Cibi e Bevande
INGREDION INCORPORATED REPORTS FOURTH QUARTER AND FULL-YEAR 2018 RESULTS
WESTCHESTER, Ill., February 5, 2019 - Ingredion Incorporated (NYSE: INGR), a leading global provider of ingredient solutions to diversified industries, today reported results for the fourth quarter 2018. The results, reported in accordance with U.S. generally accepted accounting principles ("GAAP") for 2018 and 2017, include items that are excluded from the non-GAAP financial measures that the Company presents.
"During the fourth quarter, we continued taking actions to drive improved performance in response to challenging North America market dynamics and continued foreign exchange devaluations. We took multiple pricing actions, progressed our $125 million Cost Smart savings program, and grew our specialties portfolio, all while delivering on our customer experience commitments," said Jim Zallie, Ingredion's president and chief executive officer.
"By the end of 2018, we actioned $11 million of run-rate savings, exceeding our $5 million initial year target for Cost Smart. After ceasing manufacturing operations at our Stockton, California plant, we successfully transitioned service for our West Coast customers to other plants in our network, better aligning our manufacturing cost structure with future sweetener demand. We are on the right path to becoming a more streamlined and agile organization."
Zallie continued, "We are pleased to have grown our specialties portfolio to 29 percent of total net sales in 2018, driven by growth and demand for our on-trend platforms such as clean and simple ingredients, sugar reduction and starch-based texturizers. We're excited about the prospects for our more than $200 million of investments in plant-based proteins, specialty starch texturizers, and sugar reduction capabilities."
*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.
"We remained focused on delivering shareholder value and continued to deploy cash with 5.8 million share repurchases during 2018 at an expected price range of $101 to $103 a share, pending the final settlement of the accelerated share repurchase," Zallie concluded.
Totals may not foot due to rounding
The Company expects 2019 adjusted EPS to be in the range of $6.80-$7.50 compared to adjusted EPS of $6.92 in 2018. This expectation excludes acquisition-related, integration and restructuring costs, as well as any potential impairment costs. Compared with last year, the 2019 full-year outlook assumes: North America operating income is flat assuming current market values for corn and corn by-products, which have been negatively impacted by crop inventory imbalances arising from the U.S. and China trade dispute; South America operating income is up; Asia-Pacific and EMEA operating incomes are expected to modestly increase; an adjusted effective tax rate range of approximately 26.0-27.5 percent; and continued higher-value specialty ingredients growth. The Company expects operating income to be down in the first half of 2019, given the anticipated layout of corn costs in North America and the timing of anticipated foreign-exchange devaluations relative to 2018.
Cash from operations in 2019 is expected to be in the range of $650 million to $700 million. Capital expenditures are anticipated to be between $330 million to $360 million.
Ingredion will conduct a conference call today at 8 a.m. ET (7 a.m. CT) hosted by Jim Zallie, president and chief executive officer, and James Gray, executive vice president and chief financial officer. The call will be webcast in real time and will include a visual presentation accessible through the Ingredion website at www.ingredion.com. The presentation will be available to download a few hours prior to the start of the call. A replay of the webcast will be available for a limited time at www.ingredion.com.
Jim Zallie, president and chief executive officer; James Gray, executive vice president and chief financial officer; Jorgen Kokke, executive vice president, global specialties, and president, North America; and Pierre Perez, senior vice president and president, EMEA, will participate in the Consumer Analyst Group of New York (CAGNY) conference on Tuesday, February 19, 2019 at 2 p.m. ET in Boca Raton, Florida. The presentation will be available on the Company's website,
www.ingredion.com , in the "Company and Investors" section, under "Investors/Presentations & Presentations/Webcasts."
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 2018 annual net sales of nearly $6 billion, the Company turns grains, fruits, vegetables and other plant materials into value-added ingredients and biomaterial solutions for the food, beverage, paper and corrugating, brewing and other industries. With Ingredion Idea Labs® innovation centers around the world and more than 11,000 employees, the Company develops ingredient solutions to meet consumers' evolving needs by making crackers crunchy, yogurt creamy, candy sweet, paper stronger, and adding fiber to nutrition bars. For more information, visit ingredion.com.
This news release contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends these forward-looking statements to be covered by the safe harbor provisions for such statements.
Forward-looking statements include, among other things, any statements regarding the Company's prospects or future financial condition, earnings, revenues, tax rates, capital expenditures, cash flows, expenses or other financial items, any statements concerning the Company's prospects or future operations, including management's plans or strategies and objectives therefor and any assumptions, expectations or beliefs underlying the foregoing.
These statements can sometimes be identified by the use of forward looking words such as "may," "will," "should," "anticipate," "assume", "believe," "plan," "project," "estimate," "expect," "intend," "continue," "pro forma," "forecast," "outlook," "propels," "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 the effects of global economic conditions, including, particularly, economic, currency and political conditions in South America and economic and political conditions in Europe, and their impact on our sales volumes and pricing of our products; our ability to collect our receivables from customers and our ability to raise funds at reasonable rates; fluctuations in worldwide markets for corn and other commodities, and the associated risks of hedging against such fluctuations; fluctuations in the markets and prices for our co-products, particularly corn oil; fluctuations in aggregate industry supply and market demand; the behavior of financial markets, including foreign currency fluctuations and fluctuations in interest and exchange rates; volatility and turmoil in the capital markets; the commercial and consumer credit environment; general political, economic, business, market and weather conditions in the various geographic regions and countries in which we buy our raw materials or manufacture or sell our products; future financial performance of major industries which we serve, including, without limitation, the food, beverage, paper and corrugated, and brewing industries; energy costs and availability; freight and shipping costs; and changes in regulatory controls regarding quotas; tariffs, duties, taxes and income tax rates, particularly United States tax reform enacted in 2017; operating difficulties; 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 develop or acquire new products and services at rates or of qualities sufficient to meet expectations; energy issues in Pakistan; boiler reliability; our ability to effectively integrate and operate acquired businesses; our ability to achieve budgets and to realize expected synergies; our ability to achieve expected savings under our Cost Smart program; our ability to complete planned maintenance and investment projects successfully and on budget; labor disputes; genetic and biotechnology issues; changing consumption preferences including those relating to high fructose corn syrup; increased competitive and/or customer pressure in the corn-refining industry; and the outbreak or continuation of serious communicable disease or hostilities including acts of terrorism. 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, 2017 and subsequent reports on Forms 10-Q and 8-K.
Notes
(i) As a result of the Company's adoption of ASC 606, the Company identified certain fulfillment costs that were included as a reduction in "Net sales before shipping and handling costs" which are more appropriately classified as fulfillment activities under ASC 606 rather than a discount to the transaction price. Upon adoption of the new standard, the Company has elected to reclassify these costs on a retrospective basis, resulting in $16 million and $64 million reclassified from "Net sales before shipping and handling costs" to "Less: shipping and handling costs" for the three months and year ended December 31, 2017, respectively. Reported net sales does not change as a result of this reclassification.
(ii) As a result of the Company's adoption of the amendments to ASC 715, the Company was required to retrospectively present service costs separate from the other components of net periodic benefit costs. The other components of net periodic benefit costs have been reclassified from Cost of sales and Operating expenses to Other, non-operating income. The result is a reduction to Operating income and increase to Other, non-operating income of $1 million and $6 million for the three months and year ended December 31, 2017, respectively.
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.
Net income, EPS and tax rates may not foot or recalculate due to rounding.
Notes
(i) The 2017 period includes costs related to the acquisition and integration of Penford Corporation, Kerr Concentrates, Inc., TIC Gums Incorporated, Shandong Huanong Specialty Corn Development Co., Ltd, and/or Sun Flour Industry Co, Ltd.
(ii) 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 program in relation to the cessation of wet-milling at the Stockton, California plant, including $8 million for mechanical stores write downs, $6 million for accelerated depreciation, and $4 million of other restructuring costs. In addition, we recorded $2 million of restructuring charges as part of the Cost Smart SG&A program in relation to restructuring projects in the South America, APAC, and North America segments. 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, including $34 million for accelerated depreciation, $8 million for mechanical stores write downs, $4 million for other restructuring costs, and $3 million for employee-related severance, as part of the Cost Smart cost of sales program in relation to the cessation of wet-milling at the Stockton, California plant. In addition, $11 million of restructuring charges were recorded related to the Cost Smart SG&A program, including $7 million of employee-related severance and other costs for restructuring projects in the South America, APAC, and North America segments and $4 million of costs related to the Latin America finance transformation initiative. Finally, $4 million of restructuring charges related to other projects were recorded including $3 million of costs related to the North America finance transformation and $1 million of costs related to the leaf extraction process in Brazil.
During the three months and year ended December 31, 2017, we recorded a $15 million and $38 million pre-tax restructuring/impairment charges, respectively. During the fourth quarter of 2017, we recorded $13 million of restructuring charges related to the abandonment of certain assets related to our leaf extraction process in Brazil, $1 million of employee-related severance and other costs associated with the Finance Transformation initiative, and $1 million of other restructuring costs including employee-related severance costs in North America. During the year ended December 31, 2017, we recorded $17 million of employee-related severance and other costs associated with the restructuring in Argentina, $13 million of restructuring charges related to the abandonment of certain assets related to our leaf extraction process in Brazil, $6 million of employee-related severance and other costs associated with the Finance Transformation initiative, and $2 million of other restructuring charges including employee-related severance costs in North America and a refinement of estimates for prior year restructuring activities.
(iii) During the three months and year ended December 31, 2017, we recorded $9 million in other income for cash proceeds from an insurance recovery related to capital reconstruction.
(iv) The 2017 period includes the flow-through of costs primarily associated with the sale of TIC Gums Incorporated inventory that was adjusted to fair value at the acquisition date in accordance with business combination accounting rules.
(v) The enactment of the Tax Cuts and Jobs Act ("TCJA") in December 2017 resulted in a one-time provisional amount of $23 million for the three months and year ended December 31, 2017. During the three months and year ended December 31, 2018, we adjusted our provisional amounts and recognized an incremental $1 million and $3 million of tax expense, respectively, related to the TCJA.
(vi) The Company had been pursuing relief from double taxation under the U.S. and Canadian tax treaty for the years 2004 through 2013. During the fourth quarter of 2016, the Company recorded a net reserve of $24 million, including interest thereon, recorded as a $70 million liability and a $46 million benefit. In addition, as a result of the settlement, for the years 2014-2016, we established a net reserve of $7 million, recorded as a $21 million liability and $14 million benefit. During the third quarter of 2017, an agreement was reached between the two countries for the specific issues being contested. As a result of the agreement, we are entitled to deduct a foreign exchange loss of $10 million on our 2017 U.S. federal income tax return. As a result of that final settlement, the Company received a $40 million refund from the CRA and recorded $2 million of interest penalty through tax expense in 2018. In addition, during the third quarter of 2018, the Company reversed $2 million of the $7 million net reserve related to the settlement.
For notes (i) through (iv) see notes (i) through (iv) 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
For notes (i) through (vi) see notes (i) through (vi) included in the Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Income and Adjusted Diluted EPS.
Above is a reconciliation of our anticipated full year 2019 diluted EPS to our anticipated full year 2019 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.
(vi) Primarily reflects current estimates for 2019 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.
(vii) As a result of the 2017 Tax Cuts and Jobs Act and the U.S. - Canada tax settlement announced in Q4 2016 and other one-time tax payments made during the year that we expect to receive a full refund in the future, the Company incurred one-time net tax cash benefits of $47 million during the year.
###
CONTACTS:
Investors: Heather Kos, 708-551-2592
Media: Becca Hary, 708-551-2602
2321 Rosecrans Avenue. Suite 2200
90245 El Segundo Stati Uniti