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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, 2012

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 $49.52 on June 29, 2012, and, for the purpose of this calculation only, the assumption that all of the Registrant’s directors and executive officers are affiliates) was approximately $3,793,000,000.

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, as of February 25, 2013, was 77,266,000.

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 2013 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2012.

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INGREDION INCORPORATED

FORM 10-K
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PART I.

ITEM 1.  BUSINESS

The Company

On May 15, 2012, the Company’s stockholders approved the Company’s name change to Ingredion Incorporated (“Ingredion”) from Corn Products International, Inc.  We believe the name better reflects our position as a leading global manufacturer and supplier of starch and sweetener ingredients to a range of industries, including packaged food, beverage, brewing and industrial customers.  Ingredion was incorporated as a Delaware corporation in 1997 and its common stock is traded on the New York Stock Exchange.

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.

On October 1, 2010, the Company acquired National Starch, a global developer and manufacturer of specialty modified starches from Akzo Nobel N.V., headquartered in the Netherlands.  National Starch is a recognized innovator in starch and food ingredients.  Its technologies are supported by a research and development infrastructure and protected by more than 800 patents and patents pending, which drive development of advanced specialty starches for the next generation of food products.

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 $6.53 billion in 2012.  Approximately 57 percent of our 2012 net sales were provided from our North American operations. Our South American operations provided 22 percent of net sales, while our Asia Pacific and EMEA (Europe, Middle East and Africa) operations contributed approximately 13 percent and 8 percent, respectively.

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Products

Sweetener Products. Our sweetener products represented approximately 44 percent, 43 percent and 52 percent of our net sales for 2012, 2011 and 2010, 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 actually speeds 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; acts as a bulking, drying and anti-caking agent; serves as a carrier; provides freezing point and crystallization control; and aids 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 37 percent, 36 percent and 28 percent of our net sales for 2012, 2011 and 2010, respectively.  Starches are an important component in a wide range of processed foods, where they are used for adhesions, 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

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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.

Co-Products and others.  Co-products and others accounted for 19 percent, 21 percent and 20 percent of our net sales for 2012, 2011 and 2010, 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 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 based on the geographic organization of our business: North America, South America, Asia Pacific and EMEA.  In 2012, approximately 57 percent of our net sales were derived from operations in North America, while net sales from operations in South America represented 22 percent.  Our Asia Pacific and EMEA operations represented approximately 13 percent and 8 percent of our net sales, respectively.  See Note 14 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 Argentina, Brazil, Chile, Colombia and Peru.  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, high fructose corn syrups and caramel color.

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

Additionally, Ingredion utilizes a network of tolling manufacturers in its various regions in the production cycle of certain specialty starches.  In general, these tolling manufacturers produce certain basic starches for the Company, 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.

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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 & 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. High fructose corn syrup 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 2012:

Also noteworthy, approximately 18 percent of our net sales in 2012 were to customers that we regard as Global Accounts.  No customer accounted for 10 percent or more of our net sales in 2012, 2011 or 2010.

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: farmer 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.  The Company also uses tapioca, potato, rice and sugar as a 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 produce 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 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 a global research and development capability concentrated in Bridgewater, New Jersey.  Activities at Bridgewater include plant science and physical, chemical and biochemical modifications to food formulation, as well as development of non-food applications such as starch-based biopolymers.  In addition, Ingredion has 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 2012 was approximately $37 million, or approximately one-half of one percent of our total net sales.

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 five to fifteen years.

Patents, Trademarks and Technical License Agreements

We own a number of patents, including approximately 800 patents and patents pending through the acquisition of National Starch 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 the Company or its results of operations if decided against us.

Employees

As of December 31, 2012 we had approximately 11,200 employees, of which approximately 1,900 were located in the United States.  Approximately 35 percent of US and 47 percent of our non-US employees are unionized.  In addition, the Company has approximately 900 temporary employees.

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Government Regulation and Environmental Matters

As a manufacturer and maker 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 US, 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 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 2012.  We may also be required to comply with US, 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 US, 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.  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 2012, we spent approximately $4 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 $12 million and $8 million for environmental facilities and programs in 2013 and 2014, respectively.

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 during the past five years.  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 which 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 US, the European Union, South America 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; 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.

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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.

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, but there can be no assurance that this will continue to be the case.  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 10 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 impacts 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 these commodities 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 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

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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 the cash flow of the Company.  We fund any unrealized losses or receive cash for any unrealized gains 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.

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.  There is also a demand for corn in the US to produce ethanol which has been significantly impacted by US governmental policies designed to encourage the production of ethanol.  In addition, government programs supporting sugar prices indirectly impact the price of corn sweeteners, especially high fructose corn syrup.

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. Fluctuation in prices of these competing products may affect prices of, and profits derived from, our products. 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 high fructose corn syrup, in favor of foods that are perceived as being more healthy, could reduce our sales and profitability, and such a reduction 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.

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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 even where they are approved. 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 profitability could be negatively impacted if we fail to maintain satisfactory labor relations.

Approximately 35 percent of our US and 47 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 affect on our business.

Approximately 44 percent of our 2012 sales were made to companies engaged in the food industry and approximately 15 percent were made to companies in the beverage industry.  Additionally, sales to the animal nutrition market, the paper and corrugating industry, and the brewing industry represented approximately 12 percent, 9 percent and 9 percent of our 2012 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 such as Severe Acute Respiratory Syndrome (“SARS”) or the Avian Flu, 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 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.

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

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 such 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.  Our annual impairment assessment as of October 1, 2012 did not result in any additional impairment charges for the year.

Even though it was determined that there was no additional long-lived asset impairment as of October 1, 2012, 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, 2013.

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.

In particular, the carrying value of deferred tax assets, which are predominantly in the US, UK and Korea, is 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.

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

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.

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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, 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.

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:

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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, Charleston and Mapleton, as well as at our plants in San Juan del Rio, Mexico; Baradero, Argentina; 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. Our Stockton, California co-generation facility was previously operated by a third party.  It is not currently generating power for sale to the electrical grid.

In recent years, we have made significant capital expenditures to update, expand and improve our facilities, spending $313 million in 2012.  We believe these capital expenditures will allow us to operate efficient facilities for the foreseeable future.   We currently anticipate that capital expenditures for 2013 will approximate $350 million to $400 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 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

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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.  The motion to dismiss the counterclaim is still pending before the court.

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 currently subject to various other claims and suits arising in the ordinary course of business, including certain environmental proceedings.  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 5,862 at January 31, 2013.

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 surplus funds to pay dividends.

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The quarterly high and low sales prices for our common stock and cash dividends declared per common share for 2011 and 2012 are shown below.

Issuer Purchases of Equity Securities:

The following table summarizes information with respect to our purchases of our common stock during the fourth quarter of 2012.

On November 17, 2010, our Board of Directors authorized an extension of our stock repurchase program permitting us to purchase up to 5 million shares of our outstanding common stock through November 30, 2015.  The stock repurchase program was authorized by the Board of Directors on November 7, 2007 and would have expired on November 30, 2010.  As of December 31, 2012, we had repurchased 1.6 million shares under the program, leaving 3.4 million shares available for repurchase.

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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 $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 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 sale of $2 million ($0.02 per diluted common share).  See Notes 3, 4, 8 and 9 of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.

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(c)  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.   See Notes 3, 4, 9 and 13 of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.

(d)   Includes $14 million of after-tax charges for bridge loan and other financing costs ($0.18 per diluted common share), after-tax acquisition-related costs 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. See Notes 3, 4 and 6 of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.

(e)  Includes after-tax charges for impaired assets and restructuring costs of $110 million, or $1.47 per diluted common share.

(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 throughout 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.

Critical success factors in our business include managing our significant manufacturing costs, including 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”).

2012 was a strong year for us as we achieved Company record highs for net sales, operating income, net income and diluted earnings per common share, driven primarily by higher product selling prices and volume growth.  Despite challenging macroeconomic conditions, we achieved sales volume growth and product price improvements to cover higher raw material costs and foreign currency headwinds.  Additionally, we further enhanced our liquidity and financial flexibility by selling $300 million of 1.80 percent five-year Senior Notes and by entering into a new five-year $1 billion revolving credit agreement.  We also completed our integration of the National Starch acquisition and we look forward to continued business growth in 2013.

We currently expect that our 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 strategies 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 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 currency exchange rate changes, where significant, is provided below.

2012 Compared to 2011

Net Income attributable to Ingredion.  Net income attributable to Ingredion for 2012 increased to $428 million, or $5.47 per diluted common share, from 2011 net income of $416 million, or $5.32 per diluted common share.  Our results for 2012 include 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 include 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

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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).  Our results for 2011 included a $58 million NAFTA award ($0.75 per diluted common share) received from the Government of the United Mexican States (see Note 13 of the notes to the consolidated financial statements for additional information) and an after-tax gain of $18 million ($0.23 per diluted common share) pertaining to a change in a postretirement plan (see Note 9 of the notes to the consolidated financial statements for additional information).  Additionally, our 2011 results included after-tax costs of $21 million ($0.26 per diluted common share) relating to the integration of National Starch and after-tax restructuring charges of $7 million ($0.08 per diluted common share) associated with our manufacturing optimization plan in North America.

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 and the integration costs, restructuring charges, NAFTA award and gain from the postretirement plan change in 2011, net income and diluted earnings per common share for 2012 would have grown 19 percent from 2011.  This net income growth primarily reflects an increase in operating income in North America and, to a lesser extent, in Asia Pacific.  Reduced financing costs and a lower effective income tax rate also contributed to the improved earnings.

Net Sales.  Net sales for 2012 increased to $6.53 billion from $6.22 billion in 2011, as sales growth in North America and Asia Pacific more than offset declines in South America and EMEA.

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

The increase in net sales primarily reflects improved price/product mix of 6 percent and volume growth of 2 percent driven by stronger demand from our beverage, brewing and food customers, which more than offset unfavorable currency translation of 3 percent attributable to weaker foreign currencies relative to the US dollar.

Net sales in North America increased 11 percent reflecting improved price/product mix of 7 percent and volume growth of 4 percent driven by stronger demand from our beverage, brewing and food customers.  Improved selling prices helped to offset higher corn costs.  Net sales in South America decreased 7 percent, as a 9 percent decline attributable to weaker foreign currencies and a 3 percent volume reduction, more than offset a 5 percent price/product mix improvement.  The volume decline primarily reflects a combination of weaker economic activity in the segment and a transportation strike and labor issues that impacted our customers in Argentina earlier in the year.  Asia Pacific net sales grew 7 percent, as volume growth of 5 percent and price/product mix improvement of 3 percent, more than offset unfavorable currency translation of 1 percent.  EMEA net sales decreased 3 percent, as unfavorable currency translation of 6 percent and a 1 percent volume reduction resulting primarily from the closure of our manufacturing plant in Kenya, more than offset a 4 percent price/product mix improvement.

Cost of Sales.  Cost of sales for 2012 increased 4 percent to $5.29 billion from $5.09 billion in 2011.  The increase primarily reflects higher corn costs and volume growth.  Currency translation caused cost of sales for 2012 to decrease

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approximately 3 percent from 2011, reflecting the impact of weaker foreign currencies.  Gross corn costs per ton for 2012 increased approximately 4 percent from 2011, driven by higher market prices for corn.  Additionally, energy costs increased approximately 2 percent from 2011; primarily reflecting higher costs in Pakistan, where power shortages due to energy infrastructure problems in that country drove costs higher.  Our gross profit margin for 2012 was 19 percent, compared to 18 percent in 2011.

Selling, General and Administrative Expenses.  Selling, general and administrative (“SG&A”) expenses for 2012 increased to $556 million from $543 million in 2011.  The increase primarily reflects higher compensation-related costs; lower integration expenses and the impact of weaker foreign currencies partially offset these increases.  Currency translation caused operating expenses for 2012 to decrease approximately 3 percent from 2011.  SG&A expenses represented 9 percent of net sales in both 2012 and 2011.  Without integration costs, SG&A expenses, as a percentage of net sales, would have been 8 percent in both 2012 and 2011.

Other Income-net.  Other income-net of $22 million for 2012 decreased from other income-net of $98 million in 2011.  This decrease primarily reflects the effects of the $58 million NAFTA award received from the Government of the United Mexican States in the first quarter of 2011 and a $30 million gain associated with a fourth quarter 2011 postretirement benefit plan change.  A $5 million gain from a change in a benefit plan in North America and a $2 million gain from a land sale in the fourth quarter of 2012 partially offset these declines.

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

Operating income for 2012 declined slightly to $668 million from $671 million in 2011.  Operating income for 2012 includes $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 includes the $5 million gain from the benefit plan change in North America and a $2 million gain from the sale of land.  Operating income for 2011 included the $58 million NAFTA award, a $30 million gain from a change in a postretirement plan, $31 million of costs pertaining to the integration of National Starch and $10 million of restructuring charges associated with our North American manufacturing optimization plan.  Without the impairment/restructuring charges, integration costs, the NAFTA award, the gains from the changes in benefit plans, and the gain from the land sale, operating income for 2012 would have increased 12 percent, primarily reflecting strong earnings growth in North America and, to a lesser extent, in Asia Pacific.  Unfavorable currency translation associated with weaker foreign currencies caused operating income to decline by approximately $30 million from 2011.  North America operating income increased 27 percent to $408 million from $322 million in 2011.  Improved product selling prices and volume growth helped to offset higher corn costs.  Currency translation associated with a weaker Canadian dollar caused operating income to decrease by approximately $1 million in North America.  South America operating income decreased 2 percent to $198 million from $203 million in 2011.  Improved product price/mix largely offset the unfavorable impacts of higher local product costs; translation effects associated with weaker South American currencies (particularly the Argentine Peso and Brazilian Real), which had a $22 million unfavorable impact on the segment; and lower volumes due to soft demand from a weaker economy.

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Asia Pacific operating income rose 20 percent to $95 million from $79 million in 2011.  This increase primarily reflects sales volume growth and improved price/mix, which more than offset the impact of weaker currencies.  Unfavorable translation effects associated with weaker foreign currencies caused Asia Pacific operating income to decrease by approximately $1 million.  EMEA operating income decreased 7 percent to $78 million from $84 million in 2011, primarily reflecting unfavorable currency translation.  Translation effects associated with weaker foreign currencies caused EMEA operating income to decrease by approximately $6 million. While our installation of equipment helped to mitigate energy issues somewhat, energy infrastructure in Pakistan remains problematic and we continue to face challenges resulting from the power shortages in that country.

Financing Costs-net.  Financing costs-net decreased to $67 million in 2012 from $78 million in 2011.  The decrease primarily reflects an increase in interest income of $5 million attributable to our higher cash balances, a $4 million decrease in interest expense driven by lower borrowing rates and a $2 million reduction in foreign currency transaction losses.

Provision for Income Taxes.  Our effective tax rate was 27.8 percent in 2012, as compared to 28.7 percent in 2011.  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, we recorded a $4 million pretax charge related to the disposition of our non wholly-owned consolidated subsidiary in China, which is not expected to produce a realizable tax benefit.  Our effective income tax rate for 2011 includes the benefit of the one-time recognition of tax free income related to the NAFTA award in pretax income, which lowered our effective income tax rate by 3.5 percentage points.  Without the impact of the items described above, our effective tax rates for 2012 and 2011 would have been approximately 30 percent and 32 percent, respectively.  See also Note 8 of the notes to the consolidated financial statements.

Net Income Attributable to Non-controlling Interests.  Net income attributable to non-controlling interests was $6 million in 2012, down from $7 million in 2011. The decrease reflects lower earnings at our non wholly-owned operations in Pakistan and China.

Comprehensive Income.  We recorded comprehensive income of $366 million in 2012, as compared with $193 million in 2011.  The increase primarily reflects a $97 million favorable variance in the currency translation adjustment and a $94 million favorable variance associated with our cash-flow hedging activity.  The favorable variance in the currency translation adjustment reflects a more moderate weakening in end of period foreign currencies relative to the US dollar in 2012, as compared to a year ago, when end of period foreign currency depreciation was more significant.

2011 Compared to 2010

On October 1, 2010, we acquired National Starch, a global provider of specialty starches.  The results of National Starch are included in our consolidated financial results from October 1, 2010 forward.  As a result, there are significant fluctuations in our financial statements as compared to 2010.  While we identify significant fluctuations due to the acquisition, our discussion below also addresses results of operations absent the impact of the National Starch acquisition and acquired operations for the nine months ended September 30, 2011, where appropriate, to provide a more comparable and meaningful analysis.

Net Income attributable to Ingredion.  Net income attributable to Ingredion for 2011 more than doubled to $416 million, or $5.32 per diluted common share, from 2010 net income of $169 million, or $2.20 per diluted common share.  Our results for 2011 included a $58 million NAFTA award ($0.75 per diluted common share) received from the Government of the United Mexican States (see Note 13 of the notes to the consolidated financial statements for additional information) and an after-tax gain of $18 million ($0.23 per diluted common share) pertaining to a change in a postretirement plan (see Note 9 of the notes to the consolidated financial statements for additional information).

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Additionally, our 2011 results included after-tax costs of $21 million ($0.26 per diluted common share) relating to the integration of National Starch and after-tax restructuring charges of $7 million ($0.08 per diluted common share) associated with our manufacturing optimization plan in North America.  Our 2010 results included after-tax acquisition-related costs of $26 million ($0.34 per diluted common share), after-tax restructuring charges of $22 million ($0.29 per diluted common share) for impaired assets and other costs primarily associated with the closing of our plant in Chile, after-tax costs 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 and after-tax charges of $14 million for bridge loan and other financing costs ($0.18 per diluted common share) related to the acquisition of National Starch.  See also Note 4 of the notes to the consolidated financial statements for additional information pertaining to the asset impairments and restructurings.

Without the integration costs, restructuring charges, the NAFTA award, and the gain from the postretirement plan change in 2011 and the impairment, restructuring, acquisition-related costs and bridge loan and other financing expenses in 2010, net income for 2011 would have grown 47 percent from 2010, while our diluted earnings per common share would have risen 44 percent.  This net income growth primarily reflects an increase in operating income driven by earnings of the acquired National Starch operations and, to a lesser extent, organic earnings growth.  Higher financing costs partially offset the increased operating income.

Net Sales.  Net sales for 2011 increased to $6.22 billion from $4.37 billion in 2010, as sales grew in each of our segments.

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

The increase in net sales reflects a 22 percent volume increase driven by sales for the first nine months of 2011 from our acquired National Starch operations, price/product mix improvement of 19 percent reflecting the pass through of higher raw material costs, and favorable currency translation of 1 percent due to stronger foreign currencies.  Organic sales growth in each of our segments was strong, driven mainly by improved product selling prices.  Organic volume was flat.  Co-product sales of approximately $1.12 billion for 2011 increased 43 percent from $781 million in 2010, driven by improved selling prices and increased volume.  Co-product sales from acquired operations for the first nine months of 2011 contributed approximately $66 million, or 8 percent, of the increase.

Net sales in North America increased 38 percent reflecting sales contributed by the acquired National Starch operations and organic growth.  Without sales from the acquired operations for the nine months ended September 30, 2011, net sales on a comparable basis in North America would have increased approximately 18 percent, reflecting price/product mix improvement of 17 percent and a 1 percent increase attributable to currency translation.  Volume in the segment was flat.  Net sales in South America increased 26 percent, driven by a 25 percent price/product mix improvement.  Favorable currency translation of 2 percent more than offset a 1 percent volume decline in the segment.  The volume decline primarily reflects cooler than normal weather conditions in Brazil which reduced demand for beer and soft drink products.  Additionally, our strategy to implement higher pricing contributed to the slight volume decline.  Asia Pacific net sales increased 76 percent, principally driven by sales contributed from acquired operations.  Without the acquired operations, Asia Pacific net sales, on a comparable basis, would have increased approximately 11 percent, reflecting price/product mix improvement of 11 percent and a 4 percent currency translation benefit associated with stronger foreign currencies, which more than offset an organic volume decline of 4 percent.  The impacts of a tsunami and

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flooding resulted in reduced demand for our products in the segment.  EMEA net sales more than doubled, largely due to sales contributed from acquired operations.  Without the acquired operations, EMEA net sales, on a comparable basis, would have increased approximately 20 percent, driven by price/product mix improvement.   Organic volume growth of 3 percent was offset by a 3 percent decline attributable to weaker foreign currencies in the segment.

Cost of Sales.  Cost of sales for 2011 increased 40 percent to $5.09 billion from $3.64 billion in 2010.  More than half of this increase reflects costs associated with sales of products from acquired operations for the first nine months of 2011.  The remainder of the increase was driven principally by higher corn costs and, to a lesser extent, currency translation.  Currency translation caused cost of sales for 2011 to increase approximately 2 percent from 2010, reflecting the impact of stronger foreign currencies.  Gross corn costs per ton for 2011 increased approximately 36 percent from 2010, driven by higher market prices for corn.  Our gross profit margin for 2011 was 18 percent, compared to 17 percent in 2010, reflecting the impact of the acquired National Starch operations and improved product selling prices.

Selling, General and Administrative Expenses.  SG&A expenses for 2011 increased to $543 million from $370 million in 2010.  This increase primarily reflects SG&A expenses of the acquired National Starch operations.  Additionally, higher compensation-related costs and stronger foreign currencies also contributed to the increase in SG&A expenses.  Currency translation caused operating expenses for 2011 to increase approximately 1 percent from 2010, reflecting the impact of stronger foreign currencies.  SG&A expenses for 2011 represented 9 percent of net sales, up from 8 percent in 2010.  Without integration and acquisition costs, SG&A expenses, as a percentage of net sales, would have been 8 percent in both 2011 and 2010.

Other Income-net.  Other income-net of $98 million for 2011 increased from other income-net of $10 million in 2010.  This increase primarily reflects the $58 million NAFTA award received from the Government of the United Mexican States in the first quarter of 2011 and a $30 million gain associated with a fourth quarter 2011 postretirement benefit plan change.

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

Operating income for 2011 increased to $671 million from $339 million in 2010.  Operating income for 2011 included the $58 million NAFTA award, a $30 million gain from a change in a postretirement plan, $31 million of costs pertaining to the integration of National Starch and a $10 million restructuring charge to reduce the carrying value of certain equipment in connection with our North American manufacturing optimization plan.  Operating income for 2010 included acquisition-related costs of $35 million, impairment/restructuring charges of $25 million and the flow through of $27 million of costs associated with acquired National Starch inventory that was marked up to fair value at the

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acquisition date in accordance with business combination accounting rules.  Without the NAFTA award, the gain from the change in the postretirement benefit plan and the integration and restructuring costs in 2011 and the impairment, restructuring, inventory mark-up charge and acquisition-related costs in 2010, operating income for 2011 would have increased 46 percent over the prior year, as earnings grew in each of our segments.  This increase was driven by earnings contributed during the first nine months of 2011 from the acquired National Starch operations and, to a lesser extent, organic earnings growth in each of our segments principally driven by improved product pricing.  Currency translation associated with stronger foreign currencies caused operating income to increase by approximately $4 million from 2010.  North America operating income increased 30 percent to $322 million from $249 million in 2010.  Approximately one-fourth of this growth was attributable to income for the first nine months of 2011 from acquired operations.  The remaining increase was primarily driven by higher product selling prices.  Currency translation associated with the stronger Canadian dollar caused operating income to increase by approximately $3 million in North America.  South America operating income increased 24 percent to $203 million from $163 million in 2010.  Higher product selling prices drove this earnings growth.  Asia Pacific operating income almost tripled to $79 million from $28 million in 2010, driven by earnings from acquired operations.  Without the earnings from acquired operations, operating income in the segment, on a comparable basis, would have grown approximately 5 percent from a year ago.  This increase primarily reflects higher product selling prices and favorable currency translation.  Stronger foreign currencies (particularly the Korean Won) caused operating income to increase by approximately $1 million in Asia Pacific.  EMEA operating income more than doubled to $84 million, from $37 million in 2010, due in large part to earnings from acquired operations.  Without the earnings from acquired operations, operating income, on a comparable basis, would have grown approximately 29 percent from a year ago, primarily driven by higher product selling prices and organic volume growth.

Financing Costs-net.  Financing costs-net increased to $78 million in 2011 from $64 million in 2010.  The year ago period included a $20 million charge for bridge loan financing fees related to the acquisition of National Starch.  Without this charge in 2010, financing costs for 2011 would have increased approximately 76 percent.  This increase primarily reflects interest expense on our higher average borrowings due to the National Starch acquisition.

Provision for Income Taxes.  Our effective tax rate was 28.7 percent in 2011, as compared to 36.1 percent in 2010.  Our effective income tax rate for 2011 included the benefit of the one-time recognition of tax free income related to the NAFTA award in pre-tax income, which lowered our effective income tax rate by 3.5 percentage points.  Our 2010 effective income tax rate included the impacts of the National Starch acquisition costs, the Chilean charges for impaired assets and other related costs, and an increase in the valuation allowance for Chile.  The 2011 impact of National Starch acquisition costs and changes to the Chilean valuation allowance were not material.  Without the impact of the items described above, our effective tax rates for 2011 and 2010 would have been approximately 32 percent and 33 percent, respectively.  See also Note 8 of the notes to the consolidated financial statements.

Net Income Attributable to Non-controlling Interests.  Net income attributable to non-controlling interests was $7 million in 2011, consistent with 2010.

Comprehensive Income.  We recorded comprehensive income of $193 million in 2011, as compared with $287 million in 2010.  The decrease primarily reflects unfavorable currency translation attributable to weaker foreign currencies and losses on cash flow hedges, which more than offset our net income growth.  The unfavorable variances in the currency translation adjustment reflect a weakening in end of period foreign currencies relative to the US dollar in 2011, as compared to a year ago when end of period foreign currencies had strengthened.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2012, our total assets were $5.59 billion, up from $5.32 billion at December 31, 2011.  This increase primarily reflects our larger cash and cash equivalents position and increased inventories, partially offset by translation effects associated with weaker end of period foreign currencies relative to the US dollar of approximately $28 million.  Total equity increased to $2.46 billion at December 31, 2012 from $2.13 billion at December 31, 2011, primarily reflecting our net income for 2012 and the exercise of stock options, partially offset by dividends on our common stock, an increase in our accumulated other

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comprehensive loss principally driven by actuarial losses on our postretirement benefit obligations and unfavorable foreign currency translation.

On October 22, 2012, we entered into a new five-year, senior unsecured $1 billion revolving credit agreement (the “Revolving Credit Agreement”).  The Revolving Credit Agreement replaced our previously existing $1 billion senior unsecured revolving credit facility.  We paid fees of approximately $3 million relating to the new credit facility, which are being amortized to interest expense over the term of the facility.

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.

At December 31, 2012, there were no borrowings outstanding under our $1 billion revolving credit facility.  In addition, we have a number of short-term credit facilities consisting of operating lines of credit.  At December 31, 2012, we had total debt outstanding of $1.80 billion, compared to $1.95 billion at December 31, 2011.  The debt includes $350 million (principal amount) of 3.2 percent notes due 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 $76 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, 2012, such guarantees aggregated $57 million.  Management believes that such consolidated subsidiaries will meet their financial obligations as they become due.

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 $503 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 4.5 percent and 4.8 percent for 2012 and 2011, respectively.

Net Cash Flows

A summary of operating cash flows is shown below:

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Cash provided by operations was $732 million in 2012, as compared with $300 million in 2011.  The increase in operating cash flow for 2012 primarily reflects improved working capital management.  The improvement in working capital was driven principally by improved accounts receivable collections and inventory management, and an increase in accounts payable.  Our margin accounts relating to commodity hedging contracts were relatively unchanged.  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 or be entitled to receive, cash deposits for margin calls depending on the movement in the market price for corn.

Listed below are our primary investing and financing activities for 2012:

On September 20, 2012, we sold $300 million of 1.80 percent Senior Notes due September 25, 2017 (the “Notes”).  The Notes rank equally with our other senior unsecured debt.  Interest on the Notes is required to be paid semi-annually on March 25th and September 25th, beginning in March 2013.  We have the option to prepay the Notes at 100 percent of the principal amount plus interest up to the prepayment date and, in certain circumstances, a make-whole amount.  The net proceeds from the sale of the Notes of approximately $297 million were used to repay $205 million of borrowings under our previously existing $1 billion revolving credit facility (see discussion above) and for general corporate purposes.  We paid debt issuance costs of approximately $2 million relating to the Notes, which are being amortized to interest expense over the life of the Notes.

On December 14, 2012, our board of directors declared a quarterly cash dividend of $0.26 per share of common stock.  This dividend was paid on January 25, 2013 to stockholders of record at the close of business on December 31, 2012.

We currently anticipate that capital expenditures for 2013 will be in the range of $350 million to $400 million.

We currently expect that our 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 strategies 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 planned to be permanently reinvested.  Approximately $296 million of our cash and cash equivalents as of December 31, 2012 is held by our operations outside of the United States.  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 cash needs for the foreseeable future. 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.

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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:

We use derivatives to manage price risk related to purchases of corn and natural gas 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 eighteen 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.  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, 2012, our accumulated other comprehensive loss account (“AOCI”) included $7 million of losses, net of tax of $4 million, related to these derivative instruments.  It is anticipated that approximately $3 million of these losses, net of tax of $2 million, 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, 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 US dollars (USD) and to transactional foreign exchange risk when transactions not denominated in the functional currency of the operating unit are revalued.  We primarily use foreign currency forward contracts, swaps and options to selectively hedge our foreign currency transactional exposures.  We generally hedge these exposures up to twelve months forward.  At December 31, 2012, we had $268 million of foreign currency forward sales contracts and $167 million of foreign currency forward purchase contracts that hedged transactional exposures.  The fair value of these derivative instruments was approximately $5 million at December 31, 2012.

Interest Rate Risk:

We occasionally use interest rate swaps and Treasury Lock agreements (“T-Locks”) from time to time 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.  At December 31, 2012, we did not have any T-Locks outstanding.

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 a fixed rate (3.2 percent) 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 obligation attributable to changes in interest rates and account for them as fair value hedges.  The fair value of these interest rate swap agreements approximated $20 million at December 31, 2012 and is reflected in the Consolidated Balance Sheet within non-current assets, with an offsetting amount recorded in long-term debt to adjust the carrying amount of the hedged debt obligation.

At December 31, 2012, our accumulated other comprehensive loss account included $10 million of losses (net of tax of $6 million) related to settled Treasury Lock agreements.  These deferred losses are being amortized to financing costs

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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, 2012.  Information included in the table is cross-referenced to the notes to the consolidated financial statements elsewhere in this report, as applicable.

(in millions)

(a)         The purchase obligations relate principally to power supply agreements, including take or pay energy supply contracts, which help to provide us with an adequate power supply at certain of our facilities.

(b)         The above table does not reflect unrecognized income tax benefits of $37 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.

On January 20, 2006, Ingredion Brasil Ingredientes Industriais Ltda. (“Ingredion Brazil”) entered into a Natural Gas Purchase and Sale Agreement (the “Agreement”) with Companhia de Gas de Sao Paulo — Comgas (“Comgas”). Pursuant to the terms of the Agreement, Comgas supplies natural gas to the cogeneration facility at Ingredion Brazil’s Mogi Guacu plant.  This Agreement will expire on March 31, 2023, unless extended or terminated under certain conditions specified in the Agreement.  During the term of the Agreement, Ingredion Brazil is obligated to purchase from Comgas, and Comgas is obligated to provide to Ingredion Brazil, certain minimum quantities of natural gas that are specified in the Agreement.  The price for such quantities of natural gas is determined pursuant to a formula set forth in the Agreement.  The price may vary based upon gas commodity cost and transportation costs, which are adjusted annually; the distribution margin which is set by the Brazilian Commission of Public Energy Services; and the fluctuation of exchange rates between the US dollar and the Brazilian real.  We estimate that the total minimum expenditures by Ingredion Brazil through the remaining term of the Agreement will be approximately $195 million based on current exchange rates as of December 31, 2012 and estimates regarding the application of the formula set forth in the Agreement, spread evenly over the remaining term of the Agreement.  These amounts are included in the purchase obligations disclosed in the table above.  See also Note 10 of the notes to the consolidated financial statements for additional information.

We currently anticipate that in 2013 we will make cash contributions of $12 million and $14 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 is 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 2012 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 2012 and 2011 exclude the impacts of impairment and restructuring charges, the reversal of the Korea deferred tax asset valuation allowance, integration costs, and the NAFTA award.   Including these charges, the Company’s effective income tax rate for 2012 and 2011 were 27.8 percent and 28.7 percent, respectively.  Listed below is a schedule that reconciles our effective income tax rates under US GAAP to the adjusted income tax rates.