Ingredion Inc

1. Description of the Business and Summary of Significant Accounting Policies

Unless the context otherwise requires, all references herein to the “Company,” “Ingredion,” “we,” “us,” and “our” shall mean Ingredion Incorporated and its consolidated subsidiaries.

Description of the business: We primarily manufacture and sell sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials to a wide range of industries, both domestically and internationally.

Basis of presentation: The Consolidated Financial Statements consist of the accounts of Ingredion, including all subsidiaries. Intercompany accounts and transactions are eliminated in consolidation.

Use of estimates: The preparation of the accompanying Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates and assumptions impact the value of purchase consideration, accounts receivable, inventories, certain investments, goodwill, intangible assets and other long-lived assets, legal contingencies, income taxes, and pension and other postretirement benefits, among others. These estimates and assumptions are based on our best estimates and judgment. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We will adjust such estimates and assumptions when facts and circumstances dictate. Corn price volatility, adverse changes in the global economic environment, foreign currency devaluations versus the U.S. dollar, and access to credit markets increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in the financial statements in future periods.

Foreign currency translation: Assets and liabilities of foreign subsidiaries, other than those whose functional currency is the U.S. dollar, are translated at current exchange rates with the related translation adjustments reported in equity as a component of Accumulated other comprehensive loss (“AOCL”), and income statement accounts are translated at the average exchange rate during the period. The U.S. dollar is the functional currency for our subsidiaries in Mexico and Argentina, and we translate their monetary assets and liabilities at current exchange rates with the related adjustment included in financing costs in our Consolidated Statements of Income. Non-monetary assets and liabilities are translated at historical exchange rates with the related translation adjustments included in AOCL in our Consolidated Balance Sheets.

Revenue recognition: Ingredion recognizes revenue under the core principle to depict our transfer of products and solutions to customers in amounts that reflect the consideration we expect to receive. To achieve that core principle, we apply the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

We identify customer purchase orders, which in some cases are governed by a master sales agreement, as the contracts with our customers. For each contract, we consider the transfer of products, each of which is distinct, to be the identified performance obligation. The pricing model can be fixed or variable within the contract. The variable pricing model is based on historical commodity pricing and is determinable before we complete the performance obligation. To determine the transaction price for the contract performance obligations, we also evaluate whether the price could be adjusted, and we may reduce the transaction price for certain sales adjustments such as volume incentive discounts and other discount arrangements. We estimate transaction price adjustments using the expected value method based on our analysis of historical volume incentives or discounts over a period considered adequate to account for current pricing and business trends. Historically, actual volume incentives and discounts relative to those estimated and included when determining the transaction price have not materially differed. We accrue volume incentives and discounts in Accrued liabilities and liabilities held for sale in the Consolidated Balance Sheets when we satisfy the performance obligation. We consider the product price as specified in the contract, net of any discounts, as the standalone selling price as it is an observable input that represents the price if we sold the product to a similar customer in similar circumstances. We do not recognize any significant financing components since payment is due shortly after we satisfy our performance obligation.

We recognize revenue when we satisfy our performance obligation and control is transferred to the customer, which occurs at a point in time, either upon delivery to an agreed upon location or to the customer. Further, in determining whether control has transferred, we consider if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.

Shipping and handling activities related to contracts with customers represent fulfillment costs and are recorded in Cost of sales in the Consolidated Statements of Income. Taxes assessed by governmental authorities and collected from customers are accounted for on a net basis and excluded from net sales. We expense costs to obtain a contract when we incur the costs since most contracts are one year or less. These costs primarily include our internal sales force compensation. Under the terms of these programs, the compensation is generally earned, and the costs are recognized when we recognize the revenue.

From time to time, we may enter into long-term contracts with our customers. Historically, such contracts do not result in significant contract assets or liabilities. Any such arrangements are accounted for in Other assets or Accrued liabilities and liabilities held for sale in the Consolidated Balance Sheets.

Cash and cash equivalents: Cash equivalents consist of all instruments purchased with an original maturity of three months or less and that have virtually no risk of loss in value.

Accounts receivable: Accounts receivable consists of trade and other receivables carried at approximate fair value, net of an allowance for credit losses. The allowance for credit losses is determined using our best estimate of expected credit losses based on historical experience and current forecasts of future economic conditions, and we adjust this estimate over the life of the receivable as needed.

Inventories: Inventories are stated at the lower of cost or net realizable value. Costs are predominantly determined using the weighted average method.

Long-term investments: We hold marketable securities and equity investments, which we include in Other assets in the Consolidated Balance Sheets. Marketable securities are carried at fair value and we record changes in fair value to Other operating (income) expense in the Consolidated Statements of Income if we maintain the securities for processing transactions that directly support operating activities; otherwise, we record changes in fair value to Other non-operating (income) expense in the Consolidated Statements of Income.

Equity investments in companies for which we do not have the ability to exercise significant influence are accounted for at fair value, with changes in fair value recorded in Other non-operating expense (income) in the Consolidated Statements of Income. Equity securities without readily determinable fair values are carried at cost, less impairments, if any, and adjusted for observable price changes for the identical or a similar investment of the same issuer. We perform a qualitative impairment assessment to determine if such investments are impaired, which considers all available information, including declines in the financial performance of the issuing entity, the issuing entity’s operating environment and general market conditions. Impairments of equity securities without readily determinable fair value are recorded in Other non-operating expense (income) in the Consolidated Statements of Income.

Equity investments in companies for which we have the ability to exercise significant influence, but not control, are accounted for using the equity method of accounting. Our share of the earnings or losses reported by equity method investees is recognized in Other operating (income) expense in the Consolidated Statements of Income. Each reporting period, we evaluate declines in the fair value of equity method investments below carrying value to determine if any are other-than-temporary and if so, we write down the investment to its estimated fair value. Impairments are recognized in Restructuring/impairment charges in the Consolidated Statements of Income.

Leases: We determine if an arrangement contains a lease, as well as its classification as an operating lease or finance lease, at the inception of the agreement. Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The commencement date used for the calculation of the lease obligations recorded is the latter of the lease start date or January 1, 2019, which is when we adopted Accounting Standards Codification (“ASC”) 842. As most of our leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments. The lease asset value includes in our calculation any prepaid lease payments made and any lease incentives received from the arrangement as a reduction of the asset. Certain leases have options to terminate or extend the life of the lease, which we include in the lease asset and lease liability calculation when we have sole discretion to exercise the option and it is reasonably certain we will. We do not separate lease and non-lease components for our leases when it is impracticable to separate them, such as leases with variable payment arrangements. We have certain leases that have variable payments based solely on output or usage of the leased asset, which we do not record in our Consolidated Balance Sheets, but expense as incurred. Lease expense is recognized on a straight-line basis over the lease term. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets.

Property, plant and equipment and definite-lived intangible assets: Property, plant and equipment (“PP&E”) is stated at cost less accumulated depreciation and definite-lived intangible assets are stated at cost less accumulated amortization. For PP&E, depreciation is generally computed on the straight-line basis over the estimated useful lives of depreciable assets, which range from 25 to 50 years for buildings and fromtwo to 25 years for machinery and equipment. Costs for mechanical stores represent costs for spare parts used in the production process that are capitalized in PP&E as part of machinery and equipment until they are utilized in the manufacturing process and expensed as a period cost. Where permitted by law, accelerated depreciation methods are used for tax purposes. For definite-lived intangible assets, we recognize the cost of these amortizable assets in operations over their estimated useful life, which range fromtwo to 30 years. We review the recoverability of the net book value of PP&E and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. If this review indicates that the carrying values of the asset group will not be recovered, we reduce the carrying values to fair value and recognize an impairment charge. The impairment analysis for long-lived assets occurs before the goodwill impairment assessment described below.

Assets held for sale: We classify long-lived assets or disposal groups as held for sale in the period when all of the following conditions have been met:

•we have approved and committed to a plan to sell the assets or disposal group,

•the asset or disposal group is available for immediate sale in its present condition,

•an active program to locate a buyer and other actions required to complete the sale have been initiated,

•the sale of the asset or disposal group is probable and expected to be completed within one year,

•the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and

•it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

When all the held for sale criteria are met, we initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or the fair value less any costs to sell, recognize any resulting losses, and cease depreciation and amortization of the long-lived asset or assets within a disposal group. Until the date of sale or until the asset or disposal group are no longer classified as held for sale, we assess fair value less any costs to sell and recognize any resulting losses at each reporting period. Gains are not recognized until the date of the sale.

Indefinite-lived intangible assets and goodwill: We have certain indefinite-lived intangible assets in the form of tradenames and trademarks. Our methodology for allocating the purchase price of acquisitions is based on established valuation techniques that reflect the consideration of a number of factors, including valuations performed by third-party appraisers when appropriate. Goodwill represents the excess of the cost of an acquired entity over the fair value assigned to identifiable assets acquired and liabilities assumed. We assess indefinite-lived intangible assets and goodwill for impairment annually (or other circumstances requiring assessment), which we perform as of July 1 of each year.

In testing indefinite-lived intangible assets for impairment, we first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is greater than its carrying amount. If not, then we determine the fair value of the indefinite-lived intangible assets by performing a quantitative impairment analysis that considers various factors, including net sales derived from these intangibles and certain market and industry conditions.

In testing goodwill for impairment, we first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount. If not, then an impairment exists for the difference between the fair value and carrying value of the reporting unit. This difference is not to exceed the goodwill recorded at the reporting unit.

Hedging instruments: We use derivative financial instruments consisting primarily of commodity futures, swaps and option contracts, forward currency contracts and options, interest rate swaps, and Treasury lock agreements (“T-Locks”).

When we enter a derivative contract, we designate the derivative as a hedge of variable cash flows to be paid related to certain forecasted transactions (“a cash flow hedge”), as a hedge of the fair value of certain fixed (“firm”) commitments (“a fair value hedge”), or as a non-designated hedging instrument. This process includes linking all derivatives that are designated as cash flow or fair value hedges to specific assets and liabilities on the Consolidated Balance Sheets, or to specific firm commitments or forecasted transactions. For all hedging relationships, we document the hedging relationships and our risk-management objective and strategy for undertaking the hedge transactions, the hedging instrument, the hedged item, the nature of the risk being hedged, how we will assess the hedging instrument’s effectiveness in offsetting the hedged risk, and a description of the method to measure ineffectiveness. We also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative that is used in a hedging transaction is highly effective in offsetting changes in cash flows or fair values of hedged items.

For hedging instruments designated as cash flow hedges, unrealized gains and losses associated with marking cash flow hedging contracts to market (fair value) are recorded as a component of other comprehensive loss (“OCL”) and included in the equity section of the Consolidated Balance sheets as part of AOCL. These amounts, as well as their related tax effects, are subsequently reclassified into earnings in the same line item affected by the hedged transaction and in the same period or periods during which the hedged transaction affects earnings, or in the period a hedge is determined to be ineffective. Gains and losses from cash flow hedging instruments reclassified from AOCL to earnings are reported as Cash provided by operating activities on the Consolidated Statements of Cash Flows.

For hedging instruments designated as fair value hedges, unrealized gains and losses associated with marking fair value hedging contracts to market (fair value) are recorded in earnings each period. Unrealized gains and losses on hedged items in designated and highly effective fair value hedges are also recorded in earnings each period.

For hedging instruments not designated as hedging instruments for accounting purposes, all realized and unrealized gains and losses from these instruments are recognized in earnings during each accounting period.

We assess the effectiveness of hedging contracts based on changes in the contract’s fair value. The changes in the market value of our hedging contracts have historically been, and are expected to be, highly effective at offsetting changes in the price of hedged items. We discontinue hedge accounting prospectively when it is unlikely or not probable that a forecasted transaction will occur or when we determine that the designation of the derivative as a hedging instrument is no longer appropriate, since the derivative is no longer effective in offsetting changes in the cash flows or fair value of the originally intended hedged transaction. When we discontinue hedge accounting, we continue to carry the derivative on the Consolidated Balance Sheets at its fair value and freeze the deferred gains or losses into AOCL. Changes in the fair value of the derivative are recognized in earnings in the same line item as the original hedged transaction instead of AOCL. Any accumulated gains and losses that were included in AOCL in the period we determined the hedge to be ineffective are also released to earnings.

Pension and other postretirement benefits: All U.S. pension and postretirement benefit plans and most non-U.S. pension and postretirement benefit plans value the vested benefit obligation based on the actuarial present value of the vested benefits to which employees are currently entitled based on their expected date of separation or retirement.

For defined benefit plans, the service cost component of net periodic benefit cost is presented within either Cost of sales or Operating expenses on the Consolidated Statements of Income. The interest cost, expected return on plan assets, amortization of actuarial loss, amortization of prior service credit and settlement loss components of net periodic benefit cost are presented as Other non-operating expense (income) on the Consolidated Statements of Income.

Actuarial gains and losses in excess of 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets are classified in AOCL, along with the related tax impact, and recognized as a component of net periodic benefit cost over the average remaining service period of a plan’s active employees for active defined benefit pension plans and over the average remaining life of a plan’s active employees for frozen defined benefit pension plans.

Share-based compensation: We have a stock incentive plan that provides for share-based employee compensation, including the granting of stock options, shares of restricted stock, restricted stock units and performance shares to certain key employees. Compensation expense is generally recognized in the Consolidated Statements of Income on a straight-line basis for all awards over the requisite service period. We estimate a forfeiture rate at the time of certain grants, and we update the estimate throughout the vesting of certain awards within the amount of compensation costs recognized in each period.

Earnings per common share: Basic earnings per common share (“EPS”) is computed by dividing Net income attributable to Ingredion by the weighted average number of shares outstanding. Diluted EPS is calculated using the treasury stock method, computed by dividing Net income attributable to Ingredion by the weighted average number of shares outstanding, including the dilutive effect of outstanding stock options and other instruments associated with long-term incentive compensation plans.

Risks and uncertainties: We operate domestically and internationally, and our business and assets in each country are subject to varying degrees of risk and uncertainty. We insure our business and assets in each country against insurable risks in a manner that we deem appropriate. Because of our geographic dispersion, we believe that a loss from a non-insured event in any one country would not have a material adverse effect on our operations as a whole. Additionally, we believe there is no significant concentration of risk with any single customer or supplier whose failure or non-performance would materially affect our results. We do not consider the potential for insurance recoveries if we record accruals for estimated probable costs from events or circumstances that may be insured.

New Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2024. We adopted ASU 2020-04 at the beginning of our 2023 fiscal year and this ASU did not have a material impact on our Consolidated Financial Statements.

In September 2022, the FASB issued ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The amendments require buyers to disclose information about supplier finance programs that is sufficient to allow financial statement users to understand their nature, activity during the period, changes from period to period and potential magnitude. The amendments in this update are effective for annual periods beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. We adopted the updates to the standard at the beginning of our 2023 fiscal year and will adopt the amendment on rollforward information during the first quarter of 2024. These updates did not have a material impact to our Consolidated Balance Sheets. The disclosure required by the recently adopted accounting standard is reflected in Note 15. We are currently assessing the impact of the rollforward information amendment on our Consolidated Financial Statements.

In August 2023, the FASB issued ASU No. 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60). The amendments in this update require that a joint venture apply a new basis of accounting upon formation. By applying a new basis of accounting, a joint venture, upon formation, will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The amendments in this ASU are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. A joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively. We plan to adopt this ASU on a prospective basis at the beginning of our 2025 fiscal year and do not believe it will have a material impact on our Consolidated Financial Statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280). The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this ASU are effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Entities must apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. We are currently assessing the impact of this ASU on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require public business entities on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, the amendment requires information pertaining to taxes paid (net of refunds received) to be disaggregated by federal, state, and foreign taxes with further disaggregation for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The amendments in this ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently assessing the impact of this ASU on our Consolidated Financial Statements.

2. Acquisitions and Divestitures

Acquisition of PureCircle Non-Controlling Interests

During 2023 and 2022, Ingredion purchased shares from minority shareholders in PureCircle Limited (“PureCircle”) for $2 million and $46 million, respectively. These purchases increased our ownership percentage in PureCircle to 88 percent as of December 31, 2023, from 87 percent as of December 31, 2022, and from 75 percent as of December 31, 2021.

Other Acquisitions

On December 1, 2022, we acquired a 65 percent controlling interest in Mannitab Pharma Specialties Private Limited (“Mannitab”), which is an Indian manufacturer of spray dried mannitol and fine grade mannitol, for $22 million. We agreed to acquire the remaining 35 percent of Mannitab on or before March 2026. To reflect our controlling interest in Mannitab, we recorded $19 million of goodwill and $9 million of definite-lived intangible assets on our Consolidated Financial Statements when we completed the purchase accounting in 2023. Beginning at the acquisition date, our Consolidated Financial Statements reflect the effects of the acquisition and Mannitab's financial results, which we report in our Asia-Pacific reportable business segment.

On August 1, 2022, we acquired 100 percent of Amishi Drugs and Chemicals Private Limited (“Amishi”) for $7 million, which added $3 million of goodwill and intangible assets to our Consolidated Financial Statements. Amishi is an Indian manufacturer of chemically modified starch-based pharmaceutical excipients. Beginning at the acquisition date, our Consolidated Financial Statements reflect the effects of the acquisition and Amishi's financial results, which we report in our Asia-Pacific reportable business segment.

On April 1, 2021, we acquired 100 percent of KaTech, a privately held company headquartered in Germany. KaTech provides advanced texture and stabilization solutions to the food and beverage industry. To complete the closing, we made a total cash payment of $40 million, net of cash acquired, which we funded from cash on hand. The acquisition added $26 million of goodwill and intangible assets, as well as $14 million of tangible assets. Beginning at the acquisition date, our Consolidated Financial Statements reflect the effects of the acquisition and KaTech’s financial results, which we report in our Europe, Middle East and Africa (“EMEA”) reportable business segment.

Pre-tax acquisition and integration costs were insignificant in 2023, $1 million in 2022, and $5 million in 2021. The acquisitions individually and in the aggregate would not have been material to our results of operations for any periods presented.

South Korea Divestiture

On November 10, 2023, we entered into a definitive agreement to sell our business in South Korea to an affiliate of the Sajo Group, a leading food company headquartered in Seoul, South Korea, for 384.0 billion South Korean won, or approximately $294 million. We received 330.0 billion South Korean won, or $247 million net of certain transaction costs, when the transaction closed on February 1, 2024, and we will receive the remaining consideration in equal annual payments through February 2027. In the first quarter of 2024, we expect to record again from the imputed fair value of $283 million in consideration. Our business in South Korea generated operating profits of $30 million in 2023, $14 million in 2022 and $27 million in 2021.

In connection with this divestment, we reclassified the assets and liabilities of our South Korea business, which is in our Asia-Pacific reportable business segment, as held for sale during the fourth quarter of 2023 in our Consolidated Financial Statements. The following table presents the major classes of assets and liabilities classified as held for sale for the South Korea divestment. Assets classified as held for sale are included in Prepaid expenses and assets held for sale, and liabilities held for sale are included in Accrued liabilities and liabilities held for sale on the Consolidated Balance Sheets as of December 31, 2023.

3. Intangible Assets

Goodwill

The original carrying value of goodwill and accumulated impairment charges at December 31, 2023 are as follows:

We concluded that as of our July 1, 2023 impairment assessments, there wereno impairments to goodwill.

Other Intangible Assets

A summary of other intangible assets is as follows:

Amortization expense related to intangible assets was $26 million in 2023, $26 million in 2022, and $27 million in 2021. Based on the results of our impairment assessments, we concluded that as of July 1, 2023, there wereno impairments to our indefinite-lived other intangible assets.

Estimated future amortization expense related to intangible assets is as follows:

4. Investments

Investments as of December 31, 2023 and 2022 are as follows:

Our investments classified as equity investments do not have readily determinable fair values. Beginning on the dates we entered into the agreements for equity method investments, our share of income from them is included within Other operating (income) expense in the Consolidated Statements of Income. Of the $11 million of Restructuring/impairment charges in the Consolidated Statements of Income we recorded in 2023, $10 million represented other-than-temporary-impairments on our Amyris joint venture and other joint ventures.

Amyris Joint Venture

On June 1, 2021, we entered into an agreement with Amyris for certain exclusive commercialization rights to Amyris’ rebaudioside M by fermentation product, the exclusive licensing of the product’s manufacturing technology, and a 31 percent ownership stake in a joint venture for the products (the “Amyris joint venture”). In exchange, we contributed $28 million of total consideration, which included $10 million of cash, as well as non-exclusive intellectual property licenses and other consideration valued at $18 million. The transaction resulted in an $8 million gain recorded in Other operating (income) expense, which included $18 million related to the non-exclusive intellectual property licenses, offset by the $10 million cash payment. Beginning June 1, 2021, we began accounting for the investment under the equity method and we recognize our share of results one quarter in arrears due to the timing of when results are available.

Argentina Joint Venture

On February 12, 2021, we entered into an agreement with an affiliate of Grupo Arcor, an Argentine food company, to establish Ingrear Holding S.A. (the “Argentina joint venture”), a joint venture that operates five manufacturing facilities in Argentina to sell value-added ingredients to customers in the food, beverage, pharmaceutical and other industries in Argentina, Chile and Uruguay. On August 2, 2021, we completed all closing conditions, pending customary antitrust review, to combine the manufacturing facilities, finalize the transaction and formally establish the Argentina joint venture, which is managed by a jointly appointed team of executives.

We exchanged certain assets and liabilities with a fair value of $71 million from our Argentina, Chile and Uruguay operations for a value of $64 million of the Argentina joint venture, as well as $7 million of other consideration, including cash, from Grupo Arcor as of August 2, 2021. This resulted in our ownership of 49 percent of the Argentine joint venture’s outstanding shares.

This transaction also resulted in a $340 million impairment charge for assets and liabilities we contributed to the Argentina joint venture, which consisted of $311 million related to the write-off of the cumulative translation losses associated with the contributed net assets and $29 million related to the final write-down of the contributed net assets to fair value. We incurred$4 million and $6 million of pre-tax acquisition and integration costs to acquire the Argentina and Amyris joint venture investments in 2022 and 2021, respectively. The 2022 charges were recorded within Financing costs on the Consolidated Statements of Income.

The Argentina joint venture is accounted for on the equity method of accounting, and we recognize our share of income or expense in Other operating (income) expenseone month in arrears due to the timing of when results are available. On December 13, 2023, the new Argentine government allowed the Argentine peso to devalue from the exchange rate of approximately 366 pesos to one U.S. dollar, to 800 pesos to one U.S. dollar. Our 2023 results do not reflect the impact of this devaluation.

5. Restructuring Charges

During 2023, we recorded $1 million of pre-tax restructuring charges related to the divestiture of our South Korea business.

During 2022, we recorded $4 million of pre-tax restructuring charges, which included $3 million of costs associated with our Cost Smart selling, general and administrative expense (“SG&A”) program and $1 million of costs as part of our Cost Smart Cost of sales program.

During 2021, we recorded a total of $47 million of pre-tax restructuring charges. We recorded pre-tax net restructuring charges of $27 million as part of our Cost Smart Cost of sales program, which primarily consisted of accelerated depreciation and other costs recorded in our North America segment. We also recorded $17 million of employee-related and other costs associated with our Cost Smart SG&A program, consisting of professional services and employee-related severance costs primarily in our North America and EMEA segments.

6. Derivative Instruments and Hedging Activities

We are exposed to market risk stemming from changes in commodity prices (primarily corn and natural gas), foreign currency exchange rates and interest rates. In the normal course of business, we actively manage our exposure to these market risks by entering various hedging transactions authorized under established policies that place controls on these activities. These transactions utilize exchange-traded derivatives or over-the-counter derivatives with investment grade counterparties. We use derivative financial instruments that consist of commodity-related futures, options and swap contracts, foreign currency-related forward contracts, interest rate swaps and treasury locks (“T-Locks”).

Commodity price hedging: Our principal use of derivative financial instruments is to manage commodity price risk relating to anticipated purchases of corn and natural gas that we intend to use in the manufacturing process, generally over the next 12 to 24 months. We maintain a commodity-price risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by commodity-price volatility. To manage price risk related to corn purchases primarily in North America, we use corn futures and option contracts that trade on regulated commodity exchanges to lock in corn costs associated with fixed-priced customer sales contracts. We use soybean oil and soybean meal futures contracts in North America that trade on regulated commodity exchanges to hedge sales of our co-products. We also use over-the-counter natural gas swaps primarily in North America to hedge a portion of our natural gas usage. These derivative financial instruments limit the impact that volatility resulting from fluctuations in market prices will have on corn and natural gas purchases, as well as co-product sales. Our natural gas, soybean meal and the majority of our corn and soybean oil derivatives have been designated as cash flow hedging instruments. A portion of our corn and soybean oil derivatives are not designated as hedging instruments for accounting purposes.

We had outstanding futures and option contracts that hedged the forecasted purchase of approximately 109 million and 120 million bushels of corn as of December 31, 2023 and 2022, respectively. We also had outstanding swap contracts that hedged the forecasted purchase of approximately 28 million and 31 million mmbtus of natural gas as of December 31, 2023 and 2022, respectively.

Foreign currency hedging: Due to our global operations, including operations in many emerging markets, we are exposed to fluctuations in foreign currency exchange rates. As a result, we have exposure to translational foreign-exchange risk when the results of our foreign net assets and operations are translated to U.S. dollars and to transactional foreign-exchange risk when transactions not denominated in the functional currency are revalued. Our foreign-exchange risk management strategy uses derivative financial instruments such as foreign currency forward contracts, swaps and options to manage our transactional foreign exchange risk. We enter into foreign currency derivative instruments that are designated as cash flow hedging instruments as well as instruments not designated as hedging instruments for accounting purposes in order to mitigate transactional foreign-exchange risk.

We hedge certain assets using foreign currency derivatives not designated as hedging instruments, which had a notional value of $694 million and $405 million as of December 31, 2023 and 2022, respectively. We also hedge certain liabilities using foreign currency derivatives not designated as hedging instruments, which had a notional value of $182 million and $239 million as of December 31, 2023 and 2022, respectively.

We hedge certain assets using foreign currency cash flow hedging instruments, which had a notional value of $449 million and $668 million as of December 31, 2023 and 2022, respectively. We also hedge certain liability positions using foreign currency cash flow hedging instruments, which had a notional value of $621 million and $840 million as of December 31, 2023 and 2022, respectively.

Interest rate hedging: We assess our exposure to variability in interest rates by identifying and monitoring changes in interest rates that may adversely impact future cash flows and the fair value of existing debt instruments and by evaluating hedging opportunities. Our risk management strategy is to monitor interest rate risk attributable to our outstanding and forecasted debt obligations as well as our offsetting hedge positions. Derivative financial instruments that we have used to manage our interest rate risk consist of interest rate swaps and T-Locks.

We periodically enter into T-Locks to hedge our exposure to interest rate changes. We have settled T-Locks associated with the issuance of our senior notes due in 2030 and 2050. The realized loss upon settlement of these T-Locks was recorded in AOCL and is amortized into earnings over the term of the senior notes. We did not have open T-Locks as of December 31, 2023 and 2022.

The derivative instruments designated as cash flow hedges included in AOCL as of December 31, 2023 and 2022, are as follows:

As of December 31, 2023, AOCL included $46 million of net losses (net of income taxes of $16 million) on commodities-related derivative instruments, T-Locks and foreign currency hedges designated as cash flow hedges that are expected to be reclassified into earnings during the next twelve months.

The fair value and balance sheet location of our derivative instruments, presented gross in the Consolidated Balance Sheets, are as follows:

Additional information relating to our derivative instruments are as follows:

7. Fair Value Measurements

We measure certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, we use various valuation approaches. The hierarchy of those valuation approaches is in three levels based on the reliability of inputs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Below is a summary of the hierarchy levels:

•Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly for substantially the full term of the financial instrument. Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability or can be derived principally from or corroborated by observable market data.

•Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

Assets and liabilities measured at fair value on a recurring basis are presented below:

The carrying values of cash equivalents, short-term investments, accounts receivable, accounts payable and short-term borrowings approximate fair values. Commodity futures, options and swap contracts are recognized at fair value. Foreign currency forward contracts, swaps and options are also recognized at fair value. The fair value of our Long-term debt is estimated based on quotations of major securities dealers who are market makers in the securities. See Note 11 for information on the fair value of pension plan assets.

8. Financing Arrangements

We had total debt outstanding of approximately $2.2 billion and $2.5 billion at December 31, 2023 and 2022, respectively. As of December 31, 2023, our Short-term borrowings consisted primarily of commercial paper borrowings and amounts outstanding under various unsecured local country operating lines of credit. In 2023, we paid the outstanding principal in full and without penalty under our term loan credit agreement that was due on December 16, 2024.

In 2021, we established a commercial paper program under which we may issue senior unsecured notes of short maturities up to a maximum aggregate principal amount of $1.0 billion outstanding at any time. The notes may be sold from time to time on customary terms in the U.S. commercial paper market. We use the note proceeds for general corporate purposes. From the inception of the program until December 31, 2021, the average amount of commercial paper outstanding was $670 million with an average interest rate of 0.27 percent and a weighted average maturity of 48 days. During 2022, the average amount of commercial paper outstanding was $522 million with an average interest rate of 1.97 percent and a weighted average maturity of 16 days. As of December 31, 2022, $390 million of commercial paper was outstanding with an average interest rate of 4.75 percent and a weighted average maturity of 7 days. During 2023, the average amount of commercial paper outstanding was $397 million with an average interest rate of 5.30 percent and a weighted average maturity of 11 days. As of December 31, 2023, $327 million of commercial paper was outstanding with an average interest rate of 5.50 percent and a weighted average maturity of 11 days. The amount of commercial paper outstanding under this program in 2024 is expected to fluctuate.

Presented below are our debt carrying amounts, net of related discounts, premiums and debt issuance costs and fair values as of December 31, 2023 and 2022:

We guarantee certain obligations of our consolidated subsidiaries, which aggregated to $49 million and $63 million at December 31, 2023 and 2022, respectively.

9. Leases

The components of lease expense are as follows:

We have operating leases for certain rail cars, office spaces, warehouses and machinery and equipment. We currently have no finance leases. The following is a reconciliation of future undiscounted cash flows to the operating lease liabilities and the related operating lease assets as presented within Other non-current liabilities and Other assets, respectively, on our Consolidated Balance Sheets as of December 31, 2023:

Supplemental cash flow information arising from lease transactions is as follows:

10. Income Taxes

The components of income before income taxes and the provision for income taxes for the years indicated are presented below:

Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting basis and tax basis of assets and liabilities. Significant temporary differences as of December 31, 2023 and 2022, are summarized as follows:

Of the $58 million of tax-effected net operating loss carryforwards as of December 31, 2023, $42 million are for foreign loss carryforwards, $14 million for state loss carryforwards, and $2 million for U.S. federal loss carryforwards. Of the $42 million of foreign loss carryforwards, $24 million are related to Canada, $5 million to Australia, $4 million to Brazil, $3 million to Argentina, and $3 million to Malaysia with carryforward periods of 20 years, indefinite, indefinite,5 years and 10 years, respectively. U.S. federal and state loss carryforwards have various expiration periods beginning in 2025.

A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Prior to establishing a valuation allowance, we consider historical taxable income, scheduled reversal of deferred tax liabilities, tax planning strategies, tax carryovers and projected future taxable income. As of December 31, 2023, we maintained valuation allowances of $46 million, consisting of $23 million primarily related to foreign loss carryforwards, $14 million for state loss carryforwards, $6 million for state credits and carryforwards, $2 million for U.S. federal loss carryforwards and $1 million for certain foreign tax credits, all of which we have determined will more likely than not expire prior to realization.

Net operating loss carryforwards disclosed in the financial statements differ from the as-filed tax returns due to an unrecognized tax benefit. Foreign net operating loss carryforwards and valuation allowances would increase $10 million absent the unrecognized tax benefit.

A reconciliation of the U.S. federal statutory tax rate to our effective tax rate follows:

The 2023 statutory tax rates (including surcharges and local jurisdictional taxes when applicable) were 30 percent in Mexico,32 percent in Germany,35 percent in Colombia,39 percent in Pakistan, and 26 percent in Canada, where we have significant operations. In addition, our subsidiary in Brazil has a statutory tax rate of 34 percent before the application of local incentives that vary each year.

During 2023, the IRS released Notice 2023-55, to address the final foreign tax credit regulations issued in 2022. The notice was effective in 2023 and provided retroactive relief to fiscal 2022. This increased our ability to claim certain foreign tax credits against U.S. taxes with respect to fiscal years 2022 and 2023.

Additionally, during 2023, the Brazilian Government published Law 14.596/23, which established a transfer pricing framework in Brazil that is aligned with the Organization for Economic Co-operation and Development (“OECD”) guidelines. The law was effective January 1, 2024, but our subsidiary in Brazil elected to early adopt the law as of January 1, 2023, which provided a favorable country earnings mix and related increase in our foreign-derived intangible income.

As of December 31, 2023, we had a $1 million accrual for foreign withholding on certain unremitted earnings from foreign subsidiaries. No foreign withholding taxes, federal and state taxes or foreign currency gains or losses have been provided on distributions of approximately $2.7 billion of unremitted earnings of our foreign subsidiaries, as such amounts are considered permanently reinvested. It is not practicable to estimate the additional income taxes, including applicable foreign withholding taxes that would be due upon the repatriation of these earnings.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, for 2023 and 2022 is as follows:

Of the $31 million of unrecognized tax benefits as of December 31, 2023, $20 million represents the amount that, if recognized, could affect the effective tax rate in future periods. The remaining $11 million includes $10 million of net operating loss carryforwards that would have otherwise had a valuation allowance and $1 million of U.S. federal benefits.

We account for interest and penalties related to income tax matters within the provision for income taxes. We have accrued $5 million of interest expense and penalties related to unrecognized tax benefits as of December 31, 2023.

We are subject to U.S. federal income tax as well as income tax in multiple states and non-U.S. jurisdictions. The U.S. federal tax returns are subject to audit for the years 2020 through 2023. In general, our foreign subsidiaries remain subject to audit for years 2013 and later.

It is reasonably possible that the total amount of unrecognized tax benefits including interest and penalties will increase or decrease within twelve months of December 31, 2023. We believe it is reasonably possible that $4 million of the unrecognized tax benefits may be recognized within twelve months of December 31, 2023, as a result of a statute of limitations lapse and potential settlement.

11. Pension and Other Postretirement Benefits

We sponsor noncontributory defined benefit pension plans (qualified and non-qualified) covering a substantial portion of our employees in the U.S. and Canada and certain employees in other foreign countries. Plans for most salaried employees provide pay-related benefits based on years of service. Plans for hourly employees generally provide benefits based on flat dollar amounts and years of service. Our general funding policy is to make contributions to the plans that comply with minimum funding requirements and are within the limits of deductibility under current tax regulations. Certain foreign countries allow income tax deductions without regard to contribution levels and our policy in those countries is to make contributions required by the terms of the applicable plan.

Included in our pension obligation are nonqualified supplemental retirement plans for certain key employees. Benefits provided under these plans are unfunded and we make direct payments to plan participants. We also provide healthcare and/or life insurance benefits for retired employees in the U.S., Canada and Brazil. Healthcare benefits for retirees outside the U.S., Canada and Brazil are generally covered through local government plans.

Pension Plans

Pension Obligation and Funded Status: The changes in pension benefit obligations and plan assets during 2023 and 2022, as well as the funded status and the amounts recognized in our Consolidated Balance Sheets related to our pension plans at December 31, 2023 and 2022, are as follows:

As of December 31, 2023, the actuarial loss for the U.S. and non-U.S. plans was primarily driven by a decrease in the discount rate compared to the prior year. As of December 31, 2022, the actuarial gain for the U.S. and non-U.S. plans was primarily driven by an increase in discount rates compared to the prior year.

Amounts recorded in the Consolidated Balance Sheets as of December 31, 2023 and 2022 are as follows:

Amounts recorded in AOCL, excluding tax effects that have not yet been recognized as components of net periodic benefit cost at December 31, 2023 and 2022, are as follows:

The amount recognized in AOCL at December 31, 2023 decreased compared to prior year for the U.S. pension plans mainly because the actual return on assets was more than the expected return on assets, which was partially offset by the decrease in discount rates used to measure our obligations under our U.S. pension. The net amount recognized in AOCL at December 31, 2023 for the non-U.S. pension plans as compared to December 31, 2022 was flat primarily due to the actuarial loss amortization, which was offset by foreign currency translation.

The accumulated benefit obligation for all defined benefit pension plans was $485 million and $469 million at December 31, 2023 and 2022, respectively. Information for pension plans with a projected benefit obligation in excess of plan assets and an accumulated benefit obligation in excess of plan assets is as follows:

Components of net periodic benefit cost consist of the following for 2023, 2022 and 2021:

Total amounts recorded in other comprehensive income and net periodic benefit cost are as follows:

The weighted average assumptions used to determine our obligations for the pension plans are as follows:

The weighted average assumptions used to determine our net periodic benefit cost for the pension plans are as follows:

For 2023, we assumed an expected long-term rate of return on assets of 5.50 percent for U.S. plans and 4.66 percent for Canadian plans. In developing the expected long-term rate of return assumption on plan assets, which consist mainly of U.S. and Canadian debt and equity securities, we evaluated historical rates of return achieved on plan assets and the asset allocation of the plans, input from our independent actuaries and investment consultants, and historical trends in long-term inflation rates. Projected return estimates are based upon broad equity and bond indices.

The discount rate reflects a rate of return on high-quality fixed-income investments that match the duration of the expected benefit payments. We typically use returns on long-term, high-quality corporate AA bonds as a benchmark in establishing this assumption, and we elect to use a full yield curve approach to estimate these components of benefit cost by applying the specific spot rates along the yield curve used to determine the benefit obligation to the relevant projected cash flows.

Plan Assets: Our investment policy for our pension plans is to balance risk and return through diversified portfolios of fixed income securities, equity instruments and short-term investments. Maturities for fixed income securities are managed such that sufficient liquidity exists to meet near-term benefit payment obligations. For U.S. pension plans, the weighted average target range allocation of assets was 9 to 19 percent in equities and 81 to 91 percent in fixed income inclusive of other short-term investments. The asset allocation is reviewed regularly, and portfolio investments are rebalanced to the targeted allocation when considered appropriate.

Our weighted average asset allocations as of December 31, 2023 and 2022, for U.S. and non-U.S. pension plan assets are as follows:

With the exception of cash, which is considered Level 1 in the fair value hierarchy, all significant pension plan assets are held in collective trusts by our U.S. and non-U.S. plans. The fair value of shares of collective trusts are based upon the net asset value (“NAV”) of the fund reported by the fund managers based on quoted market prices of the underlying securities as of the balance sheet date and are considered to be Level 2 fair value measurements. Investments measured at NAV as a practical expedient for fair value, are excluded from the fair value hierarchy. This may produce a fair value measurement that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with those of other market participants, different methods could result in different fair value measurements at the reporting date.

The fair values of our plan assets by asset category are as follows:

During 2023, we made cash contributions of $1 million to our U.S. pension plans and $6 million to our non-U.S. pension plans. We anticipate that in 2024 we will make cash contributions of $1 million to our U.S. pension plans and $4 million to our non-U.S. pension plans. Cash contributions in subsequent years will depend on a number of factors, including the performance of plan assets.

We expect to pay the following benefit payments to beneficiaries, which reflect anticipated future service, as appropriate:

We also maintain defined contribution plans. We make matching contributions to these plans that are subject to certain vesting requirements and are based on a percentage of employee contributions. The expense for defined contribution plans was $28 million in 2023, $22 million for 2022, and $22 million in 2021.

Postretirement Benefit Plans

Our postretirement benefit plans currently are not funded. The information presented below includes plans in the U.S., Brazil and Canada. The changes in the benefit obligations of the plans during 2023 and 2022, as well as the amounts recognized in our Consolidated Balance Sheets at December 31, 2023 and 2022, are as follows:

As of December 31, 2023, the actuarial loss was insignificant. As of December 31, 2022, the actuarial gain was mainly driven by higher discount rates.

Amounts recorded in the Consolidated Balance Sheets at December 31, 2023 and 2022 consist of:

Amounts recorded in AOCL, excluding tax effects that have not yet been recognized as components of net periodic benefit cost at December 31, 2023 and 2022, are as follows:

Components of net periodic benefit cost consisted of the following for 2023, 2022 and 2021:

Total amounts recorded in other comprehensive income and net periodic benefit cost for 2023, 2022 and 2021 are as follows:

We used the following weighted average assumptions to determine our postretirement benefit obligations for 2023 and 2022:

The following weighted average assumptions were used to determine our net postretirement benefit cost:

The discount rate reflects a rate of return on high-quality fixed-income investments that match the duration of expected benefit payments. We typically use returns on long-term, high-quality corporate AA bonds as a benchmark in establishing this assumption.

The healthcare cost trend rates used in valuing our postretirement benefit obligations are established based upon actual healthcare trends and consultation with actuaries and benefit providers. We used the following assumptions as of December 31, 2023:

We expect to make the following benefit payments to beneficiaries under our postretirement benefit plans, which reflect anticipated future service, as appropriate:

Multi-employer Plan

Ingredion participates in and contributes toone multi-employer benefit plan under the terms of collective bargaining agreements that cover certain union-represented employees and retirees in the U.S. The plan covers medical and dental benefits for active hourly employees and retirees represented by the United Steelworkers Union for certain U.S. locations. The risks of participating in this multi-employer plan are different from risk of participating in single-employer plans. This plan receives contributions from two or more unrelated employers pursuant to one or more collective bargaining agreements, and the assets contributed by one employer may be used to fund the benefits of all employees covered within the plan.

We are required to make contributions to this multi-employer plan as determined by the terms and conditions of the collective bargaining agreements and plan terms, but we do not provide more than five percent of the total contributions to the plan. We made regular contributions to the plan of $11 million in 2023, $10 million in 2022, and $14 million in 2021. We cannot currently estimate the amount of multi-employer plan contributions that will be required in 2024 and future years, but these contributions could increase due to healthcare cost trends. The North Kansas City retiree medical group shifted from a multi-employer plan to the Ingredion Post Retirement Medical Health and Life Plan at the end of 2021. The remaining collective bargaining agreements associated with the multi-employer plan expire during 2024 through 2027.

12. Equity

Preferred stock: We have authorized 25 million shares of $0.01 par value preferred stock, none of which were issued or outstanding at December 31, 2023 and 2022.

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 2023, we repurchased 1.0 million outstanding shares of common stock in open market transactions at a net cost of $101 million. During 2022, pursuant to our previous stock repurchase program which has since been terminated, we repurchased 1.3 million shares of common stock in open market transactions at a net cost of $112 million.

Common stock share activity for 2023, 2022 and 2021 is as follows:

Share-based payments: Share-based compensation expense for 2023, 2022 and 2021 is as follows:

We have a stock incentive plan (“SIP”) that was approved on May 19, 2023 and which is administered by the People, Culture and Compensation Committee (“Compensation Committee”) of our 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 5.4 million shares were originally authorized for awards under the SIP. As of December 31, 2023,5.4 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 the 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 athree-year period at the anniversary dates of the date of grant.

We granted non-qualified options to purchase 197 thousand,281 thousand and 358 thousand shares for 2023, 2022 and 2021, respectively. The fair value of each option grant was estimated using the Black-Scholes option-pricing model with the following assumptions:

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 in 2023 is as follows:

For 2023, 2022 and 2021, cash received from the exercise of stock options was $28 million, $11 million and $21 million, respectively. As of December 31, 2023, 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 1.6 years.

Additional information pertaining to stock option activity is as follows:

Restricted Stock Units: We have 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 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.

RSU activity in 2023 is as follows:

The total fair value of RSUs that vested in each of 2023, 2022 and 2021 was $12 million.

At December 31, 2023, the total remaining unrecognized compensation cost related to RSUs was $20 million, which will be amortized on a weighted-average basis over approximately 1.7 years. Recognized compensation cost related to unvested RSUs is included in Share-based payments subject to redemption in the Consolidated Balance Sheets and totaled $28 million for both December 31, 2023 and 2022, respectively.

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 ontwo 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 ourthree-year average Adjusted Return on Invested Capital (“ROIC”) against an established ROIC target. The 2021 performance shares were granted intwo tranches. Vesting for the first tranche was split evenly between our 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 2023 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 thethree-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 athree-year graded vesting schedule.

For the 2023 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 thethree-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 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. The total compensation expense for these awards is amortized over athree-year graded vesting schedule.

We awarded 93 thousand,86 thousand and 108 thousand performance shares in 2023, 2022 and 2021, respectively. The weighted average fair value of the shares granted during 2023, 2022 and 2021 was $114.26, $138.85 and $100.29, respectively.

The 2020 performance share awards that vested during 2023 achieved a 77 percent payout of the granted performance shares. As of December 31, 2023, the 2021 performance share awards are estimated to pay out at 200 percent. Additionally, there were 34 thousand shares cancelled during 2023.

As of December 31, 2023, the unrecognized compensation cost relating to these plans was $8 million, which will be amortized over the remaining requisite service periods of 1.8 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 $27 million and $20 million at December 31, 2023 and 2022, respectively.

Other share-based awards under the SIP: Under the compensation agreement with the Board of Directors, $150,000 of a non-employee director’s annual retainer is paid in Company common stock. A director may elect to defer all or a portion of the director's common stock or cash compensation, in shares of restricted stock units. These restricted units may not be transferred until a date not less thansix months and no more than ten years and 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 in each of 2023, 2022 and 2021. At December 31, 2023, there were approximately 235 thousand restricted stock units outstanding under this plan at a carrying value of approximately $15 million.

Accumulated Other Comprehensive Loss: A summary of Accumulated other comprehensive loss for 2023, 2022 and 2021 is presented below:

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

Approximately 0.5 million,1.4 million and 0.9 million share-based awards of common stock were excluded for 2023, 2022 and 2021, respectively, from the calculation of the weighted average number of shares outstanding for diluted EPS because their effects were anti-dilutive.

13. Segment Information

We are principally engaged in the production and sale of starches and sweeteners for a wide range of industries and we are managed geographically on a regional basis. The nature, amount, timing and uncertainty of our Net sales are managed by us primarily based on our geographic segments, which we classify and report as North America, South America, Asia-Pacific and EMEA. Our North America segment includes businesses in the U.S., Mexico and Canada. Our South America segment includes businesses and our share of earnings from investments in joint ventures in Brazil, Colombia, Peru, Ecuador and Argentina. Our Asia-Pacific segment includes businesses in Thailand, China, Japan, Australia, Indonesia, India, the Philippines, Malaysia, Singapore, New Zealand, Vietnam and previously South Korea, in which we sold our business on February 1, 2024, as more fully described in Note 2. Our EMEA segment includes businesses in Germany, Pakistan, the United Kingdom, South Africa and Poland.

In November 2023, we announced plans to reorganize our business operations, which will result in a change to our reportable business segments. Once the reorganization is complete, which we expect to occur in 2024, we anticipate that our production assets and commercial efforts will align with a global focus on Texture and Healthful Solutions, a local focus on Food and Industrial Ingredients, and other businesses. We will continue to report our results using the existing reportable segment structure until the new segments are operational and discrete financial information consistent with the new segments is being provided to our Chief Operating Decision Maker.

Net sales to unaffiliated customers by reportable segment are as follows:

No customer accounted for 10 percent or more of our net sales in 2023, 2022 or 2021.

Operating income by reportable segment is as follows:

Total assets by reportable segment as of December 31, 2023 and 2022 are as follows:

(a)For purposes of presentation, North America includes Corporate assets.

Depreciation and amortization, mechanical stores expense and capital expenditures and mechanical stores purchases by reportable segment are as follows:

(a)North America includes Corporate activities.

(b)Represents costs for spare parts used in the production process that are recorded in PP&E as part of machinery and equipment until they are utilized in the manufacturing process and expensed as a period cost.

Net sales to unaffiliated customers by country of origin are as follows:

Long-lived assets (excluding intangible assets and deferred tax assets) by country as of December 31, 2023 and 2022 are as follows:

14. Commitments and Contingencies

In October 2022, the Brazilian Superior Court of Justice issued a motion of clarification that certain tax incentives provided by local governments can be excluded from taxable income. In the fourth quarter of 2022, we filed an action for a right to recover previously taxable, local government tax incentives granted during fiscal years 2018 to 2022. As our recovery is probable, we recorded a $27 million income tax benefit, which we expect to recover by the end of 2027. As of December 31, 2023 and 2022, we had $32 million and $27 million, respectively, of remaining tax incentives recorded within Other assets on the Consolidated Balance Sheets.

In May 2021, the Brazilian Supreme Court (“Court”) issued its ruling related to the calculation of certain indirect taxes (referred as “Brazil indirect tax matters” in these financial statements), which affirmed the Brazil Federal Court of Appeals (“Lower Court”) rulings that we had received in previous years and affirmed that we are entitled to previously recorded tax credits. The Court ruling ensured that we are entitled to $15 million of additional credits from the period of 2015 to 2018 that was previously unrecorded pending a final Court ruling. We recorded the $15 million of additional credits in 2021 within Other operating (income) expense in the Consolidated Statements of Income. As of December 31, 2023 and 2022, we had $5 million and $17 million, respectively, of remaining indirect tax credits recorded in Other assets and Prepaid expenses and assets held for sale on our Consolidated Balance Sheets. We will use the income tax offsets to eliminate our Brazilian federal tax payments in 2024, including the income tax payable for the indirect taxes recovered.

We are currently subject to claims and suits arising in the ordinary course of business, including labor matters, certain environmental proceedings and other commercial claims. We also routinely receive inquiries from regulators and other government authorities relating to various aspects of our business, including with respect to compliance with laws and regulations relating to the environment, and at any given time we have matters at various stages of resolution with the applicable governmental authorities. The outcomes of these matters are not within our complete control and may not be known for prolonged periods of time. We do not believe that the results of currently known legal proceedings and inquires will be material to us. There can be no assurance, however, that such proceedings, matters, claims, suits or investigations or those arising in the future, whether taken individually or in the aggregate, will not have a material adverse effect on our financial condition or results of operations.

15. Supplementary Information

Accounts Receivable, Net

Accounts receivable, net as of December 31, 2023 and 2022 were as follows:

Write-offs of accounts receivable were immaterial in 2023 and 2022. There were no significant contract assets associated with customers as of December 31, 2023 or 2022.

Inventories

Inventories as of December 31, 2023 and 2022 were as follows:

PP&E, net

PP&E, net as of December 31, 2023 and 2022 were as follows:

We recorded capitalized interest to PP&E of$3 million in 2023, $4 million in 2022, and $4 million in 2021. We recognized depreciation expense of $193 million in 2023, $189 million in 2022, and $194 million in 2021.

Supply Chain Finance Programs

Under supply chain finance programs administered by third-party banks, our suppliers have the opportunity to sell receivables due from us to participating financing institutions and receive earlier payment at a discount. Our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether such supplier sells its receivable to a financial institution. The payment terms we negotiate with a supplier are independent of whether such supplier participates in a supply chain finance program, and participation in any such program by a supplier has no effect on our income or cash flows.

As of December 31, 2023 and 2022, participating financial institutions held $153 million and $175 million, respectively, of our liabilities recorded in Accounts payable on our Consolidated Balance Sheets. As of December 31, 2023, supply chain finance programs existed for operations in Brazil, China, Thailand, Mexico, Colombia and Peru.

Accrued Liabilities and Liabilities Held for Sale

Accrued liabilities as of December 31, 2023 and 2022 are as follows:

There were no significant contract liabilities associated with our customers as of December 31, 2023 and 2022. Liabilities for volume discounts and incentives were also not significant as of December 31, 2023 and 2022.

Other Non-Current Liabilities

Other non-current liabilities as of December 31, 2023 and 2022 were as follows:

Supplemental Statements of Income Information

Research and development (“R&D”) expense was approximately $63 million, $52 million and $43 million in 2023, 2022 and 2021, respectively. Our R&D expense, which we record in Operating expenses in the Consolidated Statements of Income, represents investments in new product development and innovation.

Supplemental Cash Flow Information

The following represents additional cash flow information:

Quarterly Financial Data (Unaudited)

Earnings per share for each quarter and the year are calculated individually and may not sum to the total for the respective year. Summarized quarterly financial data was as follows: