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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

or

o          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission file number 1-13397

INGREDION INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)

Registrant’s telephone number, including area code (708) 551-2600

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the Registrant’s voting stock held by non-affiliates of the Registrant (based upon the per share closing price of $75.04 on June 30, 2014, and, for the purpose of this calculation only, the assumption that all of the Registrant’s directors and executive officers are affiliates) was approximately $5,319,000,000.

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, as of February 19, 2015, was 71,505,000.

Documents Incorporated by Reference:

Information required by Part III (Items 10, 11, 12, 13 and 14) of this document is incorporated by reference to certain portions of the Registrant’s definitive Proxy Statement (the “Proxy Statement”) to be distributed in connection with its 2015 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2014.

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INGREDION INCORPORATED

FORM 10-K
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PART I.

ITEM 1.  BUSINESS

The Company

Ingredion Incorporated (“Ingredion”) is a leading global manufacturer and supplier of starch and sweetener ingredients to a range of industries, including packaged food, beverage, brewing, industrial, pharmaceutical and personal care customers.  Ingredion was incorporated as a Delaware corporation in 1997 and its common stock is traded on the New York Stock Exchange.  On October 1, 2010, we acquired National Starch, a global developer and manufacturer of specialty and modified starches for a cash purchase price of $1.369 billion.  The acquisition provided Ingredion with a broader portfolio of products, enhanced geographic reach, and the ability to offer customers a broad range of value added ingredient solutions for a variety of their evolving needs. 

On October 14, 2014, we entered into a definitive agreement to acquire Penford Corporation (“Penford”), a US-based leader in specialty ingredients for food and non-food applications.  The acquisition has been approved by the boards of directors of both companies and by the shareholders of Penford.  It is subject to approval by regulators as well as to other customary closing conditions.  The purchase price is approximately $340 million, including the assumption of debt.  Penford, headquartered in Centennial, Colorado had net sales of $444 million in fiscal year 2014.  Penford employs approximately 443 people and operates six plants in the United States, all of which manufacture specialty starches.  The acquisition will provide Ingredion with an enhanced portfolio of specialty and industrial products and further improve our ability to offer customers a broad range of value added ingredient solutions for a variety of their evolving needs.  The acquisition is expected to close in the first quarter of 2015 pending regulatory approval.

For purposes of this report, unless the context otherwise requires, all references herein to the “Company,” “Ingredion,” “we,” “us,” and “our” shall mean Ingredion Incorporated and its subsidiaries.

Ingredion supplies a broad range of customers in many diverse industries around the world, including the food, beverage, brewing, pharmaceutical, paper and corrugated products, textile and personal care industries, as well as the global animal feed and corn oil markets.

Our product line includes starches and sweeteners, animal feed products and edible corn oil.  Our starch-based products include both food-grade and industrial starches.  Our sweetener products include glucose syrups, high maltose syrups, high fructose corn syrup (“HFCS”), caramel color, dextrose, polyols, maltodextrins and glucose and syrup solids.

Our products are derived primarily from the processing of corn and other starch-based materials, such as tapioca, potato and rice.

Our manufacturing process is based on a capital-intensive, two-step process that involves the wet milling and processing of starch-based materials, primarily corn.  During the front-end process, corn is steeped in a water-based solution and separated into starch and co-products such as animal feed and corn oil.  The starch is then either dried for sale or further processed to make sweeteners, starches and other ingredients that serve the particular needs of various industries.

We believe our approach to production and service, which focuses on local management and production improvements of our worldwide operations, provides us with a unique understanding of the cultures and product requirements in each of the geographic markets in which we operate, bringing added value to our customers through innovative solutions.

Our consolidated net sales were $5.67 billion in 2014.  Approximately 55 percent of our 2014 net sales were provided from our North American operations. Our South American operations provided 21 percent of net sales, while our Asia Pacific and EMEA (Europe, Middle East and Africa) operations contributed approximately 14 percent and 10 percent, respectively.

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Products

Sweetener Products. Our sweetener products represented approximately 39 percent, 42 percent and 44 percent of our net sales for 2014, 2013 and 2012, respectively.

Glucose Syrups: Glucose syrups are fundamental ingredients widely used in food products, such as baked goods, snack foods, beverages, canned fruits, condiments, candy and other sweets, dairy products, ice cream, jams and jellies, prepared mixes and table syrups.  Glucose syrups offer functionality in addition to sweetness to processed foods.  They add body and viscosity; help control freezing points, crystallization and browning; add humectancy (ability to add moisture) and flavor; and act as binders.

High Maltose Syrup: This special type of glucose syrup is primarily used as a fermentable sugar in brewing beers. High maltose syrups are also used in the production of confections, canning and some other food processing applications.  Our high maltose syrups speed the fermentation process, allowing brewers to increase capacity without adding capital.

High Fructose Corn Syrup: High fructose corn syrup is used in a variety of consumer products including soft drinks, fruit-flavored beverages, baked goods, dairy products, confections and other food and beverage products.  In addition to sweetness and ease of use, high fructose corn syrup provides body; humectancy; and aids in browning, freezing point and crystallization control.

Dextrose: Dextrose has a wide range of applications in the food and confection industries, in solutions for intravenous and other pharmaceutical applications, and numerous industrial applications like wallboard, biodegradable surface agents and moisture control agents. Dextrose functionality in foods, beverages and confectionary includes sweetness control; body and viscosity; acting as a bulking, drying and anti-caking agent; serving as a carrier; providing freezing point and crystallization control; and aiding in fermentation.  Dextrose is also a fermentation agent in the production of light beer.  In pharmaceutical applications dextrose is used in IV solutions as well as an excipient suitable for direct compression in tableting.

Polyols:  These products are sugar-free, reduced calorie sweeteners primarily derived from starch or sugar for the food, beverage, confectionery, industrial, personal and oral care, and nutritional supplement markets.  In addition to sweetness, polyols inhibit crystallization; provide binding, humectancy and plasticity; add texture; extend shelf life; prevent moisture migration; and are an excipient suitable for tableting.

Maltodextrins and Glucose Syrup Solids: These products have a multitude of food applications, including formulations where liquid syrups cannot be used. Maltodextrins are resistant to browning, provide excellent solubility, have a low hydroscopicity (do not retain moisture), and are ideal for their carrier/bulking properties. Glucose syrup solids have a bland flavor, remain clear in solution, are easy to handle and provide bulking properties.

Starch Products.  Our starch products represented approximately 43 percent, 41 percent and 37 percent of our net sales for 2014, 2013 and 2012, respectively.  Starches are an important component in a wide range of processed foods, where they are used for adhesion, clouding, dusting, expansion, fat replacement, freshness, gelling, glazing, mouth feel, stabilization and texture. Cornstarch is sold to cornstarch packers for sale to consumers.  Starches are also used in paper production to create a smooth surface for printed communications and to improve strength in recycled papers. Specialty starches are used for enhanced drainage, fiber retention, oil and grease resistance, improved printability and biochemical oxygen demand control. In the corrugating industry, starches and specialty starches are used to produce high quality adhesives for the production of shipping containers, display board and other corrugated applications.  The textile industry uses starches and specialty starches for sizing (abrasion resistance) to provide size and finishes for manufactured products.  Industrial starches are used in the production of construction materials, textiles, adhesives, pharmaceuticals and cosmetics, as well as in mining, water filtration and oil and gas drilling. Specialty starches are used for biomaterial applications including biodegradable plastics, fabric softeners and detergents, hair and skin care applications, dusting powders for surgical gloves and in the production of glass fiber and insulation.

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Specialty Ingredients.  We consider certain of our starch and sweetener products to be specialty ingredients.  Specialty ingredients comprised approximately 24 percent of our net sales for 2014, up from 21 percent in 2013.  Our specialty ingredients are aligned with growing market and consumer trends such as health and wellness, clean-label, affordability, indulgence and sustainability.  We plan to drive growth for our specialty ingredients portfolio by leveraging the following six platforms (or springboards): Wholesome, Texture, Nutrition, Sweetness, Delivery Systems and Green Solutions.

Wholesome: Specialty ingredients that provide clean-label solutions enabling front-of-pack claims for our customers.  Products include Novation clean label functional starches, value added pulse-based ingredients and Gluten Free offerings.  Texture: Specialty ingredients that provide food texture solutions for consumer acceptance and build back texture.  Include starch systems that replace more expensive ingredients and are designed to optimize customer formulation costs, texturizers that create rich, creamy mouth feel, and products that enhance texture in healthier offerings.  Nutrition: Specialty ingredients that provide nutritional carbohydrates with benefits of digestive health and energy management.  Our fibers and complimentary nutritional ingredients address the leading health and wellness concerns of consumers, including digestive health, infant nutrition, weight and energy management, aging and immunity.  Sweetness: Specialty ingredients that provide affordability, natural, reduced calorie and sugar-free sweetener solutions for our customers.  We have a broad portfolio of nutritive and non-nutritive sweeteners, including high potency sweeteners and our naturally based stevia sweetener.  Delivery Systems: Functional ingredients that are designed to deliver superior emulsification and protection of flavors and other active ingredients.  Products include starches to help emulsify or mix natural colors in beverages and specialty starches that encapsulate and protect flavors and vitamins in pharmaceuticals and spray-dried food ingredients.  Green Solutions: Bio-based solutions that help manufacturers become more sustainable by replacing synthetic materials with nature-based ingredients in personal care, home care and other industrial segments.

Each springboard addresses multiple consumer trends.  For instance, specialty texture solutions are leveraged to address consumer health and wellness, affordability and indulgence demands while wholesome solutions can address clean-label, indulgence and health and wellness consumer demands.  Specialty ingredients that provide nutrition solutions for health and wellness can also address food indulgence and convenience desires of consumers.  Specialty ingredients that provide sweetness solutions for health and wellness demands can also deliver affordability and food indulgence solutions.

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Co-Products and others.  Co-products and others accounted for 18 percent, 17 percent and 19 percent of our net sales for 2014, 2013 and 2012, respectively.  Refined corn oil (from germ) is sold to packers of cooking oil and to producers of margarine, salad dressings, shortening, mayonnaise and other foods.  Corn gluten feed is sold as animal feed. Corn gluten meal is sold as high-protein feed for chickens, pet food and aquaculture.

Geographic Scope and Operations

We are principally engaged in the production and sale of sweeteners and starches for a wide range of industries, and we manage our business on a geographic regional basis.  Our operations are classified into four reportable business segments: North America, South America, Asia Pacific and EMEA.  In 2014, approximately 55 percent of our net sales were derived from operations in North America, while net sales from operations in South America represented 21 percent.  Net sales from operations in Asia Pacific and EMEA represented approximately 14 percent and 10 percent, respectively, of our 2014 net sales.  See Note 12 of the notes to the consolidated financial statements entitled “Segment Information” for additional financial information with respect to our reportable business segments.

In general, demand for our products is balanced throughout the year.  However, demand for sweeteners in South America is greater in the first and fourth quarters (its summer season) while demand for sweeteners in North America is greater in the second and third quarters.  Due to the offsetting impact of these demand trends, we do not experience material seasonal fluctuations in our net sales.

Our North America segment consists of operations in the US, Canada and Mexico. The region’s facilities include 13 plants producing a wide range of both sweeteners and starches.

We are the largest manufacturer of corn-based starches and sweeteners in South America, with sales in Brazil, Colombia and Ecuador and the Southern Cone of South America, which includes Argentina, Chile, Peru and Uruguay.  Our South America segment includes 11 plants that produce regular, modified, waxy and tapioca starches, high fructose and high maltose syrups and syrup solids, dextrins and maltodextrins, dextrose, specialty starches, caramel color, sorbitol and vegetable adhesives.

Our Asia Pacific segment manufactures corn-based products in South Korea, Australia and China.  Also, we manufacture tapioca-based products in Thailand, which supplies not only our Asia Pacific segment but the rest of our global network.  The region’s facilities include 7 plants that produce modified, specialty, regular, waxy and tapioca starches, dextrins, glucose, high maltose syrup, dextrose, HFCS and caramel color.

Our EMEA segment includes 5 plants that produce modified and specialty starches, glucose and dextrose in England, Germany and Pakistan.

Additionally, we utilize a network of tolling manufacturers in various regions in the production cycle of certain specialty starches.  In general, these tolling manufacturers produce certain basic starches for us, and we in turn complete the manufacturing process of the specialty starches through our finishing channels.

We utilize our global network of manufacturing facilities to support key global product lines.

Competition

The starch and sweetener industry is highly competitive.  Many of our products are viewed as basic ingredients that compete with virtually identical products and derivatives manufactured by other companies in the industry.  The US is a highly competitive market where there are other starch processors, several of which are divisions of larger enterprises.  Some of these competitors, unlike us, have vertically integrated their starch processing and other operations.  Competitors include ADM Corn Processing Division (“ADM”) (a division of Archer-Daniels-Midland Company), Cargill, Inc., Tate & Lyle Ingredients Americas, Inc., and several others. Our operations in Mexico and Canada face competition from US imports and local producers including ALMEX, a Mexican joint venture between ADM and Tate &

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Lyle Ingredients Americas, Inc.  In South America, Cargill has starch processing operations in Brazil and Argentina.  Many smaller local corn and tapioca refiners also operate in many of our markets. Competition within our markets is largely based on price, quality and product availability.

Several of our products also compete with products made from raw materials other than corn. HFCS and monohydrate dextrose compete principally with cane and beet sugar products. Co-products such as corn oil and gluten meal compete with products of the corn dry milling industry and with soybean oil, soybean meal and other products. Fluctuations in prices of these competing products may affect prices of, and profits derived from, our products.

Customers

We supply a broad range of customers in over 60 industries worldwide.  The following table provides the percentage of total net sales by industry for each of our segments for 2014:

No customer accounted for 10 percent or more of our net sales in 2014, 2013 or 2012.

Raw Materials

Corn (primarily yellow dent) is the primary basic raw material we use to produce starches and sweeteners.  The supply of corn in the United States has been, and is anticipated to continue to be, adequate for our domestic needs. The price of corn, which is determined by reference to prices on the Chicago Board of Trade, fluctuates as a result of various factors including: farmers’ planting decisions, climate, and government policies (including those related to the production of ethanol), livestock feeding, shortages or surpluses of world grain supplies, and domestic and foreign government policies and trade agreements.  We also use tapioca, potato, rice and sugar as raw material.

Corn is also grown in other areas of the world, including Canada, Mexico, Europe, South Africa, Argentina, Australia, Brazil, China and Pakistan.  Our affiliates outside the United States utilize both local supplies of corn and corn imported from other geographic areas, including the United States.  The supply of corn for these affiliates is also generally expected to be adequate for our needs.  Corn prices for our non-US affiliates generally fluctuate as a result of the same factors that affect US corn prices.

We also utilize specialty grains such as waxy and high amylose corn in our operations.  In general, the planning cycle for our specialty grain sourcing begins three years in advance of the anticipated delivery of the specialty corn since the necessary seed must be grown in the season prior to grain contracting.  In order to secure these specialty grains at the time of our anticipated needs, we contract with certain farmers to grow the specialty corn approximately two years in advance of delivery.  These specialty grains are higher cost due to their more limited supply and require longer planning cycles to mitigate the risk of supply shortages.

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Due to the competitive nature of our industry and the availability of substitute products not produced from corn, such as sugar from cane or beets, end product prices may not necessarily fluctuate in a manner that correlates to raw material costs of corn.

We follow a policy of hedging our exposure to commodity fluctuations with commodities futures and options contracts primarily for certain of our North American corn purchases.  We use derivative hedging contracts to protect the gross margin of our firm-priced business in North America.  Other business may or may not be hedged at any given time based on management’s judgment as to the need to fix the costs of our raw materials to protect our profitability.  Outside of North America, we generally enter into short-term commercial sales contracts and adjust our selling prices based upon the local raw material costs.  See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in the section entitled “Commodity Costs” for additional information.

Research and Development

We have global research and development capabilities concentrated in Bridgewater, New Jersey.  Activities at Bridgewater include plant science and physical, chemical and biochemical modifications to food formulations, food sensory evaluation, as well as development of non-food applications, such as starch-based biopolymers.  In 2013, we expanded our Bridgewater facility with the addition of a lab and sensory evaluation space dedicated to our sweeteners portfolio.  In addition, we have product application technology centers that direct our product development teams worldwide to create product application solutions to better serve the ingredient needs of our customers.  Product development activity is focused on developing product applications for identified customer and market needs.  Through this approach, we have developed value-added products for use by customers in various industries.  We usually collaborate with customers to develop the desired product application either in the customers’ facilities, our technical service laboratories or on a contract basis. These efforts are supported by our marketing, product technology and technology support staff.  Research and development expense for 2014 was approximately $37 million.

Sales and Distribution

Our salaried sales personnel, who are generally dedicated to customers in a geographic region, sell our products directly to manufacturers and distributors. In addition, we have a staff that provides technical support to our sales personnel on an industry basis.  We generally contract with trucking companies to deliver our bulk products to customer destinations. In North America, we generally use trucks to ship to nearby customers. For those customers located considerable distances from our plants, we use either rail or a combination of railcars and trucks to deliver our products. We generally lease railcars for terms of three to ten years.

Patents, Trademarks and Technical License Agreements

We own approximately 900 patents and patents pending which relate to a variety of products and processes, and a number of established trademarks under which we market our products. We also have the right to use other patents and trademarks pursuant to patent and trademark licenses. We do not believe that any individual patent or trademark is material to our business. There is no currently pending challenge to the use or registration of any of our significant patents or trademarks that would have a material adverse impact on us or our results of operations if decided against us.

Employees

As of December 31, 2014 we had approximately 11,400 employees, of which approximately 1,900 were located in the United States.  Approximately 36 percent of US and 48 percent of our non-US employees are unionized.  Of our total, we have approximately 1,100 temporary employees.

Government Regulation and Environmental Matters

As a manufacturer and marketer of food items and items for use in the pharmaceutical industry, our operations and the use of many of our products are subject to various federal, state, foreign and local statutes and regulations, including the Federal Food, Drug and Cosmetic Act and the Occupational Safety and Health Act.  We and many of our

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products are also subject to regulation by various government agencies, including the United States Food and Drug Administration.   Among other things, applicable regulations prescribe requirements and establish standards for product quality, purity and labeling.  Failure to comply with one or more regulatory requirements can result in a variety of sanctions, including monetary fines.  No such fines of a material nature were imposed on us in 2014.  We may also be required to comply with federal, state, foreign and local laws regulating food handling and storage.  We believe these laws and regulations have not negatively affected our competitive position.

Our operations are also subject to various federal, state, foreign and local laws and regulations with respect to environmental matters, including air and water quality and underground fuel storage tanks, and other regulations intended to protect public health and the environment.  We operate industrial boilers that fire natural gas, coal, or biofuels to operate our manufacturing facilities and they are our primary source of greenhouse gas emissions.  In Argentina, we are in discussions with local regulators associated with conducting studies of possible environmental remediation programs at our Chacabuco plant.  We are unable to predict the outcome of these discussions; however, we do not believe that the ultimate cost of remediation will be material.  Based on current laws and regulations and the enforcement and interpretations thereof, we do not expect that the costs of future environmental compliance will be a material expense, although there can be no assurance that we will remain in compliance or that the costs of remaining in compliance will not have a material adverse effect on our future financial condition and results of operations.

During 2014, we spent approximately $9 million for environmental control and wastewater treatment equipment to be incorporated into existing facilities and in planned construction projects.  We currently anticipate that we will spend approximately $8 million for environmental facilities and programs in both 2015 and 2016.

Other

Our Internet address is www.ingredion.com.  We make available, free of charge through our Internet website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended.  These reports are made available as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission.  Our corporate governance guidelines, board committee charters and code of ethics are posted on our website, the address of which is www.ingredion.com, and each is available in print to any shareholder upon request in writing to Ingredion Incorporated, 5 Westbrook Corporate Center, Westchester, Illinois 60154 Attention: Corporate Secretary.  The contents of our website are not incorporated by reference into this report.

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Executive Officers of the Registrant

Set forth below are the names and ages of all of our executive officers, indicating their positions and offices with the Company and other business experience.  Our executive officers are elected annually by the Board to serve until the next annual election of officers and until their respective successors have been elected and have qualified unless removed by the Board.

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ITEM 1A.  RISK FACTORS

Our business and assets are subject to varying degrees of risk and uncertainty. The following are factors that we believe could cause our actual results to differ materially from expected and historical results. Additional risks that are currently unknown to us may also impair our business or adversely affect our financial condition or results of operations. In addition, forward-looking statements within the meaning of the federal securities laws that are contained in this Form 10-K or in our other filings or statements may be subject to the risks described below as well as other risks and uncertainties. Please read the cautionary notice regarding forward-looking statements in Item 7 below.

Current economic conditions may adversely impact demand for our products, reduce access to credit and cause our customers and others with whom we do business to suffer financial hardship, all of which could adversely impact our business, results of operations, financial condition and cash flows.

Economic conditions in the South America, the European Union and many other countries and regions in which we do business have experienced various levels of weakness over the last few years, and may remain challenging for the foreseeable future.  General business and economic conditions that could affect us include the strength of the economies in which we operate, unemployment, inflation and fluctuations in debt markets.  While currently these conditions have not impaired our ability to access credit markets and finance our operations, there can be no assurance that there will not be a further deterioration in the financial markets.

There could be a number of other effects from these economic developments on our business, including reduced consumer demand for products; pressure to extend our customers’ payment terms; insolvency of our customers, resulting in increased provisions for credit losses; decreased customer demand, including order delays or cancellations, and counterparty failures negatively impacting our operations.

In connection with our defined benefit pension plans, adverse changes in investment returns earned on pension assets and discount rates used to calculate pension and related liabilities or changes in required pension funding levels may have an unfavorable impact on future pension expense and cash flow.

In addition, the volatile worldwide economic conditions and market instability may make it difficult for us, our customers and our suppliers to accurately forecast future product demand trends, which could cause us to produce excess products that can increase our inventory carrying costs.  Alternatively, this forecasting difficulty could cause a shortage of products that could result in an inability to satisfy demand for our products.

We operate a multinational business subject to the economic, political and other risks inherent in operating in foreign countries and with foreign currencies.

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We have operated in foreign countries and with foreign currencies for many years.  Our results are subject to foreign currency exchange fluctuations.  Our operations are subject to political, economic and other risks.  There has been and continues to be significant political uncertainty in some countries in which we operate.  Economic changes, terrorist activity and political unrest may result in business interruption or decreased demand for our products.  Protectionist trade measures and import and export licensing requirements could also adversely affect our results of operations.  Our success will depend in part on our ability to manage continued global political and/or economic uncertainty.

We primarily sell world commodities.  Historically, local prices have adjusted relatively quickly to offset the effect of local currency devaluations, although we cannot guarantee this in the future.  Due to pricing controls on many consumer products instituted by the Argentina government, it has taken longer than in the past to achieve pricing improvement in that country.  Also, the recent strength in the US dollar may provide some challenges to our sales prices as it could take an extended period of time to fully recapture the impact of foreign currency devaluation.

We may hedge transactions that are denominated in a currency other than the currency of the operating unit entering into the underlying transaction.  We are subject to the risks normally attendant to such hedging activities.

Raw material and energy price fluctuations, and supply interruptions and shortages could adversely affect our results of operations.

Our finished products are made primarily from corn. Purchased corn and other raw material costs account for between 40 percent and 65 percent of finished product costs.  Some of our products are based upon specific varieties of corn that are produced in significantly less volumes than yellow dent corn.  These specialty grains are higher-cost due to their more limited supply and require planning cycles of up to three years in order for us to receive our desired amount of specialty corn.  Also, we utilize tapioca in the manufacturing of starch products in Thailand.  If our raw materials are not available in sufficient quantities or quality, our results of operations could be negatively impacted.

Energy costs represent approximately 11 percent of our finished product costs. We use energy primarily to create steam in our production process and to dry product.  We consume coal, natural gas, electricity, wood and fuel oil to generate energy.  In Pakistan, the overall economy has been slowed by severe energy shortages which both negatively impact our ability to produce sweeteners and starches, and also negatively impact the demand from our customers due to their inability to produce their end products because of the shortage of reliable energy.

The market prices for our raw materials may vary considerably depending on supply and demand, world economies and other factors.  We purchase these commodities based on our anticipated usage and future outlook for these costs.  We cannot assure that we will be able to purchase these commodities at prices that we can adequately pass on to customers to sustain or increase profitability.

In North America, we sell a large portion of our finished products at firm prices established in supply contracts typically lasting for periods of up to one year.  In order to minimize the effect of volatility in the cost of corn related to these firm-priced supply contracts, we enter into corn futures and options contracts, or take other hedging positions in the corn futures market.  We are unable to directly hedge price risk related to co-product sales; however, we occasionally enter into hedges of soybean oil (a competing product to our animal feed and corn oil) in order to mitigate the price risk of animal feed and corn oil sales.  These derivative contracts typically mature within one year.  At expiration, we settle the derivative contracts at a net amount equal to the difference between the then-current price of corn (or soybean oil) and the derivative contract price.  These hedging instruments are subject to fluctuations in value; however, changes in the value of the underlying exposures we are hedging generally offset such fluctuations.  The fluctuations in the fair value of these hedging instruments may affect our cash flow.  We fund any unrealized losses or receive cash for any unrealized gains on futures contracts on a daily basis.  While the corn futures contracts or hedging positions are intended to minimize the effect of volatility of corn costs on operating profits, the hedging activity can result in losses, some of which may be material.  Outside of North America, sales of finished products under long-term, firm-priced supply contracts are not material.  We also use over-the-counter natural gas swaps to hedge portions of our natural gas costs, primarily in our North American operations.

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Due to market volatility, we cannot assure that we can adequately pass potential increases in the cost of corn and other raw materials on to customers through product price increases or purchase quantities of corn and other raw materials at prices sufficient to sustain or increase our profitability.

Our corn and raw material costs account for 40 percent to 65 percent of our product costs.  The price and availability of corn and other raw materials is influenced by economic and industry conditions, including supply and demand factors such as crop disease and severe weather conditions such as drought, floods or frost that are difficult to anticipate and which we cannot control.

Our profitability may be affected by other factors beyond our control.

Our operating income and ability to increase profitability depend to a large extent upon our ability to price finished products at a level that will cover manufacturing and raw material costs and provide an acceptable profit margin. Our ability to maintain appropriate price levels is determined by a number of factors largely beyond our control, such as aggregate industry supply and market demand, which may vary from time to time, and the economic conditions of the geographic regions where we conduct our operations.

We operate in a highly competitive environment and it may be difficult to preserve operating margins and maintain market share.

We operate in a highly competitive environment.  Many of our products compete with virtually identical or similar products manufactured by other companies in the starch and sweetener industry.  In the United States, there are competitors, several of which are divisions of larger enterprises that have greater financial resources than we do. Some of these competitors, unlike us, have vertically integrated their corn refining and other operations.  Many of our products also compete with products made from raw materials other than corn, including cane and beet sugar.  Fluctuation in prices of these competing products may affect prices of, and profits derived from, our products.  In addition, government programs supporting sugar prices indirectly impact the price of corn sweeteners, especially HFCS.  Competition in markets in which we compete is largely based on price, quality and product availability.

Changes in consumer preferences and perceptions may lessen the demand for our products, which could reduce our sales and profitability and harm our business.

Food products are often affected by changes in consumer tastes, national, regional and local economic conditions and demographic trends. For instance, changes in prevailing health or dietary preferences causing consumers to avoid food products containing sweetener products, including HFCS, in favor of foods that are perceived as being more healthy, could reduce our sales and profitability, and such reductions could be material. Increasing concern among consumers, public health professionals and government agencies about the potential health concerns associated with obesity and inactive lifestyles represent a significant challenge to some of our customers, including those engaged in the food and soft drink industries.

The uncertainty of acceptance of products developed through biotechnology could affect our profitability.

The commercial success of agricultural products developed through biotechnology, including genetically modified corn, depends in part on public acceptance of their development, cultivation, distribution and consumption. Public attitudes can be influenced by claims that genetically modified products are unsafe for consumption or that they pose unknown risks to the environment even if such claims are not based on scientific studies. These public attitudes can influence regulatory and legislative decisions about biotechnology. The sale of the Company’s products which may contain genetically modified corn could be delayed or impaired because of adverse public perception regarding the safety of the Company’s products and the potential effects of these products on animals, human health and the environment.

Our information technology systems, processes, and sites may suffer interruptions or failures which may affect our ability to conduct our business.

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Our information technology systems, some of which are dependent on services provided by third parties, provide critical data connectivity, information and services for internal and external users.  These interactions include, but are not limited to, ordering and managing materials from suppliers, converting raw materials to finished products, inventory management, shipping products to customers, processing transactions, summarizing and reporting results of operations, human resources benefits and payroll management, complying with regulatory, legal or tax requirements, and other processes necessary to manage our business.  We have put in place security measures to protect ourselves against cyber-based attacks and disaster recovery plans for our critical systems.  However, if our information technology systems are breached, damaged, or cease to function properly due to any number of causes, such as catastrophic events, power outages, security breaches, or cyber-based attacks, and our disaster recovery plans do not effectively mitigate on a timely basis, we may encounter disruptions that could interrupt our ability to manage our operations and suffer damage to our reputation, which may adversely impact our revenues, operating results and financial condition.

Our profitability could be negatively impacted if we fail to maintain satisfactory labor relations.

Approximately 36 percent of our US and 48 percent of our non-US employees are members of unions.  Strikes, lockouts or other work stoppages or slow downs involving our unionized employees could have a material adverse effect on us.

Our reliance on certain industries for a significant portion of our sales could have a material adverse effect on our business.

Approximately 51 percent of our 2014 sales were made to companies engaged in the food industry and approximately 13 percent were made to companies in both the beverage and animal nutrition markets.  Additionally, sales to the paper and corrugating industry and the brewing industry represented approximately 9 percent and 7 percent of our 2014 net sales, respectively.  If our food customers, beverage customers, brewing industry customers, paper and corrugating customers or animal feed customers were to substantially decrease their purchases, our business might be materially adversely affected.

Natural disasters, war, acts and threats of terrorism, pandemic and other significant events could negatively impact our business.

If the economies of any countries where we sell or manufacture products are affected by natural disasters; such as earthquakes, floods or severe weather; war, acts of war or terrorism; or the outbreak of a pandemic; it could result in asset write-offs, decreased sales and overall reduced cash flows.

Government policies and regulations in general, and specifically affecting agriculture-related businesses, could adversely affect our operating results.

Our operating results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, and other activities of United States and foreign governments, agencies, and similar organizations. These conditions include but are not limited to changes in a country’s or region’s economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights, changes in the regulatory or legal environment, restrictions on currency exchange activities, currency exchange rate fluctuations, burdensome taxes and tariffs, and other trade barriers. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities, and war, could limit our ability to transact business in these markets and could adversely affect our revenues and operating results.

Due to cross-border disputes, our operations could be adversely affected by actions taken by the governments of countries where we conduct business.

The recognition of impairment charges on goodwill or long-lived assets could adversely impact our future financial position and results of operations.

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We perform an annual impairment assessment for goodwill and our indefinite-lived intangible assets, and as necessary, for other long-lived assets.  If the results of such assessments were to show that the fair value of these assets were less than the carrying values, we could be required to recognize a charge for impairment of goodwill and/or long-lived assets and the amount of the impairment charge could be material.  The results of our impairment testing in the fourth quarter of 2014 indicated that the estimated fair value of our Southern Cone of South America reporting unit was less than its carrying amount primarily due to the impacts on its fair value of the elongation of unfavorable financial trends, such as the impact of higher production costs and our inability to increase selling prices to a level sufficient to recover the impacts of inflation and currency devaluation.  Also, the political and economic volatility in the region and continued uncertainty in Argentina negatively impacted our earnings forecasts in the near term.  Therefore, we recorded a non-cash impairment charge of $33 million in the fourth quarter of 2014 to write-off the remaining balance of goodwill for this reporting unit.  Additionally, based on the results of the annual assessment, we concluded that as of October 1, 2014, it was more likely than not that the fair value of all other reporting units was greater than their carrying value (although the $32 million of goodwill at our Brazil reporting unit continues to be closely monitored due to recent trends experienced in this reporting unit, such as continued economic headwinds and heightened competition).

Even though it was determined that there was no additional long-lived asset impairment as of October 1, 2014, the future occurrence of a potential indicator of impairment, such as a significant adverse change in the business climate that would require a change in our assumptions or strategic decisions made in response to economic or competitive conditions, could require us to perform an assessment prior to the next required assessment date of October 1, 2015.

Changes in our tax rates or exposure to additional income tax liabilities could impact our profitability.

We are subject to income taxes in the United States and in various other foreign jurisdictions.  Our effective tax rates could be adversely affected by changes in the mix of earnings by jurisdiction, changes in tax laws or tax rates including potential tax reform in the US to broaden the tax base and reduce deductions or credits, changes in the valuation of deferred tax assets and liabilities, and material adjustments from tax audits.

The carrying values of deferred tax assets, which are predominantly in the US, United Kingdom, Mexico and Korea, are dependent upon our ability to generate future taxable income in these jurisdictions.  In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions and a material assessment by a governing tax authority could affect our profitability.

Operating difficulties at our manufacturing plants could adversely affect our operating results.

Producing starches and sweeteners through corn refining is a capital intensive industry. We have 36 plants and have preventive maintenance and de-bottlenecking programs designed to maintain and improve grind capacity and facility reliability. If we encounter operating difficulties at a plant for an extended period of time or start-up problems with any capital improvement projects, we may not be able to meet a portion of sales order commitments and could incur significantly higher operating expenses, both of which could adversely affect our operating results.  We also use boilers to generate steam required in our manufacturing processes. An event that impaired the operation of a boiler for an extended period of time could have a significant adverse effect on the operations of any plant where such event occurred.

Also, we are subject to risks related to such matters as product quality or contamination; compliance with environmental, health and safety regulations; and customer product liability claims.  The liabilities that could result from these risks may not always be covered by, or could exceed the limits of our insurance coverage related to product liability and food safety matters.  In addition, negative publicity caused by product liability and food safety matters may damage our reputation.  The occurrence of any of the matters described above could adversely affect our revenues and operating results.

We may not have access to the funds required for future growth and expansion.

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We may need additional funds to grow and expand our operations. We expect to fund our capital expenditures from operating cash flow to the extent we are able to do so.  If our operating cash flow is insufficient to fund our capital expenditures, we may either reduce our capital expenditures or utilize our general credit facilities.  For further strategic growth through mergers or acquisitions, we may also seek to generate additional liquidity through the sale of debt or equity securities in private or public markets or through the sale of non-productive assets.  We cannot provide any assurance that our cash flows from operations will be sufficient to fund anticipated capital expenditures or that we will be able to obtain additional funds from financial markets or from the sale of assets at terms favorable to us.  If we are unable to generate sufficient cash flows or raise sufficient additional funds to cover our capital expenditures or other strategic growth opportunities, we may not be able to achieve our desired operating efficiencies and expansion plans, which may adversely impact our competitiveness and, therefore, our results of operations.  Our working capital requirements, including margin requirements on open positions on futures exchanges, are directly affected by the price of corn and other agricultural commodities, which may fluctuate significantly and change quickly.

We may not successfully identify and complete acquisitions or strategic alliances on favorable terms or achieve anticipated synergies relating to any acquisitions or alliances, and such acquisitions could result in unforeseen operating difficulties and expenditures and require significant management resources.

We regularly review potential acquisitions of complementary businesses, technologies, services or products, as well as potential strategic alliances. We may be unable to find suitable acquisition candidates or appropriate partners with which to form partnerships or strategic alliances. Even if we identify appropriate acquisition or alliance candidates, we may be unable to complete such acquisitions or alliances on favorable terms, if at all. In addition, the process of integrating an acquired business (such as Penford), technology, service or product into our existing business and operations may result in unforeseen operating difficulties and expenditures. Integration of an acquired company also may require significant management resources that otherwise would be available for ongoing development of our business. Moreover, we may not realize the anticipated benefits of any acquisition or strategic alliance, and such transactions may not generate anticipated financial results. Future acquisitions could also require us to issue equity securities, incur debt, assume contingent liabilities or amortize expenses related to intangible assets, any of which could harm our business.

An inability to contain costs could adversely affect our future profitability and growth.

Our future profitability and growth depends on our ability to contain operating costs and per-unit product costs and to maintain and/or implement effective cost control programs, while at the same time maintaining competitive pricing and superior quality products, customer service and support. Our ability to maintain a competitive cost structure depends on continued containment of manufacturing, delivery and administrative costs, as well as the implementation of cost-effective purchasing programs for raw materials, energy and related manufacturing requirements.

If we are unable to contain our operating costs and maintain the productivity and reliability of our production facilities, our profitability and growth could be adversely affected.

Volatility in the stock market, fluctuations in quarterly operating results and other factors could adversely affect the market price of our common stock.

The market price for our common stock may be significantly affected by factors such as our announcement of new products or services or such announcements by our competitors; technological innovation by us, our competitors or other vendors; quarterly variations in our operating results or the operating results of our competitors; general conditions in our or our customers’ markets; and changes in the earnings estimates by analysts or reported results that vary materially from such estimates. In addition, the stock market has experienced significant price fluctuations that have affected the market prices of equity securities of many companies that have been unrelated to the operating performance of any individual company.

No assurance can be given that we will continue to pay dividends.

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The payment of dividends is at the discretion of our Board of Directors and will be subject to our financial results and the availability of surplus funds to pay dividends.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None

ITEM 2.  PROPERTIES

We operate, directly and through our consolidated subsidiaries, 36 manufacturing facilities, all of which are owned. In addition, we lease our corporate headquarters in Westchester, Illinois and our research and development facility in Bridgewater, New Jersey.

The following list details the locations of our manufacturing facilities within each of our four reportable business segments:

We believe our manufacturing facilities are sufficient to meet our current production needs. We have preventive maintenance and de-bottlenecking programs designed to further improve grind capacity and facility reliability.

We have electricity co-generation facilities at all of our US and Canadian plants with the exception of Indianapolis, North Kansas City, Stockton, Charleston and Mapleton, as well as at our plants in San Juan del Rio, Mexico; Mexico City, Mexico; Baradero, Argentina; Cali, Colombia; and Balsa Nova and Mogi-Guacu, Brazil, that provide electricity at a lower cost than is available from third parties. We generally own and operate these co-generation facilities, except for the facilities at our Cardinal, Ontario; and Balsa Nova and Mogi-Guacu, Brazil locations, which are owned by, and operated pursuant to co-generation agreements with third parties.

In recent years, we have made significant capital expenditures to update, expand and improve our facilities, spending $276 million in 2014.  We believe these capital expenditures will allow us to operate efficient facilities for the foreseeable future.   We currently anticipate that capital expenditures for 2015 will approximate $300 million.

ITEM 3.  LEGAL PROCEEDINGS

As previously reported, on April 22, 2011, Western Sugar and two other sugar companies filed a complaint in the U.S. District Court for the Central District of California against the Corn Refiners Association (“CRA”) and

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certain of its member companies, including us, alleging false and/or misleading statements relating to high fructose corn syrup in violation of the Lanham Act and California’s unfair competition law.  The complaint seeks injunctive relief and unspecified damages.  On May 23, 2011, the plaintiffs amended the complaint to add additional plaintiffs, among other reasons.

On July 1, 2011, the CRA and the member companies in the case filed a motion to dismiss the first amended complaint on multiple grounds.  On October 21, 2011, the U.S. District Court for the Central District of California dismissed all Federal and state claims against us and the other members of the CRA, with leave for the plaintiffs to amend their complaint, and also dismissed all state law claims against the CRA.

The state law claims against the CRA were dismissed pursuant to a California law known as the anti-SLAPP (Strategic Lawsuit Against Public Participation) statute, which, according to the court’s opinion, allows early dismissal of meritless first amendment cases aimed at chilling expression through costly, time-consuming litigation.  The court held that the CRA’s statements were protected speech made in a public forum in connection with an issue of public interest (high fructose corn syrup).  Under the anti-SLAPP statute, the CRA is entitled to recover its attorney’s fees and costs from the plaintiffs.

On November 18, 2011, the plaintiffs filed a second amended complaint against certain of the CRA member companies, including us, seeking to reinstate the federal law claims, but not the state law claims, against certain of the CRA member companies, including us.  On December 16, 2011, the CRA member companies filed a motion to dismiss the second amended complaint on multiple grounds. On July 31, 2012, the U.S. District Court for the Central District of California denied the motion to dismiss for all CRA member companies other than Roquette America, Inc.

On September 4, 2012, we and the other CRA member companies that remain defendants in the case filed an answer to the plaintiffs’ second amended complaint that, among other things, added a counterclaim against the Sugar Association.  The counterclaim alleges that the Sugar Association has made false and misleading statements that processed sugar differs from high fructose corn syrup in ways that are beneficial to consumers’ health (i.e., that consumers will be healthier if they consume foods and beverages containing processed sugar instead of high fructose corn syrup).  The counterclaim, which was filed in the U.S. District Court for the Central District of California, seeks injunctive relief and unspecified damages. Although the counterclaim was initially only filed against the Sugar Association, the Company and the other CRA member companies that remain defendants in the Western Sugar case have reserved the right to add other plaintiffs to the counterclaim in the future.

On October 29, 2012, the Sugar Association and the other plaintiffs filed a motion to dismiss the counterclaim and certain related portions of the defendants’ answer, each on multiple grounds.  On December 10, 2012, the remaining member companies which are defendants in the case responded to the motion to dismiss the counterclaim.  On January 14, 2013, the plaintiffs filed a reply to the defendants’ response to the motion to dismiss.  On September 16, 2013, the U.S. District Court for the Central District of California denied the motion to dismiss the counterclaim, which entitles the Company and the other CRA member companies to continue to pursue the counterclaim against the Sugar Association and the other plaintiffs.

On May 23, 2014, the defendants asked the court for leave to amend their counterclaim to add the individual sugar companies as counterclaim defendants.  The motion for leave to amend was denied by the court on August 4, 2014 and this decision is in the process of being appealed by the defendants.  On August 26, 2014, each of the Company and Tate & Lyle filed motions to disqualify the plaintiffs’ lead counsel, Squire Patton Boggs, due to a conflict of interest arising from Squire Sanders’ merger with Patton Boggs, a firm which represents each of the Company and Tate & Lyle.  In addition, on August 26, 2014, the defendants filed two separate motions for summary judgment, one on the issue of liability and the other on the issue of damages, and the plaintiffs filed a motion for summary judgment with respect to the defendants’ counterclaim.

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The motion to disqualify the plaintiff’s attorneys was argued before the court on both November 13 and November 25, 2014.  On February 13, 2015, the court granted the Company’s and Tate & Lyle’s motions to dismiss Squire Patton Boggs due to a conflict of interest.  The schedule for arguing the summary judgment motions and the pre-trial conference have been delayed until May 5, 2015 while the plaintiffs seek replacement counsel in the case.

We continue to believe that the second amended complaint is without merit and intend to vigorously defend this case.  In addition, we intend to vigorously pursue our rights in connection with the counterclaim.

We are also party to a large number of labor claims relating to our Brazilian operations.  We have reserved an aggregate of approximately $5 million as of December 31, 2014 in respect of these claims.  These labor claims primarily relate to dismissals, severance, health and safety, work schedules and salary adjustments.

We are currently subject to various other claims and suits arising in the ordinary course of business, including certain environmental proceedings and other commercial claims.  We do not believe that the results of such legal proceedings, even if unfavorable to us, will be material to us.  There can be no assurance, however, that such claims or suits 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.

ITEM 4.      MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.                         MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Shares of our common stock are traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “INGR.”  The number of holders of record of our common stock was 5,078 at January 31, 2015.

We have a history of paying quarterly dividends.  The amount and timing of the dividend payment, if any, is based on a number of factors including estimated earnings, financial position and cash flow.  The payment of a dividend is solely at the discretion of our Board of Directors.  Future dividend payments will be subject to our financial results and the availability of funds and statutory surplus to pay dividends.

The quarterly high and low sales prices for our common stock and cash dividends declared per common share for 2013 and 2014 are shown below.

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Issuer Purchases of Equity Securities:

The following table summarizes information with respect to our purchases of our common stock during the fourth quarter of 2014.

*On December 12, 2014, the Board of Directors authorized a new stock repurchase program permitting the Company to purchase up to 5 million of its outstanding common shares from January 1, 2015 through December 31, 2019.  The Company’s previously authorized stock repurchase program permitting the purchase of up to 4 million shares has been almost fully utilized with 176 thousand shares available to be repurchased as of December 31, 2014.

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ITEM 6.                         SELECTED FINANCIAL DATA

Selected financial data is provided below.

(a)   Includes National Starch from October 1, 2010 forward.

(b)   Includes a $33 million impairment charge ($0.44 per diluted common share) to write-off goodwill at our Southern Cone of South America reporting unit and after-tax costs of $1 million ($0.02 per diluted common share) related to the pending Penford acquisition.

(c)   Includes a $13 million benefit from the reversal of a valuation allowance that had been recorded against net deferred tax assets of our Korean subsidiary ($0.16 per diluted common share), after-tax charges for impaired assets and restructuring costs of $23 million ($0.29 per diluted common share), an after-tax gain from a change in a North American benefit plan of $3 million ($0.04 per

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diluted common share), after-tax costs of $3 million ($0.03 per diluted common share) relating to the integration of National Starch and an after-tax gain from the sale of land of $2 million ($0.02 per diluted common share).  See Notes 4 and 8 of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.

(d)   Includes a $58 million NAFTA award ($0.75 per diluted common share) received from the Government of the United Mexican States, an after-tax gain of $18 million ($0.23 per diluted common share) pertaining to a change in a postretirement plan, after-tax charges of $7 million for restructuring costs ($0.08 per diluted common share) and after-tax costs of $21 million ($0.26 per diluted common share) relating to the integration of National Starch.

(e)   Includes $14 million of after-tax charges for bridge loan and other financing costs ($0.18 per diluted common share), after-tax costs related to the National Starch acquisition of $26 million ($0.34 per diluted common share), after-tax charges of $22 million ($0.29 per diluted common share) for impaired assets and other costs primarily associated with our operations in Chile and after-tax charges of $18 million ($0.23 per diluted common share) relating to the sale of National Starch inventory that was adjusted to fair value at the acquisition date in accordance with business combination accounting rules.

(f)   Includes non-controlling interests.

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ITEM 7.                         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are a major supplier of high-quality food and industrial ingredients to customers around the world.  We have 36 manufacturing plants located in North America, South America, Asia Pacific and Europe, the Middle East and Africa (“EMEA”), and we manage and operate our businesses at a regional level.  We believe this approach provides us with a unique understanding of the cultures and product requirements in each of the geographic markets in which we operate, bringing added value to our customers.  Our ingredients are used by customers in the food, beverage, animal feed, paper and corrugating, and brewing industries, among others.

Our Strategic Blueprint continues to guide our decision-making and strategic choices with an emphasis on value-added ingredients for our customers. The foundation of our Strategic Blueprint is operational excellence, which includes our focus on safety, quality and continuous improvement.  We see growth opportunities in three areas.  First is organic growth as we work to expand our current business.  Second, we are focused on broadening our ingredient portfolio of on-trend products through internal and external business development.  Finally, we look for growth from geographic expansion as we pursue extension of our reach to new locations.  The ultimate goal of these strategies and actions is to deliver increased shareholder value.

Critical success factors in our business include managing our significant manufacturing costs, including costs for corn, other raw materials and utilities.  In addition, due to our global operations we are exposed to fluctuations in foreign currency exchange rates.  We use derivative financial instruments, when appropriate, for the purpose of minimizing the risks and/or costs associated with fluctuations in certain raw material and energy costs, foreign exchange rates and interest rates.  Also, the capital intensive nature of our business requires that we generate significant cash flow over time in order to selectively reinvest in our operations and grow organically, as well as through strategic acquisitions and alliances.  We utilize certain key financial metrics relating to working capital, debt and return on capital employed to monitor our progress toward achieving our strategic business objectives (see section entitled “Key Financial Performance Metrics”).

Our net income per diluted common share for 2014 declined 6 percent from 2013 due to the recording of a non-cash impairment charge of $33 million to write-off goodwill at our Southern Cone of South America business unit and $2 million of costs related to our pending acquisition of Penford Corporation.  Without these items, our diluted earnings per common share would have increased 3 percent from 2013.  Our operating income, excluding the impairment charge and acquisition costs, was up slightly from a year ago as growth in EMEA, Asia Pacific and reduced corporate expenses were substantially offset by weaker results in North America and South America.  In North America, our largest segment, operating income declined 6 percent primarily reflecting the unfavorable impact of harsh winter weather conditions on our business in the first quarter of 2014.  South America operating income fell 7 percent driven by the impact of difficult economic conditions in the Southern Cone of South America and unfavorable currency translation driven by the stronger US dollar.  Operating income grew in both Asia Pacific and EMEA reflecting volume and gross margin growth.  Given that both Asia Pacific and EMEA possess strong specialty product portfolios, we remain confident regarding future growth in these segments.

Our operating cash flow of $731 million for 2014 grew 18 percent from 2013.  We continue to use our operating cash flow to invest in our business and reward shareholders.  Our acquisition of Penford Corporation (see below) is expected to close in the first quarter of 2015 pending regulatory approval.  It should be immediately accretive to earnings and will enhance our specialty ingredient product portfolio.  Additionally, we continue to make strategic investments in research and development and capital for our specialty product portfolio.  During 2014 we repurchased 3.8 million of our common shares and our board of directors recently authorized the repurchase of an additional five million shares over the next five years.  We also continued to pay quarterly cash dividends to our shareholders. Our balance sheet is strong and positions us well for future strategic initiatives.

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Looking ahead, we anticipate that our operating income and net income will grow in 2015 compared to 2014.  In North America, we expect operating income to increase as we do not expect a repetition of the adverse weather effect that we experienced in the first quarter of 2014 and to benefit from anticipated improvement in price/product price mix.  In South America, we expect modest operating income growth driven primarily by good cost management. We anticipate slow economic growth and continued foreign exchange headwinds in that segment for 2015.  In Argentina, the political and economic environment remains volatile, challenging and uncertain, and we currently believe that our full year 2015 operating income in that country will be flat relative to 2014.  Operating income in both Asia Pacific and EMEA should continue to grow in 2015, despite currency headwinds associated with a stronger US dollar.  We anticipate that this growth will be driven primarily by improved price/product mix from our specialty ingredient product portfolio and effective cost control.

On October 14, 2014, we entered into a definitive agreement to acquire Penford Corporation (“Penford”), a US-based leader in specialty ingredients for food and non-food applications.  The acquisition has been approved by the boards of directors of both companies and by the shareholders of Penford.  It is subject to approval by regulators as well as to other customary closing conditions.  The purchase price is estimated to be $340 million, including the assumption of debt.  We expect to fund the acquisition of Penford with available cash and proceeds from borrowings under our revolving credit agreement.

Penford, headquartered in Centennial, Colorado had net sales of $444 million in fiscal year 2014.  Penford employs approximately 443 people and operates six plants in the United States, all of which manufacture specialty starches.  See Note 3 of the notes to the consolidated financial statements for additional information.

We currently expect that our available cash balances, future cash flow from operations and borrowing capacity under our credit facilities will provide us with sufficient liquidity to fund our anticipated capital expenditures, dividends and other investing and/or financing activities for the foreseeable future.

RESULTS OF OPERATIONS

We have significant operations in North America, South America, Asia Pacific and EMEA.  For most of our foreign subsidiaries, the local foreign currency is the functional currency.  Accordingly, revenues and expenses denominated in the functional currencies of these subsidiaries are translated into US dollars (“USD”) at the applicable average exchange rates for the period.  Fluctuations in foreign currency exchange rates affect the US dollar amounts of our foreign subsidiaries’ revenues and expenses.  The impact of foreign currency exchange rate changes, where significant, is provided below.

2014 Compared to 2013

Net Income attributable to Ingredion.  Net income attributable to Ingredion for 2014 decreased to $355 million, or $4.74 per diluted common share, from $396 million, or $5.05 per diluted common share in 2013.  Our results for 2014 include an impairment charge of $33 million ($0.44 per diluted common share) to write-off goodwill at our Southern Cone of South America reporting unit (see Note 4 of the notes to the consolidated financial statements for additional information) and after-tax costs of $2 million ($0.02 per diluted common share) related to our pending acquisition of Penford.  Without the impairment charge and acquisition costs, our net income would have declined 2 percent from 2013, while our diluted earnings per share would have grown by 3 percent.  This improvement in our diluted earnings per common share was driven by the favorable impact of our share repurchases.

Net Sales.  Net sales for 2014 decreased to $5.67 billion from $6.33 billion in 2013, primarily reflecting reduced net sales in North America driven by lower raw material costs (primarily corn) that were reflected in our product pricing.

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A summary of net sales by reportable business segment is shown below:

The decrease in net sales was driven by an 8 percent price/product mix decline primarily attributable to lower raw material costs and unfavorable currency translation of 4 percent due to the stronger US dollar.  A 2 percent volume increase partially offset the unfavorable impacts of the reduced selling prices and currency translation.

Net sales in North America decreased 15 percent, primarily reflecting a 16 percent price/product mix decline driven principally by lower raw material costs.  A 2 percent volume improvement more than offset unfavorable currency translation of 1 percent in Canada.  Net sales in South America decreased 10 percent, as a 16 percent decline attributable to weaker foreign currencies more than offset price/product mix improvement of 6 percent.  Volume in the segment was flat.  Asia Pacific net sales declined 1 percent, as a 5 percent price/product mix decline and unfavorable currency translation of 2 percent, more than offset volume growth of 6 percent.  EMEA net sales grew 7 percent reflecting price/product mix improvement of 3 percent, 3 percent volume growth and favorable currency translation of 1 percent primarily attributable to a stronger British Pound Sterling.

Cost of Sales.  Cost of sales for 2014 decreased 12 percent to $4.55 billion from $5.20 billion in 2013.  This reduction primarily reflects lower raw material costs and the effects of currency translation.  Gross corn costs per ton for 2014 decreased approximately 24 percent from 2013, driven by lower market prices for corn.  Currency translation caused cost of sales for 2014 to decrease approximately 4 percent from 2013, reflecting the impact of weaker foreign currencies, particularly in South America.  Our gross profit margin for 2014 was 20 percent, compared to 18 percent in 2013.  Despite reduced selling prices driven by lower corn costs, we have generally maintained per unit gross profit dollar levels, resulting in the improved gross profit margin percentages.

Selling, General and Administrative Expenses.  Selling, general and administrative (“SG&A”) expenses for 2014 declined to $525 million from $534 million in 2013.  The decrease was driven principally by foreign currency weakness which more than offset slightly higher compensation-related costs.  Currency translation caused SG&A expenses for 2014 to decrease approximately 4 percent from 2013.  SG&A expenses represented 47 percent of gross profit in 2014, consistent with 2013.

Other Income-net.  Other income-net of $24 million for 2014 increased from other income-net of $16 million in 2013.  This increase primarily reflects $7 million of income associated with a tax indemnification agreement relating to a subsidiary acquired from Akzo Nobel N.V. (“Akzo”) in 2010 and a $3 million gain from the sale of our idled plant in Kenya.  In the third quarter of 2014, we recognized a charge to our income tax provision for an unfavorable income tax audit result at the former Akzo subsidiary related to a pre-acquisition period for which we are indemnified by Akzo.  The costs incurred by the acquired subsidiary are recorded in our provision for income taxes while the reimbursement from Akzo under the indemnification agreement is recorded as other income.  The impact on our net income is zero.

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Operating Income.  A summary of operating income is shown below:

Operating income for 2014 decreased to $581 million from $613 million in 2013.  Operating income for 2014 includes a $33 million charge to write-off impaired goodwill at our Southern Cone of South America reporting unit and $2 million of costs associated with our pending acquisition of Penford.  Without the impairment charge and acquisition costs, operating income for 2014 would have been essentially flat with 2013.  Our operating income primarily reflects earnings growth in EMEA and Asia Pacific along with reduced corporate expenses, which basically offset lower earnings in North America and South America.  Unfavorable currency translation attributable to a stronger US dollar reduced operating income by approximately $28 million from 2013.

North America operating income decreased 6 percent to $375 million from $401 million in 2013.  The decline primarily reflects our weak first quarter 2014 results that were negatively impacted by harsh winter weather conditions that caused higher energy, transportation and production costs.  Additionally, currency translation associated with a weaker Canadian dollar caused operating income to decrease by approximately $7 million in North America.  We are pursuing insurance recoveries for the property and business interruption loss that was caused by the harsh winter weather.  South America operating income decreased 7 percent to $108 million from $116 million in 2013.  The decrease was driven by weaker results in the Southern Cone of South America, which more than offset earnings growth in Brazil.  The operating income decline in the Southern Cone of South America primarily reflects the impact of higher production costs and our inability to increase selling prices to a level sufficient to recover the impacts of inflation and currency devaluation.  Translation effects associated with weaker South American currencies (particularly the Argentine Peso and Brazilian Real) caused operating income to decrease by approximately $18 million.  We currently anticipate that our business in South America will continue to be challenged by difficult economic conditions in 2015.  Asia Pacific operating income grew 6 percent to $103 million from $97 million in 2013.  This increase was driven principally by volume growth in our Asian business and lower corn costs in South Korea.   Unfavorable translation effects associated with weaker Asian currencies caused Asia Pacific operating income to decrease by approximately $3 million.  EMEA operating income rose 28 percent to $95 million from $74 million in 2013.  The improved earnings primarily reflect improved selling prices, volume growth and manufacturing efficiencies resulting from capital investments, particularly in Europe, and lower energy costs in Pakistan.

Financing Costs-net.  Financing costs-net decreased to $61 million in 2014 from $66 million in 2013.  The decline reflects a decrease in interest expense, an increase in interest income and a reduction in foreign currency transaction losses.   The reduction in interest expense reflects lower average interest rates driven by the effect of our interest rate swaps, which more than offset the impact of higher average borrowings.  The increase in interest income was driven principally by higher interest rates on our cash investments.

Provision for Income Taxes.  Our effective tax rate was 30.2 percent in 2014, as compared to 26.3 percent in 2013.  In the fourth quarter of 2014 we impaired goodwill in our Southern Cone subsidiaries and recorded a charge of $33 million without a tax benefit, which increased the effective tax rate by 1.8 percentage points.  We use the US dollar as the functional currency for our subsidiaries in Mexico.  Because of the decline in the value of the Mexican peso versus the US dollar, primarily late in 2014, the Mexican tax provision includes an unfavorable impact of approximately $7 million, or 1.3 percentage points in our effective tax rate, primarily associated with foreign currency transaction gains for local income tax purposes on net US dollar monetary assets held in Mexico for which there is no corresponding gain in our pre-tax income.  The tax provision also includes approximately $7 million for an unfavorable audit result at a National

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Starch subsidiary related to a pre-acquisition period for which we are indemnified by Akzo.  Additionally, the 2014 tax provision includes $12 million of net favorable reversals of previously unrecognized tax benefits due to the lapsing of the statute of limitations.   We have significant operations in Canada, Mexico and Thailand where the statutory tax rates are 25 percent, 30 percent and 20 percent, respectively.  In addition, our subsidiary in Brazil has a lower effective tax rate of 26 percent including local tax incentives.

Our effective tax rate for 2013 includes approximately $2 million of tax benefits related to the January 2, 2013 enactment of the US American Taxpayer Relief Act of 2012.  We also received a favorable tax determination from the Canadian courts during 2013 that resulted in approximately $4 million of tax benefits related to prior years, and an additional $2 million related to 2013.  In addition, in 2013, we recognized approximately $11 million of tax benefits related to net changes in previously unrecognized tax benefits and global provision to return adjustments.

Without the impact of the items described above, our effective tax rates for 2014 and 2013 would have been approximately 28 percent and 30 percent, respectively.  See Note 8 of the notes to the consolidated financial statements for additional information.

Net Income Attributable to Non-controlling Interests.  Net income attributable to non-controlling interests was $8 million in 2014, up from $7 million in 2013.  The increase primarily reflects improved net income at our non-wholly-owned operation in Pakistan.

Comprehensive Income.  We recorded comprehensive income of $156 million in 2014, as compared with $288 million in 2013.  The decrease in comprehensive income primarily reflects a $75 million unfavorable variance relating mainly to the reduced funded status of our pension and postretirement benefit plans associated with lower discount rates and a revised mortality table, a $58 million unfavorable variance in the cumulative translation adjustment and our lower net income of $40 million, partially offset by a $44 million favorable variance associated with our cash-flow hedging activity.  The unfavorable variance in the cumulative translation adjustment reflects a greater weakening in end of period foreign currencies relative to the US dollar, as compared to a year ago.

2013 Compared to 2012

Net Income attributable to Ingredion.  Net income attributable to Ingredion for 2013 decreased to $396 million, or $5.05 per diluted common share, from 2012 net income of $428 million, or $5.47 per diluted common share.  Our results for 2012 included after-tax charges of $16 million ($0.20 per diluted common share) for impaired assets and restructuring costs in Kenya, China and Colombia (see Note 4 of the notes to the consolidated financial statements for additional information), after-tax restructuring charges of $7 million ($0.09 per diluted common share) relating to our manufacturing optimization plan in North America, and after-tax costs of $3 million ($0.03 per diluted common share) associated with our integration of National Starch.  Additionally, our 2012 results included the reversal of a $13 million valuation allowance that had been recorded against net deferred tax assets of our Korean subsidiary ($0.16 per diluted common share), an after-tax gain from a change in a benefit plan of $3 million ($0.04 per diluted common share) and an after-tax gain from the sale of land of $2 million ($0.02 per diluted common share).

Without the impairment/restructuring charges, the reversal of the Korean deferred tax asset valuation allowance, the gain from the benefit plan change, the gain from the land sale and the integration costs in 2012, net income and diluted earnings per common share for 2013 would have declined 9 percent from 2012.  This decline in net income primarily reflects lower operating income driven principally by significantly reduced operating income in South America.

Net Sales.  Net sales for 2013 decreased to $6.33 billion from $6.53 billion in 2012, primarily reflecting reduced sales in South America and North America.

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A summary of net sales by reportable business segment is shown below:

The decrease in net sales primarily reflects a 3 percent volume reduction and unfavorable currency translation of 3 percent attributable to weaker foreign currencies relative to the US dollar, which more than offset improved price/product mix of 3 percent.

Net sales in North America decreased 3 percent, as a 4 percent volume decline and slightly unfavorable currency translation attributable to a weaker Canadian dollar more than offset improved price/product mix of 2 percent.  Increased selling prices helped to offset higher corn costs.  Net sales in South America decreased 9 percent, as a 10 percent decline attributable to weaker foreign currencies and a 2 percent volume reduction more than offset a 3 percent price/product mix improvement.  The volume reduction primarily reflects weaker economic conditions, particularly in the Southern Cone of South America and in Brazil, and reduced sales to the brewing industry where excess industry capacity resulted in weaker brewery demand for high maltose in Brazil.  Asia Pacific net sales declined 1 percent, as a volume decline of 2 percent and slightly unfavorable currency translation effects more than offset a 1 percent price/product mix improvement.  The volume reduction reflects the effect of the fourth quarter 2012 sale of our investment in our Chinese non-wholly-owned consolidated subsidiary, Shouguang Golden Far East Modified Starch Co., Ltd. (“GFEMS”).  Without net sales of $23 million from GFEMS in 2012, Asia Pacific net sales for 2013 would have increased 2 percent and volume would have grown 1 percent from a year ago.  EMEA net sales grew 6 percent reflecting price/product mix improvement of 8 percent and 1 percent volume growth, which more than offset unfavorable currency translation of 3 percent.  Without an $11 million sales reduction attributable to the closure of our plant in Kenya, EMEA net sales for 2013 would have increased approximately 8 percent and volume would have grown approximately 3 percent from 2012.

Cost of Sales.  Cost of sales for 2013 decreased 2 percent to $5.20 billion from $5.29 billion in 2012.  Higher raw material costs were more than offset by reduced volume, the effects of currency translation and the impacts of continued cost savings focus.  Pricing actions by us limited the unfavorable impact of higher raw material costs on our operating income.  Currency translation caused cost of sales for 2013 to decrease approximately 3 percent from 2012, reflecting the impact of weaker foreign currencies, particularly in South America.  Gross corn costs per ton for 2013 increased approximately 1 percent from 2012, driven by higher market prices for corn.  Additionally, energy costs increased approximately 2 percent from 2012, primarily reflecting higher costs in Korea and Pakistan.  Our gross profit margin for 2013 was 18 percent, compared to 19 percent in 2012, primarily reflecting lower gross profits in South America.

Selling, General and Administrative Expenses.  SG&A expenses for 2013 declined to $534 million from $556 million in 2012.  The decrease was driven principally by foreign currency weakness and cost savings initiatives.  Currency translation caused SG&A expenses for 2013 to decrease approximately 3 percent from 2012.  SG&A expenses represented approximately 8 percent of net sales in 2013, consistent with 2012.

Other Income-net.  Other income-net of $16 million for 2013 decreased from other income-net of $22 million in 2012.  This decrease primarily reflects the effects of a $5 million gain from a change in a North America benefit plan and a $2 million gain from a land sale, both of which were recorded in the fourth quarter of 2012.

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Operating Income.  A summary of operating income is shown below:

Operating income for 2013 declined to $613 million from $668 million in 2012.  Operating income for 2012 included $20 million of charges for impaired assets and restructuring costs in Kenya, $11 million of restructuring charges to reduce the carrying value of certain equipment associated with our manufacturing optimization plan in North America, $5 million of charges for impaired assets in China and Colombia, and $4 million of costs pertaining to the integration of National Starch.  Additionally, operating income for 2012 included the $5 million gain from the benefit plan change in North America and the $2 million gain from the sale of land.  Without the impairment/restructuring charges, integration costs, the gain from the benefit plan change and the gain from the land sale, operating income for 2013 would have decreased 13 percent, primarily reflecting reduced operating income in South America.  Unfavorable currency translation associated with weaker foreign currencies caused operating income to decline by approximately $21 million from 2012.

North America operating income decreased 2 percent to $401 million from $408 million in 2012.  Lower volumes due to reduced customer demand drove the operating income decline.  Improved product selling prices and manufacturing cost saving initiatives limited the unfavorable impact of the reduced sales volume.  Currency translation associated with a weaker Canadian dollar caused operating income to decrease by approximately $3 million in North America.  South America operating income decreased 41 percent to $116 million from $198 million in 2012.  The decrease was driven by significantly weaker results in the Southern Cone of South America and in Brazil.  Our inability to increase selling prices to a level sufficient to recover higher corn, energy and labor costs, primarily in Argentina, and the reduced absorption of fixed manufacturing costs as a result of lower sales volumes due to soft demand from a weaker economy, drove the earnings decline.  Translation effects associated with weaker South American currencies (particularly the Argentine Peso and Brazilian Real) caused operating income to decrease by approximately $14 million.  Asia Pacific operating income rose 2 percent to $97 million from $95 million in 2012.  This increase primarily reflects organic volume growth and slightly higher product selling prices, which more than offset higher local production costs and the impact of weaker foreign currencies.  Unfavorable translation effects associated with weaker foreign currencies caused Asia Pacific operating income to decrease by approximately $1 million.  EMEA operating income decreased 6 percent to $74 million from $78 million in 2012.  The decrease primarily reflects the impacts of weaker foreign currencies and higher local production and energy costs, which more than offset improved product price/mix and volume growth.  Translation effects associated with weaker foreign currencies (particularly the Pakistan Rupee) caused EMEA operating income to decrease by approximately $3 million.

Financing Costs-net.  Financing costs-net decreased slightly to $66 million in 2013 from $67 million in 2012.  The decrease primarily reflects reduced interest expense driven by lower average borrowings and interest rates and an increase in interest income attributable to our higher cash balances, partially offset by an increase in foreign currency transaction losses.

Provision for Income Taxes.  Our effective tax rate was 26.3 percent in 2013, as compared to 27.8 percent in 2012.  Our effective tax rate for 2013 includes approximately $2 million of tax benefits related to the January 2, 2013 enactment of the US American Taxpayer Relief Act of 2012.  The Company also received a favorable tax determination from the Canadian courts during 2013 that resulted in approximately $4 million of tax benefits related to prior years, and an

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additional $2 million related to the current year.  In addition, the Company recognized approximately $11 million of tax favorability related to net changes in previously unrecognized tax benefits and global provision to return adjustments.  Our effective income tax rate for 2012 includes the effects of the discrete reversal of a $13 million valuation allowance that had been recorded against net deferred tax assets of our Korean subsidiary, the recognition of an income tax benefit of $8 million related to our $20 million restructuring charge in Kenya and the associated tax write-off of the investment.  Additionally, in 2012 we recorded a $4 million pre-tax charge related to the disposition of GFEMS, which is not expected to produce a realizable tax benefit.  Without the impact of the items described above, our effective tax rates for 2013 and 2012 would have been approximately 30 percent in both periods.  See Note 8 of the notes to the consolidated financial statements for additional information.

Net Income Attributable to Non-controlling Interests.  Net income attributable to non-controlling interests was $7 million in 2013, up from $6 million in 2012.  The increase reflects the impact of our 2012 sale of GFEMS and improved net income at our non-wholly-owned operation in Pakistan.

Comprehensive Income.  We recorded comprehensive income of $288 million in 2013, as compared with $366 million in 2012.  The decrease in comprehensive income primarily reflects a $125 million unfavorable variance in the cumulative translation adjustment, a $41 million unfavorable variance associated with our cash-flow hedging activity and our lower net income of $31 million, partially offset by a $119 million favorable variance relating mainly to the improved funded status of our pension and postretirement benefit plans.  The unfavorable variance in the cumulative translation adjustment reflects a greater weakening in end of period foreign currencies relative to the US dollar, as compared to a year ago.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2014, our total assets were $5.09 billion, down from $5.36 billion at December 31, 2013.  This decrease primarily reflects translation effects associated with weaker end of period foreign currencies relative to the US dollar.  Total equity decreased to $2.21 billion at December 31, 2014, from $2.43 billion at December 31, 2013.  This decrease primarily reflects our share repurchases, dividends on our common stock and an increase in our accumulated other comprehensive loss driven principally by unfavorable foreign currency translation.  These declines more than offset the favorable impact of our 2014 net income on total equity.

We have a senior, unsecured, $1 billion revolving credit agreement (the “Revolving Credit Agreement”) that matures on October 22, 2017.  Subject to certain terms and conditions, we may increase the amount of the revolving credit facility under the Revolving Credit Agreement by up to $250 million in the aggregate.  All committed pro rata borrowings under the revolving credit facility will bear interest at a variable annual rate based on the LIBOR or prime rate, at our election, subject to the terms and conditions thereof, plus, in each case, an applicable margin based on our leverage ratio (as reported in the financial statements delivered pursuant to the Revolving Credit Agreement).

The Revolving Credit Agreement contains customary representations, warranties, covenants, events of default, terms and conditions, including limitations on liens, incurrence of debt, mergers and significant asset dispositions.  We must also comply with a leverage ratio and an interest coverage ratio covenant.  The occurrence of an event of default under the Revolving Credit Agreement could result in all loans and other obligations under the agreement being declared due and payable and the revolving credit facility being terminated.  We met all covenant requirements as of December 31, 2014.

At December 31, 2014, we had $87 million of borrowings outstanding under our Revolving Credit Agreement.  In addition, we have a number of short-term credit facilities consisting of operating lines of credit.  At December 31, 2014, we had total debt outstanding of $1.83 billion, compared to $1.81 billion at December 31, 2013.  In addition to the borrowings outstanding under the Revolving Credit Agreement, our total debt includes $350 million of 3.2 percent notes due November 1, 2015, $300 million (principal amount) of 1.8 percent senior notes due 2017, $200 million of 6.0 percent senior notes due 2017, $200 million of 5.62 percent senior notes due 2020, $400 million (principal amount) of 4.625 percent notes due 2020, $250 million (principal amount) of 6.625 percent senior notes due 2037 and $23 million of consolidated subsidiary debt consisting of local country short-term borrowings.  Ingredion Incorporated, as the parent company, guarantees certain obligations of its consolidated subsidiaries.  At December 31, 2014, such guarantees aggregated $214 million.  Management believes that such consolidated subsidiaries will meet their financial obligations as they become due.

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Historically, the principal source of our liquidity has been our internally generated cash flow, which we supplement as necessary with our ability to borrow on our bank lines and to raise funds in the capital markets.  In addition to borrowing availability under our Revolving Credit Agreement, we also have approximately $485 million of unused operating lines of credit in the various foreign countries in which we operate.

The weighted average interest rate on our total indebtedness was approximately 4.1 percent and 4.4 percent for 2014 and 2013, respectively.

Net Cash Flows

A summary of operating cash flows is shown below:

Cash provided by operations was $731 million in 2014, as compared with $619 million in 2013.  The increase in operating cash flow for 2014 primarily reflects improved cash flow associated with working capital activities.  An increase in accounts payable and accrued liabilities associated with the timing of payments and a decrease in our margin accounts relating to commodity hedging contracts were the primary sources of our 2014 cash inflow from reduced working capital.

We had cash inflows of $39 million in 2014 from our margin account activity relating to commodity hedging contracts.  To manage price risk related to corn purchases in North America, we use derivative instruments (corn futures and options contracts) to lock in our corn costs associated with firm-priced customer sales contracts.  We are unable to directly hedge price risk related to co-product sales; however, we enter into hedges of soybean oil (a competing product to our animal feed and corn oil) in order to mitigate the price risk of animal feed and corn oil sales.  As the market price of corn fluctuates, our derivative instruments change in value and we fund any unrealized losses or receive cash for any unrealized gains related to outstanding corn futures and option contracts.  We plan to continue to use corn futures and option contracts to hedge the price risk associated with firm-priced customer sales contracts in our North American business and, accordingly, we will be required to make cash deposits to or be entitled to receive cash from our margin accounts depending on the movement in the market price for corn.

Listed below are our primary investing and financing activities for 2014:

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On December 12, 2014, our board of directors declared a quarterly cash dividend of $0.42 per share of common stock.  This dividend was paid on January 26, 2015 to stockholders of record at the close of business on December 31, 2014.

As part of our stock repurchase program, we entered into an accelerated share repurchase agreement (“ASR”) on July 30, 2014 with an investment bank under which we repurchased $300 million of our common stock.  We paid the $300 million on August 1, 2014 and received an initial delivery of shares from the investment bank of 3,152,502 shares, representing approximately 80 percent of the shares anticipated to be repurchased based on current market prices at that time.  The initial delivery of shares resulted in an immediate reduction in the number of shares used to calculate the weighted average common shares outstanding for basic and diluted net earnings per share from the effective date of the ASR.  On December 29, 2014, the ASR was completed and we received 671,823 additional shares of our common stock bringing the total amount of repurchases to 3,824,325 shares, based upon the volume-weighted average price of $78.45 per share over the term of the share repurchase agreement.  The ASR was funded through a combination of cash on hand and utilization of the Revolving Credit Agreement.

On October 14, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Penford Corporation, a Washington corporation (“Penford”), Prospect Sub, Inc., a Washington corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), and the Company.  The Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement were unanimously approved by our board of directors.  The Merger Agreement provides for the merger of Merger Sub with and into Penford, on the terms and subject to the conditions set forth in the Merger Agreement (the “Merger”), with Penford continuing as the surviving corporation in the Merger.  As a result of the Merger, Penford will become a wholly-owned subsidiary of the Company.

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share (a “Share”) of common stock of Penford (“Penford Common Stock”) issued and outstanding immediately prior to the Effective Time, other than (a) Shares owned by the Company or Merger Sub, or by any subsidiary of the Company or Merger Sub, immediately prior to the Effective Time and (b) Shares outstanding immediately prior to the Effective Time and held by a holder who is entitled to exercise dissenters’ rights and properly exercises dissenters’ rights under Washington law with respect to such Shares, will be converted into the right to receive $19.00 in cash per Share, without interest and subject to and reduced by the amount of any tax withholding.  As of the date of the Merger Agreement, Penford had 12,735,038 outstanding Shares and 1,429,000 Shares underlying outstanding options.   Outstanding borrowings under Penford’s revolving credit agreement will become due as a result of the Merger.  The purchase price is estimated to be $340 million, including the assumption of debt.  We expect to fund the acquisition of Penford with available cash and proceeds from borrowings under our revolving credit agreement.  The acquisition is expected to close in the first quarter of 2015 pending regulatory approval.  See Note 3 of the notes to the consolidated financial statements for additional information.

We currently anticipate that capital expenditures for 2015 will approximate $300 million.

We currently expect that our available cash balances, future cash flow from operations and borrowing capacity under our credit facilities will provide us with sufficient liquidity to fund our anticipated capital expenditures, dividends, and other investing and/or financing activities for the foreseeable future.

We have not provided federal and state income taxes on accumulated undistributed earnings of certain foreign subsidiaries because these earnings are considered to be permanently reinvested.  It is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings.  We do not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements or planned acquisition of Penford.  Approximately $604 million of our total cash and cash equivalents and short-term investments of $614 million at December 31, 2014, was held by our operations outside of the United States.  We anticipate that such cash and short-term investments will be used to fund growth opportunities outside of the United States, including capital expenditures and acquisitions.  We expect that available cash balances and credit facilities in the United States, along with cash generated from operations, will be sufficient to meet our operating and other cash needs for the foreseeable future.

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Hedging

We are exposed to market risk stemming from changes in commodity prices, foreign currency exchange rates and interest rates.  In the normal course of business, we actively manage our exposure to these market risks by entering into various hedging transactions, authorized under established policies that place clear controls on these activities.  These transactions utilize exchange-traded derivatives or over-the-counter derivatives with investment grade counterparties.  Our hedging transactions may include, but are not limited to, a variety of derivative financial instruments such as commodity futures, options and swap contracts, forward currency contracts and options, interest rate swap agreements and treasury lock agreements.  See Note 5 of the notes to the consolidated financial statements for additional information.

Commodity Price Risk:

Our principal use of derivative financial instruments is to manage commodity price risk in North America relating to anticipated purchases of corn and natural gas to be used in the manufacturing process.  We periodically enter into futures, options and swap contracts for a portion of our anticipated corn and natural gas usage, generally over the following twelve to twenty-four months, in order to hedge price risk associated with fluctuations in market prices.  These derivative instruments are recognized at fair value and have effectively reduced our exposure to changes in market prices for these commodities.  We are unable to directly hedge price risk related to co-product sales; however, we enter into hedges of soybean oil (a competing product to our corn oil) in order to mitigate the price risk of corn oil sales.  Unrealized gains and losses associated with marking our commodities-based derivative instruments to market are recorded as a component of other comprehensive income (“OCI”).  At December 31, 2014, our accumulated other comprehensive loss account (“AOCI”) included $13 million of losses, net of tax of $6 million, related to these derivative instruments.   It is anticipated that these losses will be reclassified into earnings during the next twelve months.  We expect the losses to be offset by changes in the underlying commodities cost.

Foreign Currency Exchange Risk:

Due to our global operations, including 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 our foreign operation results are translated to USD and to transactional foreign exchange risk when transactions not denominated in the functional currency of the operating unit are revalued.  We primarily use derivative financial instruments such as foreign currency forward contracts, swaps and options to manage our foreign currency transactional exchange risk.  At December 31, 2014, we had foreign currency forward sales contracts with an aggregate notional amount of $150 million and foreign currency forward purchase contracts with an aggregate notional amount of $70 million that hedged transactional exposures.  The fair value of these derivative instruments is an asset of $1 million at December 31, 2014.

We also have foreign currency derivative instruments that hedge certain foreign currency transactional exposures and are designated as cash-flow hedges.  The amount included in AOCI relating to these hedges at December 31, 2014 was not significant.

We have significant operations in Argentina.  We utilize the official exchange rate published by the Argentine government for re-measurement purposes.  Due to exchange controls put in place by the Argentine government, a parallel market exists for exchanging Argentine pesos to US dollars at rates less favorable than the official rate.  Argentina and other emerging markets experienced increased devaluation and volatility in 2014 and we anticipate that this trend will continue in 2015.

Interest Rate Risk:

We occasionally use interest rate swaps and Treasury Lock agreements (“T-Locks”) to hedge our exposure to interest rate changes, to reduce the volatility of our financing costs, or to achieve a desired proportion of fixed versus floating rate debt, based on current and projected market conditions.  We did not have any T-Locks outstanding at December 31, 2014 or 2013.

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In September 2014, we entered into interest rate swap agreements that effectively convert the interest rates on our 6.0 percent $200 million senior notes due April 15, 2017, our 1.8 percent $300 million senior notes due September 25, 2017 and on $200 million of our $400 million 4.625 percent senior notes due November 1, 2020, to variable rates.  Additionally, we have interest rate swap agreements that effectively convert the interest rate on our 3.2 percent $350 million senior notes due November 1, 2015 to a variable rate.   These swap agreements call for us to receive interest at the fixed coupon rate of the respective notes and to pay interest at a variable rate based on the six-month US dollar LIBOR rate plus a spread.  We have designated these interest rate swap agreements as hedges of the changes in fair value of the underlying debt obligations attributable to changes in interest rates and account for them as fair-value hedges.  The fair value of these interest rate swap agreements was $13 million at both December 31, 2014 and December 31, 2013, and is reflected in the Consolidated Balance Sheets within other assets, with an offsetting amount recorded in long-term debt to adjust the carrying amount of the hedged debt obligations.

At December 31, 2014, our accumulated other comprehensive loss account included $7 million of losses (net of tax of $4 million) related to settled Treasury Lock agreements.  These deferred losses are being amortized to financing costs over the terms of the senior notes with which they are associated.  It is anticipated that $2 million of these losses (net of tax of $1 million) will be reclassified into earnings during the next twelve months.

Contractual Obligations and Off Balance Sheet Arrangements

The table below summarizes our significant contractual obligations as of December 31, 2014.  Information included in the table is cross-referenced to the notes to the consolidated financial statements elsewhere in this report, as applicable.

(a)         Long-term debt at December 31, 2014 includes $350 million of 3.2 percent senior notes that mature November 1, 2015.  These borrowings are included in long-term debt as we have the ability and intent to refinance the notes on a long-term basis prior to the maturity date.

(b)         The purchase obligations relate principally to power supply and raw material sourcing agreements, including take or pay contracts, which help to provide us with adequate power and raw material supply at certain of our facilities.

(c)          The above table does not reflect unrecognized income tax benefits of $23 million, the timing of which is uncertain. See Note 8 of the notes to the consolidated financial statements for additional information with respect to unrecognized income tax benefits.

We currently anticipate that in 2015 we will make cash contributions of $1 million and $2 million to our US and non-US pension plans, respectively.  See Note 9 of the notes to the consolidated financial statements for further information with respect to our pension and postretirement benefit plans.

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Key Financial Performance Metrics

We use certain key financial metrics to monitor our progress towards achieving our long-term strategic business objectives.  These metrics relate to our return on capital employed, our financial leverage, and our management of working capital, each of which is tracked on an ongoing basis.  We assess whether we are achieving an adequate return on invested capital by measuring our “Return on Capital Employed” (“ROCE”) against our cost of capital.  We monitor our financial leverage by regularly reviewing our ratio of net debt to adjusted earnings before interest, taxes, depreciation and amortization (“Net Debt to Adjusted EBITDA”) and our “Net Debt to Capitalization” percentage to assure that we are properly financed.  We assess our level of working capital investment by evaluating our “Operating Working Capital as a percentage of Net Sales.”  We believe these metrics provide valuable managerial information to help us run our business and are useful to investors.

The metrics below include certain information (including Capital Employed, Adjusted Operating Income, Adjusted EBITDA, Net Debt, Adjusted Current Assets, Adjusted Current Liabilities and Operating Working Capital) that is not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”).  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 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 generally accepted accounting principles.

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

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Our calculations of these key financial metrics for 2014 with comparisons to the prior year are as follows:

* Balance sheet amounts used in computing capital employed represent beginning of period balances.

** The effective income tax rate for 2014 excludes the impacts of an impairment charge and acquisition costs.   Including these items, the Company’s effective income tax rate for 2014 was 30.2 percent. Listed below is a schedule that reconciles our effective income tax rate under US GAAP to the adjusted income tax rate.