3,079

 

$

2,966

 

4

%

Less: shipping and handling costs

 

85

 

78

 

 

 

169

 

151

 

 

 

Net sales

 

$

1,457

 

$

1,455

 

0

%

$

2,910

 

$

2,815

 

3

%

Cost of sales

 

1,084

 

1,100

 

 

 

2,185

 

2,121

 

 

 

Gross profit

 

$

373

 

$

355

 

5

%

$

725

 

$

694

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

157

 

144

 

9

%

306

 

282

 

9

%

Other (income) expense, net

 

(1

)

 

 

 

(3

)

1

 

 

 

Restructuring charge

 

6

 

13

 

 

 

16

 

13

 

 

 

Operating income

 

$

211

 

$

198

 

7

%

$

406

 

$

398

 

2

%

Financing costs, net

 

20

 

19

 

 

 

41

 

33

 

 

 

Income before income taxes

 

$

191

 

$

179

 

7

%

$

365

 

$

365

 

0

%

Provision for income taxes

 

58

 

59

 

 

 

105

 

111

 

 

 

Net income

 

$

133

 

$

120

 

11

%

$

260

 

$

254

 

2

%

Less: Net income attributable to non-controlling interests

 

3

 

3

 

 

 

6

 

6

 

 

 

Net income attributable to Ingredion

 

$

130

 

$

117

 

11

%

$

254

 

$

248

 

2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Ingredion common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

71.8

 

72.2

 

 

 

72.0

 

72.1

 

 

 

Diluted

 

73.2

 

74.0

 

 

 

73.4

 

73.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share of Ingredion:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.81

 

$

1.62

 

12

%

$

3.53

 

$

3.44

 

3

%

Diluted

 

$

1.78

 

$

1.58

 

13

%

$

3.46

 

$

3.36

 

3

%

 



 

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Balance Sheets

 

(in millions, except share and per share amounts)

 

June 30, 2017

 

December 31, 2016

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

441

 

$

512

 

Short-term investments

 

13

 

4

 

Accounts receivable — net

 

900

 

923

 

Inventories

 

822

 

789

 

Prepaid expenses

 

32

 

24

 

Total current assets

 

2,208

 

2,252

 

 

 

 

 

 

 

Property, plant and equipment — net

 

2,145

 

2,116

 

Goodwill

 

798

 

784

 

Other intangible assets — net

 

505

 

502

 

Deferred income tax assets

 

7

 

7

 

Other assets

 

126

 

121

 

Total assets

 

$

5,789

 

$

5,782

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Short-term borrowings

 

$

116

 

$

106

 

Accounts payable and accrued liabilities

 

758

 

872

 

Total current liabilities

 

874

 

978

 

 

 

 

 

 

 

Non-current liabilities

 

172

 

158

 

Long-term debt

 

1,838

 

1,850

 

Deferred income tax liabilities

 

175

 

171

 

Share-based payments subject to redemption

 

27

 

30

 

 

 

 

 

 

 

Equity

 

 

 

 

 

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 shares issued at June 30, 2017 and December 31, 2016

 

1

 

1

 

Additional paid-in capital

 

1,141

 

1,149

 

Less: Treasury stock (common stock; 6,125,618 and 5,396,526 shares at June 30, 2017 and December 31, 2016, respectively) at cost

 

(515

)

(413

)

Accumulated other comprehensive loss

 

(1,029

)

(1,071

)

Retained earnings

 

3,080

 

2,899

 

Total Ingredion stockholders’ equity

 

2,678

 

2,565

 

Non-controlling interests

 

25

 

30

 

Total equity

 

2,703

 

2,595

 

 

 

 

 

 

 

Total liabilities and equity

 

$

5,789

 

$

5,782

 

 



 

Ingredion Incorporated (“Ingredion”)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Six Months 
Ended June 30,

 

(in millions)

 

2017

 

2016

 

 

 

 

 

 

 

Cash provided by operating activities

 

 

 

 

 

Net income

 

$

260

 

$

254

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

103

 

96

 

Charge for fair value markup of acquired inventory

 

9

 

 

Decrease in margin accounts

 

13

 

13

 

Increase in other trade working capital

 

(121

)

(156

)

Other

 

38

 

59

 

Cash provided by operating activities

 

302

 

266

 

 

 

 

 

 

 

Cash used for investing activities

 

 

 

 

 

Capital expenditures, net of proceeds on disposals

 

(144

)

(125

)

Payment for acquisition

 

(13

)

 

Short-term investments

 

(8

)

(14

)

Other

 

 

(1

)

Cash used for investing activities

 

(165

)

(140

)

 

 

 

 

 

 

Cash used for financing activities

 

 

 

 

 

Proceeds from borrowings, net of payments

 

(7

)

(23

)

(Repurchase) issuance of common stock, net

 

(128

)

8

 

Dividends paid (including to non-controlling interests)

 

(83

)

(69

)

Cash used for financing activities

 

(218

)

(84

)

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

10

 

11

 

(Decrease) Increase in cash and cash equivalents

 

(71

)

53

 

Cash and cash equivalents, beginning of period

 

512

 

434

 

Cash and cash equivalents, end of period

 

$

441

 

$

487

 

 



 

Ingredion Incorporated (“Ingredion”)

Supplemental Financial Information

(Unaudited)

 

I.  Geographic Information of Net Sales and Operating Income

 

 

 

Three Months Ended 
June 30,

 

Change

 

Six Months Ended 
June 30,

 

Change

 

(in millions)

 

2017

 

2016

 

%

 

2017

 

2016

 

%

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

905

 

$

895

 

1

%

$

1,786

 

$

1,735

 

3

%

South America

 

228

 

240

 

(5

)%

483

 

455

 

6

%

Asia Pacific

 

187

 

180

 

4

%

366

 

349

 

5

%

EMEA

 

137

 

140

 

(2

)%

275

 

276

 

0

%

Total

 

$

1,457

 

$

1,455

 

0

%

$

2,910

 

$

2,815

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

181

 

$

160

 

13

%

$

341

 

$

309

 

10

%

South America

 

4

 

14

 

(71

)%

18

 

32

 

(44

)%

Asia Pacific

 

29

 

30

 

(3

)%

59

 

58

 

2

%

EMEA

 

29

 

29

 

0

%

57

 

55

 

4

%

Corporate

 

(22

)

(22

)

0

%

(42

)

(42

)

0

%

Sub-total

 

221

 

211

 

5

%

433

 

412

 

5

%

Acquisition/integration costs

 

 

 

 

 

(2

)

(1

)

 

 

Restructuring charge

 

(6

)

(13

)

 

 

(16

)

(13

)

 

 

Charge for fair value mark-up of acquired inventory

 

(4

)

 

 

 

(9

)

 

 

 

Total

 

$

211

 

$

198

 

7

%

$

406

 

$

398

 

2

%

 



 

II.  Non-GAAP Information

 

To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company uses non-GAAP historical financial measures, which exclude certain GAAP items such as acquisition and integration costs, impairment and restructuring costs, and certain other special items. The Company uses the term “adjusted” when referring to these non-GAAP amounts.

 

Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance.  By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the Company’s operating results and trends for the periods presented.  These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP and reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

 

Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies.  A reconciliation of each non-GAAP historical financial measure to the most comparable GAAP measure is provided in the tables below.

 

Ingredion Incorporated (“Ingredion”)

Reconciliation of GAAP Net Income and Diluted Earnings Per Share (“EPS”) to

Non-GAAP Adjusted Net Income and Adjusted Diluted EPS

(Unaudited)

 

 

 

Three Months Ended

 

Three Months Ended

 

Six Months Ended

 

Six Months Ended

 

 

 

June 30, 2017

 

June 30, 2016

 

June 30, 2017

 

June 30, 2016

 

 

 

(in millions)

 

EPS

 

(in millions)

 

EPS

 

(in millions)

 

EPS

 

(in millions)

 

EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Ingredion

 

$

130

 

$

1.78

 

$

117

 

$

1.58

 

$

254

 

$

3.46

 

$

248

 

$

3.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition / integration costs, net of income tax benefit of $0 and $1 million for the three and six months ended June 30, 2017, respectively, and $0 million for the three and six months ended June 30, 2016, respectively (i)

 

 

 

 

 

1

 

0.01

 

1

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge, net of income tax benefit of $1 million and $0 million for the three and six months ended June 30, 2017, respectively, and $3 million for the three and six months ended June 30, 2016 (ii)

 

5

 

0.07

 

10

 

0.14

 

16

 

0.22

 

10

 

0.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge for fair value mark-up of acquired inventory, net of income tax benefit of $1 million and $3 million for the three and six months ended June 30, 2017, respectively (iii)

 

3

 

0.04

 

 

 

6

 

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted net income

 

$

138

 

$

1.89

 

$

128

 

$

1.73

 

$

277

 

$

3.77

 

$

259

 

$

3.51

 

 

Net income, EPS and tax rates may not foot or recalculate due to rounding.

 


Notes

 

(i) The 2017 and 2016 periods include costs related to the acquisition and integration of the businesses acquired from Penford and/or Kerr.  Additionally, the 2017 period includes costs related to the acquisitions of TIC Gums Incorporated, Shandong Huanong Specialty Corn Development Co., Ltd, and/or Sun Flour Industry Co, Ltd.

 

(ii) During the three and six months ended June 30, 2017, the Company recorded a $6 million and $16 million pre-tax restructuring charge, respectively. During the second quarter, the Company recorded $6 million of employee-related severance and other costs associated with the restructuring in Argentina and $1 million in other restructuring costs related to the Finance Transformation initiative, offset by a $1 million reduction due to refinement of employee-related severance charges related to prior year restructuring activities.  During the six months ended June 30, 2017, the $16 million net restructuring charges consisted of $17 million of employee-related severance and other costs associated with the restructuring in Argentina and $1 million in other restructuring costs related to the Finance Transformation initiative, offset by a $2 million reduction in employee-related severance costs related to refinement of estimates for prior year restructuring activities.  During the three and six months ended June 30, 2016, the Company recorded a $13 million pre-tax restructuring charge consisting of $8 million of employee-related severance and other costs associated with the execution of IT outsourcing contracts, $3 million of employee-related severance costs associated with the Company’s optimization initiative in South America and $2 million of costs attributable to the Port Colborne plant sale.

 

(iii) The 2017 period includes the flow-through of costs primarily associated with the sale of TIC Gums Incorporated inventory that was adjusted to fair value at the acquisition date in accordance with business combination accounting rules.

 



 

II. Non-GAAP Information (continued)

 

Ingredion Incorporated (“Ingredion”)

Reconciliation of GAAP Operating Income to Non-GAAP Adjusted Operating Income

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

(in millions, pre-tax)

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

211

 

$

198

 

$

406

 

$

398

 

 

 

 

 

 

 

 

 

 

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition/integration costs (i)

 

 

 

2

 

1

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge (ii)

 

6

 

13

 

16

 

13

 

 

 

 

 

 

 

 

 

 

 

Charge for fair value mark-up of acquired inventory (iii)

 

4

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted operating income

 

$

221

 

$

211

 

$

433

 

$

412

 

 

Net income, EPS and tax rates may not foot or recalculate due to rounding.

 


For notes (i) through (iii) see notes (i) through (iii) included in the Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Income and Adjusted Diluted EPS

 



 

II. Non-GAAP Information (continued)

 

Ingredion Incorporated (“Ingredion”)

Reconciliation of GAAP Effective Income Tax Rate to Non-GAAP Adjusted Effective Income Tax Rate

(Unaudited)

 

 

 

Three Months Ended June 30, 2017

 

Six Months Ended June 30, 2017

 

 

 

Income before

 

Provision for

 

Effective Income

 

Income before

 

Provision for

 

Effective Income

 

(in millions)

 

Income Taxes (a)

 

Income Taxes (b)

 

Tax Rate (b/a)

 

Income Taxes (a)

 

Income Taxes (b)

 

Tax Rate (b/a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

$

191

 

$

58

 

30.4

%

$

365

 

$

105

 

28.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition/integration costs (i)

 

 

 

 

 

2

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge (ii)

 

6

 

1

 

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge for fair value mark-up of acquired inventory (iii)

 

4

 

1

 

 

 

9

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Non-GAAP

 

$

201

 

$

60

 

29.9

%

$

392

 

$

109

 

27.8

%

 

 

 

Three Months Ended June 30, 2016

 

Six Months Ended June 30, 2016

 

 

 

Income before

 

Provision for

 

Effective Income

 

Income before

 

Provision for

 

Effective Income

 

(in millions)

 

Income Taxes (a)

 

Income Taxes (b)

 

Tax Rate (b/a)

 

Income Taxes (a)

 

Income Taxes (b)

 

Tax Rate (b/a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

$

179

 

$

59

 

32.8

%

$

365

 

$

112

 

30.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition/integration costs (i)

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charge (ii)

 

13

 

3

 

 

 

13

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Non-GAAP

 

$

193

 

$

62

 

32.0

%

$

379

 

$

115

 

30.2

%

 

Net income, EPS and tax rates may not foot or recalculate due to rounding.

 


For notes (i) through (iii) see notes (i) through (iii) included in the Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Income and Adjusted Diluted EPS.

 



 

II. Non-GAAP Information (continued)

 

Ingredion Incorporated (“Ingredion”)

Reconciliation of 2017 GAAP Diluted Earnings per Share (“EPS”)

to Expected Adjusted Diluted Earnings per Share (“Adjusted EPS”)

(Unaudited)

 

 

 

Expected EPS Range

 

 

 

for Full Year 2017

 

 

 

Low End

 

High End

 

GAAP EPS (a)

 

$

7.30

 

$

7.59

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

Charge for fair value markup of acquired inventory (b)

 

0.08

 

0.08

 

 

 

 

 

 

 

Acquisition/integration costs

 

0.01

 

0.01

 

 

 

 

 

 

 

Restructuring charges

 

0.29

 

0.31

 

 

 

 

 

 

 

Anticipated income tax settlement (c)

 

(0.18

)

(0.19

)

 

 

 

 

 

 

Expected Adjusted EPS

 

$

7.50

 

$

7.80

 

 

Above is a reconciliation of our expected full year 2017 diluted EPS to our expected full year 2017 adjusted diluted EPS. The amounts above may not reflect certain future charges, costs and/or gains that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance.  These amounts include, but are not limited to, acquisition and integration costs, impairment and restructuring costs, and certain other special items.  We generally exclude these items from our adjusted EPS guidance.

 


(a) For the reasons stated above, we are more confident in our ability to predict adjusted EPS than we are in our ability to predict EPS.  Therefore, we do not provide guidance concerning GAAP EPS.

 

(b) Includes the flow-through of costs associated with inventory that was adjusted to fair value at the acquisition date of our recent acquisitions in accordance with business combination accounting rules.

 

(c) We have been pursuing relief from double taxation under the U.S. and Canadian tax treaty for the years 2007-2013.  During the fourth quarter of 2016, a tentative settlement was reached between the U.S. and Canada and, consequently, we established a net reserve of $24 million, including interest thereon, recorded as a $70 million liability and a $46 million benefit.  Recently, the two countries have provided us with additional details of their settlement, including details about a payment to be made from our Canadian affiliate.  As a result, we now believe that the settlement will create a tax-deductible, foreign exchange loss in the U.S.  Therefore, we anticipate a reduction of tax expense of $13-$14 million will be recorded in the third quarter of 2017.