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Ingredion Incorporated Reports Fourth Quarter and Full-Year 2019 Results

February 11, 2020 7:01 AM

WESTCHESTER, Ill., Feb. 11, 2020 (GLOBE NEWSWIRE) -- Ingredion Incorporated (NYSE: INGR), a leading global provider of ingredient solutions to diversified industries, today reported results for the fourth quarter and full-year 2019. The results, reported in accordance with U.S. generally accepted accounting principles (“GAAP”) for 2019 and 2018, include items that are excluded from the non-GAAP financial measures that the Company presents.

“For the second consecutive quarter, we delivered net sales growth by taking pricing actions across our business which more than offset significant foreign currency challenges. We also grew our global specialties portfolio, led by double digit growth in Latin America. Global volumes were flat, however, due to the continued challenging macroeconomic environment in Asia-Pacific and Europe,” said Jim Zallie, Ingredion’s president and chief executive officer.

“In 2019, we progressed our Driving Growth Roadmap by advancing on-trend specialty growth platforms, including significant investments in plant-based proteins and sugar reduction capabilities. Our specialties portfolio now represents 30 percent of total net sales,” Zallie continued.

“Throughout the year, we also streamlined our organization achieving significant improvements in operational efficiencies and delivering nearly $75 million of run-rate savings against our $30 million - $40 million Cost Smart savings target for 2019. We have broadened and accelerated our transformation efforts, and as a result are increasing our three year Cost Smart savings program target to $150 million by 2021.”

“We are confident in our long-term profit growth outlook and remain focused on executing against our strategic plan to drive growth and increase shareholder value,” Zallie concluded.

____________
*Adjusted diluted earnings per share (“adjusted EPS”), adjusted operating income, adjusted effective income tax rate and adjusted cash flow from operations 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)

4Q184Q1920182019
Reported EPS$1.36$1.61$6.17$6.13
Acquisition/Integration Costs—$0.01—$0.03
Restructuring/Impairment Costs$0.23$0.18$0.71$0.65
Other Matters$0.01$(0.19)$0.04$(0.16)
Adjusted EPS**$1.61$1.61$6.92$6.65

**Totals may not foot due to rounding

Estimated factors affecting change in reported and adjusted EPS

4Q192019
Margin(0.03)(0.25)
Volume0.110.19
Foreign exchange(0.12)(0.49)
Other income(0.06)(0.10)
Total operating items(0.10)(0.65)
Other non-operating income(0.01)(0.05)
Financing costs0.010.05
Shares outstanding0.040.41
Tax rate0.07(0.04)
Non-controlling interest(0.01)0.01
Total non-operating items0.100.38
Total items affecting EPS—(0.27)

Financial Highlights

Business Review

Total Ingredion

$ in millions2018 Net salesFX ImpactVolumePrice mix2019 Net sales% change
Fourth quarter1,537-56—681,5491%
Full-year6,289-292-522646,209-1%

Net Sales

Operating income

North America

$ in millions2018 Net salesFX ImpactVolumePrice mix2019 Net sales% change
Fourth quarter917—-23289221%
Full-year3,857-10-82693,834-1%

Operating income

South America

$ in millions2018 Net salesFX ImpactVolumePrice mix2019 Net sales% change
Fourth quarter245-4623392617%
Full-year988-20021151960-3%

Operating income

Asia-Pacific

$ in millions2018 Net salesFX ImpactVolumePrice mix2019 Net sales% change
Fourth quarter2202-1-9212-4%
Full-year837-15-12823-2%

Operating income

Europe, Middle East, and Africa (EMEA)

$ in millions2018 Net salesFX ImpactVolumePrice mix2019 Net sales% change
Fourth quarter155-12—11154-1%
Full-year607-671042592-2%

Operating income

Dividends and Share Repurchases

2020 Outlook
The Company expects 2020 reported EPS in the range of $6.48-$7.10 compared to reported EPS of $6.13 in 2019, and adjusted EPS to be in the range of $6.60-$7.20 compared to adjusted EPS of $6.65 in the prior year. This expectation excludes acquisition-related, integration and restructuring costs, as well as any potential impairment costs. Compared with last year, the 2020 full-year outlook assumes: North America operating income increases driven by favorable price mix; South America operating income increases driven by improved price mix and higher volumes; Asia-Pacific and EMEA operating incomes are expected to modestly increase driven by higher volumes and improved price mix; an adjusted effective tax rate range of approximately 26.0-27.0 percent; and continued mid to high single digit specialty ingredients net sales growth.

Cash from operations in 2020 is expected to be in the range of $640 million to $710 million. Committed capital investments are anticipated to be between $285 million to $305 million.

Conference Call and Webcast Details
Ingredion will conduct a conference call today at 9 a.m. ET (8 a.m. CT) hosted by Jim Zallie, The call will be webcast in real time and will include a visual presentation accessible through the Ingredion website at https://ir.ingredionincorporated.com/, in the "Events and Presentations" section, under "News and Events.” 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 at https://ir.ingredionincorporated.com/.

Upcoming Communications
Jim Zallie, president and chief executive officer; James Gray, executive vice president and chief financial officer; and Jorgen Kokke, executive vice president, global specialties, will participate in the Consumer Analyst Group of New York (CAGNY) conference on Tuesday, February 18, 2020 at 3 p.m. ET in Boca Raton, Florida. The presentation will be available on the Company’s website,
https://ir.ingredionincorporated.com/, in the "Events and Presentations" section, under "News and Events.”

ABOUT THE COMPANY
Ingredion Incorporated (NYSE: INGR) headquartered in the suburbs of Chicago, is a leading global ingredient solutions provider serving customers in more than 120 countries. With annual net sales over $6 billion, the Company turns grains, fruits, vegetables and other plant-based materials into value-added ingredients solutions for the food, beverage, animal nutrition, brewing and industrial markets. With Ingredion Idea Labs® innovation centers around the world and more than 11,000 employees, the Company co-creates with customers and fulfills its purpose of bringing together the potential of people, nature and technology to create ingredient solutions that make life better. Visit ingredion.com for more information and the latest Company news.

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 others, any statements regarding the Company's prospects or future financial condition, earnings, revenues, tax rates, capital expenditures, cash flows, expenses or other financial items, including the Company's expectations regarding 2020 reported and adjusted EPS, 2020 operating income, 2020 adjusted effective tax rate, 2020 cash from operations, and 2020 committed capital investments; 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," "opportunities," "potential," "provisional," 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, investors 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 changing consumption preferences including those relating to high fructose corn syrup; the effects of global economic conditions and the general political, economic, business, market conditions that affect customers and consumers in the various geographic regions and countries in which we buy our raw materials or manufacture or sell our products, including, particularly, economic, currency and political conditions in South America and economic and political conditions in Europe, and the impact these factors may have on our sales volumes, the pricing of our products and our ability to collect our receivables from customers; future financial performance of major industries which we serve and from which we derive a significant portion of our sales, including, without limitation, the food, beverage, paper and corrugated, and brewing industries; the uncertainty of acceptance of products developed through genetic modification and biotechnology; our ability to develop or acquire new products and services at rates or of qualities sufficient to meet expectations; changes in government policy, law or regulations and costs of legal compliance, including with respect to environmental compliance; increased competitive and/or customer pressure in the corn-refining industry and related industries, including with respect to the markets and prices for our primary products and our co-products, particularly corn oil; the availability of raw materials, including potato starch, tapioca, gum Arabic and the specific varieties of corn upon which some of our products are based our ability to pass along potential increases in the cost of corn or other raw materials to customers; energy costs and availability, including energy issues in Pakistan; our ability to contain costs, achieve budgets and to realize expected synergies, including with respect to our ability to complete planned maintenance and investment projects on time and on budget, achieving expected savings under our Cost Smart program as well as with respect to freight and shipping costs; the behavior of financial and capital markets, including with respect to foreign currency fluctuations, fluctuations in interest and exchange rates and market volatility and the associated risks of hedging against such fluctuations; our ability to successfully identify and complete acquisitions or strategic alliances on favorable terms as well as our ability to successfully integrate acquired businesses or implement and maintain strategic alliances and achieve anticipated synergies with respect to all of the foregoing; operating difficulties, including with respect to information technology systems, processes and sites as well as boiler reliability; our ability to maintain satisfactory labor relations; the impact that weather, natural disasters, war or similar acts of hostility, acts and threats of terrorism, the outbreak or continuation of pandemics and other significant events could have on our business; tariffs, quotas, duties, taxes and income tax rates, particularly United States tax reform enacted in 2017; and our ability to raise funds at reasonable rates.

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, 2018 and our subsequent reports on Form 10-Q and Form 8-K.

CONTACTS:
Investors: Tiffany Willis, 708-551-2592
Media: Becca Hary, 708-551-2602


Ingredion Incorporated ("Ingredion")
Condensed Consolidated Statements of Income
(Unaudited)
(in millions, except per share amounts) Three Months Ended
December 31,		 Change
%		 Year Ended
December 31,		 Change
%
2019 2018 2019 2018
Net sales $1,549 $1,537 1% $6,209 $6,289 (1%)
Cost of sales 1,226 1,217 4,897 4,921
Gross profit 323 320 1% 1,312 1,368 (4%)
Operating expenses 153 146 5% 610 611 0%
Other income, net (16) (3) (19) (10)
Restructuring/impairment charges 16 19 57 64
Operating income 170 158 8% 664 703 (6%)
Financing costs, net 19 21 81 86
Other, non-operating expense (income), net - (1) 1 (4)
Income before income taxes 151 138 9% 582 621 (6%)
Provision for income taxes 38 41 158 167
Net income 113 97 16% 424 454 (7%)
Less: Net income attributable to non-controlling interests 4 3 11 11
Net income attributable to Ingredion $109 $94 16% $413 $443 (7%)
Earnings per common share attributable to Ingredion
common shareholders:
Weighted average common shares outstanding:
Basic 67.0 68.3 66.9 70.9
Diluted 67.5 69.1 67.4 71.8
Earnings per common share of Ingredion:
Basic $1.63 $1.38 18% $6.17 $6.25 (1%)
Diluted $1.61 $1.36 18% $6.13 $6.17 (1%)
Note (i) Historically, the Company presented shipping and handling costs as a reduction to Net sales in the Condensed Consolidated Statements of Income. The Company is now presenting these expenses within Cost of sales in the Condensed Consolidated Statements of Income. The change was applied retrospectively to all periods presented in the Condensed Consolidated Statements of Income to reflect the change in presentation. The change in presentation had no effect on Gross profit, Operating income, or Net income.


Ingredion Incorporated ("Ingredion")
Condensed Consolidated Balance Sheets
(in millions, except share and per share amounts)December 31, 2019 December 31, 2018
(Unaudited)
Assets
Current assets
Cash and cash equivalents$264 $327
Short-term investments 4 7
Accounts receivable – net 977 951
Inventories 861 824
Prepaid expenses 54 29
Total current assets 2,160 2,138
Property, plant and equipment – net 2,306 2,198
Goodwill 801 791
Other intangible assets – net 437 460
Operating lease assets 151 -
Deferred income tax assets 13 10
Other assets 172 131
Total assets$6,040 $5,728
Liabilities and equity
Current liabilities
Short-term borrowings$82 $169
Accounts payable and accrued liabilities 885 777
Total current liabilities 967 946
Non-current liabilities 220 217
Long-term debt 1,766 1,931
Non-current operating lease liabilities 120 -
Deferred income tax liabilities 195 189
Share-based payments subject to redemption 31 37
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 December 31, 2019 and December 31, 2018 1 1
Additional paid-in capital 1,137 1,096
Less: Treasury stock (common stock; 10,993,388 and 11,284,681 shares at
December 31, 2019 and December 31, 2018, respectively) at cost (1,040) (1,091)
Accumulated other comprehensive loss (1,158) (1,154)
Retained earnings 3,780 3,536
Total Ingredion stockholders' equity 2,720 2,388
Non-controlling interests 21 20
Total equity 2,741 2,408
Total liabilities and equity$6,040 $5,728


Ingredion Incorporated ("Ingredion")
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Year Ended December 31,
(in millions) 2019 2018
Cash provided by operating activities:
Net income $424 $454
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 220 247
Mechanical stores expense 57 57
Deferred income taxes 3 (23)
Margin accounts (1) 5
Changes in other trade working capital (53) (123)
Other 30 86
Cash provided by operating activities 680 703
Cash used for investing activities:
Capital expenditures and mechanical stores purchases (328) (350)
Payments for acquisitions, net of cash acquired (42) -
Investment in a non-consolidated affiliate (10) (15)
Other 6 4
Cash used for investing activities (374) (361)
Cash used for financing activities:
(Payments on) proceeds from borrowings, net (256) 249
Repurchases of common stock, net 63 (657)
Issuances of common stock for share-based compensation, net of settlements 3 1
Dividends paid, including to non-controlling interests (174) (182)
Cash used for financing activities (364) (589)
Effect of foreign exchange rate changes on cash (5) (21)
Decrease in cash and cash equivalents (63) (268)
Cash and cash equivalents, beginning of period 327 595
Cash and cash equivalents, end of period $264 $327



Ingredion Incorporated ("Ingredion")
Supplemental Financial Information
(Unaudited)
I. Geographic Information of Net Sales and Operating Income
(in millions) Three Months Ended
December 31,		 Change Year Ended
December 31,		 Change
2019 2018 % 2019 2018 %
Net Sales
North America $922 $917 1% $3,834 $3,857 (1%)
South America 261 245 7% 960 988 (3%)
Asia-Pacific 212 220 (4%) 823 837 (2%)
EMEA 154 155 (1%) 592 607 (2%)
Total Net Sales $1,549 $1,537 1% $6,209 $6,289 (1%)
Operating Income
North America $113 $114 (1%) $522 $545 (4%)
South America 35 31 13% 96 99 (3%)
Asia-Pacific 22 29 (24%) 87 104 (16%)
EMEA 28 30 (7%) 99 116 (15%)
Corporate (30) (27) (11%) (99) (97) (2%)
Sub-total 168 177 (5%) 705 767 (8%)
Acquisition/integration costs (1) - (3) -
Restructuring/impairment charges (16) (19) (57) (64)
Other matters 19 - 19 -
Total Operating Income $170 $158 8% $664 $703 (6%)



II. Non-GAAP Information
To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), we use 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. We generally use 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 our 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 attributable to Ingredion and Diluted Earnings Per Share ("EPS") to
Non-GAAP Adjusted Net Income attributable to Ingredion and Adjusted Diluted EPS
(Unaudited)
Three Months Ended Three Months Ended Year Ended Year Ended
December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018
(in millions)EPS (in millions)EPS (in millions)EPS (in millions)EPS
Net income attributable to Ingredion$109 $1.61 $94 $1.36 $413 $6.13 $443 $6.17
Add back:
Acquisition/integration costs, net of income tax benefit of $- and $1 million for the three months and year ended December 31, 2019, respectively (i) 1 0.01 - - 2 0.03 - -
Restructuring/impairment charges, net of income tax benefit of $4 million and $13 million for the three months and year ended December 31, 2019, respectively, and $3 million and $13 million for the three months and year ended December 31, 2018, respectively (ii) 12 0.18 16 0.23 44 0.65 51 0.71
Other matters, net of income tax expense of $6 million and $8 million for the three months and year ended December 31, 2019, respectively (iii) (13) (0.19) 1 0.01 (11) (0.16) 3 0.04
Non-GAAP adjusted net income attributable to Ingredion$109 $1.61 $111 $1.61 $448 $6.65 $497 $6.92
Net income, EPS and tax rates may not foot or recalculate due to rounding.
Notes
(i) The 2019 period includes costs related to the acquisition and integration of the business acquired from Western Polymer, LLC.
(ii) During the three months and year ended December 31, 2019, the Company recorded $16 million and $57 million of pre-tax restructuring/impairment charges, respectively. During the fourth quarter of 2019, we recorded $11 million of net restructuring related expenses as part of the Cost Smart cost of sales program and $5 million of employee-related and other costs, including professional services, associated with our Cost Smart SG&A program. During the year ended December 31, 2019, the Company recorded $57 million of pre-tax restructuring charges, including $29 million of net restructuring related expenses as part of the Cost Smart cost of sales program and $28 million of employee-related and other costs, including professional services, associated with our Cost Smart SG&A program. During the three months and year ended December 31, 2018, we recorded $19 million and $64 million of pre-tax restructuring/impairment charges, respectively. During the fourth quarter of 2018, we recorded $18 million of restructuring expenses as part of the Cost Smart cost of sales, $2 million of restructuring charges as part of the Cost Smart SG&A, these charges were offset by $1 million reduction of expense from the prior year estimate of North America restructuring activities. During the year ended December 31, 2018, we recorded $64 million of pre-tax restructuring charges consisting of $49 million of restructuring expenses as part of the Cost Smart cost of sales program, $11 million of restructuring charges were recorded related to the Cost Smart SG&A program, and $4 million of restructuring charges related to other projects.
(iii) During the three months and year ended December 31, 2019, we recorded a $22 million pre-tax benefit for the favorable judgement received by Ingredion from the Federal Court of Appeals in Brazil related to certain indirect taxes collected in prior years. As a result of the decision, the Company expects to be entitled to credits against its Brazilian federal tax payments in 2020 and future years. The benefit recorded represents the Company's current estimate of the credits and interest due from the favorable decision in accordance with ASC 450, Contingencies. This benefit was offset by other adjusted charges during the period.
II. Non-GAAP Information (continued)
Ingredion Incorporated ("Ingredion")
Reconciliation of GAAP Operating Income to Non-GAAP Adjusted Operating Income
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
(in millions, pre-tax) 2019 2018 2019 2018
Operating income$170 $158 $664 $703
Add back:
Acquisition/integration costs (i) 1 - 3 -
Restructuring/impairment charges (ii) 16 19 57 64
Other matters (iii) (19) - (19) -
Non-GAAP adjusted operating income$168 $177 $705 $767
For notes (i) through (iii) see notes (i) through (iii) included in the Reconciliation of GAAP Net Income attributable to Ingredion and Diluted EPS to Non-GAAP Adjusted Net Income attributable to Ingredion 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 December 31, 2019 Year Ended December 31, 2019
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 $151 $38 25.2% $582 $158 27.1%
Add back:
Acquisition/integration costs (i) 1 - 3 1
Restructuring/impairment charges (ii) 16 4 57 13
Other matters (iii) (19) (6) (19) (8)
Adjusted Non-GAAP $149 $36 24.2% $623 $164 26.3%
Three Months Ended December 31, 2018 Year Ended December 31, 2018
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 $138 $41 29.7% $621 $167 26.9%
Add back:
Restructuring/impairment charges (ii) 19 3 64 13
Other matters (iii) - (1) - (3)
Adjusted Non-GAAP $157 $43 27.4% $685 $177 25.8%
For notes (i) through (iii) see notes (i) through (iii) included in the Reconciliation of GAAP Net Income attributable to Ingredion and Diluted EPS to Non-GAAP Adjusted Net Income attributable to Ingredion and Adjusted Diluted EPS.



II. Non-GAAP Information (continued)
Ingredion Incorporated ("Ingredion")
Reconciliation of Anticipated GAAP Diluted Earnings per Share ("GAAP EPS")
to Anticipated Adjusted Diluted Earnings per Share ("Adjusted EPS")
(Unaudited)
Anticipated EPS Range
for Full Year 2020
Low End High End
GAAP EPS $6.48 $7.10
Add:
Restructuring/impairment charges (ii) 0.12 0.10
Adjusted EPS $6.60 $7.20
Above is a reconciliation of our anticipated full year 2020 diluted EPS to our anticipated full year 2020 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. For these reasons, we are more confident in our ability to predict adjusted EPS than we are in our ability to predict GAAP EPS.
(ii) Primarily reflects current estimates for 2020 restructuring charges related to the Cost Smart Cost of Sales & SG&A programs. As specific projects within these programs are approved, the estimates will be reviewed and may be subject to revision.



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