Table of Contents
Exhibit 99.1
ARAUCO AND CONSTITUTION PULP INC
TABLE OF CONTENTS
Table of Contents
CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Ratio Analysis of the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
1. | VALUATION OF ASSETS AND LIABILITIES |
The financial statements of Celulosa Arauco y Constitución S.A., a Chilean corporation (the “Company”) and its subsidiaries (the Company, together with its subsidiaries, “Arauco”) have been prepared on the basis of International Financial Reporting Standards (IFRS). In management’s opinion there is no material difference between the Company’s economic value and the valuation reflected in the Company’s financial statements.
2. | ANALYSIS OF FINANCIAL POSITION |
a) | Analysis of the Financial Statement |
The principal components of assets and liabilities as of June 30, 2011 and December 31, 2010 are as follows:
Assets | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||
Current assets | 3,187,099 | 3,152,116 | ||||||
Non-current assets | 9,650,670 | 9,354,216 | ||||||
Total assets | 12,837,769 | 12,506,332 | ||||||
Liabilities and Shareholders’ Equity | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||
Current liabilities | 1,259,095 | 1,209,061 | ||||||
Non-current liabilities | 4,462,564 | 4,456,696 | ||||||
Non –parent participation | 104,912 | 108,381 | ||||||
Net equity attributable to parent company Shareholders’ equity | 7,011,198 | 6,732,194 | ||||||
Total net equity and liabilities | 12,837,769 | 12,506,332 |
As of June 30, 2011, total assets increased by 2.65% or U.S.$ 331 million compared to December 31, 2010. This increase is mainly attributable to an increase in Trade and Account receivables and Property, Plant and Equipment.
Total liabilities increased by U.S.$ 56 million. This increase is mainly attributable to an increase in the category Commercial accounts and Other payables.
The main financial and operating ratios are as follows:
Liquidity ratios | 06/30/2011 | 12/31/2010 | ||||||
Current ratio | 2.53 | 2.61 | ||||||
Acid ratio | 1.62 | 1.72 | ||||||
Debt indicators | 06/30/2011 | 12/31/2010 | ||||||
Debt to equity ratio | 0.80 | 0.83 | ||||||
Short-term debt to total debt | 0.22 | 0.21 | ||||||
Long-term debt to total debt | 0.78 | 0.79 | ||||||
06/30/2011 | 06/30/2010 | |||||||
Financial expenses covered | 5.35 | 3.76 |
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Table of Contents
CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Ratio Analysis of the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
2. | ANALYSIS OF FINANCIAL POSITION,continued |
a) | Analysis of the Balance Sheet, continued |
Operational ratios | 06/30/2011 | 12/31/2010 | ||||||
Inventory turnover | 2.49 | 2.30 | ||||||
Inventory turnover (excluding biological assets) | 3.57 | 3.41 | ||||||
Inventory permanence-days | 144.44 | 156,84 | ||||||
Inventory permanence (excluding biological assets) | 100.86 | 105,55 |
The liquidity ratio and the acid test for the current period has decreased compared to the period 2010. This is due to an increase in current liabilities compared to the proportional increase in the variation of current assets, which in turn is explained by a decrease of Cash and cash equivalents and an increase of Other Non-Financial liabilities.
As of June 30, 2011, the short-term debt represented 22% of total liabilities compared to 21% as of December 31, 2010.
The ratio of financial expenses covered increased from 3.76 to 5.35. This increase is attributable to higher profits in the current period.
b) | Analysis of the Income Statement |
Profit before Income Tax
Profit before Income Tax registers a profit of U.S.$453 million in 2011 compared to U.S.$297 million in 2010, an increase of U.S.$156 million. The change was attributable to the factors described in the following table:
Item | Million U.S.$ | |||
Gross margin | 183 | |||
Other operating income | 41 | |||
Administration cost | (103 | ) | ||
Financial costs | (6 | ) | ||
Foreign currency exchange rate | 44 | |||
Others net | (3 | ) | ||
Net change in income before income tax | 156 |
Gross Margin presents a profit of U.S.$853 million in 2011, an increase of U.S.$183 million compared to U.S.$670 million in 2010, caused by a proportional increase in revenues due to an increase in sales price and volume.
The profit in the exchange rate difference is principally due to a depreciation of the dollar against the Chilean peso and the Euro, currencies in which the Company owns financial investments, tax receivables and other accounts receivables.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Ratio Analysis of the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
2. | ANALYSIS OF FINANCIAL POSITION,continued |
The main indicators related to result accounts and the details of revenues and operation costs are as follows:
Revenues | 06/30/2011 ThU.S$ | 06/30/2010 ThU.S$ | ||||||
Pulp | 1,139,575 | 814,667 | ||||||
Sawn timber | 363,085 | 274,661 | ||||||
Panels | 641,310 | 528,323 | ||||||
Forestry | 78,417 | 69,535 | ||||||
Other | 12,433 | 11,083 | ||||||
Total revenues | 2,234,820 | 1,698,269 | ||||||
Sales costs | 06/30/2011 ThU.S$ | 06/30/2010 ThU.S$ | ||||||
Wood | 367,054 | 264,763 | ||||||
Forestry work | 283,354 | 199,917 | ||||||
Depreciation | 107,432 | 84,112 | ||||||
Other costs | 623,824 | 479,155 | ||||||
Total sales costs | 1,381,664 | 1,027,947 | ||||||
Profitability index | 06/30/2011 | 12/31/2010 | ||||||
Profitability on equity | 10.31 | 10.60 | ||||||
Profitability on assets | 5.68 | 5.86 | ||||||
Return on operating assets | 7.29 | 7.04 | ||||||
Profitability ratios | 06/30/2011 | 06/30/2010 | ||||||
Income per share (U.S.$) (1) | 3.13 | 2.09 | ||||||
EBITDA( MThU.S.$) | 669,415 | 599,542 | ||||||
Income after tax (ThU.S.$) (2) | 359,599 | 237,277 | ||||||
Gross margin (ThU.S.$) | 853,156 | 670,322 | ||||||
Financial costs (ThU.S.$) | (104,095 | ) | (107,563 | ) |
(1) | Earnings per share refer to the profit to net equity to parent company. |
(2) | Includes interest. |
3. | DIFFERENCE BETWEEN ECONOMIC VALUES AND BOOK ASSETS |
Assets and liabilities are presented in the Financial Statements according to International Financial Reporting Standards and instructions issued by the Chilean Securities Commission.
We believe that there are no substantial differences between the economic value of our assets and the value reflected in these Financial Statements.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Ratio Analysis of the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
4. | MARKET SITUATION |
Pulp
The second quarter of 2011 showed fluctuations in the market trends; most of them were expected and obeyed to seasonal trends variations. April and May registered a strong demand and high prices. However, this stopped in June when price adjustments occurred across different markets, especially in the spot market. Additionally, producers began offering in non-active markets due to the downward tendency in prices and the lack of demand in their traditional markets. Another factor is that at current price levels, the world production capacity is operating at nearly 100%. Mills in North America and Europe that halted operations during 2008-2009 are nowadays producing back again. Generally, these are plants that do not have a stable or regular client portfolio, and are the first to suffer a low demand leading them to lower its price. This is particularly significant in North America where U.S. demand continues to stay low and with no signs of immediate future recovery. This has made Canadian pulp producers to concentrate its sales towards the Asian market, especially in China, Japan and Korea. Until June, 2011 Chinese pulp imports coming from Canada increased 100%.
The Chinese market began to show a lower demand as a consequence of the lower activity experienced during the summer. Further, the activity has been decreasing due to energy restrictions imposed to paper manufacturers in China . Although our demand and sales during the quarter in China were normal, we began to observe a downward adjustment in local pulp prices and sales at lower-than-market levels coming from some producers that during May-June had difficulties in closing their normal sales volumes in such market.
In the rest of Asia and Europe the situation was similar to that of China, however, in some of these markets the overcapacity in paper production continued to have an important impact over paper producer’s margins. In order to revert this situation, during this second quarter some important actions were undertaken, especially in Korea and Switzerland, such as the closure of paper mills which contributed to take out paper production from the market. In Europe the paper manufacturers anticipate a difficult scenario if production capacity does not adjust to demand, particularly in printing and writing paper markets. Likewise, Europe is facing slow activity, due to the summer season. Overall, positive results are expected but not until the last quarter of this year.
In line with the abovementioned, North America continues with rather low domestic demand and no major changes are expected in the near future.
Latin America continues with a very active and strong demand. In this market, prices remain stable and only a moderate adjustment is expected compared to other market. Such adjustment will result mainly as a consequence of world market trends and to avoid that spot pulp producers from North America make world prices fall significantly.
The plant production has been normal, however the billing quarter was affected by the strike in Lirquén port during the month of June. This strike affected the shipment capacity in containers and ship bulkers, having to postpone shipping and therefore invoicing. This situation will be normalized in the next few weeks.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Ratio Analysis of the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Sawn Timber
The real estate and construction markets in the United States still remained at low levels during the second quarter of 2011. In June 2011, the Housing Starts index reached 629,000 units per year. The current levels of construction remain to be low when compared to the average of last ten years.
During the second quarter of this year, there was a recovery in sale prices of moldings and sawn timber when compared to the last. This was the result of a higher demand seen in the market.
Additionally, during this quarter wood products continued to have a favorable demand in most markets, especially in Asia. This caused sale prices to increase in China, Korea, Japan and Taiwan.
Since June, 2011, wood and log stocks in China had been increasing. This might negatively affect sawn timber sales prices during the third quarter of this year.
Panels
At the end of the second quarter of this year, consolidated sales of the panel division showed an increase of 19.5% compared to the same quarter of 2010. Sales volume increased in the same period by 6%. Overall, during this quarter has showed a recovery in market prices together with an increase in sales volume.
Plywood sales volume climbed 31% driven by an increase in the shipments to Europe and Asia that came with important price recoveries. The U.S. market also experienced a strong increase in sales volume but the price levels remained more stable.
Sales volume of MDF products fell nearly 5% mainly due to a drop in the Brazilian and Chilean markets. Particleboard sales volume increased 5% mainly due to a higher demand in Argentina.
Our MDF molding segment decreased its sales volume during this second quarter, however, the average price increased near 5%. The MDF molding market remains very slow given the weak demand in the North American construction sector.
Our Hard Board business experienced a drop in sales volume of 11% mainly explained by a decreased in supply, together with a strong price increase which was near 20% compared to the same period last year. Overall, demand for our Hard Board products has continued to increase driven by a lower world supply of this product from competitors.
Currently a board plant is under construction (Particle Board of Medium density) in Teno,
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Ratio Analysis of the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Curicó Province, 7th Region of Maule. The plant will have a capacity of 985.0003 feet and an electric line of 154 Kv will be given to the plant from the electric station in Teno. Likewise, it will create additional value to its products through an impregnating paper plant and two rows of melamine which may cover up to 80% of the boards produced by the plant.
The project that already has all its environmental permits, will start operating the first quarter of 2012, and will imply an investment of US$120 million.
5. | ANALYSIS OF CASH FLOW |
The main components of net cash flow as of June 30, 2011 and 2010 are as follows:
06/30/2011 MUS$ | 06/30/2010 MUS$ | |||||||
Positive (negative) Cash flow | ||||||||
Cash flow from operating activities | 347,069 | 387,615 | ||||||
Cash flow from financing activities: | ||||||||
Loan and bond payments | (18,679 | ) | (170,869 | ) | ||||
Dividend payments | (196,354 | ) | (63,821 | ) | ||||
Others | 819 | 873 | ||||||
Cash flow from investment activities: | ||||||||
Purchase and sales of permanent investments | (35,738 | ) | (37,536 | ) | ||||
Incorporation and sale of property, plant and equipment | (261,756 | ) | (218,238 | ) | ||||
Incorporation and sale of biological assets | (62,884 | ) | (59,610 | ) | ||||
Loan to related companies | (91,630 | ) | 0 | |||||
Other | (5,531 | ) | (1,104 | ) | ||||
Net cash flow for the period | (324,683 | ) | (162,690 | ) |
We had a positive operating cash flow of U.S.$357 million in the current period compared to a positive balance of U.S.$388 million in 2010. This drop is mainly due to the payment of higher income taxes during the 2011 period.
Cash flow from financing activities as of June 30,2011 had a negative balance of U.S.$214 million compared to a negative balance of U.S.$234 million for the same period in 2010. This change resulted from less loan payments made in the year 2011, offset by higher dividend payments in 2011.
The investment cash flow decreased U.S. $468 million (U.S.$316 million in period 2010) at the end of the current period mainly due to an increase in capital contributions loans made to affiliated companies and payments for acquisition of property, plant and equipment.
6. | MARKET RISK ANALYSIS |
In respect of the economic risks resulting from interest rate variations, the Company maintains, as of June 30, 2011, a ratio of fixed rate debt to total consolidated debt of approximately 92.9%, which it believes is consistent with industry standards. The Company does not engage in futures against variations in the selling prices of pulp and forest products because it believes that risks resulting from price variations are limited, in large part because
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Ratio Analysis of the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
the Company maintains one of the lowest cost structures in the industry.
The Company and most of its subsidiaries maintain their accounting records and prepare their financial statements in U.S. dollars. Both the accounts receivable and most financial liabilities are denominated in U.S. dollars or are covered by an exchange rate swap, as well as most of their revenues. As a result, exposure to changes in the exchange rate has decreased significantly.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
CONSOLIDATED BALANCE SHEETS
Note | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||||||
Assets | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | 4 | 721,218 | 1,043,834 | |||||||||
Other financial current assets | 23 | 1,458 | 2,909 | |||||||||
Other current non-financial assets | 216,325 | 177,140 | ||||||||||
Trade and Other receivables-net | 23 | 947,980 | 774,289 | |||||||||
Related party receivables | 13 | 99,721 | 18,074 | |||||||||
Inventories | 3 | 820,842 | 727,535 | |||||||||
Biological assets, current | 20 | 324,900 | 344,096 | |||||||||
Tax receivables | 40,547 | 50,131 | ||||||||||
Total Current Assets other than assets or disposal groups classified as held for sale or as held for distribution to owners | 3,172,991 | 3,138,008 | ||||||||||
Non-Current Assets or disposal groups classified as held for sale | 22 | 14,108 | 14,108 | |||||||||
Non-Current Assets or disposal groups classified as held for sale or as held for distribution to owners | 14,108 | 14,108 | ||||||||||
Total Current Assets | 3,187,099 | 3,152,116 | ||||||||||
Other non-current financial assets | 23 | 60,288 | 53,407 | |||||||||
Other non-current and non-financial assets | 64,456 | 52,352 | ||||||||||
Trade receivables, non current | 23 | 10,164 | 11,965 | |||||||||
Investment in associates accounted for using equity method | 15 | 528,210 | 498,204 | |||||||||
Intangible assets | 19 | 17,756 | 11,127 | |||||||||
Goodwill | 70,461 | 66,231 | ||||||||||
Property, plant and equipment | 7 | 5,265,912 | 5,088,745 | |||||||||
Biological assets, non-current | 20 | 3,505,380 | 3,446,862 | |||||||||
Deferred tax assets | 6 | 128,043 | 125,323 | |||||||||
Total non-current assets | 9,650,670 | 9,354,216 | ||||||||||
Total Assets | 12,837,769 | 12,506,332 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
CONSOLIDATED BALANCE SHEETS (continued)
Note | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||||||
Liabilities | ||||||||||||
Current Liabilities | ||||||||||||
Other financial liabilities, current | 23 | 577,338 | 554,673 | |||||||||
Trade and Other payables | 23 | 413,617 | 362,182 | |||||||||
Related party payables | 13 | 14,448 | 9,209 | |||||||||
Other provisions, current | 18 | 7,479 | 5,842 | |||||||||
Tax liabilities | 45,001 | 62,887 | ||||||||||
Current provision for employee benefits | 10 | 3,478 | 3,312 | |||||||||
Other current financial liabilities | 25 | 197,734 | 210,956 | |||||||||
Total current liabilities other than liabilities included in disposal groups classified as held for sale | 1,259,095 | 1,209,061 | ||||||||||
Total Current Liabilities | 1,259,095 | 1,209,061 | ||||||||||
Non-Current Liabilities | ||||||||||||
Other non-current financial liabilities | 23 | 2,882,770 | 2,909,429 | |||||||||
Other non-current provisions | 18 | 9,385 | 7,609 | |||||||||
Deferred tax liabilities | 6 | 1,387,381 | 1,369,489 | |||||||||
Non-current provision for employee benefits | 10 | 37,887 | 35,964 | |||||||||
Other non-current financial liabilities | 145,141 | 134,205 | ||||||||||
Total non-current liabilities | 4,462,564 | 4,456,696 | ||||||||||
Total liabilities | 5,721,659 | 5,665,757 | ||||||||||
Net Equity | ||||||||||||
Issued capital stock | 353,176 | 353,176 | ||||||||||
Accumulated earnings | 6,532,928 | 6,320,264 | ||||||||||
Other reserves | 125,094 | 58,754 | ||||||||||
Net equity attributable to parent company | 7,011,198 | 6,732,194 | ||||||||||
Non-controlling interest | 104,912 | 108,381 | ||||||||||
Total net equity | 7,116,110 | 6,840,575 | ||||||||||
Total net equity and liabilities | 12,837,769 | 12,506,332 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Consolidated Financial Income Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
CONSOLIDATED STATEMENTS OF INCOME
Note | January-June | April - June | ||||||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||||||
Income Statement | ||||||||||||||||||||
Revenue | 9 | 2,234,820 | 1,698,269 | 1,187,771 | 913,389 | |||||||||||||||
Cost of sales | (1,381,664 | ) | (1,027,947 | ) | (738,035 | ) | (536,126 | ) | ||||||||||||
Gross Income | 853,156 | 670,322 | 449,736 | 377,263 | ||||||||||||||||
Other operating income | 2 | 137,524 | 96,518 | 72.949 | 61.207 | |||||||||||||||
Distribution costs | 2 | (229,783 | ) | (167,806 | ) | (118,551 | ) | (89,939 | ) | |||||||||||
Administrative expenses | 2 | (192,815 | ) | (152,071 | ) | (107,778 | ) | (75,796 | ) | |||||||||||
Other operating expenses | 2 | (31,521 | ) | (25,683 | ) | (18,546 | ) | 12,776 | ||||||||||||
Other income (loss) | (1 | ) | 275 | 68 | 367 | |||||||||||||||
Financial income | 11,406 | 10,728 | 4,120 | 2,144 | ||||||||||||||||
Financial costs | 2 | (104,095 | ) | (107,563 | ) | (52,520 | ) | (57,628 | ) | |||||||||||
Participation in (loss) income in associates and joint ventures accounted through equity method | 15 | (8,277 | ) | (2,119 | ) | (4,381 | ) | (615 | ) | |||||||||||
Exchange rate differences | 17,656 | (25,990 | ) | 4,490 | (8,407 | ) | ||||||||||||||
Income before income tax | 453,250 | 296,611 | 229,587 | 221,372 | ||||||||||||||||
Income tax | 6 | (93,651 | ) | (59,334 | ) | (46,491 | ) | (46,623 | ) | |||||||||||
Income from continuing operations | 359,599 | 237,277 | 183,096 | 174.749 | ||||||||||||||||
Net Income | 359,599 | 237,277 | 183,096 | 174,749 | ||||||||||||||||
Income attributable to equity holders | ||||||||||||||||||||
Income attributable to parent company | 354,065 | 236,529 | 181,578 | 174,073 | ||||||||||||||||
Income attributable to non-parent company | 5,534 | 748 | 1,518 | 676 | ||||||||||||||||
Net Income | 359,599 | 237,277 | 183,096 | 174,749 | ||||||||||||||||
Basic earnings per share | ||||||||||||||||||||
Earnings per share from continuing operations | 0.0031291 | 0.0020904 | 0.0016047 | 0.0015384 | ||||||||||||||||
0.0031291 | 0.0020904 | 0.0016047 | 0.0015384 | |||||||||||||||||
Earnings per diluted shares | ||||||||||||||||||||
Earnings per diluted share from continuing operations | 0.0031291 | 0.0020904 | 0.0016047 | 0.0015384 | ||||||||||||||||
Basic earnings per diluted share | 0.0031219 | 0.0020904 | 0.0016047 | 0.0015384 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Consolidated Financial Income Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
COMPREHENSIVE INCOME STATEMENTS
Note | January-June | April- June | ||||||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||||||
Net Income | 359,599 | 237,277 | 183,096 | 174,749 | ||||||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||||||
Exchange difference on conversion | ||||||||||||||||||||
Gain (loss) for exchange differences, before tax | 11 | 73,162 | (30,719 | ) | 48,827 | (11,251 | ) | |||||||||||||
Cash flow hedges | ||||||||||||||||||||
Gain (loss) for cash flow hedges, before tax | (4,183 | ) | (1,896 | ) | 110 | (8,405 | ) | |||||||||||||
Participation in Other comprehensive income in associates and joint ventures accounted for using equity method | (334 | ) | 41 | 380 | 137 | |||||||||||||||
Other comprehensive income, net of tax | 68,645 | (32,574 | ) | 49,317 | (19,519 | ) | ||||||||||||||
Comprehensive income statement | ||||||||||||||||||||
Income tax related to Other comprehensive income | ||||||||||||||||||||
Income tax related to Cash flow hedges on Other comprehensive income | 1,043 | 322 | 588 | 1,428 | ||||||||||||||||
Other comprehensive income | 69,688 | (32,252 | ) | 49,905 | (18,091 | ) | ||||||||||||||
Total comprehensive income | 429,287 | 205,025 | 233,001 | 156,658 | ||||||||||||||||
Comprehensive Income Statement attributable to: | ||||||||||||||||||||
Comprehensive income statement attributable to parent company | 420,405 | 206,057 | 229,274 | 156,616 | ||||||||||||||||
Comprehensive income statement attributable to controlling interest | 8,882 | (1,032 | ) | 3,727 | 42 | |||||||||||||||
Total comprehensive income | 429,287 | 205,025 | 233,001 | 156,658 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Consolidated Statement of Changes in Net Equity
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
CONSOLIDATED STATEMENTS OF CHANGES IN NET EQUITY
06/30/2011 | Share Capital ThU.S.$ | Conversion Reserves ThU.S.$ | Hedge Reserves ThU.S.$ | Other Reserves ThU.S.$ | Other Reserves Total ThU.S.$ | Accumulated Earnings ThU.S.$ | Equity attributable to Parent Company ThU.S.$ | Non-controlling interest ThU.S.$ | Equity Total ThU.S.$ | |||||||||||||||||||||||||||||
Opening balance at 01/01/2011 | 353,176 | 72,699 | (14,079 | ) | 134 | 58,754 | 6,320,264 | 6,732,194 | 108,381 | 6,840,575 | ||||||||||||||||||||||||||||
Changes in equity | ||||||||||||||||||||||||||||||||||||||
Comprehensive income statement | ||||||||||||||||||||||||||||||||||||||
Net income | 0 | 0 | 0 | 0 | 0 | 354,065 | 354,065 | 5,534 | 359,599 | |||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 0 | 69,814 | (3,140 | ) | (334 | ) | 66,340 | 0 | 66,340 | 3,348 | 69,688 | |||||||||||||||||||||||||||
Comprehensive income | 0 | 69,814 | (3,140 | ) | (334 | ) | 66.340 | 354,065 | 420,405 | 8,882 | 429,287 | |||||||||||||||||||||||||||
Dividends | 0 | 0 | 0 | 0 | 0 | (141,401 | ) | (141,401 | ) | 0 | (141,401 | ) | ||||||||||||||||||||||||||
Increase (decrease) for transfer and other changes | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (12,351 | ) | (12,351 | ) | |||||||||||||||||||||||||||
Total Changes in equity | 0 | 69,814 | (3,140 | ) | (334 | ) | 66,340 | 212,664 | 279,004 | (3,469 | ) | 275,535 | ||||||||||||||||||||||||||
Closing balance at 06/30/2011 | 353,176 | 142,513 | (17,219 | ) | (200 | ) | 125,094 | 6,532,928 | 7,011,198 | 104,912 | 7,116,110 | |||||||||||||||||||||||||||
06/30/2011 | Share Capital ThU.S.$ | Conversion Reserves ThU.S.$ | Hedge Reserves ThU.S.$ | Other Reserves ThU.S.$ | Other Reserves Total ThU.S.$ | Accumulated Earnings ThU.S.$ | Equity attributable to Parent Company ThU.S.$ | Non-controlling interest ThU.S.$ | Equity Total ThU.S.$ | |||||||||||||||||||||||||||||
Opening balance at 01/01/2011 | 353,176 | 27,551 | (4,820 | ) | (1,113 | ) | 21,618 | 5,893,799 | 6,268,593 | 113,840 | 6,382,433 | |||||||||||||||||||||||||||
Changes in equity | ||||||||||||||||||||||||||||||||||||||
Comprehensive income statement | ||||||||||||||||||||||||||||||||||||||
Net income | 0 | 0 | 0 | 0 | 0 | 236,529 | 236,529 | 748 | 237,277 | |||||||||||||||||||||||||||||
Other comprehensive income, net of tax | 0 | (28,939 | ) | (1,574 | ) | 41 | (30,472 | ) | 0 | (30,472 | ) | (1,780 | ) | (32,252 | ) | |||||||||||||||||||||||
Comprehensive income | 0 | (28,939 | ) | (1,574 | ) | 41 | (30,472 | ) | 236,529 | 206,057 | (1,032 | ) | 205,025 | |||||||||||||||||||||||||
Dividends | 0 | 0 | 0 | 0 | 0 | (97,218 | ) | (97,218 | ) | 0 | (97,218 | ) | ||||||||||||||||||||||||||
Increase (decrease) for transfer and other changes | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (10,622 | ) | (10,622 | ) | |||||||||||||||||||||||||||
Total Changes in equity | 0 | (28,939 | ) | (1,574 | ) | 41 | (30,472 | ) | 139,311 | 108,839 | (11,654 | ) | 97,185 | |||||||||||||||||||||||||
Closing balance at 06/30/2010 | 353,176 | (1,388 | ) | (6,394 | ) | (1,072 | ) | (8,854 | ) | 6,033,110 | 6,377,432 | 102,186 | 6,479,618 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Consolidated Statement of Cash Flows-Direct Method
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
CONSOLIDATED STATEMENTS OF CASH FLOWS-DIRECT METHOD
06/30/2011 ThU.S.$ | 06/30/2010 ThU.S.$ | |||||||
Cash Flows from (used in) Operating Activities | ||||||||
Classes of cash receipts from operating activities | ||||||||
Receipts from sales of goods and rendering of services | 2,274,344 | 1,793,038 | ||||||
2,048 | 0 | |||||||
Other cash receipts from operating activities | 126,606 | 73,254 | ||||||
Classes of cash payments | ||||||||
Payments to suppliers for goods and services | (1,743,628 | ) | (1,317,839 | ) | ||||
Payments to and behalf of employees | (152,130 | ) | (103,219 | ) | ||||
Other cash payments from operating activities | (3,878 | ) | (5,069 | ) | ||||
1,753 | 6,353 | |||||||
Interest paid | (92,230 | ) | (94,348 | ) | ||||
Interest received | 9,146 | 5,564 | ||||||
Income taxes refund (paid) | (74,623 | ) | 28,225 | |||||
Other (outflows) inflows of cash, net | (339 | ) | 1,656 | |||||
Net Cash flows from Operating Activities | 347,069 | 387,615 | ||||||
Cash flows from (used in) Investing Activities | ||||||||
Cash flows used to obtain control of subsidiaries or other businesses | 0 | (6,977 | ) | |||||
(779 | ) | 0 | ||||||
Other cash payments to acquire interests in joint ventures | (34,959 | ) | (30,559 | ) | ||||
Capital contributions to joint ventures | (91,630 | ) | 0 | |||||
Proceeds from sale of property, plant and equipment | 7,326 | 1,069 | ||||||
Purchase of property, plant and equipment | (269,082 | ) | (219,307 | ) | ||||
Purchase of intangible assets | (6,639 | ) | (150 | ) | ||||
Proceeds from other long-term assets | 3,073 | 490 | ||||||
Purchase of other long-term assets | (65,957 | ) | (60,100 | ) | ||||
Cash receipts from repayment of advances and loans made to other parties | 0 | 118 | ||||||
Other outflows of cash, net | 1,108 | (1,072 | ) | |||||
Cash flows used in Investing Activities | (457,539 | ) | (316,488 | ) | ||||
Cash flows from (used in) Financing Activities | ||||||||
0 | 26,640 | |||||||
Proceeds from short-term borrowings | 62,622 | 0 | ||||||
Repayments of borrowings | (81,300 | ) | (197,509 | ) | ||||
Dividends paid | (196,354 | ) | (63,821 | ) | ||||
Other inflows of cash, net | 819 | 873 | ||||||
Cash flows from (used in) Financing Activities | (214,213 | ) | (233,817 | ) | ||||
Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes | (324,683 | ) | (162,690 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,067 | (13,188 | ) | |||||
Net increase (decrease) of Cash and Cash equivalents | (322,616 | ) | (175,878 | ) | ||||
Cash and cash equivalents, at the beginning of the period | 1,043,834 | 534,199 | ||||||
Cash and cash equivalents, at the end of the period | 721,218 | 358,321 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 1. PRESENTATION OF FINANCIAL STATEMENTS (IAS 1)
Entity Information
Name of Reporting Entity
Celulosa Arauco y Constitución S.A. (Arauco), Tax No. 93,458,000-1, Closed Company, was registered in the Securities Registry (the “Registry”) of the Superintendency of Securities and Insurance (the “Superintendency”) as No. 042 on June 14, 1982. Forestal Cholguán S.A., a subsidiary of Arauco, is also registered on the Registry as No. 030. Arauco is controlled by Empresas Copec S.A., which owns 99.9779% of Arauco, and is registered in the Registry as No. 0028. Each of the above companies is subject to audit by the Superintendency.
The Company’s head office address is El Golf Avenue 150, floor 14, Las Condes, Santiago, Chile.
Celulosa Arauco y Constitución S.A. and subsidiaries (hereinafter “Arauco”) is principally engaged in the production and sale of forestry and wood products. Its main operations are focused on the following business areas: Pulp, Plywood and Fiberboard Panels, Sawn Timber and Forestry.
The current controllers of the Company are Mrs. Maria Noseda Zambra of Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through Inversiones Angelini y Cia. Ltda., which owns 63.4015% of the shares of AntarChile S.A., the controller of our parent company Empresas Copec S.A.
Arauco’s Interim Consolidated Financial Statements were prepared on a going concern basis.
Presentation of Financial Statements
The Financial Statements presented by Arauco cover the following periods:
• | Consolidated Balance Sheet as of June 30, 2011. |
• | Consolidated Statement of Income for the period ended June 30, 2011. |
• | Comprehensive Income Statement for the period ended June 30, 2011. |
• | Consolidated Statement of Changes in Net Equity for the period ended June 30, 2011. |
• | Consolidated Statement of Cash Flows – Direct Method for the period ended June 30, 2011. |
• | Disclosure of Explanatory Information (notes). |
Date of Approval of Financial Statements
The issuance of these interim consolidated financial statements for the period between January 1, 2011 and June 30, 2011 was approved by the Board of Directors of the Company (the “Board”) in Extraordinary Session No. 452 of August 23, 2011.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Functional and Reporting Currency
Arauco has defined the U.S. Dollar as its functional currency, as most of the Company’s operations are a result of exports, and its costs to a large extent are related to or index-linked to the U.S. Dollar.
For the pulp segment, most of the sales operations are exports, and the costs are related mainly to plantation costs, which are settled in U.S. Dollars.
For the sawmill and panel segments, although total sales include a mix of domestic sales and exports, the prices for the products are established in U.S. Dollars, as is also the case for the cost structure of the related raw materials.
Although the costs of labor and services are generally billed and paid in local currency, these costs are not as significant as the costs of raw materials and depreciation of equipment, which are driven mainly by global conditions and therefore, influenced mostly by the U.S. Dollar.
The financial information included herein is presented in thousands of U.S. Dollars without decimals.
Additional Information Relevant to the Understanding of the Financial Statements
The company Fondo de Inversión Bío Bío and its subsidiary Forestal Río Grande S.A. qualify as Special Purpose Entities. These entities are considered to be controlled by Arauco, which is determined, by the fact that they maintain exclusive contracts with Arauco for wood provision, forward purchase of land and forest administration. Consequently, the financial information of these companies is consolidated with the financial information of the Company and is included in these consolidated financial statements of Arauco.
Compliance and Adoption of IFRS
The accompanying consolidated financial statements of Arauco include the balance sheet, statements of income from operations and cash flows in accordance with IFRS.
This presentation is required to give a faithful representation of the effects of transactions, as well as other events and conditions, according to the definitions and criteria established within the conceptual framework of IFRS for the recognition of assets, liabilities, income and expenses.
IFRS Compliance Declaration
These interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standard Board (“IASB”), which have been adopted in Chile under the title “Financial Reporting Standards in Chile” (NIFCH) and represent the wholesale adoption, explicitly and without reservation, of IFRS.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Information on Objectives, Policies and Processes applied by the Company regarding Capital Management
Arauco’s policies on capital management have the objective of:
a) | Guaranteeing business continuity and normal operations in the long term; |
b) | Providing all financing needs for new investments to achieve sustainable growth over time; |
c) | Maintenance of an adequate capital structure considering all economic cycles that impact the business and the nature of the industry; and |
d) | Maximizing the Company’s value, as well as providing an adequate return to shareholders. |
Qualitative Information on Objectives, Policies and Processes applied by the Company regarding Capital Management
Arauco determines and manages its capital structure based on its equity at book value plus its financial liabilities (bank borrowings and bonds).
Quantitative Information on Capital Management
Financial guarantees of the Company are as follows:
Instrument | Amount at 06/30/2011 (ThU.S. $) | Amount at 12/31/2010 (ThU.S. $) | Interest Coverage >= 2.0x | Debt Level(1) <= 1.2x | Debt Level(2) <= 0.75x | |||||||||||||||
Local Bonds | 691,828 | 677,362 | N/A | ü | N/A | |||||||||||||||
Forestal Río Grande S.A. Loan | 86,788 | 104,144 | ü | (3 | ) | N/A | ü | (3 | ) | |||||||||||
Bilateral Bank Loan | 240,234 | 240,260 | ü | ü | N/A | |||||||||||||||
Other Loans | 53,396 | 53,152 | No Financial Covenants Required | |||||||||||||||||
Foreign Bonds | 2,379,599 | 2,374,258 | No Financial Covenants Required |
N/A: Not applicable for the instrument
(1) Debt Level (financial debt divided by: equity plus minority interest)
(2) Debt Level (financial debt divided by: total assets)
(3) Financial guarantees on credits taken by Forestal Río Grande S.A. only apply to financial statements of that company
As of June 30, 2011, Arauco has complied with all financial covenants.
Debt instruments ratings as of June 30, 2011 are as follows:
Instrument | Standard & Poor’s | Fitch Ratings | Moody’s | Feller Rate | ||||||||||||
Local Bonds | — | AA | — | AA | ||||||||||||
Foreign Bonds | BBB | BBB+ | Baa2 | — |
Capital requirements are established based on the Company’s financial needs and on maintaining an adequate liquidity level and complying with financial guarantees established in current debt contracts. The company manages its capital structure and makes adjustments based on the prevailing economic conditions in order to mitigate the risks associated with adverse market conditions, and based on opportunities that may arise to improve the Company’s level of liquidity.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Capital (in Thousands of U.S. Dollars) as of June 30 2011, and December 31, 2010, are as follow:
In ThU.S.$ | 06/30/2011 | 12/31/2010 | ||||||
Equity | 7,116,110 | 6,840,575 | ||||||
Bank Loans | 380,418 | 397,556 | ||||||
Financial Leases | 200 | 393 | ||||||
Bonds | 3,071,427 | 3,051,620 | ||||||
Capital | 10,568,155 | 10,290,144 |
The nature of external capital requirements is determined by the obligation to maintain certain financial ratios that ensure compliance with either bank loans or bond payments, which provide guidelines on the capital ranges required for compliance with these requirements. Arauco has fulfilled all its external requirements.
Arauco considers it unlikely that future uncertainty risks will result in any significant adjustment to the book value of assets and liabilities within the current financial period. In the case of the fair value of biological assets, no risks are foreseen in which the value of forests will change significantly. Notably, the data used to make the foregoing determination contemplates the long-term realization of such risks, and therefore the estimates provided are also relevant for the long term.
Summary of significant accounting policies
The accompanying interim consolidated financial statements as of June 30, 2011 were prepared in accordance with current IFRS accounting policies, uniformly applied to all items in these interim consolidated financial statements.
a) Basis for Presentation of financial statements
These interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standard Board (“IASB”), and represent the wholesale adoption, explicitly and without reservation of the mentioned international standards.
The interim consolidated financial statements have been prepared under the historic cost convention, as modified for the revaluation of biological assets, financial assets and financial liabilities (including derivative instruments) at fair value.
There have been some minor reclassifications to prior period financial statements, for presentation purposes.
b) Critical accounting estimates and judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to make subjective estimates and assumptions that affect the amounts reported. Estimates are based on historical experience and various other assumptions that are believed to be reasonable, though actual results and timing could differ from the estimates. Management believes that the accounting policies below take into account those matters that require the exercise of judgment, but acknowledge that different judgments could result in substantially different results.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
• | Property, Plant and Equipment |
Management prepared the corresponding valuations based on a report issued by a third party expert.
The carrying amounts of fixed assets are reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may be impaired. The recoverable amount of an asset is estimated as the higher of fair value less the cost to sell and the value in use, with an impairment charge being recognized whenever the carrying amount exceeds the recoverable amount. The value in use is calculated using a discounted cash flow model, which is most sensitive to the discount rate as well as the expected future cash inflows.
• | Fair Value of Financial Instruments |
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Arauco uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date.
• | Biological Assets |
The recovery of forest plantations is based on discounted cash flow models which mean that the fair value of biological assets is calculated using cash flows from continuing operations on a discounted basis, on our sustainable forest management plans and the estimated growth of forests. This recovery is performed on the basis of each stand identified and for each type of tree species.
These discounted cash flows require estimates in growth, harvest, sales prices and costs. It is therefore important that management make appropriate estimates of future levels and trends for sales and costs, as well as conduct regular surveys of the forests to establish the volumes of wood available for harvesting and their current growth rates. The main considerations used to calculate the valuation of forest plantations are presented in Note 20.
• | Lawsuits and Contingencies |
Arauco and its subsidiaries are subject to certain ongoing lawsuits. Future effects on Arauco’s financial condition resulting from these lawsuits are estimated by the management of the Company, in collaboration with its legal advisors. Arauco reserves appropriate contingency estimates on each balance sheet and/or upon each substantial modification to an underlying cause of any such litigation, which decisions are based on the reports of its legal advisors. Detailed lawsuits information is presented in Note 18.
c) Consolidation
The interim consolidated financial statements include all entities over which Arauco has the power to govern the financial and operating policies, which usually requires holding shares with more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Unrealized earnings from subsidiary operations have been eliminated from the interim consolidated financial statements and minority shareholder equity is recognized in the equity balance.
Interim consolidated financial statements for the period ended June 30, 2011 and 2010, include subsidiary balances shown in Note 13 and balances of the Fondo de Inversión Bío Bío, and its subsidiary Forestal Río Grande S.A., both of which qualify as Special Purpose Entities.
Certain consolidated subsidiaries report statutory financial statements in Brazilian Reales and Chilean Pesos, their main functional currencies. For consolidation purposes, they have been translated as indicated in Note 1 (e) (ii).
d) Segments
Arauco has defined its operating segments according to its business areas, which are defined by products and services sold to customers. This is consistent with the management, resource allocation and performance assessment made by key personnel responsible for making relevant decisions related to the Company’s operation. The Chief Executive Officer and Corporate Managing Directors of each segment are responsible for these decisions.
Detailed financial information by segment is presented in Note 24.
e) Functional currency
(i) Functional currency
Arauco’s entities are measured using the currency of the primary economic environment in which the Company operates (the functional currency). The interim consolidated financial statements are presented in U.S. Dollars, which is Arauco’s functional and presentation currency.
(ii) Foreign Currency Translations other than the Arauco’s functional currency – Subsidiaries and Associates
The income statements of subsidiaries, whose functional and presentational currencies are not the U.S. Dollar, are translated into the Arauco reporting currency (U.S. Dollars) using the average monthly exchange rates, whereas the balance sheets of such subsidiaries are translated using the exchange rates at the reporting date. Exchange differences arising from the translation of net investments in foreign entities are recorded directly in shareholders’ equity as Conversion reserves, as shown in the statement of changes in equity. The cumulative translation differences of divestments and liquidations are combined with their gain or loss on disposal.
(iii) Foreign Currency Transactions
Transactions in foreign currencies are recorded at the rate of exchange prevailing on the transaction date. Gains and losses on foreign currency resulting from the settlement of such transactions and from the conversion at the closing exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except those that match with the deferral in net equity, such as gains and losses derived from cash flow hedges.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
f) Cash and cash equivalents
Cash and cash equivalents include cash-in-hand, deposits held on call at banks and other liquid investments with an original maturity of less than three months.
g) Financial Instruments
(i) Financial assets-liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it was acquired principally for the purpose of selling in the short term.
Derivatives are also classified as acquired for trading unless they are designated as hedges. Assets in this category are classified as current assets and the obligation for these instruments is presented under Other Financial Liabilities within the Financial Statement.
Regular purchases and sales of financial assets are recognized on the trade-date, which is the date on which the Company commits to purchase or sell the asset.
The financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the income statement. They are subsequently recorded at fair value with the effect of the change in value recorded in income.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months from the balance sheet date, which are classified as non-current assets. Loans and receivables include trade receivables and other receivables.
Loans and receivables are initially recorded at fair value and subsequently at amortized cost according to the effective interest rate method. A provision of bad debts is recorded to reflect uncollectable amounts.
(iii) Financial liabilities valued at amortized cost
Loans, bond obligations and liabilities of a similar nature are recognized initially at fair value, net of transaction costs incurred. In subsequent periods, they are stated at amortized cost and any difference between proceeds (net of transaction costs), and redemption value is recognized in the income statement over the life of the debt according to the effective interest rate method.
Financial obligations are classified as current liabilities unless the Company has an unconditional right to defer settlement for at least 12 months after the balance sheet date.
(iv) Creditors and other payables
These instruments are initially recorded at fair value and subsequently at amortized cost using the effective interest rate method.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
(v) Hedging instruments
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the Comprehensive Income Statement. The gain or loss relating to the ineffective portion is recognized immediately in the Income Statement within Other Operating Income by activity or Operating Expenses by activity, respectively.
When a hedging instrument expires or is sold, or when it ceases to meet the criteria to be recognized through the hedge accounting treatment, any cumulative gain or loss in equity at that time recognized in the Income Statement. When a possible transaction is no longer expected to occur, the cumulative gain or loss in equity is immediately transferred to the Income Statement.
h) Inventories
Inventories are reported at the lower of cost or net realizable value. Cost is determined using the weighted average cost method.
The cost of finished goods and work in progress includes the cost of raw materials, direct labor, other direct costs and general manufacturing expenses, excluding interest expenses.
Initial costs of harvested wood are determined at fair value less cost of sale at the point of harvest.
Biological assets are transferred to inventories when forests are harvested.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
When market conditions result in the manufacturing costs of a product exceeding its net realizable value, a valuation allowance is made. This provision also includes obsolescence amounts resulting from slow moving inventories and technical obsolescence.
i) Assets held for sale
Non-current assets held for sale are measured at the lower of book and fair value, less costs for sale. Assets are classified in this line when the book value may be recovered through a sale transaction that is highly likely to be carried out. Management must be committed to a plan to sell the asset and should have initiated an active program to find a buyer and complete the plan. Likewise, management must also expect that the sale will be qualified for full recognition within one year following the date of its classification.
Non-current assets classified as held for sale are not depreciated.
j) Business Combinations
Business combinations are recognized using the purchase method. This involves recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
The goodwill acquired in a business combination is initially measured at the cost of the business combination less the interest of the company in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquisition. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of impairment testing, goodwill acquired in a business combination is allocated as of the acquisition date to the cash generating unit of the group or groups of cash generating units expected to benefit from the synergies of the combination without prejudice to whether other assets or liabilities of Arauco are assigned to those units or groups of units.
If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement as Other income (loss).
Arauco measures the fair value of the acquired company in the business combination on a step by step basis, recognizing the effects of variation in the income statement or comprehensive income statement in the period in which they occur, depending where the investment was classified.
Accounting policies for subsidiaries will be adjusted if necessary to ensure consistency with the policies adopted by Arauco. Non-controlling interest is presented as a separate component of equity.
k) Investments in associates
Associates are entities over which Arauco exercises significant influence but not control, generally holding between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and are initially recognized at cost. Their book net equity is increased or decreased proportionately in the profit or loss and comprehensive income statement of the period as a result of adjustments of conversion arising from the financial statement conversion into other currencies. Arauco’s investment in associates includes goodwill (net of any accumulated impairment loss).
If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement as Other income (loss).
l) Intangible assets
(i) Computer Software
Computer software programs are capitalized in terms of the costs incurred to make them compatible with specific programs. These costs are amortized over the estimated useful lives.
(ii) Rights
This item includes water-rights, right of way and other acquired rights recognized at historical cost and have an unlimited useful life as the expected cash flow generating period is unpredictable. These rights are not amortized as they are perpetual and will not require renewal, but are subject to annual impairment tests.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
m) Goodwill
The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. Goodwill is not amortized but is tested for impairment on annual basis.
n) Property, Plant and Equipment
Property, plant and equipment are stated at historical cost less depreciation and accumulated impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.
Asset depreciation is calculated by components using the straight-line method, considering any adjustments for impairment.
The useful life of property, plant and equipment is determined according to expected use of the assets.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, on an annual basis.
o) Leases
Fixed asset leases in which Arauco substantially holds all ownership risks and advantages are classified as Financial Leases. Financial leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.
Leases in which significant risks and rewards are not transferred to the lessee are classified as operating leases. Payments under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
p) Biological Assets
IAS 41 requires that biological assets, such as standing trees, are presented in the Balance Sheet at fair value. The forests are thus accounted for at fair value less estimated point-of sale costs at harvest, assuming that the fair value of these assets can be measured reliably.
The valuation of forest plantation assets is based on discounted cash flow models whereby the fair value of the biological assets is calculated using cash flows from continuous operations, which are discounted based on our sustainable forest management plans and the estimated growth of the forests. This valuation is performed on the basis of each identifiable farm block basis and for each type of tree.
Forest plantations shown as current assets are those that will be harvested and sold in the short term.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Biological growth and changes in fair value are recognized in the income statement within Other income by activity.
q) Deferred income tax
Deferred income tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not recognized if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable income. Deferred income tax is determined using tax rates (and laws) that have been enacted as of the balance sheet date that are expected to apply when the related deferred income tax asset or the deferred income tax liability is settled.
The deferred income tax assets are recognized to the extent that it is probable that future taxable benefits will be available.
r) Provisions
Provisions are recognized when the Company has a current legal or constructive obligation as a result of past events; it is probable that an outflow will be required to settle the obligation; and the amount has been reliably estimated. This amount is quantified and recognized with the best possible estimate at the end of each period.
s) Revenue recognition
Revenues are recognized after Arauco has transferred the risks and rewards of ownership to the buyer and Arauco retains neither a continuing right to dispose of the goods, nor effective control of those goods; this means that generally revenues are recorded upon delivery of goods to customers in accordance with agreed terms of delivery.
Segment revenues mentioned in Note 24 comply with the conditions indicated above.
Revenues from inter-segment sales (which are made at prices that approximate market prices) are eliminated in the consolidated financial statements.
t) Minimum dividend
Article No. 79 of the Private Limited Companies Law of Chile provides that, unless otherwise unanimously agreed or adopted by the shareholders, a dividend must be distributed annually in cash to shareholders in proportion to their shares or in the proportion established by the statutes for preferred shares, if any, in the amount of at least 30% of net income for the current year, except where necessary to absorb accumulated losses from prior years.
The General Shareholders’ Meeting of Arauco resolved to maintain annual dividends at 40% of net distributable income, including a provisional dividend share distribution at year-end. Dividends payable are recognized as a liability in the financial statements in the period they are declared and approved by the Company’s shareholders or when configuring the corresponding obligation on the basis of existing legislation or distribution policies established by the Shareholders’ Meeting.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
The interim and final dividends are recorded in equity upon their approval by the relevant groups, which include the Company’s Board and the shareholders.
The amount of these dividends is presented in this interim consolidated financial statement under Other non-current Financial Liabilities.
u) Impairment
Non-financial Assets
The carrying amounts of tangible and intangible assets are subject to impairment tests whenever some event or change in business circumstances indicates that the book value of assets may not be recoverable, whereas goodwill is tested annually. The recoverable amount of an asset is estimated as the higher of net selling price and value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.
A previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, however, not to an extent higher than the carrying amount that would have been determined and recognized in prior years. For goodwill, however, a recognized impairment loss is not reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
“Cash-generating units” are the smallest identifiable groups of assets whose use generates continuous funds largely independent of those produced by the use of other assets or groups of assets.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The distribution is made between cash-generating units or groups of cash generating units expected to benefit from the business combination that resulted in the goodwill.
Financial Assets
At the end of each period, an evaluation is performed in order to measure the existence of any objective evidence that assets or a group of financial assets have been adversely affected. Impairment effects will be recognized in the Consolidated Income Statement only if there is objective evidence that one or more events will occur after initial recognition of financial asset impairment and if these events will affect associated future cash flows.
The provision for doubtful trade receivables is established when there is objective evidence that Arauco will not receive payments under the original terms of sale. Provisions are made when the client is a party to a bankruptcy court agreement or cessation of payments, and are written-off when Arauco has exhausted all levels of recovery of debt in a reasonable time.
The impairment loss is measured as the difference between the book value of assets and the current value of estimated future cash flows. The asset value will be presented net of the loss recognized directly in income. If the impairment loss decreases in later periods, it is reversed either directly or by adjusting the provision for doubtful accounts, with effect in income.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
v) Employee Benefit Costs
The Company has severance payment obligations for voluntary cessation services. These are paid to certain workers that have more than 5 years seniority within the Company in accordance with conditions established within collective or individual contracts.
Actuarial gains and losses are recognized in income in the year they are incurred.
These obligations are treated as post-employment benefits in accordance with current standards.
w) Employee Vacations
Arauco recognizes the expense for employee vacation on an accrual basis and it is recorded at nominal value.
This obligation is presented in the Consolidated Balance Sheet in the line Trade and Other payables.
x) Joint Venture Equity
Joint venture equity is recognized using the equity method.
y) Recent accounting pronouncements
At the date of issuance of these interim consolidated financial statements, the following accounting pronouncements were issued by the IASB .
a) New standards, interpretations, amendments and improvements mandatory since January 1, 2011 which currently are not applicable or relevant to the Company.
Rules and interpretations | Content | Mandatory application date | ||
IAS 24 (reviewed) | Disclosure of related parties | January 1, 2011 | ||
IFRIC 19 | Extinguishing financial liabilities with equity instruments | January 1, 2010 | ||
Rules and amendments | Content | Mandatory application date | ||
IAS 32 | Classification for issuance rights | February 1, 2010 | ||
IFRIC 14 | Pre-payments of minimum funding requirement | January 1, 2011 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
b) New issued standards, interpretations and amendments not in effect for year 2011, for which there has been not been made any decision in advance.
Rules and interpretations | Content | Mandatory application date | ||
IAS 19 | Benefits to empleyees | January 1, 2013 | ||
IFRS 9 | Financial instruments | January 1. 2013 | ||
IFRS 10 | Consolidated financial statements | January 1,2013 | ||
IFRS 11 | Joint Agreement | January 1,2013 | ||
IFRS 12 | Disclosure of shareholdings in other entities | January 1,2013 | ||
IFRS 13 | Fair value measurement | January 1,2013 | ||
Rules and amendments | Content | Mandatory application date | ||
IAS 12 | Income tax | January 1, 2012 | ||
IFRS 7 | Disclosure of financial instruments | July 1, 2011 | ||
IAS 1 | Filing of financial statements |
Arauco believes that the adoption of standards, amendments and interpretations described above will have no significant impact on the financial statements of the Company in the period of initial application.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 2. DISCLOSURE OF OTHER INFORMATION
a) | Disclosure of Information on Capital Issued |
Subscribed and paid-in Capital amounts to ThU.S. $353,176.
100% of capital corresponds to ordinary shares.
06/30/2011 | 12/31/2010 | |||
Description of Ordinary Capital Share Types | 100% of Capital corresponds to ordinary shares | |||
Number of Authorized Shares by Type of Capital in Ordinary Shares | 113,152,446 | |||
Nominal Value of Shares by Type of Capital in Ordinary Shares | ThU.S.$ 0.0031211 per share | |||
Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital | ThU.S.$353,176 |
Rights, Privileges and Restrictions by Type of Capital in Ordinary Shares
Liabilities presented under Other Financial Liabilities current and non-current, have certain financial restrictions the Parent Company must comply with; otherwise, debt under these contracts can become payable.
Financial restrictions are the following:
i) | Debt ratio must not exceed 1.2 |
ii) | Interest hedging index cannot be less than 2.0 |
At closing date Arauco complied with the totality of these restrictions.
06/30/2011 | 12/31/2010 | |||
Number of Shares Issued and Completely Paid by Type of Capital in Ordinary Shares | 113,152,446 |
b) | Disclosure of information on Dividends paid to Ordinary Shares |
The interim dividend paid each year is equivalent to 20% of the distributable net income calculated as of the end of September of each year and presented in the Consolidated Statement of Changes in Net Equity.
Dividend paid each year corresponds to the spread between the 40% of net income distributable at the end of last year and the amount of interim dividend paid at the end of last fiscal year.
The ThUS$141,401 (ThUS$97,218 as of June, 2010) presented in Consolidated Statement of Changes in Net Equity corresponds to the provision of minimum dividend registered (see Note 25).
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Dividends paid during years 2011 and 2010 and the corresponding amount per share
Detail of Dividend Paid, Ordinary Shares | ||
Dividend Paid, Ordinary Shares | Final Dividend | |
Type of Shares for which there is a Dividend Paid, Ordinary Shares | Unlisted Ordinary Shares | |
Date of Dividend Paid, Ordinary Shares | 05-10-2011 | |
Amount of Dividend, Ordinary Shares, Gross | ThU.S.$ 182,770 | |
Number of Shares for which Dividends are Paid, Ordinary Shares | 113,152,446 | |
Dividend per Share, Ordinary Share | U.S.$ 1.61525 | |
Detail of Dividend Paid, Ordinary Shares | ||
Dividend Paid, Ordinary Shares | Provisional Dividend | |
Type of Shares for which there is a Dividend Paid, Ordinary Shares | Unlisted Ordinary Shares | |
Date of Dividend Paid, Ordinary Shares | 12-15-2010 | |
Amount of Dividend, Ordinary Shares, Gross | ThU.S.$ 182,770 | |
Number of Shares for which Dividends are Paid, Ordinary Shares | 113,152,446 | |
Dividend per Share, Ordinary Share | U.S.$ 0.7557 | |
Detail of Dividend Paid, Ordinary Shares | ||
Dividend Paid, Ordinary Shares | Final Dividend | |
Type of Shares for which there is a Dividend Paid, Ordinary Shares | Unlisted Ordinary Shares | |
Date of Dividend Paid, Ordinary Shares | 05-10-2010 | |
Amount of Dividend, Ordinary Shares, Gross | ThU.S.$ 56,758 | |
Number of Shares for which Dividends are Paid, Ordinary Shares | 113,152,446 | |
Dividend per Share, Ordinary Share | U.S.$ 0.50161 |
c) | Disclosure of Information on Reserves |
Other Reserves
Other reserves consist of Conversion Reserves, Hedge Reserves and Other Reserves.
Arauco does not have restrictions associated with these reserves.
Conversion Reserves
This corresponds to foreign currency translation of those Arauco’s subsidiaries that do not use the U.S. Dollar as their functional currency.
Hedge Reserves
This corresponds to Arauco’s portion of gains or swap net losses resulting from hedging as of the end of each fiscal year.
Other Reserves
This mainly corresponds to the value in Other comprehensive income of investment in associates.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
d) | Disclosures of other Information |
Below are balances of Other Income by activity, Other Expenses by activity, Financing Costs and Participation in income (loss) of associates and joint venture as of June 30, 2011 and 2010, respectively.
January - June | April - June | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
ThU.S.$ | ThU.S.$ | ThU.S.$ | ThU.S.$ | |||||||||||||
Classes of Other Income by activity | ||||||||||||||||
Other Operating Income, Total | 137,524 | 96,518 | 72,949 | 61,207 | ||||||||||||
Gain from changes in fair value of biological assets | 114,969 | 72,627 | 57,785 | 41,346 | ||||||||||||
Revenue from export promotion | 3,232 | 3,013 | 1,651 | 1,657 | ||||||||||||
Earthquake insurance net effect | 1,920 | 9,650 | 1,512 | 9,650 | ||||||||||||
Leases received | 1,695 | 1,228 | 884 | 557 | ||||||||||||
Gain on sales of fixed assets | 3,242 | 458 | 3,032 | 81 | ||||||||||||
Other operating results | 12,466 | 9,542 | 8,085 | 7,916 | ||||||||||||
Classes of Other Expenses by activity | ||||||||||||||||
Total of other expenses by activity | (31,521 | ) | (25,683 | ) | (18,546 | ) | 12,776 | |||||||||
Depreciations | (498 | ) | (1,294 | ) | (347 | ) | (550 | ) | ||||||||
Contingent provision | (2,977 | ) | (1,205 | ) | (2,137 | ) | (1,172 | ) | ||||||||
Assets provision | (616 | ) | (129 | ) | 18 | (13 | ) | |||||||||
Expenses due to downtime of processing plants | (3,804 | ) | (1,406 | ) | (2,849 | ) | (1,372 | ) | ||||||||
Fines, readjustments and interests | (503 | ) | (2,308 | ) | (396 | ) | (1,654 | ) | ||||||||
Loss of forest | (3,745 | ) | (6,514 | ) | (189 | ) | (6,514 | ) | ||||||||
Other taxes | (2,374 | ) | (2,392 | ) | (1,278 | ) | (1,153 | ) | ||||||||
Earthquake expenses | 0 | 0 | 0 | 27,328 | ||||||||||||
Research and development expenses | (1,588 | ) | (1,212 | )) | (924 | ) | (561 | ) | ||||||||
Compensation and eviction | (1,816 | ) | (539 | ) | (1,213 | ) | (539 | ) | ||||||||
Other expenses | (13,600 | ) | (8.684 | ) | (9,231 | ) | (1,024 | ) | ||||||||
Classes of Financing Costs | ||||||||||||||||
Financing Costs, Total | (104,095 | ) | (107,563 | ) | (52,520 | ) | (57,628 | ) | ||||||||
Interest costs | (91,728 | ) | (97,902 | ) | (47,307 | ) | (51,516 | ) | ||||||||
Bank loans and interest bearing bonds issued | (91,728 | ) | (97,902 | ) | (47,307 | ) | (51,516 | ) | ||||||||
Other financing costs | (12,367 | ) | (9,661 | ) | (5,213 | ) | (6,112 | ) | ||||||||
Classes of Participation in Income (Loss) of associates and joint venture accounted through Equity Method | ||||||||||||||||
Total | (8,277 | ) | (2,199 | ) | (4,381 | ) | (615 | ) | ||||||||
Investments in associates | (940 | ) | 283 | (1,109 | ) | 118 | ||||||||||
Joint ventures | (7,337 | ) | (2,402 | ) | (3,272 | ) | (733 | ) | ||||||||
Balance of Expenses by nature: | ||||||||||||||||
January - June | April - June | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Distribution expenses | ThU.S.$ | ThU.S.$ | ThU.S.$ | ThU.S.$ | ||||||||||||
Sale costs | 28,523 | 22,679 | 12,889 | 11,653 | ||||||||||||
Commissions | 7,873 | 4,567 | 4,414 | 1,731 | ||||||||||||
Insurances | 1,648 | 1,147 | 1,019 | 594 | ||||||||||||
Other sales expenses | 19,002 | 16,965 | 7,456 | 9,328 | ||||||||||||
Shipping and freight costs | 201,260 | 145,127 | 105,662 | 78,286 | ||||||||||||
Port services | 1,671 | 2,258 | 1,218 | 1,215 | ||||||||||||
Freights | 188,429 | 135,331 | 98,694 | 73,015 | ||||||||||||
Other shipping and freight costs | 11,160 | 7,538 | 5,750 | 4,056 | ||||||||||||
Total | 229,783 | 167,806 | 118,551 | 89,939 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
January - June | April - June | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Administration expenses | ThU.S.$ | ThU.S.$ | ThU.S.$ | ThU.S.$ | ||||||||||||
Wage and salaries | 79,640 | 64,917 | 43,698 | 34,571 | ||||||||||||
Marketing, advertising, promotion and publications expenses | 2,808 | 3,390 | 1,306 | 1,380 | ||||||||||||
Insurances | 7,084 | 4,303 | 4,887 | 2,108 | ||||||||||||
Depreciations and amortization not paid | 4,739 | 4,930 | 2,407 | 2,542 | ||||||||||||
Computer services | 5,003 | 5,090 | 1,361 | 3,465 | ||||||||||||
Office, warehouse and machinery leases | 5,879 | 4,002 | 3,344 | 1,633 | ||||||||||||
External audits | 1,527 | 2,351 | 742 | 1,099 | ||||||||||||
Donations, contributions, grants | 5,414 | 7,638 | 3,591 | 1,517 | ||||||||||||
Fees (advices technical, legal) | 17,320 | 13,318 | 7,183 | 4,816 | ||||||||||||
Property taxes, patents and municipal rights | 9,007 | 7,740 | 5,675 | 5,553 | ||||||||||||
Other administration expenses | 54,394 | 34,392 | 33,584 | 17,112 | ||||||||||||
Total | 192,815 | 152,071 | 107,778 | 75,796 |
2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Expenses for | Note | ThU.S.$ | ThU.S.$ | ThU.S.$ | ThU.S.$ | |||||||||||||||
Depreciations | 7 | 113,992 | 109,312 | 57,279 | 65,015 | |||||||||||||||
Employee benefits | 10 | 158,138 | 104,277 | 80,175 | 49,651 | |||||||||||||||
Amortization | 19 | 627 | 883 | 291 | 461 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 3. INVENTORIES (IAS 2)
Components of Inventory | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||
Raw Materials | 103,929 | 86,617 | ||||||
Production Supplies | 68,759 | 65,154 | ||||||
Work in progress | 48,972 | 62,612 | ||||||
Finished goods | 488,188 | 426,447 | ||||||
Parts | 110,854 | 86,532 | ||||||
Other Inventories | 140 | 173 | ||||||
Total Inventories | 820,842 | 727,535 |
As of June 30, 2011, a cost of sales of inventories amounted to ThU.S.$ 1,374,583 (ThU.S.$1,006,890 as of June 30, 2010).
As of June 30, 2011, a net increase in the provision for obsolescence effects of ThU.S.$1,086 was recognized (ThU.S.$324 as of December 31, 2010); therefore, the provision balance as of June 30, 2011 amounted to ThU.S.$8,286 (ThU.S.$7,200 as of December 31, 2010).
The inventories write-off amounted to ThU.S.$601 as of June 30, 2011.
As of the date of the issuance of these financial statements, no inventories have been pledged as collateral or guarantees.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 4. CASH FLOW STATEMENT (IAS 7)
Cash and cash equivalents includes cash flow, bank account balances, fixed term deposits, repurchase agreements and mutual funds. They are short-term investments that are readily convertible into cash, and are subject to an immaterial change in value.
The objective of fixed term deposits is to maximize earnings on short-term cash flow surpluses. This instrument is authorized by Arauco’s Investment Policy, which establishes a mandate that allows investments in fixed income securities. In general, these instruments have a maturity period of less than ninety days.
Arauco invests in local mutual funds to maximize the profitability of cash flow surpluses in Chilean Pesos, or in international mutual funds in foreign currencies such as U.S. Dollars or Euros. These instruments are acceptable under Arauco’s Investment Policy.
As of the date of these consolidated financial statements, there are no significant amounts of cash or cash equivalents that are freely available.
06/30/2011 | 12/31/2010 | |||||||
Components of Cash and Cash Equivalents | ThU.S.$ | ThU.S.$ | ||||||
Cash on hand | 409 | 263 | ||||||
Banks | 25,015 | 69,692 | ||||||
Short term deposit | 366,554 | 705,694 | ||||||
Mutual funds | 329,237 | 267,811 | ||||||
Other cash and cash equivalents | 3 | 374 | ||||||
Total | 721,218 | 1,043,834 |
The following tables detail the value of the cost of the investment in Dynea Brasil S.A. dated March 15, 2010, Savitar (see Note 14), and the net value of assets and liabilities of each acquired entity, discounting both the amount of cash and cash equivalents acquired in order to distinguish those cash flows from those that arise from other operating, investing or financing activities.
2010 Purchase of Investments | ThU.S.$ | |||
Acquisition: Dynea Brasil S.A. | ||||
Cash paid for acquisitions and cash equivalents | 15,000 | |||
Cash and cash equivalents held by acquired entities | (8,023 | ) | ||
Net cash paid to acquire entities | 6,977 |
ThU.S.$ | ||||
Net Assets less Cash and Cash equivalents of acquired entity | 22,613 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 5. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES (IAS 8)
Changes in Accounting Policies
These policies have been designed in accordance with IFRS in effect as of June 30, 2011 and applied uniformly to all items presented in these interim consolidated financial statements.
Changes in the Treatment of Accounting Policy
The financial statements as of June 30, 2011 do not show changes in accounting policies compared to the same period last year.
The consolidated financial statements of Arauco as of December 31, 2009 are the Group’s first annual financial statements prepared under International Financial Reporting Standards (IFRS). The Group’s previous financial statements were prepared according to Generally Accepted Accounting Principles in Chile.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 6. TAXES (IAS 12)
The tax rate applicable to the major companies in which Arauco participates is 17% in Chile, 35% in Argentina and 34% in Brazil.
Deferred Tax Assets
The following table details deferred tax assets:
Deferred Tax Assets | 06/30/2011 ThU.S. $ | 12/31/2010 ThU.S. $ | ||||||
Deferred Tax Assets related to Provisions | 5,468 | 4,658 | ||||||
Deferred Tax Assets related to accrued liabilities | 4,359 | 4,601 | ||||||
Deferred Tax Assets related to Post-Employment obligations | 6,993 | 6,616 | ||||||
Deferred Tax Assets related to Revaluation of Property, Plant and equipment | 1,095 | 2,339 | ||||||
Deferred Tax Assets related to Financial Instruments Restatements | 991 | 1,370 | ||||||
Deferred Tax Assets related to tax losses | 64,582 | 56,724 | ||||||
Valuation of biological assets | 7,221 | 8,805 | ||||||
Valuation of inventory | 4,453 | 9,034 | ||||||
Income provision | 3,274 | 2,765 | ||||||
Trade debtors and receivables | 3,221 | 3,940 | ||||||
Intangible revaluation differences | 26,194 | 24,370 | ||||||
Deferred Tax Assets related to Others | 192 | 101 | ||||||
Deferred Tax Assets Total | 128,043 | 125,323 |
As of the date of the present financial statement some of Arauco’s subsidiaries present tax losses of ThU.S.$240,050 (ThU.S.$260,701 as of March 31, 2010) which are mainly due to operational and financial losses.
Arauco believes that the projections of future earnings in subsidiaries that have generated tax losses will allow the recovery of these assets.
Deferred Tax Liability
Deferred tax liability corresponds to income tax amounts payable in future periods related to taxable temporary differences.
The following table details deferred tax liabilities:
Deferred Tax Liabilities | 06/30/2011 ThU.S. $ | 12/31/2010 ThU.S. $ | ||||||
Deferred Tax Liabilities related to Revaluated Property, Plant and equipment | 703,375 | 686,408 | ||||||
Deferred Tax Liabilities related to Financial Instrument restatement | 14,229 | 13,751 | ||||||
Valuation of biological asset | 524,288 | 511,401 | ||||||
Valuation of inventory | 15,957 | 12,450 | ||||||
Valuation of prepaid expenses Differences in valuation of deferred expenditures |
| 74,929 41,532 |
|
| 76,539 35,130 |
| ||
Deferred Tax Liabilities related to Others | 13,071 | 33,810 | ||||||
Deferred Tax Liabilities Total | 1,387,381 | 1,369,489 |
From the deferred tax assets and deferred tax liabilities listed in the above tables, approximately ThU.S.$15,235 and ThU.S.$158,787 respectively, will be used in a period of 12 months.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Arauco does not offset deferred tax assets and deferred tax liabilities since there is no legal right to offset amounts recognized in these items that correspond to different fiscal jurisdictions.
Temporary Differences
The following tables summarize current asset and liability timing differences:
06/30/2011 | 12/31/2010 | |||||||||||||||
Detail of Classes of Deferred Tax Temporary Differences | Deductible Difference ThU.S.$ | Taxable Difference ThU.S.$ | Deductible Difference ThU.S.$ | Taxable Difference ThU.S.$ | ||||||||||||
Deferred Tax Assets | 63,461 | 0 | 68,599 | 0 | ||||||||||||
Tax Loss | 64,582 | 0 | 56,724 | 0 | ||||||||||||
Deferred Tax Liabilities | 0 | 1,387,381 | 0 | 1,369,489 | ||||||||||||
Total | 128,043 | 1,387,381 | 125,323 | 1,369,489 |
Detail of Temporary Difference Income and Loss Amounts | January-June | April-June | ||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Deferred Tax Assets | (12,305 | ) | 1,170 | (2,964 | ) | 1,730 | ||||||||||
Tax Loss | 12,250 | 4,625 | 519 | (457 | ) | |||||||||||
Deferred Tax Liabilities | (1,544 | ) | (43,233 | ) | 9,717 | (14,686 | ) | |||||||||
Total | (1,599 | ) | (37,438 | ) | 7,272 | (13,413 | ) |
Income Tax Expense (Income)
Income Tax consists of the following:
Income tax composition | January-June | April-June | ||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Current income tax expense | (94,871 | ) | (27,164 | ) | (55,712 | ) | (34,470 | ) | ||||||||
Tax benefit arising from unrecognized tax assets previously used to reduce tax expense | 53 | 5,681 | 53 | 1,472 | ||||||||||||
Previous period current tax adjustments | 2,316 | (269 | ) | 1,367 | (86 | ) | ||||||||||
Other current tax expenses | 450 | (144 | ) | 529 | (126 | ) | ||||||||||
Current Tax Expense, Net | (92,052 | ) | (21,896 | ) | (53,763 | ) | (33,210 | ) | ||||||||
Deferred expense from taxes relative to the creation and reversion of temporary differences | (19,110 | ) | (42,063 | ) | 3,497 | (12,956 | ) | |||||||||
Deferred income from taxes relative to tax rate changes or new fees | 5,261 | 0 | 3,256 | 0 | ||||||||||||
Tax benefit arising from unrecognized tax assets previously used to reduce expenses due to deferred taxes | 12,250 | 4,625 | 519 | (457 | ) | |||||||||||
Total Deferred Tax Expense, Net | (1,599 | ) | (37,438 | ) | 7,272 | (13,413 | ) | |||||||||
Income Tax Expense, Total | (93,651 | ) | (59,334 | ) | (46,491 | ) | (46,623 | ) |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
The following table details the income tax for foreign and national companies as of June 30, 2011 and 2010 respectively:
January-June | April-June | |||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Foreign current tax | (28,414 | ) | (22,584 | ) | (15,435 | ) | (15,299 | ) | ||||||||
National current tax | (63,638 | ) | 688 | (38,328 | ) | (17,911 | ) | |||||||||
Current tax, Total | (92,052 | ) | (21,896 | ) | (53,763 | ) | (33,210 | ) | ||||||||
Foreign deferred tax | 9,002 | 8,935 | 6,427 | 4,259 | ||||||||||||
National deferred tax | (10,601 | ) | (46,373 | ) | 845 | (17,672 | ) | |||||||||
Deferred tax, Total | (1,599 | ) | (37,438 | ) | 7,272 | (13,413 | ) | |||||||||
Income (expense) due to Income Tax, Total | (93,651 | ) | (59,334 | ) | (46,491 | ) | (46,623 | ) |
Income Tax Expense Reconciliation using the Effective Rate method
Income tax expenditure reconciliation is as follows:
Reconciliation of Income tax from Statutory Rate to Effective Tax Rate | January-June | April- June | ||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Tax Expense Using Statutory Rate | (90,650 | ) | (50,424 | ) | (45,917 | ) | (37,484 | ) | ||||||||
Tax effect of rates in other jurisdictions | (6,172 | ) | (4,495 | ) | (695 | ) | (690 | ) | ||||||||
Tax effect of non taxable ordinary income | 6,649 | 6,954 | 2,267 | 6,365 | ||||||||||||
Tax effect of non tax deductible expenses | (8,090 | ) | (7,864 | ) | 84 | (7,122 | ) | |||||||||
Tax effect of tax loses unrecognized for previous periods | (314 | ) | 0 | (1,048 | ) | 0 | ||||||||||
Tax effect of tax rates changes | 5,234 | 0 | 2,723 | 0 | ||||||||||||
Tax effect of excess tax for previous periods | 2,316 | (269 | ) | 1,367 | (86 | ) | ||||||||||
Other Increases (Decreases) Legal Taxes | (2,624 | ) | (3,236 | ) | (5,272 | ) | (7,606 | ) | ||||||||
Adjustment to Tax Expense using the Statutory Rate, Total | (3,001 | ) | (8,910 | ) | (574 | ) | (9,139 | ) | ||||||||
Tax Expenses Using the Effective Rate | (93,651 | ) | (59,334 | ) | (46,491 | ) | (46,623 | ) |
The effect of deferred taxes related to financial hedging instruments corresponds to a credit (subscription) of ThU.S.$ 1,043 as of June 30, 2011 (ThU.S.$322 as of June 30, 2010), which presents net in Hedge reserves in the Statement of Changes in Net Equity.
On July 30, 2010 Law N. 20.455 for national reconstruction financing was published in the Chilean Official Gazette (Diario Oficial de Chile). One of the most important changes such law introduced was the increase in the First Category Taxes for revenues received and /or accrued during commercial years 2011 and 2012, with rates of 20% and 18.5%, respectively.
The effect on the change in tax rates caused an adjustment to the assets and liabilities accounts for deferred taxes, according to the profile projected for temporary reverse differences, in tax losses benefits and in other events that create differences between book and tax basis of assets and liabilities.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 7. PROPERTY, PLANT AND EQUIPMENT (IAS 16)
Properties, Plant and Equipment, Net | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||
Construction in progress | 568,427 | 562,309 | ||||||
Land | 840,195 | 821,288 | ||||||
Buildings | 1,446,437 | 1,417,684 | ||||||
Plant and equipment | 2,315,319 | 2,188,323 | ||||||
Information technology equipment | 16,411 | 16,963 | ||||||
Fixed facilities and accessories | 3,673 | 3,657 | ||||||
Motorized vehicles | 9,137 | 10,057 | ||||||
Others | 66,313 | 68,464 | ||||||
Total Net | 5,265,912 | 5,088,745 | ||||||
Properties, Plant and Equipment, Gross | ||||||||
Constructions in progress | 568,427 | 562,309 | ||||||
Land | 840,195 | 821,288 | ||||||
Buildings | 2,582,885 | 2,523,397 | ||||||
Plant and equipment | 4,323,094 | 4,180,142 | ||||||
Information technology equipment | 43,555 | 43,614 | ||||||
Fixed facilities and accessories | 17,602 | 17,339 | ||||||
Motorized vehicles | 31,596 | 32,328 | ||||||
Others | 105,247 | 110,076 | ||||||
Total Gross | 8,512,601 | 8,290,493 | ||||||
Accumulated depreciation and impairment | ||||||||
Buildings | (1,136,448 | ) | (1,105,713 | ) | ||||
Plant and equipment | (2,007,775 | ) | (1,991,819 | ) | ||||
Information technology equipment | (27,144 | ) | (26,651 | ) | ||||
Fixed facilities and accessories | (13,929 | ) | (13,682 | ) | ||||
Motorized vehicles | (22,459 | ) | (22,271 | ) | ||||
Others | (38,934 | ) | (41,612 | ) | ||||
Total | (3,246,689 | ) | (3,201,748 | ) |
Description of Property, Plant and Equipment Pledged as Guarantee
Regarding Forestal Río Grande S.A, an affiliate of Fondo de Inversión Bío Bío, a special purpose entity, we note that in October 2006, first and second degree mortgages were executed in favor of JPMorgan Chase Bank N.A. and Arauco, respectively, which prohibited the sale of any property currently belonging to the aforementioned special purpose entity, in order to ensure fulfillment of payments to Fondo de Inversión Bío Bío.
In September 2007, Forestal Río Grande S.A acquired real estate in Yungay, located in Chile’s Region VIII, for which the company executed a first mortgage with prohibition to sell and encumber in favor of, among others, JPMorgan. Similarly, a second mortgage with prohibition to sell and encumber was executed in favor of Arauco.
06/30/2011 ThU.S$ | 12/31/2010 ThU.S$ | |||||||
Collateral amount of property, plant and equipment | 56,813 | 56,272 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Commitments for project disbursements or for the acquisition of property, plant and equipment
06/30/2011 ThU.S$ | 12/31/2010 ThU.S$ | |||||||
Amount committed for the acquisition of property, plant and equipment | 137,310 | 268,391 |
06/30/2011 ThU.S$ | 12/31/2010 ThU.S$ | |||||||
Disbursements for property, plant and equipment under construction | 198,525 | 361,598 |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Movement on Property, Plant and Equipment
The following tables detail the movement of Property, Plant and Equipment as of June 30, 2011 and December 31, 2010:
Movement of Fixed Assets | Construction in Progress ThU.S.$ | Land ThU.S.$ | Buildings ThU.S.$ | Plant and equipments ThU.S.$ | IT Equipment ThU.S.$ | Fixed Facilities and Accessories ThU.S.$ | Motorized Vehicles ThU.S.$ | Other Property, Plant and Equipment ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Opening balance 01/01/2011 | 562,309 | 821,288 | 1,417,684 | 2,188,323 | 16,963 | 3,657 | 10,057 | 68,464 | 5,088,745 | |||||||||||||||||||||||||||
Changes | ||||||||||||||||||||||||||||||||||||
Additions | 259,734 | 1,654 | 1,708 | 2,674 | 12 | 102 | 307 | 5,384 | 271,575 | |||||||||||||||||||||||||||
Dispositions | 0 | (151 | ) | (485 | ) | (114 | ) | 0 | (9 | ) | (46 | ) | (1,665 | ) | (2,470 | ) | ||||||||||||||||||||
Withdrawals | (8,190 | ) | (39 | ) | (63 | ) | (1,084 | ) | (2 | ) | 0 | 0 | (6,478 | ) | (15,856 | ) | ||||||||||||||||||||
Depreciation costs | 0 | 0 | (36,042 | ) | (84,457 | ) | (977 | ) | (344 | ) | (1,271 | ) | (679 | ) | (123,770 | ) | ||||||||||||||||||||
Net movement of earthquake assets | (61,209 | ) | 0 | (1,254 | ) | 62,557 | 252 | (2 | ) | (344 | ) | 0 | 0 | |||||||||||||||||||||||
Exchange rate increase (decrease) of foreign currency | 3,397 | 16,764 | 5,611 | 20,533 | 0 | 1 | 250 | 1,132 | 47,688 | |||||||||||||||||||||||||||
Other increase/decrease | (187,614 | ) | 679 | 59,278 | 126,887 | 163 | 268 | 184 | 155 | 0 | ||||||||||||||||||||||||||
Total Changes | 6,118 | 18,907 | (28,753 | ) | (126,996 | ) | (552 | ) | 16 | (920 | ) | (2,151 | ) | 177,167 | ||||||||||||||||||||||
Closing balance 06/30/2011 | 568,427 | 840,195 | 1,446,437 | 2,315,319 | 16,411 | 3,673 | 9,137 | 66,313 | 5,265,912 |
Movement of Fixed Assets | Construction in Progress ThU.S.$ | Land ThU.S.$ | Buildings ThU.S.$ | Plant and equipments ThU.S.$ | IT Equipment ThU.S.$ | Fixed Facilities and Accessories ThU.S.$ | Motorized Vehicles ThU.S.$ | Other Property, Plant and Equipment ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Opening balance 01/01/2010 | 433,269 | 743,950 | 1,353,461 | 2,328,457 | 18,178 | 5,207 | 9,791 | 77,440 | 4,969,753 | |||||||||||||||||||||||||||
Changes | ||||||||||||||||||||||||||||||||||||
Additions | 361,598 | 81,610 | 18,463 | 14,086 | 186 | 234 | 2,265 | 4,758 | 483,200 | |||||||||||||||||||||||||||
Acquisitions of business | 216 | 660 | 4,244 | 21,420 | 0 | 0 | 14 | 1,137 | 27,691 | |||||||||||||||||||||||||||
Dispositions | (142 | ) | (14,107 | ) | (3,499 | ) | (3,132 | ) | (3 | ) | (1 | ) | (215 | ) | (4,375 | ) | (25,474 | ) | ||||||||||||||||||
Withdrawals | (1,024 | ) | (6 | ) | (1,020 | ) | (4,315 | ) | (11 | ) | (39 | ) | (2 | ) | (408 | ) | (6,825 | ) | ||||||||||||||||||
Depreciation costs | 0 | 0 | (68,237 | ) | (160,894 | ) | (1,966 | ) | (810 | ) | (1,892 | ) | (1,708 | ) | (235,507 | ) | ||||||||||||||||||||
Impairment loss recognized in the Income Statement | 0 | 0 | (24,198 | ) | (110,408 | ) | (63 | ) | 0 | (102 | ) | (9,341 | ) | (144,112 | ) | |||||||||||||||||||||
Exchange rate increase (decrease) of foreign currency | 1,394 | 9,350 | 3,902 | 19,986 | 2 | (1,395 | ) | 64 | 824 | 34,127 | ||||||||||||||||||||||||||
Reclassification of assets held for sale | 0 | (5,003 | ) | (5,877 | ) | (3,228 | ) | 0 | 0 | 0 | 0 | (14,108 | ) | |||||||||||||||||||||||
Other increase/decrease | (233,002 | ) | 4,834 | 140,445 | 86,351 | 640 | 461 | 134 | 137 | 0 | ||||||||||||||||||||||||||
Total Changes | 129,040 | 77,338 | 64,223 | (140,134 | ) | (1,215 | ) | (1,550 | ) | 266 | (8,976 | ) | 118,992 | |||||||||||||||||||||||
Closing balance 12/31/2010 | 562,309 | 821,288 | 1,417,684 | 2,188,323 | 16,963 | 3,657 | 10,057 | 68,464 | 5,088,745 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
The depreciation charged to income as of June 30, 2011 and 2010 is as follows:
Depreciation for the period | 2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | ||||||||||||
Cost of sale | 107,432 | 84,112 | 54,846 | 42,525 | ||||||||||||
Administration expenses | 4,082 | 4,841 | 2,086 | 2,875 | ||||||||||||
Other operating expenses(*) | 2,478 | 20,359 | 347 | 19,615 | ||||||||||||
Total | 113,992 | 109,312 | 57,279 | 65,015 |
(*) | The balance of 2010, refers to the cost of depreciation of plants detained product of the earthquake. |
The useful lives of property, plant and equipment according to expected use of the assets are as follows:
Minimum | Maximum | Average | ||||||||||||||
Buildings | Useful Life in Years | 16 | 89 | 39 | ||||||||||||
Plant and equipment | Useful Life in Years | 8 | 67 | 29 | ||||||||||||
Information technology equipment | Useful Life in Years | 6 | 18 | 5 | ||||||||||||
Fixed facilities and accessories | Useful Life in Years | 6 | 12 | 10 | ||||||||||||
Motorized vehicles | Useful Life in Years | 6 | 26 | 13 | ||||||||||||
Others properties, plants and equipment | �� | Useful Life in Years | 5 | 27 | 16 |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 8. LEASES (IAS 17)
When assets are leased under a financial lease, the current value of lease payments is treated as a receivable. The difference between the gross payment to be charged and the current value of said payment is shown as capital return.
Disclosure of Financial Leases Classified by Type of Asset, Leases
06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||
Property, Plant & Equipment Financial Leasing | 0 | 440 | ||||||
Plant and Equipment | 0 | 440 |
Reconciliation of Financial Lease Minimum Payments, Lessee
06/30/2011 | ||||||||||||
Minimum lease payments, lease payment obligations | Gross ThU.S.$ | Interest ThU.S.$ | Present Value ThU.S.$ | |||||||||
Due within one year | 191 | 4 | 187 | |||||||||
Due within one and five years | 13 | 0 | 13 | |||||||||
Due beyond five years | 0 | 0 | 0 | |||||||||
Total | 204 | 4 | 200 |
12/31/2010 | ||||||||||||
Financial Lease | Gross ThU.S.$ | Gross ThU.S.$ | Gross ThU.S.$ | |||||||||
Due within one year | 354 | 10 | 344 | |||||||||
Due within one and five years | 50 | 1 | 49 | |||||||||
Due beyond five years | 0 | 0 | 0 | |||||||||
Total | 404 | 11 | 393 |
Leasing obligations that accrue interest are presented in the Consolidated Balance Sheet under Other Financial Liabilities Current and Non-current depending on the maturities stated above.
Reconciliation of Financial Lease Minimum Payments, Lessor
06/30/2011 | ||||||||||||
Minimum Financial Lease Payments Receivable, Financial Lease | Gross ThU.S.$ | Interest ThU.S.$ | Present Value ThU.S.$ | |||||||||
Due within one year | 4,145 | 349 | 3,796 | |||||||||
Due within one and five years | 4,426 | 275 | 4,151 | |||||||||
Due beyond five years | 0 | 0 | 0 | |||||||||
Total | 8,571 | 624 | 7,947 |
12/31/2010 | ||||||||||||
Minimum Financial Lease Payments Receivable, Financial Lease | Gross ThU.S.$ | Interest ThU.S.$ | Present Value ThU.S.$ | |||||||||
Due within one year | 4,767 | 450 | 4,317 | |||||||||
Due within one and five years | 5,957 | 358 | 5,599 | |||||||||
Due beyond five years | 0 | 0 | 0 | |||||||||
Total | 10,724 | 808 | 9,916 |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Accounts receivable in leasing are presented in the Consolidated Balance Sheet under Trade and Other Receivables current and non-current depending on the maturities stated above.
Significant Financial Lease Agreements
Arauco holds financial leases as a lessor and lessee detailed within the previous tables, and therefore, there are no contingent payments or restrictions to note.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 9. ORDINARY REVENUE (IAS 18)
(a) | Policy on Revenue recognition from the Sale of Goods |
Revenue from the sale of goods is recognized when an Arauco entity has transferred to the buyer the significant risks and rewards of ownership, when the amount of revenue can be reliably measured, when Arauco cannot influence the management of the sold goods and when it is probable that the economic benefits associated with the transaction will flow to the entity.
Sales are recognized in terms of the arranged price stated in the sales contract, net of volume discounts and estimated refunds at the date of the sale. Volume discounts are evaluated in terms of estimated annual purchases. There is no significant financing component given that receivables for sales are collected within a low average time period, which is in line with market practices.
(b) | Policy on Revenue recognition from Rendering of Services |
Arauco mainly has electric power, port and pest control services whose incomes are derived from fixed price service contracts, generally recognized during the period of the service contract on a straight-line basis throughout the duration of the contract.
Classes of Ordinary Revenue | January-June | April-June | ||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Sale of goods | 2,167,255 | 1,659,257 | 1,150,029 | 888,038 | ||||||||||||
Service Contracts | 67,565 | 39,012 | 37,742 | 25,351 | ||||||||||||
Total | 2,234,820 | 1,698,269 | 1,187,771 | 913,389 |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 10. EMPLOYEE BENEFITS (IAS 19)
This refers to severance payment obligations for years of service due to termination of service contracts that arise from benefits stated in work contracts and/or as severance payments stated in the Labor Law.
This is an estimate of the years of service-based severance payments to be recognized as a future termination payment liability, in accordance with in force work contracts held with workers and pursuant to actuarial valuation criteria for this type of liability.
The main factors considered for calculating the actuarial value of severance payments for years of service are employee turnover, salary increases and life expectancy of the workers included in this benefit.
Classes of Benefits and Expenses by Employee
Classes of Benefits Expenses by Employee | January-June | April-June | ||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Personnel Expenses | 158.138 | 104,277 | 80,175 | 49.651 | ||||||||||||
Wages and salaries | 152,130 | 98,782 | 76,309 | 45,780 | ||||||||||||
Compensation for years of service | 6,008 | 5,495 | 3,866 | 3,871 |
The following tables detail the balances and the movement of payments for years of service provisioned as of June 30, 2011 and December 31, 2010:
06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||
Current | 3,478 | 3,312 | ||||||
Non-current | 37,887 | 35,964 | ||||||
Total | 41,365 | 39,276 |
Roll-forward | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||
Opening balance | 39,276 | 27,667 | ||||||
Current service cost | 958 | 1,851 | ||||||
Interest cost | 1,256 | 1,798 | ||||||
Actuarial gains | 3,603 | 11,256 | ||||||
Benefits paid | (3,644 | ) | (5,537 | ) | ||||
Increase for currency exchange | (84 | ) | 2,241 | |||||
Closing balance | 41,365 | 39,276 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 11. EFFECT OF FOREIGN CURRENCY RATE VARIATIONS (IAS 21)
Local and foreign currency
Currency assets and liabilities as of June 30, 2011 and December 31, 2010 are as follows:
06-30-2011 ThU.S.$ | 12-31-2010 ThU.S.$ | |||||||
Liquid Assets | 722,676 | 1,046,743 | ||||||
US Dollar | 116,875 | 516,201 | ||||||
Euro | 729 | 73,573 | ||||||
Other currencies | 78,175 | 48,511 | ||||||
$ not adjustable | 428,359 | 408,458 | ||||||
U.F. | 98,538 | 0 | ||||||
Cash and Cash Equivalents | 721,218 | 1,043,834 | ||||||
US Dollar | 115,417 | 513,292 | ||||||
Euro | 729 | 73,573 | ||||||
Other currencies | 78,175 | 48,511 | ||||||
$ not adjustable | 428,359 | 408,458 | ||||||
U.F. | 98,538 | 0 | ||||||
Other Financial Assets | 1,458 | 2,909 | ||||||
US Dollar | 1,458 | 2,909 | ||||||
Accounts Receivable in short and long term | ||||||||
Accounts Receivable in short and long term | 1,057,865 | 804,328 | ||||||
US Dollar | 592,922 | 533,046 | ||||||
Euro | 80,028 | 31,651 | ||||||
Other currencies | 139,040 | 94,392 | ||||||
$ not adjustable | 236,648 | 136,889 | ||||||
U.F. | 9,227 | 8,350 | ||||||
Trades and Current Accounts Receivable | 947,980 | 774,289 | ||||||
US Dollar | 546,380 | 528,657 | ||||||
Euro | 30,749 | 31,651 | ||||||
Other currencies | 137,888 | 93,075 | ||||||
$ not adjustable | 228,996 | 115,338 | ||||||
U.F. | 3,967 | 5,568 | ||||||
Trades and Non-Current Accounts Receivable | 10,164 | 11,965 | ||||||
US Dollar | 1,148 | 4,389 | ||||||
Euro | 0 | 0 | ||||||
Other currencies | 117 | 205 | ||||||
$ not adjustable | 3,639 | 4,589 | ||||||
U.F. | 5,260 | 2,782 | ||||||
Accounts Receivable from related parties, current | 99,721 | 18,074 | ||||||
US Dollar | 45,394 | 0 | ||||||
Euro | 49,279 | 0 | ||||||
Other currencies | 1,035 | 1,112 | ||||||
$ not adjustable | 4,013 | 16,962 | ||||||
Other Assets | 11,057,228 | 10,655,261 | ||||||
US Dollar | 10,793,372 | 10,276,275 | ||||||
Euro | 1,463 | 458 | ||||||
Other currencies | 101,452 | 142,569 | ||||||
$ not adjustable | 125,428 | 214,370 | ||||||
U.F. | 35,513 | 21,589 | ||||||
Total Assets | 12,837,769 | 12,506,332 | ||||||
US Dollar | 115,503,169 | 11,325,522 | ||||||
Euro | 82,220 | 105,682 | ||||||
Other currencies | 318,667 | 285,472 | ||||||
$ not adjustable | 790,435 | 759,717 | ||||||
U.F. | 143,278 | 29,939 |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Local and foreign currency, continued
06-30-2011 | 12-31-2010 | |||||||||||||||
Up to 90 days ThU.S.$ | From 91 days to 1 year ThU.S.$ | Up to 90 days ThU.S.$ | From 91 days to 1 year ThU.S.$ | |||||||||||||
Total Liabilities, current | 1,181,233 | 77,862 | 763,439 | 445,622 | ||||||||||||
US Dollar | 718,831 | 75,026 | 654,148 | 440,318 | ||||||||||||
Euro | 5,071 | 0 | 5,105 | 0 | ||||||||||||
Other currencies | 182.156 | 119 | 48,019 | 2,501 | ||||||||||||
$ not adjustable | 268,963 | 0 | 49,809 | 0 | ||||||||||||
U.F. | 6,212 | 2,717 | 6,358 | 2,803 | ||||||||||||
Other Financial Liabilities, current | 499,476 | 77,862 | 109,051 | 445,622 | ||||||||||||
US Dollar | 480,095 | 75,026 | 95,871 | 440,318 | ||||||||||||
Other currencies | 16,098 | 119 | 9,980 | 2,501 | ||||||||||||
U.F. | 3,283 | 2,717 | 3,200 | 2,803 | ||||||||||||
Bank loans | 58,149 | 70,094 | 50,602 | 52,214 | ||||||||||||
US Dollar | 42,051 | 69,975 | 40,622 | 49,713 | ||||||||||||
Other currencies | 16,098 | 119 | 9,980 | 2,501 | ||||||||||||
Financial leases | 74 | 113 | 94 | 250 | ||||||||||||
U.F. | 74 | 113 | 94 | 250 | ||||||||||||
Other loans | 441,253 | 7,655 | 58,355 | 393,158 | ||||||||||||
US Dollar | 438,044 | 5,051 | 55,249 | 390,605 | ||||||||||||
U.F. | 3,209 | 2,604 | 3,106 | 2,553 | ||||||||||||
Other Financial Liabilities, current | 681.757 | 0 | 654,388 | 0 | ||||||||||||
US Dollar | 238,736 | 0 | 558,277 | 0 | ||||||||||||
Euro | 5,071 | 0 | 5,105 | 0 | ||||||||||||
Other currencies | 166,058 | 0 | 38,039 | 0 | ||||||||||||
$ not adjustable | 268,963 | 0 | 49,809 | 0 | ||||||||||||
U.F. | 2,929 | 0 | 3,158 | 0 |
06-30-2011 | 12-31-2010 | |||||||||||||||
From 13 months to 5 years ThU.S.$ | More than 5 years ThU.S.$ | From 13 months to 5 years ThU.S.$ | More than 5 years ThU.S.$ | |||||||||||||
Total Liabilities, non-current | 2,900,507 | 1,562,057 | 2,640,189 | 1,816,507 | ||||||||||||
US Dollars | 2,054,114 | 1,011,223 | 1,518,182 | 1,277,116 | ||||||||||||
Other currencies | 6,110 | 0 | — | 0 | ||||||||||||
$ not adjustable | 663,279 | 3,674 | 301,667 | 3,578 | ||||||||||||
U.F. | 38,109 | 0 | 684,401 | 0 | ||||||||||||
138,895 | 547,160 | 135,939 | 535,813 | |||||||||||||
Other Financial Liabilities, non-current | 1,320,713 | 1,562,057 | 1,092,922 | 1,816,507 | ||||||||||||
US Dollars | 1,177,175 | 1,011,223 | 950,795 | 1,277,116 | ||||||||||||
Other currencies | 4,669 | 3,674 | 6,188 | 3,578 | ||||||||||||
U.F. | 138,869 | 547,160 | 135,939 | 535,813 | ||||||||||||
Bank loans | 248,154 | 4,021 | 290,815 | 3,925 | ||||||||||||
US Dollars | 243,485 | 347 | 284,627 | 347 | ||||||||||||
Other currencies | 4,669 | 3,674 | 6,188 | 3,578 | ||||||||||||
Financial leases | 13 | 0 | 49 | 0 | ||||||||||||
U.F. | 13 | 0 | 49 | 0 | ||||||||||||
Other loans | 1,072,546 | 1,558,036 | 802,058 | 1,812,582 | ||||||||||||
US Dollars | 933,690 | 1,010,876 | 666,168 | 1,276,769 | ||||||||||||
U.F. | 138,856 | 547,160 | 135,890 | 535,813 | ||||||||||||
Other Financial Liabilities, non-current | 1,579,794 | 0 | 1,547,267 | 0 | ||||||||||||
US Dollars | 876,939 | 0 | 567,387 | 0 | ||||||||||||
Euro | 6,110 | 0 | 0 | 0 | ||||||||||||
Other currencies | 658,610 | 0 | 295,479 | 0 | ||||||||||||
$ not adjustable | 38,109 | 0 | 684,401 | 0 | ||||||||||||
U.F. | 26 | 0 | 0 | 0 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Effect of exchange rate variations
The functional currency of Brazilian subsidiaries and associate companies is the Brazilian Real. Therefore, their individual financial statements have been expressed in the presentation currency as follows:
(i) | Assets and liabilities for each balance sheet are translated at the closing exchange rate; |
(ii) | Income and expenses for each income statement are translated at the average monthly exchange rate, given that to date this average has been a fair estimate of the cumulative effect of the exchange rates at the time of the transactions; |
(iii) | All the resulting exchange differences are recognized as a separate component of net equity. |
In consolidation, the exchange rate differences arising from the translation of a net investment in companies that use currencies other than the U.S. Dollar, and those from loans and other instruments in foreign currencies recognized as hedging these investments, are assigned to net equity.
Subsidiaries that use functional currency other than the U.S. Dollar are as follow:
Subsidiary | Country | Functional currency | ||
Arauco do Brasil S.A. | Brazil | Real | ||
Arauco Forest Brasil S.A. | Brazil | Real | ||
Arauco Florestal Arapoti S.A. | Brazil | Real | ||
Empreendimentos Forestais Santa Cruz Ltda. | Brazil | Real | ||
Catan Empreendimentos e Participacoes S.A. | Brazil | Real | ||
Mahal Empreendimentos e Participacoes S.A. | Brazil | Real | ||
Arauco Distribución S.A. | Chile | Chilean peso | ||
Investigaciones Forestales Bioforest S.A. | Chile | Chilean peso | ||
Controladora de Plagas Forestales S.A. | Chile | Chilean peso |
January-June | April- June | |||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Exchange differences recognized in income and loss, except for financial instruments measured at fair value through income and loss | 18,344 | (9,425 | ) | 3,555 | (1,564 | ) | ||||||||||
Conversion reverse | 73,162 | (30,719 | ) | 48,827 | (11,251 | ) |
NOTE 12. BORROWING COSTS (IAS 23)
Arauco capitalized interest on existing investment projects. For the recording of this capitalization Arauco estimated the average rate of borrowing to finance these investment projects.
January-June | April- June | |||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Property, plant and equipment capitalized cost | ||||||||||||||||
Property, plant and equipment capitalized interest cost rate | 5.68 | % | 5.97 | % | 5,68 | % | 5,97 | % | ||||||||
Amount of the capitalized interest cost, property, presented as plant and equipment | 2,485 | 4,518 | 1,167 | 2,359 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 13. RELATED PARTIES (IAS 24)
Related Party Disclosure
Related parties are those companies as defined in IAS 24 and under the standards of the Chilean Securities Commission and the Chilean Limited Company Law.
Receivable and payable amounts among related parties at the end of each period correspond to commercial operations and financings negotiated in Chilean Pesos, American dollars and Euros, where collection or payment deadlines are outlined in the attached tables and in general do not have adjustment or interest clauses, except for financing transactions.
At the date of these consolidated financial statements there are no provisions for doubtful debts and no guarantees provided or associated with inter-company balances.
Name of Group’s Main Controller
The ultimate controllers of the Company are Mrs. Maria Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through Inversiones Angelini y Cia. Ltda.
Name of the Intermediate Controlling Entity that Prepares Financial Statements for Public Use
Empresas Copec S.A.
Salaries Received by Key Management Personnel by Category
Key personnel salaries including directors, managers and sub-managers consist of a fixed monthly rate, with a possible annual discretionary bonus.
Pricing Strategy Terms and Conditions Corresponding to Transactions with Related Parties
Transactions with related parties are performed under market conditions.
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Detail of Relationship between Parent Company and Subsidiary
ID Nº | Company Name | Origin Country | Functional Currency | % Share 06/30/2011 | % Share 12/31/2010 | |||||||||||||||||||||||||
Direct | Indirect | Total | Direct | Indirect | Total | |||||||||||||||||||||||||
- | Agenciamiento y Servicios Profesionales S.A. | Mexico | U.S. Dollar | 0.0020 | 99.9970 | 99.9990 | 0.0020 | 99.9970 | 99.9990 | |||||||||||||||||||||
- | Alto Paraná S.A. | Argentina | U.S. Dollar | 0 | 99.9766 | 99.9766 | 0 | 99.9766 | 99.9766 | |||||||||||||||||||||
- | Arauco Australia Pty Ltd. | Australia | U.S. Dollar | 0 | 99.9990 | 99.9990 | 0 | 99.9990 | 99.9990 | |||||||||||||||||||||
96547510-9 | Arauco Bioenergía S.A. | Chile | U.S. Dollar | 98.0000 | 1.9985 | 99.9985 | 98.0000 | 1.9985 | 99.9985 | |||||||||||||||||||||
- | Arauco Colombia S.A. | Colombia | U.S. Dollar | 1.5000 | 98.4980 | 99.9980 | 1.5000 | 98.4980 | 99.9980 | |||||||||||||||||||||
- | Arauco Denmark Aps | Denmark | U.S. Dollar | 0 | 99.9990 | 99.9990 | 0 | 99.9990 | 99.9990 | |||||||||||||||||||||
96765270-9 | Arauco Distribución S.A. | Chile | Chilean pesos | 0 | 99.9992 | 99.9992 | 0 | 99.9992 | 99.9992 | |||||||||||||||||||||
- | Arauco Do Brasil S.A. | Brazil | Real | 2.1530 | 97.8460 | 99.9990 | 2.4990 | 97.5000 | 99.9990 | |||||||||||||||||||||
- | Arauco Ecuador S.A. | Ecuador | U.S. Dollar | 0.1000 | 99.8990 | 99.9990 | 0.1000 | 99.8990 | 99.9990 | |||||||||||||||||||||
- | Arauco Florestal Arapoti S.A. | Brazil | Real | 0 | 79.9992 | 79.9992 | 0 | 79.9992 | 79.9992 | |||||||||||||||||||||
- | Arauco Forest Brasil S.A. | Brazil | Real | 23.1991 | 76.8000 | 99.9991 | 23.1991 | 76.8000 | 99.9991 | |||||||||||||||||||||
- | Arauco Forest Products B.V. | Holland | U.S. Dollar | 0 | 99.9990 | 99.9990 | 0 | 99.9990 | 99.9990 | |||||||||||||||||||||
- | Arauco Holanda Cooperatief U.A. | Holland | U.S. Dollar | 0 | 99.9990 | 99.9990 | 0 | 99,9990 | 99,9990 | |||||||||||||||||||||
- | Arauco Perú S.A. | Peru | U.S. Dollar | 0.0013 | 99.9977 | 99.9990 | 0.0013 | 99.9977 | 99.9990 | |||||||||||||||||||||
- | Arauco Wood Products, Inc. | USA | U.S. Dollar | 0.3953 | 99.6037 | 99.9990 | 0.3953 | 99.6037 | 99.9990 | |||||||||||||||||||||
- | Araucomex S.A. De C.V. | Mexico | U.S. Dollar | 0.0005 | 99.9985 | 99.9990 | 0.0005 | 99.9985 | 99.9990 | |||||||||||||||||||||
96565750-9 | Aserraderos Arauco S.A. | Chile | U.S. Dollar | 99.0000 | 0.9992 | 99.9992 | 99.0000 | 0.9992 | 99.9992 | |||||||||||||||||||||
82152700-7 | Bosques Arauco S.A. | Chile | U.S. Dollar | 1.000 | 98.9256 | 99.9256 | 1.0000 | 98.9256 | 99.9256 | |||||||||||||||||||||
- | Catan Empreendimentos e Participacoes S.A. | Brazil | Real | 0 | 99.9925 | 99.9925 | 0 | 99.9934 | 99.9934 | |||||||||||||||||||||
96657900-5 | Controladora De Plagas Forestales S.A. | Chile | Chilean pesos | 0 | 59.6326 | 59.6326 | 0 | 59.6326 | 59.6326 | |||||||||||||||||||||
- | Empreendimentos Florestais Santa Cruz Ltda. | Brazil | Real | 0 | 99.9754 | 99.9754 | 0 | 99.9766 | 99.9766 | |||||||||||||||||||||
96573310-8 | Forestal Arauco S.A. | Chile | U.S. Dollar | 99.9248 | 0 | 99.9248 | 99.9248 | 0 | 99.9248 | |||||||||||||||||||||
85805200-9 | Forestal Celco S.A. | Chile | U.S. Dollar | 1.0000 | 98.9256 | 99.9256 | 1.0000 | 98.9256 | 99.9256 | |||||||||||||||||||||
93838000-7 | Forestal Cholguán S.A. | Chile | U.S. Dollar | 0 | 97.4281 | 97.4281 | 0 | 97.4281 | 97.4281 | |||||||||||||||||||||
78049140-K | Forestal Los Lagos S.A. | Chile | U.S. Dollar | 0 | 79.9405 | 79.9405 | 0 | 79.9405 | 79.9405 | |||||||||||||||||||||
- | Forestal Nuestra Señora Del Carmen S.A. | Argentina | U.S. Dollar | 0 | 99.9766 | 99.9766 | 9.1600 | 90.8372 | 99.9972 | |||||||||||||||||||||
- | Forestal Talavera S.A. | Argentina | U.S.Dollar | 0 | 99.9945 | 99.9945 | 0 | 99.9945 | 99.9945 | |||||||||||||||||||||
96567940-5 | Forestal Valdivia S.A. | Chile | U.S. Dollar | 1.0000 | 98.9256 | 99.9256 | 1.0000 | 98.9256 | 99.9256 | |||||||||||||||||||||
- | Industrias Forestales S.A. | Argentina | U.S. Dollar | 9.9770 | 90.0221 | 99.9991 | 9.9770 | 90.0221 | 99.9991 | |||||||||||||||||||||
- | Inversiones Arauco Internacional Ltda. | Chile | U.S. Dollar | 98.6058 | 1.3932 | 99.9990 | 98.6058 | 1.3932 | 99.9990 | |||||||||||||||||||||
- | Inversiones Celco S.L. | Spain | U.S. Dollar | 0 | 99.9990 | 99.9990 | 0 | 99.9990 | 99.9990 | |||||||||||||||||||||
79990550-7 | Investigaciones Forestales Bioforest S.A. | Chile | Chilean pesos | 1.0000 | 98.9256 | 99.9256 | 1.0000 | 98.9256 | 99.9256 | |||||||||||||||||||||
- | Leasing Forestal S.A. | Argentina | U.S. Dollar | 0 | 99.9771 | 99.9971 | 0 | 99.9771 | 99.9771 | |||||||||||||||||||||
- | Mahal Empreendimentos e Participacoes S.A. | Brazil | Real | 0 | 99.9923 | 99.9923 | 0 | 99.9934 | 99.9934 | |||||||||||||||||||||
96510970-6 | Paneles Arauco S.A. | Chile | U.S. Dollar | 90.0000 | 0.9992 | 99.9992 | 99.0000 | 0.9992 | 99.9992 | |||||||||||||||||||||
- | Savitar S.A. | Argentina | U.S. Dollar | 0 | 99.9930 | 99.9930 | 0 | 99.9930 | 99.9930 | |||||||||||||||||||||
96637330-K | Servicios Logísticos Arauco S.A. | Chile | U.S. Dollar | 45.0000 | 54.9995 | 99.9995 | 45.0000 | 54.9995 | 99.9995 |
Subsidiaries listed in the above table and special purpose entity Fondo de Inversión Bío Bío and its subsidiary Forestal Río Grande S.A. are included in the consolidation process.
Termination Benefits received by Key Management Personnel
January-June | April-June | |||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Salaries and bonus | 24,158 | 22,607 | 11,703 | 8,963 | ||||||||||||
Diet Directory | 804 | 722 | 411 | 357 | ||||||||||||
Termination benefits | 2,137 | 691 | 1,909 | 145 | ||||||||||||
Total | 27,099 | 24,020 | 14,023 | 9,465 |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Related Party Receivables
Name of Related Party | Corresponding ID No. | Nature of Relationship | Country of Origin | Currency Rate | Maximum Maturity | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||||||||||
Forestal Mininco S.A. | 91,440,000-7 | Indirect | Chile | Chilean pesos | 30 days | 0 | 21 | |||||||||||||||
CMPC Celulosa S.A. | 96,532,330-9 | Indirect | Chile | Chilean pesos | 30 days | 0 | 536 | |||||||||||||||
Eka Chile S.A. | 99,500,140-3 | Joint venture | Chile | Chilean pesos | 30 days | 3,311 | 3,665 | |||||||||||||||
Forestal del Sur S.A. | 79,825,060-4 | Indirect | Chile | Chilean pesos | 30 days | 382 | 4,032 | |||||||||||||||
Stora Enso Arapoti Industria de Papel S.A. | - | Associates | Brazil | Real | 30 days | 1,035 | 1,112 | |||||||||||||||
Fundación Educacional Arauco | 71,625,000-8 | Other related party | Chile | Chilean pesos | 30 days | 320 | 340 | |||||||||||||||
Colbún S.A. | 96,505,760-9 | Other related party | Chile | Chilean pesos | 30 days | 0 | 8,368 | |||||||||||||||
Celulosa y Energía Punta Pereira S.A. | - | Joint venture | Uruguay | Euro | November 2011 | 49,279 | 0 | |||||||||||||||
Celulosa y Energía Punta Pereira S.A. | - | Joint venture | Uruguay | U.S. Dollar | November 2011 | 23,339 | 0 | |||||||||||||||
Eufores S.A. | - | Join Venture | Uruguay | U.S. Dollar | 30 days | 15,551 | 0 | |||||||||||||||
Forestal Cono Sur S.A. | - | Join Venture | Uruguay | U.S. Dollar | 30 days | 2,502 | 0 | |||||||||||||||
Zona Franca Punta Pereira S.A. | - | Join Venture | Uruguay | U.S. Dollar | 30 days | 4,002 | 0 | |||||||||||||||
Total | 99,721 | 18,074 | ||||||||||||||||||||
Related Party Payables | ||||||||||||||||||||||
Name of Related Party | Corresponding ID No. | Nature of Relationship | Country of Origin | Currency Rate | Maximum Maturity | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||||||||||
Compañia de Petróleos de Chile S.A. | 99,520,000-7 | Affiliate of shareholder | Chile | Chilean pesos | 30 days | 12,349 | 5,989 | |||||||||||||||
Abastible S.A. | 91,806,000-6 | Affiliate of shareholder | Chile | Chilean pesos | 30 days | 678 | 233 | |||||||||||||||
Depósitos Portuarios Lirquén S.A. | 96,871,870-3 | Other related party | Chile | Chilean pesos | 30 days | 5 | 32 | |||||||||||||||
Empresas Copec S.A. | 90,690,000-9 | Parent Company | Chile | Chilean pesos | 30 days | 0 | 27 | |||||||||||||||
Sigma S.A. | 86,370,800-1 | Other related party | Chile | Chilean pesos | 30 days | 0 | 3 | |||||||||||||||
Portaluppi, Guzmán y Bezanilla Abogados | 78,096,080-9 | Other related party | Chile | Chilean pesos | 30 days | 0 | 131 | |||||||||||||||
Empresa Nacional de Telecomunicaciones S.A. | 92,580,000-7 | Indirect | Chile | Chilean pesos | 30 days | 20 | 27 | |||||||||||||||
Servicios Corporativos Sercor S.A. | 96,925,430-1 | Associates | Chile | Chilean pesos | 30 days | 10 | 4 | |||||||||||||||
Puerto de Lirquén S.A. | 82,777,100-7 | Associates | Chile | Chilean pesos | 30 days | 209 | 655 | |||||||||||||||
Compañía Puerto de Coronel S.A. | 79,895,330-3 | Associates | Chile | Chilean pesos | 30 days | 866 | 237 | |||||||||||||||
Forestal Mininco S.A. | 91.440.000-7 | Indirect | Chile | Chilean Pesos | 30 days | 311 | 0 | |||||||||||||||
CMPC Maderas S.A. | 95,304,000-K | Other related party | Chile | Chilean pesos | 30 days | 0 | 1,826 | |||||||||||||||
Sodimac S.A. | 92,792,430-K | Other related party | Chile | Chilean pesos | 30 days | 0 | 45 | |||||||||||||||
Total | 14,448 | 9,209 |
Related party transactions
Purchases
Name of Related Party | Corresponding ID No. | Nature of Relationship | Country of Origin | Currency Rate | Transaction Detail | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||||||
Abastible S.A. | 91,806,000-6 | Affiliate of shareholder | Chile | Chilean pesos | Fuel | 2,129 | 2,897 | |||||||||||
Empresas Copec S.A. | 90,690,000-9 | Parent Company | Chile | Chilean pesos | Management service | 180 | 272 | |||||||||||
Compañia de Petróleos de Chile S.A. | 99,520,000-7 | Affiliate of shareholder | Chile | Chilean pesos | Fuel and lubricant | 49,793 | 71,424 | |||||||||||
Compañía Puerto de Coronel S.A. | 79,895,330-3 | Associates | Chile | Chilean pesos | Transport and stowage | 3,424 | 4,100 | |||||||||||
Codelco Chile | 61,704,000-k | Indirect | Chile | Chilean pesos | Supplies | 0 | 1,367 | |||||||||||
Dynea Brasil S.A. | - | Associates | Brazil | Real | Chemical products | 0 | 9,695 | |||||||||||
Dynea Brasil S.A. | - | Associates | Brazil | Real | Melamine paper | 0 | 5,466 | |||||||||||
Eka Chile S.A. | 99,500,140-3 | Associates | Chile | Chilean pesos | Sodium chlorate | 35,068 | 39,338 | |||||||||||
Forestal del Sur S.A. | 79,825,060-4 | Indirect | Chile | Chilean pesos | Wood and logs | 502 | 1,087 | |||||||||||
Portaluppi, Guzmán y Bezanilla Abogados | 78,096,080-9 | Other related party | Chile | Chilean pesos | Legal services | 782 | 1,344 | |||||||||||
Puerto de Lirquén S.A. | 82,777,100-7 | Associates | Chile | Chilean pesos | Port services | 3,847 | 7,049 | |||||||||||
Empresa Nacional de Telecomunicaciones S.A. | 92,580,000-7 | Associates | Chile | Chilean pesos | Telephone services | 322 | 252 | |||||||||||
Sodimac S.A. | 96,792,430-k | Associates | Chile | Chilean pesos | Other purchases | 20 | 248 | |||||||||||
Forestal Mininco S.A. | 91,440,000-7 | Indirect | Chile | Chilean pesos | Logs and others | 232 | 705 | |||||||||||
CMPC Celulosa S.A. | 96,532,330-8 | Indirect | Chile | Chilean pesos | Other purchases | 305 | 893 | |||||||||||
Sales | ||||||||||||||||||
Name of Related Party | Corresponding ID No. | Nature of Relationship | Country of Origin | Currency Rate | Transaction Detail | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||||||
Celulosa y Energía Punta Pereira S.A. | - | Joint venture | Uruguay | Euro | Loans | 48,688 | 0 | |||||||||||
Celulosa y Energía Punta Pereira S.A. | - | Joint venture | Uruguay | Euro | Interest | 611 | 0 | |||||||||||
Celulosa y Energía Punta Pereira S.A. | - | Joint venture | Uruguay | U.S. Dollar | Loans | 23,201 | 0 | |||||||||||
Celulosa y Energía Punta Pereira S.A. | - | Joint venture | Uruguay | U.S. Dollar | Interest | 138 | 0 | |||||||||||
Colbún S.A. | 96,505,760-9 | Indirect | Chile | Chilean pesos | Electrical power | 2,938 | 2,418 | |||||||||||
Colbún S.A. | 96,505,760-9 | Indirect | Chile | Chilean pesos | Other sales | 0 | 9,179 | |||||||||||
Dynea Brasil S.A. | - | Associates | Brazil | Real | Fuel | 0 | 259 | |||||||||||
Eka Chile S.A. | 99,500,140-3 | Joint venture | Chile | Chilean pesos | Electrical power | 18,940 | 26,277 | |||||||||||
Sodimac S.A. | 96,792,430-k | Indirect | Chile | Chilean pesos | Wood | 7,607 | 35,873 | |||||||||||
Stora Enso Industria de Papel S.A. | - | Associates | Brazil | Real | Wood | 5,036 | 8,839 | |||||||||||
Forestal del Sur S.A. | 79,825,060-4 | Indirect | Chile | Chilean pesos | Woodchip | 10,201 | 26,985 | |||||||||||
Forestal Mininco S.A. | 91,440,000-7 | Indirect | Chile | Chilean pesos | Wood | 720 | 2,061 | |||||||||||
CMPC Celulosa S.A. | 96,532,330-8 | Indirect | Chile | Chilean pesos | Inputs | 11 | 4,567 | |||||||||||
Cartulinas CMPC S.A. | 96,731,890-6 | Indirect | Chile | Chilean pesos | Pulp | 10,233 | 16,225 | |||||||||||
Eufores S.A. | - | Joint venture | Uruguay | U.S. Dollar | Loans | 15,500 | - | |||||||||||
Forestal Cono Sur S.A. | - | Joint venture | Uruguay | U.S. Dollar | Loans | 2,500 | - | |||||||||||
Zona Franca Punta Pereira | - | Joint Venture | Uruguay | U.S. Dollar | Loans | 4,000 | - |
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CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 14. CONSOLIDATED FINANCIAL STATEMENTS (IAS 27)
Subsidiaries are all entities over which Arauco has the power to manage financial and operational policies. This generally means holding more than one half of the voting rights of such entities. Stock held in an entity and the effect of the potential voting rights that are currently being exercised or converted are considered when evaluating whether the Company controls another entity. Subsidiaries are consolidated as of the date on which control is transferred to the Company, and are excluded when control is terminated.
Arauco applies the purchase method to record a business combination. Acquisition cost is the fair value of assets delivered, of equity instruments issued and of the liabilities incurred or committed at the date of exchange, plus all direct costs attributable to the acquisition. Identifiable acquired assets and liabilities as well as the contingencies committed to in business combinations are initially recognized at fair value at the date of acquisition, despite minority interest scope. Excess of acquisition cost over the Fair Value of the Company’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than Fair Value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income.
All intercompany transactions, accounts receivable, accounts payable and intercompany unrealized income are eliminated.
Disclosure of Subsidiary Investments
On June 13, 2011 Inversiones Arauco International Ltda. and Celulosa Arauco y Constitución S.A. sold its shares (82.42% and 9.16% respectively) in subsidiary Nuestra Señora del Carmen S.A. to subsidiary Alto Paraná S.A. for ThU.S.$5,400. As a result, Alto Paraná S.A. owns 100% of the shares of Nuestra Señora del Carmen S.A.
On March 29, 2011 Novo Oeste Gestao de Ativos Florestais S.A. was incorporated, receiving a capital contribution from our subsidiary Arauco Forest Brasil S.A. of ThReal 1,225 in exchange for 1,225,000 shares representing 48.9912% of ownership. The corporate purpose of this company is the management of forestry assets and commercialization of wood. To date, Arauco Forest Brasil S.A. has a pending capital contribution of ThReal 1,225.
On December 27, 2010 Inversiones Arauco Internacional Ltda. and Celulosa Arauco y Constitución S.A. made a capital contribution amounted to MEUR 99 (ThU.S.$131) and MEUR 1 (ThU.S.$1) respectively, to the new subsidiary named Arauco Holanda Cooperatief U.A., company which bought on January 7, 2011 the 100% of the shares of Arauco Forest Products B.V. to Arauco Denmark Ap for ThEur 731.
On June 28 and July 14, 2010 the Alto Paraná subsidiary made two additional capital contributions in the amounts of ThReal$17,150 (ThU.S.$9,649) and ThReal$880 (ThU.S.$502) to the Brazilian company Empreendimentos Florestais Santa Cruz Ltda. The abovementioned investments were made as part of the expansion policy of the business throughout the acquisition of forest assets in Brazil. Such transaction will be carried out by the related company Catan Empreendimentos e Participaçiónes S.A., of which, Empreendimentos Florestais Santa Cruz Ltda. and Arauco Forest Brasil S.A. own 25.24% and 74.76%, respectively.
On February 2, March 12, May 10 and July 9, 2010 capital contributions in an amount equal to ThU.S.$2,000 each, were made to the associated company Inversiones Puerto Coronel S.A.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
In April, 2010, Placas do Paraná S.A. merged into Dynea Brasil S.A.
On March 15, 2010 Arauco, through its subsidiary Placas do Paraná S.A. (now Arauco do Brasil S.A.) made a contribution of ThU.S.$15,000 to acquire 50% of the shares of Dynea Brasil S.A. As a result, Placas do Paraná S.A. (now Arauco do Brasil S.A.) holds 100% of participation in Dynea Brasil S.A. This investment generated negative goodwill of ThU.S.$1,113 presented in the income statement under Other income (loss).
On January 4, 2010, the corporate reorganization was approved as a consequence of the merging by absorption done by the subsidiary Alto Paraná S.A, of Faplac S.A. and Flooring S.A. effective last January 1, 2010.
The following table shows the fair value of the assets and liabilities acquired at the acquisition date, as disclosed in Note 4:
Dynea Brasil S.A. | 03/15/2010 ThU.S.$ | |||
Cash | 8,023 | |||
Trade accounts receivable | 3,621 | |||
Inventory | 4,535 | |||
Property, plant and equipment | 29,212 | |||
Deferred income tax | 140 | |||
Other assets | 933 | |||
Total Assets | 46,464 | |||
Trade payables | 6,707 | |||
Deferred income tax | 8,267 | |||
Other liabilities | 854 | |||
Total Liabilities | 15,828 |
The following table shows the negative goodwill for the investment in Dynea Brasil S.A.:
2010 | Dynea ThU.S.$ | |||
Paid value (+) | 15,000 | |||
50% acquired in previous years (+) | 14,523 | |||
Fair value of assets and liabilities acquired (-) | 30,636 | |||
Negative goodwill | (1,113 | ) |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Details of the subsidiaries are described in Note 13.
Summarized financial information of major subsidiaries of Arauco:
Significant subsidiary Country of incorporation Functional currency Percentage of participation | Aserraderos Arauco S.A. Chile U.S. Dollar 99.9992% | |||||||
06/30/2011 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 371,829 | 48,821 | ||||||
Non-current of subsidiary | 275,059 | 20,246 | ||||||
Total subsidiary | 646,888 | 69,067 |
12/31/2010 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 397,995 | 71,576 | ||||||
Non-current of subsidiary | 245,817 | 19,535 | ||||||
Total subsidiary | 643,812 | 91,111 |
06/30/2011 | 06/30/2010 | |||||||
ThU.S.$ | ThU.S.$ | |||||||
Income of subsidiary | 273,672 | 233,670 | ||||||
Expenses of subsidiary | (248,552 | ) | (207,074 | ) | ||||
Net Gain (loss) of subsidiary | 25,120 | 26,596 |
Significant subsidiary Country of incorporation Functional currency Percentage of participation | Paneles Arauco S.A. Chile U.S. Dollar 99.9992% | |||||||
06/30/2011 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 433,403 | 56,490 | ||||||
Non-current of subsidiary | 365,559 | 86,032 | ||||||
Total subsidiary | 798,962 | 142,522 |
12/31/2010 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 451,136 | 51,677 | ||||||
Non-current of subsidiary | 314,987 | 86,999 | ||||||
Total subsidiary | 766,123 | 138,676 |
06/30/2011 | 06/30/2010 | |||||||
ThU.S.$ | ThU.S.$ | |||||||
Income of subsidiary | 292,861 | 266,944 | ||||||
Expenses of subsidiary | (263,875 | ) | (231,955 | ) | ||||
Net Gain (loss) of subsidiary | 28,986 | 34,989 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Significant subsidiary Country of incorporation Functional currency Percentage of participation | Inversiones Arauco Internacional Ltda. Chile U.S. Dollar 99.9986% | |||||||
06/30/2011 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 89,419 | 3,005 | ||||||
Non-current of subsidiary | 2,068,858 | 2,806 | ||||||
Total subsidiary | 2,158,277 | 5,811 | ||||||
12/31/2010 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 43,804 | 1,931 | ||||||
Non-current of subsidiary | 1,954,721 | 2,220 | ||||||
Total subsidiary | 1,998,525 | 4,151 | ||||||
06/30/2011 | 06/30/2010 | |||||||
ThU.S.$ | ThU.S.$ | |||||||
Income of subsidiary | 40,971 | 47,915 | ||||||
Expenses of subsidiary | (624 | ) | (13,610 | ) | ||||
Net Gain (loss) of subsidiary | 40,347 | 34,305 | ||||||
Significant subsidiary Country of incorporation Functional currency Percentage of participation | Forestal Arauco S.A. Chile U.S. Dollar 99.9248% | |||||||
06/30/2011 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 8,063 | 317,498 | ||||||
Non-current of subsidiary | 2,940,382 | 373 | ||||||
Total subsidiary | 2,948,445 | 317,871 | ||||||
12/31/2010 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current subsidiary | 9,311 | 313,024 | ||||||
Non-current of subsidiary | 2,917,877 | 337 | ||||||
Total subsidiary | 2,927,188 | 313,361 | ||||||
06/30/2011 | 06/30/2010 | |||||||
ThU.S.$ | ThU.S.$ | |||||||
Income of subsidiary | 26,997 | 16,740 | ||||||
Expenses of subsidiary | (11,169 | ) | (23,801 | ) | ||||
Net Gain (loss) of subsidiary | 15,828 | (7,061 | ) |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 15. INVESTMENTS IN ASSOCIATES (IAS 28)
The following table shows information on Investments in Associates as of June 30, 2011 and December 31, 2010, respectively:
Name of Associate | Puerto de Lirquén S.A. | |||
Country of Incorporation of Associate | Chile | |||
Functional Currency | U.S. Dollar | |||
Main Activities of Associate | Dock and warehousing operations for owned assets and third parties, loading and unloading of all classes of goods, as well as warehousing, transportation and mobilization operations | |||
Percentage Share in Associate % | 20.13809% | |||
06/30/2011 | 12/31/2010 | |||
Investment in Associate | ThU.S.$43,706 | ThU.S.$44,077 | ||
Name of Associate | Inversiones Puerto Coronel S.A. | |||
Country of Incorporation of Associate | Chile | |||
Functional Currency | U.S. Dollar | |||
Main Activities of Associate | Investments in movables and real estate, company acquisitions, securities and investment instruments, investment management and development and/or participation in businesses and companies related to industrial, shipping, forest and commercial activities. | |||
Percentage Share in Associate % | 50.00% | |||
06/30/2011 | 12/31/2010 | |||
Investment in Associate | ThU.S.$31,651 | ThU.S.$31,453 | ||
Name of Associate | Servicios Corporativos Sercor S.A. | |||
Country of Incorporation of Associate | Chile | |||
Functional Currency | Pesos | |||
Main Activities of Associate | Consulting services to Boards of Directors and Management of companies related to Business Management | |||
Percentage Share in Associate % | 20.00% | |||
06/30/2011 | 12/31/2010 | |||
Investment in Associate | ThU.S.$ 1,375 | ThU.S.$ 1,349 | ||
Name of Associate | Stora Enso Arapoti Industria de Papel S.A. | |||
Country of Incorporation of Associate | Brazil | |||
Functional Currency | Real | |||
Main Activities of Associate | Industrialization and commercialization of paper and cellulose, raw materials and by-products | |||
Percentage Share in Associate % | 20.00% | |||
06/30/2011 | 12/31/2010 | |||
Investment in Associate | ThU.S.$41,216 | ThU.S.$38,694 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Name of Associate | Genómica Forestal S.A. | |||
Country of Incorporation of Associate | Chile | |||
Functional Currency | Pesos | |||
Main Activities of Associate | Developing forestry genomics, through the use of biotechnological, molecular and bioinformatics tools with the purpose of strengthening company genetic programs and improving the competitive position of the Chilean forestry industry for priority species. | |||
Percentage Share in Associate % | 25.00% | |||
06/30/2011 | 12/31/2010 | |||
Investment in Associate | ThU.S.$70 | ThU.S.$62 | ||
Name of Associate | Novo Oeste Gestao de Ativos Florestais S.A. | |||
Country of Incorporation of Associate | Brazil | |||
Functional Currency | Real | |||
Main Activities of Associate | Management of forestry activities and commercialization of wood and others. | |||
Percentage Share in Associate % | 48.9999% | |||
06/30/2011 | 12/31/2010 | |||
Investment in Associate | (ThU.S.$887) | 0 |
Summarized financial Information of Associates
06/30/2011 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current assets | 133,587 | 109,695 | ||||||
Non-current assets | 430,861 | 13,720 | ||||||
Equity | �� | — | 441,033 | |||||
Total Associates (*) | 564,448 | 564,448 |
12/31/2010 | ||||||||
Assets ThU.S.$ | Liabilities ThU.S.$ | |||||||
Current assets | 108,108 | 38,565 | ||||||
Non-current assets | 390,685 | 10,523 | ||||||
Equity | 449,705 | |||||||
Total Associates (*) | 498,793 | 498,793 |
06/30/2011 ThU.S. $ | 06/30/2010 ThU.S.$ | |||||||
Ordinary income | 81,928 | 218,348 | ||||||
Ordinary expenses | (82,320 | ) | (216,339 | ) | ||||
Net income (loss) (*) | (392 | ) | 2,009 |
(*) | Includes Investments in associates that do not qualify as Joint Ventures. |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Movement in Investment in Associates and Joint Ventures
06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||
Investments in associates accounted for using the equity method, opening balance | 498,204 | 476,101 | ||||||
Investment Changes in Associate Companies | ||||||||
Investment in Associates and joint ventures, Additions | 35,738 | 62,559 | ||||||
Negative goodwill immediately recognized | 0 | 1,113 | ||||||
Equity in income (Loss) investments in associates | (940 | ) | 1,906 | |||||
Equity in income (Loss) joint ventures | (7,337 | ) | (9,599 | ) | ||||
Dividends Received, Investments in Associates | 0 | (5,737 | ) | |||||
Increase (Decrease) in foreign exchange translation of investment in associates | 1,658 | 1,045 | ||||||
Other Increase (Decrease) in investment in associates | 887 | (29,184 | ) | |||||
Changes in Associate Company Investments, Total | 30,006 | 22,103 | ||||||
Investments in Associates accounted for using the equity method, closing balance | 528,210 | 498,204 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 16. INTERESTS IN JOINT VENTURES (IAS 31)
These investments are presented in the Consolidated Balance Sheet together with investments in associates and measured by using the equity method.
If a Joint Venture associate incurs negative equity as a result of legal or implicit obligations of its associate, or has made payments on behalf of its associate, then it must recognize a liability by reducing the value of the investment to zero until the associate generates income that would reverse the negative equity previously generated due to the losses.
Realized Investments
There are no new investments in joint ventures to disclose as of June 30, 2011 and 2010.
Investments in Uruguay
The main assets acquired from Ence during the year 2009 are: 130,000 hectares of land (of which 73,000 hectares are forestry plantations and 6,000 hectares are under agreements with third parties); one industrial site, the necessary environmental permits for the construction of a pulp mill; a river terminal; one chip producing mill, and one nursery.
All these assets are added to the land and plantations that Stora Enso and Arauco control through a joint venture in Uruguay, which currently maintains forestry equity of approximately 256,000 hectares of land, of which 140,000 hectares are planted.
At a later date, as mentioned in above paragraphs, during 2010, Arauco made contributions to Forestal Cono Sur S.A. and Ence Group that amounted to ThU.S.$39,559. In 2011, Arauco made capital contributions to these companies of a total of ThU.S.$34,959.
The investments in Uruguay mentioned above qualify as joint ventures because of existing contracts that stipulate that both Arauco and Stora Enso maintain joint control of such investments.
Furthermore, Arauco holds a 50% share in Eka Chile S.A. (“Eka”), a company that sells sodium chlorate to cellulose plants in Chile. A contractual agreement in effect between and Arauco and this company has permitted Arauco and Eka to initiate certain joint venture activities.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Summary Financial Information of significant investments in Joint Ventures
06/30/2011 | 12/31/2010 | |||||||||||||||
Forestal Cono Sur S.A. (consolidated) | Assets ThU.S.$ | Liabilities ThU.S.$ | Assets ThU.S.$ | Liabilities ThU.S.$ | ||||||||||||
Current | 8,335 | 13,327 | 13,735 | 4,792 | ||||||||||||
Non-Current | 281,788 | 12,658 | 274,224 | 13,060 | ||||||||||||
Equity | 264,138 | 270,107 | ||||||||||||||
Total Joint Venture | 290,123 | 290,123 | 287,959 | 287,959 | ||||||||||||
Investment | 132,069 | 135,054 | ||||||||||||||
06/30/2011 | 06/30/2010 | |||||||||||||||
Income | 1,717 | 940 | ||||||||||||||
Expenses | (7,686 | ) | (4,522 | ) | ||||||||||||
Joint Venture Net Income (Loss) | (5,969 | ) | (3,582 | ) |
06/30/2011 | 12/31/2010 | |||||||||||||||
Eufores S.A. (consolidated) | Assets ThU.S.$ | Liabilities ThU.S.$ | Assets ThU.S.$ | Liabilities ThU.S.$ | ||||||||||||
Current | 38,029 | 60,417 | 26,252 | 31,120 | ||||||||||||
Non-Current | 458,858 | 24,919 | 415,532 | 23,358 | ||||||||||||
Equity | 411,551 | 387,306 | ||||||||||||||
Total Joint Venture | 496,887 | 496,887 | 441,784 | 441,784 | ||||||||||||
Investment | 205,692 | 193,653 | ||||||||||||||
06/30/2011 | 06/30/2010 | |||||||||||||||
Income | 17,361 | 20,922 | ||||||||||||||
Expenses | (24,116 | ) | (22,360 | ) | ||||||||||||
Joint Venture Net Income (Loss) | (6,755 | ) | (1,438 | ) |
06/30/2011 | 12/31/2010 | |||||||||||||||
Eka Chile S.A. | Assets ThU.S.$ | Liabilities ThU.S.$ | Assets ThU.S.$ | Liabilities ThU.S.$ | ||||||||||||
Current | 25,030 | 8,594 | 19,546 | 6,582 | ||||||||||||
Non-Current | 30,847 | 3,806 | 31,524 | 3,768 | ||||||||||||
Equity | 43,477 | 40,720 | ||||||||||||||
Total Joint Venture | 55,877 | 55,877 | 51,070 | 51,070 | ||||||||||||
Investment | 21,732 | 20,360 | ||||||||||||||
06/30/2011 | 06/30/2010 | |||||||||||||||
Income | 38,654 | 19,362 | ||||||||||||||
Expenses | (35,897 | ) | (18,241 | ) | ||||||||||||
Joint Venture Net Income (Loss) | 2,757 | 1,121 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 17. IMPAIRMENT OF ASSETS (IAS 36)
The recoverable amount of tangible assets is measured whenever there is an indication that the asset may have suffered deterioration of its value. Among the factors to consider as evidence of impairment are the diminution in market value of assets, significant changes in the technological environment, obsolescence or physical impairment of assets and changes in the way the asset is used or expected to be used (which could involve its disuse). Arauco evaluates at the end of each reporting period whether there is any evidence of the factors above mentioned.
For this evaluation, assets are grouped into the smallest group of assets that generates cash inflows independently.
At the end of this accounting period, we had the following information:
Effect from economic crisis
The decrease in demand for sawn timber products due primarily to the credit crisis and the continued downturn in the real estate market in the United States have led Arauco to decide to permanently close during the fiscal year 2009 and 2008, and during first months of 2010 Arauco had stopped activities of the following sawmills: La Araucana, Escuadrón, Lomas Coloradas, Coronel, Coelemu, Horcones II, and the remanufacturing plant Lomas Coloradas. All closed facilities are located in Chile.
During May 2010, Horcones II plant restarted operations and in June the Plant of Coronel was sold. By the continuing investment in equipments and technologies and more intensive use of our facilities, an important part of the production capacity of the plants have been supplied, and determined that the closure of Araucana, Escuadron, Aserradero Lomas Coloradas, Coelemu sawmills and Lomas Coloradas remanufacturing plant is considered as permanent. As of the closing date of these Consolidated Financial Statements, the assets associated with these plants located in Chile are classified as Assets held for sale, as mentioned in Note 22.
Since the beginning of 2009, the complicated market condition affected the Bosseti sawmill operation located in Argentina and the Company decided to shut it down in December 2010 and to adapt its operational structure to the reality of the business, converting the operation using its land and buildings as a logistics center. At the end of 2010, the Company registered ThU.S.$2,000 as impairment provision related to machinery and installations and no decision about their destination has been made.
The recoverable value of the permanently closed facilities was determined based on sales estimates and residual value, making the corresponding provision in the event that the recoverable value is less than the book value. These estimates were made by both external and internal evaluators.
Effect from the earthquake
Immediately after the earthquake that impacted the southern central region of Chile on February 27, 2010, an area in which the Company maintains its industrial operations, all of our production units applied their contingency plans. This involved shutting down operations and evaluating the damage caused to each facility by the earthquake.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Mutrún sawmill located in Constitución was destroyed by floodwaters. This facility represented a 6% of the Arauco’ saw timber production capacity in Chile.
Arauco’s industrial facilities, 34 in Chile, have resumed their activities in the shortest time possible. As of the date of this Financial Statement, all of its facilities are operating including line II of the Arauco Pulp Mill from February, 2011.
The suspension of the Company’s operations in Chile resulted in a decrease in sales volumes and adverse effects on the result of the Company.
Insurances
Damages caused by the earthquake are adequately covered by the following insurance policies:
• | All risk of physical assets and income (loss) |
• | All transport risk and all inventory losses |
• | Residential Fire |
• | All construction risk |
Financial Statement as of June 30, 2011 includes:
U.S.$89 million registered under Trade and Other Receivables for future compensations, associated with physical damages (U.S.$64 million) and operational costs (U.S.$25 million).
These Consolidated Financial Statements include a payment compensation received today amounting to U.S.$285 million, basically associated with physical damages (U.S.$105 million) and operational costs and losses caused by downtime (U.S.$180 million).
Related expenses to the damage produced by the earthquake were recognized when the relevant events occurred, but accounts receivable from insurance companies related to these expenses, in addition to the closure of the plant as a result of the earthquake, are recognized only when payment is assured.
Cash-Generating Unit with Impaired Assets
Information on Impaired Assets as of June, 2011 and December 31, 2010 amounted to ThU.S.$2,000 by closing of Bossseti sawmill located in Argentina, as indicated in the previous paragraph.
Disclosure of Asset Impairment
Information on Impairment of Property, Plant and Equipment due to technical obsolescence and damages from the earthquake and tsunami as of June 30, 2011 and December 31, 2010:
Disclosure of Asset Impairment | ||||
Principal classes of Assets affected by Impairment and Reversion Losses | Machinery and Equipment | |||
Principal Facts and Circumstances that lead to Recognizing Impairment and Reversions Losses | Technical Obsolescence | |||
06/30/2011 | 12/31/2010 | |||
Information relevant to the sum of all impairment | ThU.S. $2,534 | ThU.S. $2,682 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Disclosure of Asset Impairment | ||||||
Principal classes of Assets affected by Impairment and Reversion Losses | Buildings and Structures Machinery and Equipment Other assets |
| ||||
Principal Facts and Circumstances that lead to Recognizing Impairment and Reversions losses | Earthquake and tsunami | |||||
06/30/2011 | 12/31/2010 | |||||
Information relevant to the sum of all impairment | ThU.S. $ 69,722 | ThU.S.$ | 144,207 |
Goodwill
Goodwill is allocated to the groups of cash-generating units that generate such goodwill. The goodwill generated by the investment in Arauco do Brazil (formerly Tafisa) was assigned to the Pien panel segment plant. The recoverable amount of the cash-generating unit was determined based on calculations of its value in use. For this calculation we used the projected cash flows based on the operational plan approved by the management covering a period of 10 years, applying a discount rate of 10%, which does not exceed the long-term average growth rate for the panel segment in Brazil. As of June 30, 2011 this goodwill amounted to ThU.S.$67,603 (ThU.S.$63,374 at December 31, 2010). The variation is due only to the conversion adjustment to Real, which is the functional currency for the subsidiaries in Brazil, therefore, there has been no impairment provision.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 18. PROVISIONS, CONTINGENT ASSETS AND CONTINGENT LIABILITIES (IAS 37)
Lawsuits or other Legal Proceedings
The contingent liabilities that Arauco deems appropriate to disclose are as follows:
1. On October 8, 2007, the Federal Administration of Public Income (Administración Federal de Ingresos Públicos) (“AFIP”) initiated an ex oficio procedure against the Company’ Argentine affiliate Alto Paraná S.A. (“APSA”) questioning whether APSA erred in deducting from its income tax liability certain expenses, interest payments and exchange rate differences generated by Private Negotiable Obligations which were issued by APSA in 2001 and paid in 2007.
On November 20, 2007, APSA submitted a counterclaim to the claims presented by AFIP, completely rejecting all AFIP’s allegations and asserting legal arguments that justify its actions in the determination of its tax burden.
On December 14, 2007, AFIP notified APSA that its counterclaim had been dismissed, thus issuing an ex-oficio ruling and ordering the payment, within 15 working days, of the calculated income tax difference for the 2002, 2003 and 2004 fiscal years, which includes the principal amount owed, interest and fines.
On February 11, 2008, APSA appealed the aforementioned ruling before the National Tax Court (Tribunal Fiscal de la Nación) (“TFN”).
On February 8, 2010, APSA was notified of TFN’s ruling, which confirmed the ruling issued by AFIP, with court expenses, based on arguments different from those that justified AFIP’s ex-oficio decision. This decision by the TFN extinguished the administrative process. As a result, the Company’s only remaining option was to pursue a remedy before the Contentious Administrative Matters Federal Appeals Court (Cámara de Apelaciones en lo Contencioso Administrativo Federal) (“CACAF”) and, subsequently, the National Supreme Court of Justice (Corte Suprema de Justicia de la Nación).
On February 15, 2010, APSA appealed before the CACAF, making all necessary submissions with the purpose of attaining a revocation of the contested decision. APSA paid litigation fees (tasa de justicia) in the amount of $5,886,053 Argentine Pesos (ThU.S.$1,481 at June 30, 2011).
On March 18, 2010, the CACAF, issued a court decree in which it ordered the AFIP to refrain from requesting the blocking of preventive interim relief measures, administratively demanding payment, issuing debt invoices, or initiating judicial collection actions, including seizure of property and other enforcement measures, against APSA until CACAF reaches a decision on APSA’s request for precautionary measures.
On May 13, 2010 the Federal Appeal Court decided to accept the precautionary ruling requested by APSA, ordering to suspend the enforcement of the AFIP resolution until the final decision on this matter. This precautionary ruling was granted by the Federal Appeal Court subject to the granting of a corresponding bond. On May 19, 2010, APSA filed with the Appeal Court a surety policy issued by Zurich Argentina Cía. de Seguros S.A. After some precisions made by APSA on the abovementioned policy, on June 2, 2010, the Federal Appeal Court accepted this surety filed by APSA and ordered to notify the precautionary
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
ruling granted to the AFIP. On June 4, 2010 the AFIP was notified on this precautionary ruling, which is final since June 22, 2010.
In spite of the TFN’s ruling, the opinion issued by APSA’s external counsel continued to be that APSA has proceeded in a lawful manner in deducting the amount questioned by the State. External counsel maintains that there is a good chance that the TFN’s ruling will be overruled and that the AFIP’s ex-oficio decision will be rendered without effect. Due to the above, no provisions have been recognized for the periods in which the Negotiable Obligations were in force.
(ii) Within the course of this case’s proceedings, and particularly regarding payment of the litigation fees (tasa de justicia) before the TFN, on July 18, 2008, the Examining Officer ordered APSA to pay $10,447,705 Argentine Pesos (ThU.S.$2,629 at June 30, 2011) as payment ofTasa de Actuación(Litigation Fee) before the TFN. On August 14 2008, APSA filed a petition with the court requesting that this order be reconsidered, or in the alternative, rejected on the grounds that the requested amount was unreasonable. APSA provided evidence that it had paid $1,634,914 Argentine Pesos (ThU.S.$411 at June 30, 2011), considering that this was the actual amount due, pursuant to Law, for theTasa de Actuación(Litigation Fee). On April 13, 2010, the First Courtroom of the CACAF denied APSA’s appeal. On April 26, APSA filed an ordinary appeal against the latter decree before the Supreme Court of the Justice, which was granted on February, 3, 2011. On June 23, 2011 the brief with the ordinary appeal was files before de Court. On July, 14, 2011 the AFIP answered the petition of this brief.Based on their analysis of the grounds underlying the appeal, APSA’s counsel has an optimistic view of the case.
2. With regard to the Valdivia Mill, on April 27, 2005, the National Defense Council (Consejo de Defensa del Estado) filed a civil lawsuit against the Company for reparation of environmental harm and indemnification before the First Civil Court of Valdivia (Primer Juzgado Civil de Valdivia) (Rol 746-2005).
The Company filed its response, arguing that it is not responsible for the environmental damages and therefore that the indemnification payments as well as the alleged reparation, are inadmissible.Currently, expert reports has already been submitted, most of which were against the Companys position, the period of time that the parties have to review them has not begun yet, pending as to solve incidence of revocation and certification.
3. With regard to the Nueva Aldea Mill, on December 21, 2007, the Company was notified of nine similar complaints. Eight complaints are directed against Echeverría Izquierdo Montajes Industriales S.A., as employer, and against Arauco, as jointly responsible, and also against the Company directly. The other complaint is directed against Mr. Leonel Enrique Espinoza Canales, as employer, against Arauco, as jointly responsible, and also against Arauco directly.
The complaints request that all plaintiffs (72 plaintiffs in total) be indemnified for the damages that they allegedly suffered as a result of an accident in which three persons working for the contractor Echeverría Izquierdo Montajes Industriales S.A. were allegedly involved. This contractor was undertaking construction work at the Nueva Aldea Pulp Mill in December 2005.
These three workers allegedly suffered irradiation from handling certain equipment and materials belonging to a subcontractor of Echeverría Izquierdo Montajes Industriales, S.A. After being notified of these complaints, the Company opposed them on the basis of lack of
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
jurisdiction, and, answered the principal complaints, arguing that they are invalid for failure to state a claim. The Company also responded to the secondary complaints made directly against the Company, requesting that they be rejected for lacking any merit. All these demands have been consolidated into a single action, for which a trial is currently underway. On March 23, 2011, Echeverría Izquierdo Montajes Industriales S.A. terminated all proceedings through out-of-court settlements with the plaintiffs, without acknowledging its liability. As a result, it waived all of its rights against the former as well as the other defendants, Leonel Espinosa Canales and Celulosa Arauco y Constitución S.A. On March 24, 2011, the settlement was submitted to the court for their approval. On April 27, 2011 the court approved the settlement.
Based on these same events, on November 10, 2009, the Company was notified of a labor complaint, pursuant to a general application procedure initiated by 14 ex-employees of Echeverría Izquierdo Montajes Industriales S.A. construction company, against the latter as a principal complaint, and against Arauco as jointly responsible, based on emotional distress suffered due to alleged exposure to a radioactive isotope during the accident that occurred in Planta Nueva Aldea on December 14 and 15, 2005. The Court denied the complaint based on the applicable statute of limitation. This case has been terminated through the abovementioned settlement. To date the withdrawal es approved and the cause is filed and closed.
Based on these same events, on January 29, 2008, the Company was notified of an action for damages due to a work accident filed by Mr. Fernando Vargas Llanos, against his former employer Inspección Técnica y Control de Calidad Limitada (ITC), the construction company Echeverría Izquierdo Montajes Industriales S.A. and against the Company. The complaint requests that Mr. Vargas be indemnified for the damages that he allegedly suffered as a result of the events that took place in December 2005.
Notified of said complaint, the Company opposed it on the basis of lack of jurisdiction, and, answered the principal complaint stating that it should be dismissed for lacking any merit. On July 20, 2009 the Court dismissed the complaint on the grounds that the plaintiff had ceased in his procedural activity for more than six months, which was then challenged by the plaintiff. The Appeals Court subsequently overruled the dismissal, rejecting the lower court’s argument of abandonment. Therefore, the processing of this case, was resumed, and a hearing was set for conciliation and testing on January 25, 2011. The hearing was not held on the mentioned date. The court was on setting new date and time. This is the only case that continues pending.
4. On August 25, 2005, the Chilean Servicio de Impuestos Internos (the “Chilean IRS”) issued tax calculations No. 184 and No. 185 of 2005 objecting to certain capital reduction transactions effected by Arauco on April 16, 2001 and October 31, 2001, and furthermore, requested reimbursement from the Company for amounts returned to it in respect of certain claimed tax losses. On November 7, 2005, the Company requested a Review of the Supervision Action (Revisión de la Actuación Fiscalizadora, or “RAF”), which is an administrative review of the tax action brought by the Chilean IRS, and filed a claim disputing the abovementioned tax calculations No. 184 and 185 of 2005. The RAF was resolved on January 9, 2009 by the Chilean IRS, which resolution, however, only partially sustained the Company’s request. In response, the Company filed an additional complaint with regard to the portion of the RAF that was not granted by the administrative review. On February 19, 2010, the Court acknowledged receipt of the Company’s request. Subsequently, the tax authority issued a report and the Company commented on such
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
report. As of the date of issuance of these financial statements, the investigation in respect of this complaint is pending.
Considering that the position of the Company is supported by solid legal arguments, there is a reasonable likelihood of a favorable outcome for the Company.
5. June 22, 2011 the Company was notified by rogatory letter of a action seeking damages for an alleged tort liability, filed by twelve fishermen of the Mataquito river before the Court of First Instance, Guarantee and Family of Licantén under Docket number 73-2011, arising out of the dead fish allegedly found in the malaquito river on June 5, 2007. The plaintiffs seek to be compensated for alleged damages that they have suffered from the aforementioned event, including lost profits, pain and suffering and an alleged contractual liability.
6. On April 14, 2009, Forestal Celco S.A. was notified of a civil lawsuit filed by Mario Felipe Rojas Sepúlveda on behalf of Víctor Adrián Gavilán Villarroel against Cooperativa Eléctrica de Chillán Limitada and against Forestal Celco S.A. The lawsuit aims to make both companies jointly and severally liable for compensation of alleged material damages suffered as a result of a fire that occurred on January 12, 2007 on the El Tablón county property, which belongs to Forestal Celco S.A.
On April 30, 2009 Forestal Celco S.A. filed objections pointing to defects in the demand. The plaintiff rectified the defects, and the Company replied to the demand. On March 8, 2011 the Court issued the legal judgment of first instance rejecting the claim. On March 21, 2011, the plaintiff appealed against the first instance verdict. The case is currently under review by the Chillan Court.
7. On December 1, 2007, Forestal Celco S.A. was notified of a civil lawsuit filed by Marcela Larraín Novoa on behalf of Nimia del Carmen Alvarez Delgado against Patricia del Carmen Muñoz Zamorano and Forestal Celco S.A. This lawsuit seeks to reclaim an 88% share of the rights to the “Loma Angosta” property, which has a surface area of 281.89 hectares. This property was purchased by Forestal Celco S.A. from Patricia del Carmen Muñoz Zamorano in 1994. To date, Patricia del Carmen Muñoz Zamorano has not yet been notified of this action.
As a result on May 18, 2008, the Company filed a motion to correct the claim, which was allowed and accepted by the Court. As of this date, the plaintiff has not corrected the defects of its claim finding the case pending.
8. On January 26, 2011, Forestal Celco S.A. was notified of a civil claim submitted by Mr. Hans Fritz Muller Knoop against Cooperativa Eléctrica de Chillán Limitada and Forestal Celco S.A., which seeks that both companies be condemned to pay (jointly and severally) an indemnity for the alleged material damages caused as a result of the spreading of a fire on January 12th, 2007, in the estate named “El Tablon”, owned by Forestal Celco S.A.
On March 10, 2011, Forestal Celco S.A. answered the claim.
9. On September 23, 2008, 28 workers submitted a lawsuit against their employer, Gama Services (which rendered services for Bosques Arauco S.A.subsidiary of Celulosa Arauco y Constitución S.A.), and Bosques Arauco S.A., for an alleged joint and several liability, requesting that the termination of their labor agreements be declared unjustified, demanding for the full payment of their social security and health benefits as well as the
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Amounts in thousands of U.S. dollars, except as indicated
payment of severance for their years of service, dismissal notice, vacations, remunerations and extra hours. Said lawsuit was submitted before the 5th Labor Court of Santiago, under Docket number 780-2008, with an undetermined claimed amount.
On January 4, 2011, Bosques Arauco S.A. received the notice of the definitive first instance ruling against Gama Services, ordering the payment of all claimed compensations, including remuneration and social security and health benefits, until the validation of the dismissal or until the ruling has been executed. Simultaneously, the ruling joint and severally condemns the Company to pay various compensations –including social security payments—that are calculated until the day of the dismissal. On January 10, 2011, the Company entered a clarification remedy and appeal requesting the complete revoking of the ruling.
10. On November 17, 2003, Bosques Arauco S.A., an affiliate of Celulosa Arauco y Constitución S.A., was notified of a property restitution claim brought by Ms. Celmira Maria Curin Tromo, whom requested the restitution of certain real estate, its profits and damages in a Special Indigenous Lawsuit, claiming that she is the sole and exclusive owner of the 5.5 hectares of land, which has allegedly been exploited by Bosques Arauco S.A., in blatant disregard of her property interest. On June 6, 2008, the first instance decision was issued, denying the claim. The decision was appealed and the Ilustrísima Corte de Apelaciones de Temuco (High Court of Appeals of Temuco) overturned the decision on January 6, 2009, finding in favor of the plaintiff with regard to every portion of the claim and ordering the restitution of the land, along with all profits and damages caused by Bosques Arauco S.A. to the land, the assessment of which was deferred to the decision’s execution phase.
On October 28, 2009, the plaintiff requested the execution of the ruling with notice to the defendant. Aside from the restitution of the property and its products, the plaintiff also requested damages for the pain and suffering she had allegedly personally endured. After being notified of the request, Bosques Arauco S.A., in turn, requested that this request be nullified on the ground that the alleged pain and suffering was not an issue in the judicial proceedings and, hence, that the ruling should not include any such damages.
11. On April 29, 2004, Aserraderos Arauco S.A. was served a breach of contract plus damages claim filed by Ingeniería y Construcciones Ralco Ltda. This claim was submitted before the 2nd Civil Court of Concepción, Docket number 3218-2003.
The plaintiff argues that the contracts entered into with sawmill administrators have an effect over Aserradores Arauco S.A.
In this suit, the evidentiary ruling was issued, but it has not yet been notified. There have been no actions for over a year and it is currently archived.
12. On November 28, 2008, Alto Paraná S.A. (APSA) was notified of Resolution 212 issued by the Argentine Central Bank (BCRA) on November 19, 2008, by which the BCRA ordered Indictment No. 3991 questioning the timely liquidation of certain foreign currency with respect to APSA’s export proceeds. APSA responded to the charges in a timely and correct manner.
As of the date of these consolidated financial statements and considering the preliminary state of proceedings, Alto Paraná S.A. (APSA) legal advisors are not in a position to estimate the outcome. Therefore, with the understanding that there are no legal grounds for the charges, no provision has been made for this claim.
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
At the closing date there are no other contingencies that might significantly affect the Company’s financial, economic or operational conditions.
Provisions as of June 30, 2011 and December 31, 2010 are as follow:
Classes of Provisions | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||
Provisions, Current | 7,479 | 5,842 | ||||||
Legal claims provision | 7,479 | 5,842 | ||||||
Provisions, non-current | 9,385 | 7,609 | ||||||
Legal claims provision | 8,498 | 7,609 | ||||||
Other provision | 887 | 0 | ||||||
Total Provisions | 16,864 | 13,451 |
06/30/2011 | ||||||||||||
Movements in Provisions | Legal Claims ThU.S.$ | Other Provisions ThU.S.$ | Total ThU.S.$ | |||||||||
Opening balance | 13,451 | 0 | 13,451 | |||||||||
Changes in provisions | ||||||||||||
Increase in existing provisions | 2,049 | 0 | 2,049 | |||||||||
Used provisions | 294 | 237 | 531 | |||||||||
Increase in foreign currency exchange | 184 | 0 | 184 | |||||||||
Other increases | (1 | ) | 650 | 649 | ||||||||
Total Changes | 2,526 | 887 | 3,413 | |||||||||
Closing balance | 15,977 | 887 | 16,864 | |||||||||
12/31/2010 | ||||||||||||
Movements in Provisions | Legal Claims ThU.S.$ | Other Provisions ThU.S.$ | Total ThU.S.$ | |||||||||
Opening balance | 14,582 | 50 | 14,632 | |||||||||
Changes in provisions | ||||||||||||
Additional provisions | 5,024 | 0 | 5,024 | |||||||||
Used provisions | (6,849 | ) | (50 | ) | (6,899 | ) | ||||||
Increase in foreign currency exchange | 665 | 0 | 665 | |||||||||
Other increases | 29 | 0 | 29 | |||||||||
Total Changes | (1,131 | ) | (50 | ) | (1.181 | ) | ||||||
Closing balance | 13,451 | 0 | 13,451 |
Provisions for legal claims are for labor and tax judgments whose payment period is indeterminate.
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 19. INTANGIBLE ASSETS (IAS 38)
Arauco holds the following main intangible assets:
Computer software
Rights
Recognition and Measurement criteria of Identifiable Intangible Assets
Cost Model
After initial recognition, intangible assets are carried at cost, including any accumulated amortization and impairment losses.
Amortization Method for Computer Software
Amortization of an intangible asset with a finite useful life shall be carried on a systematic basis over the asset’s useful life. Amortization begins when the asset is available for use, which is when it complies with all the necessary conditions to operate in the manner foreseen by the Company.
Disclosure of Identifiable Intangible Assets
Classes of Intangible Assets, Net | 06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | ||||||
Intangible assets, net | 17,756 | 11,127 | ||||||
Computer software | 9,818 | 4,054 | ||||||
Water rights | 5,789 | 5,777 | ||||||
Other identifiable intangible assets | 2,149 | 1,296 | ||||||
Classes of Identifiable intangible assets, gross | 38,361 | 26,694 | ||||||
Computer software | 30,423 | 19,601 | ||||||
Water rights | 5,789 | 5,777 | ||||||
Other identifiable intangible assets | 2,149 | 1,316 | ||||||
Classes of accumulated amortization and impairment | ||||||||
Total accumulated amortization and impairment | (20,605 | ) | (15,567 | ) | ||||
Accumulated amortization and impairment, intangible assets | (20,605 | ) | (15,567 | ) | ||||
Computer software | (20,605 | ) | (15,547 | ) | ||||
Other identifiable intangible assets | 0 | (20 | ) |
Reconciliation between opening and closing book values
06/30/2011 | ||||||||||||||||
Intangible assets Roll Forward | Computer Software ThU.S.$ | Water Rights ThU.S.$ | Others ThU.S.$ | Total ThU.S.$ | ||||||||||||
Opening Balance | 4,054 | 5,777 | 1,296 | 11,127 | ||||||||||||
Changes | ||||||||||||||||
Additions | 6,040 | 0 | 599 | 6,639 | ||||||||||||
Amortization | (627 | ) | 0 | 0 | (627 | ) | ||||||||||
Increase (decrease) in foreign currency conversion | 351 | 12 | 254 | 617 | ||||||||||||
Changes Total | 5,764 | 12 | 853 | 6,629 | ||||||||||||
Closing Balance | 9,818 | 5,789 | 2,149 | 17,756 |
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12/31/2010 | ||||||||||||||||
Intangible assets Roll Forward | Computer Software ThU.S.$ | Water Rights ThU.S.$ | Others ThU.S.$ | Total ThU.S.$ | ||||||||||||
Opening Balance | 4,381 | 5,730 | 1,043 | 11,154 | ||||||||||||
Changes | ||||||||||||||||
Additions | 1,282 | 47 | 265 | 1,594 | ||||||||||||
Amortization | (1,615 | ) | 0 | 0 | (1,615 | ) | ||||||||||
Increase (decrease) in foreign currency conversion | 6 | 0 | (12 | ) | (6 | ) | ||||||||||
Changes Total | (327 | ) | 47 | 253 | (27 | ) | ||||||||||
Closing Balance | 4,054 | 5,777 | 1,296 | 11,127 | ||||||||||||
Minimum life | Maximum life | |||||||||||||||
Computer software | Years | 3 | 16 |
The amortization of computer software is presented in the Consolidated Statements of Income under Administration Expenses.
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 20. BIOLOGICAL ASSETS (IAS 41)
Arauco’s biological assets include its forestry plantations of mainly radiata and taeda pine. The total plantation is distributed in Chile, Argentina, and Brazil, reaching 1.5 million hectares, of which 927 thousand hectares are used for planting, 377 thousand hectares are native forest, 156 thousand hectares are used for other purposes and 78 thousand hectares will be planted.
As of June 30, 2011 the production volume totaled 9.3 million cubic meters (7.9 million cubic meters as of June 30, 2010).
The main considerations in determining the fair value of biological assets include the following:
• | Arauco uses the discounted future cash flows of its forest plantations, which are based on a harvest projection date for all existing plantations. |
• | Current equity is projected assuming that total volume does not decrease and a minimum demand equal to the current demand is sustained. |
• | Future plantations are not considered. |
• | The harvest of forest plantations supplies raw material for all other products that Arauco produces and sells. By directly controlling the development of forests that will be processed, Arauco is assured of having high quality timber for each of its products. |
• | Cash flows are determined in terms of harvest and expected sale of forestry products, associated with the demand from the Company’s owned industrial centers and sales to third parties. Sales margin is also considered in the valuation of the different products that are harvested in the forest. Any changes in the value of the plantations, in accordance with the criteria previously described, are accounted for in the current financial year’s income statement, pursuant to IAS 41. These changes are presented in the Consolidated Statements of Income under Other income by activity, as of June 30, 2011 amounted to ThU.S.$114,969 (ThU.S.$72,627 as of June 30, 2010). Additionally, cost of sales include a higher cost of ThU.S.$117,951 as of June 30, 2011 (ThU.S.$81,838 as of June 30, 2010) resulting from the difference between the cost of wood at fair value versus cost basis. |
• | Forests are harvested according to the needs of Arauco’s production plants. |
• | The discount rates used are: in Chile 8%, in Argentina 12% and in Brazil 10%. |
• | It is assumed that prices of harvested timber are constant in real terms based on market prices. |
• | Cost expectations with respect to the lifetime of the forests are constant based on estimated costs included in the projections made by Arauco. |
• | The average crop age by species and country is: |
Chile | Argentina | Brazil | ||||||||||
Pine | 24 | 15 | 15 | |||||||||
Eucalyptus | 12 | 10 | 7 |
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
The following chart show changes in the balance of biological assets considering varariations in significant assumptions considered at calculating the fair value of the assets:
ThU.S.$ | ||||||||
Discount rate | 0.5 | (128,237 | ) | |||||
-0.5 | 135,467 | |||||||
Margins | 10 | 408,677 | ||||||
-10 | (408,677 | ) |
Differences in the valuation of biological assets at the discount rate margins are presented in the Income Statement under item Other Operating Income and Other Operating Expenses depending on whether this is profit or loss.
Forestry plantations classified as current assets correspond to those to be harvested and sold within 12 months.
The Company holds fire insurance policies for its forestry plantations, which together with company resources and efficient protection measures for these forestry assets allow financial and operational risks to be minimized.
Uruguay
Arauco owns biological assets in Uruguay through a joint venture in partnership with Stora Enso, which are presented in these consolidated financial statements under the equity method (see Note 16).
As of June 30, 2011, Arauco’s investment in Uruguay represented a total of 129 thousand hectares, of which 70 thousand hectares are allocated to plantations, 7 thousand hectares to native forest, 44 thousand hectares for other uses, and 7 thousand hectares for planting.
Detail of Biological Assets Pledged as Security
There is no forestry plantations pledged as security, except for those belonging to Forestal Río Grande S.A. (affiliate of Fondo de Inversiones Bio Bio, a special purpose entity). In October 2006, pledges without transfer and agreements not to prohibit sell and encumber were made in favor of JPMorgan and Arauco, for forests located on their own land.
As of June 30, 2011, the fair value of these forests reached ThU.S.$15,203 (ThU.S.$30,222 as of December 31, 2010).
Detail of Biological Assets with Restricted Ownership
As of the date of these consolidated financial statements, there are no biological assets with restricted ownership.
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Disclosure of Agricultural Products
Agricultural Products relate mainly to forestry products that are intended for sale pertaining to the operation and are valued at fair value at the closing period. These are presented in the Consolidated Balance Sheet under Inventories in the Raw Material item.
No significant grants have been received.
As of the date of these Financial Statements, the Current and Non-current biological assets are as follows:
06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||
Current | 324,900 | 344,096 | ||||||
Non-current | 3,505,380 | 3,446,862 | ||||||
Total | 3,830,280 | 3,790,958 |
Biological Assets Movement
Movement | 06/30/2011 ThU.S.$ | |||
Opening Balance | 3,790,958 | |||
Changes in Biological Assets | ||||
Additions | 69,798 | |||
Decreases due to Sales | (537 | ) | ||
Decreases due to Harvest | (173,696 | ) | ||
Gain (Loss) of Changes in Fair Value, less estimated Costs at Point of Sale | 114,969 | |||
Increases (decreases) in Foreign Currency Translation | 33,042 | |||
Other Increases (decreases) | (4,254 | ) | ||
Total Changes | 39,322 | |||
Closing Balance | 3,830,280 | |||
Movement | 12/31/2010 ThU.S.$ | |||
Opening Balance | 3,757,528 | |||
Changes in Biological Assets | ||||
Additions | 112,320 | |||
Decreases due to Sales | (2,832 | ) | ||
Decreases due to Harvest | (302,808 | ) | ||
Gain (Loss) of Changes in Fair Value, less estimated Costs at Point of Sale | 221,501 | |||
Increases (decreases) in Foreign Currency Translation | 21,501 | |||
Other Increases (decreases) | (16,252 | ) | ||
Total Changes | 33,430 | |||
Closing Balance | 3,790,958 |
As of the date of these consolidated financial statements, there are no disbursements related to the acquisition of biological assets.
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 21. ENVIRONMENT
Environment Management
For Arauco, sustainability means management strategy. This strategy incorporates values, commitments and standards, that together with the adoption of best practices as well as the use of the latest available technologies, seek to continuously improve the Company’s environmental management. It is the environmental department and each of its specialists that ensure these guidelines are met and are put in to practice in everyday company operations.
All of Arauco’s production units have certified environmental management systems, which reinforce the Company’s commitment to environmental performance and ensure the traceability of all raw materials used.
Arauco uses several supplies in its productive processes such as wood, chemical products, and water, etc., which in turn produce liquid and gas emissions. As a way to make the company’s environmental management more efficient, significant progress has been made to reduce consumption and emissions.
Environmental investments have been made related to the control of atmospheric emissions, process improvements, water and waste management, as well as effluent treatment, in order to improve the environmental performance of all of Arauco’s business units.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Environment Related Disbursement Information
As of June 30, 2011 and December 31, 2010, Arauco made the following disbursements related to its main environmental projects:
Company | 06/30/2011 Name of Project | Disbursements undertaken 2010 | Committed Disbursements | |||||||||||||||
State of Project | Amount ThU.S$ | Asset Expense | Asset/expense destination item | Amount ThU.S$ | Estimated date | |||||||||||||
Arauco Do Brasil S.A. | Environmental improvement studies | In process | 3,738 | Asset | Property, plant and equipment | 957 | 2011 | |||||||||||
Celulosa Arauco y Constitución S.A. | Investment projects for the control and management of gas emissions from industrial process | In process | 221 | Asset | Property, plant and equipment | 72 | 2011 | |||||||||||
Celulosa Arauco y Constitución S.A. | Investment projects for the control and management of gas emissions from industrial process | In process | 155 | Asset | Property, plant and equipment | 4,870 | 2012 | |||||||||||
Celulosa Arauco y Constitución S.A. | Environmental improvement studies | In process | 111 | Asset | Property, plant and equipment | 226 | 2011 | |||||||||||
Celulosa Arauco y Constitución S.A. | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | In process | 1,687 | Asset | Property, plant and equipment | 4,890 | 2011 | |||||||||||
Celulosa Arauco y Constitución S.A. | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | In process | 0 | Asset | Property, plant and equipment | 1,352 | 2012 | |||||||||||
Celulosa Arauco y Constitución S.A. | Construction of Outlets | Finished | 330 | Asset | Property, plant and equipment | 0 | 0 | |||||||||||
Celulosa Arauco y Constitución S.A. | Expansion of solid industrial waste dumpsite for management of these in the future | In process | 2,147 | Asset | Property, plant and equipment | 3,160 | 2011 | |||||||||||
Alto Paraná S.A. | Construction of Outlets | In process | 39 | Asset | Property, plant and equipment | 774 | 2011 | |||||||||||
Alto Paraná S.A. | Expansion of solid industrial waste dumpsite for management of these in the future | In process | 2 | Asset | Property, plant and equipment | 2,606 | 2011 | |||||||||||
Paneles Arauco S.A. | Environmental improvement studies | In process | 40 | Asset | Property, plant and equipment | 602 | 2011 | |||||||||||
Paneles Arauco S.A. | Environmental improvement studies | In process | 642 | Expense | Administration expenses | 1,629 | 2011 | |||||||||||
Paneles Arauco S.A | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | In process | 326 | Asset | Property, plant and equipment | 559 | 2011 | |||||||||||
Paneles Arauco S.A | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | In process | 2,068 | Asset | Operating cost | 1,123 | 2011 | |||||||||||
Paneles Arauco S.A | Expansion of solid industrial waste dumpsite for management of these in the future | In process | 183 | Expense | Administration expenses | 190 | 2011 | |||||||||||
Forestal Celco S.A | Environmental improvement studies | In process | 110 | Asset | Property, plant and equipment | 743 | 2012 | |||||||||||
Forestal Celco S.A | Environmental improvement studies | In process | 167 | Expense | Administration expenses | 217 | 2011 | |||||||||||
Forestal Valdivia S.A. | Environmental improvement studies | In process | 104 | Expense | Administration expenses | 194 | 2011 | |||||||||||
Total | 12,070 | 24,164 |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
12/31/2010 Name of Project | Disbursements undertaken 2010 | Committed Disbursements | ||||||||||||||||||
State of Project | Amount ThU.S$ | Asset Expense | Asset/expense destination item | Amount ThU.S$ | Estimated date | |||||||||||||||
Celulosa Arauco y Constitución S.A. | Construction of Outlets | Finished | 3,915 | Asset | Property, plant and equipment | 0 | 0 | |||||||||||||
Celulosa Arauco y Constitución S.A. | Environmental improvement studies | In process | 1,752 | Asset | Property, plant and equipment | 158 | 2011 | |||||||||||||
Celulosa Arauco y Constitución S.A. | Environmental improvement studies | Finished | 19,142 | Expense | Operating cost | 0 | 0 | |||||||||||||
Celulosa Arauco y Constitución S.A. | Environmental improvement studies | Finished | 1,096 | Expense | Operating cost | 0 | 0 | |||||||||||||
Celulosa Arauco y Constitución S.A. | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | In process | 5,410 | Asset | Property, plant and equipment | 251 | 2011 | |||||||||||||
Celulosa Arauco y Constitución S.A. | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | In process | 370 | Expense | Operating cost | 28 | 2011 | |||||||||||||
Celulosa Arauco y Constitución S.A. | Expansion of solid industrial waste dumpsite for management of these in the future | Finished | 1,125 | Asset | Property, plant and equipment | 0 | 0 | |||||||||||||
Celulosa Arauco y Constitución S.A. | Expansion of solid industrial waste dumpsite for management of these in the future | Finished | 394 | Expense | Operating cost | 0 | 0 | |||||||||||||
Alto Paraná S.A. | Construction of Outlets | In process | 705 | Asset | Property, plant and equipment | 813 | 2011 | |||||||||||||
Alto Paraná S.A. | Expansion of solid industrial waste dumpsite for management of these in the future | In process | 726 | Asset | Property, plant and equipment | 3,486 | 2011 | |||||||||||||
Paneles Arauco S.A. | Expansion of solid industrial waste dumpsite for management of these in the future | In process | 467 | Expense | Administration expenses | 500 | 2011 | |||||||||||||
Paneles Arauco S.A. | Expansion of solid industrial waste dumpsite for management of these in the future | In process | 1,696 | Expense | Operating cost | 2,264 | 2011 | |||||||||||||
Paneles Arauco S.A | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | Finished | 3,329 | Asset | Property, plant and equipment | 0 | 0 | |||||||||||||
Paneles Arauco S.A | Environmental improvement studies | In process | 898 | Expense | Administration expenses | 2,080 | 2011 | |||||||||||||
Paneles Arauco S.A | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | In process | 702 | Asset | Property, plant and equipment | 22 | 2011 | |||||||||||||
Forestal Celco S.A | Environmental improvement studies | In process | 853 | Asset | Property, plant and equipment | 853 | 2012 | |||||||||||||
Forestal Celco S.A | Investment projects for the control and management of harmful liquids and energy optimization from the water of industrial plants | Finished | 586 | Asset | Property, plant and equipment | 0 | 0 | |||||||||||||
Arauco Do Brasil S.A. | Environmental improvement studies | In process | 1,820 | Asset | Property, plant and equipment | 2,285 | 2011 | |||||||||||||
Total | 44,986 | 12,740 |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 22. ASSETS HELD FOR SALE
Due to the decrease in demand for saw timber products due primarily to the reasons described in Note 17, have led Arauco’s Management to decide permanently close the following sawmills: La Araucana, Escuadrón, Lomas Coloradas, Lomas Coelemu and the remanufacturing plant Lomas Coloradas. Fixed assets related to these facilities are available for sale, which is expected to occur in the next 12 months, which has begun efforts to sell the assets involved.
Information on the main types of non-current assets held for sale:
06/30/2011 ThU.S.$ | 12/31/2010 ThU.S.$ | |||||||
Land | 5,003 | 5,003 | ||||||
Buildings | 5,877 | 5,877 | ||||||
Property, plant and equipment | 3,228 | 3,228 | ||||||
Total | 14,108 | 14,108 |
As of June 30, 2011 has not been recognized in the item Other Operating Expenses related to impairment of these assets held for sale.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 23. FINANCIAL INSTRUMENTS (IFRS 7)
Classification
The following table shows Arauco’s financial instruments as of June 30, 2011 and December 31, 2010. An informative estimate of fair value is shown for instruments valued at amortized cost.
June 2011 | December 2010 | |||||||||||||||
Financial Instruments | Amortized Cost ThU.S.$ | Fair Value ThU.S.$ | Amortized Cost ThU.S.$ | Fair Value ThU.S.$ | ||||||||||||
Assets | ||||||||||||||||
Fair value with change in Income and Loss (Negotiation) (1) | 330,695 | 270,720 | ||||||||||||||
Interest Rate Swaps | 1,458 | 2,909 | ||||||||||||||
Forward | 0 | 0 | ||||||||||||||
Mutual funds (2) | 329,237 | 267,811 | ||||||||||||||
Loans and Accounts Receivables | 1,350,125 | 1,350,125 | 1,562,277 | 1,562,277 | ||||||||||||
Cash and cash equivalents | 391,981 | 391,981 | 776,023 | 776,023 | ||||||||||||
Cash | 25,424 | 25,424 | 69,955 | 69,955 | ||||||||||||
Fixed Term Deposits | 366,554 | 366,554 | 705,694 | 705,694 | ||||||||||||
Agreements | 3 | 3 | 374 | 374 | ||||||||||||
Accounts Receivables (net) | 958,144 | 958,144 | 786,254 | 786,254 | ||||||||||||
Trades and Notes Receivables | 760,423 | 760,243 | 609,730 | 609,730 | ||||||||||||
Leases | 7,947 | 7,947 | 9,916 | 9,916 | ||||||||||||
Other Debtors | 189,954 | 189,954 | 166,608 | 166,608 | ||||||||||||
Hedging | ||||||||||||||||
Swaps foreign exchange | 60,288 | 53,407 | ||||||||||||||
Financial Liabilities, Total | 3,873,726 | 4,034,413 | 3,826,284 | 3,983,667 | ||||||||||||
Liabilities | ||||||||||||||||
Financial Liabilities at amortized cost | 3,865,662 | 4,026,349 | 3,811,751 | 3,969,134 | ||||||||||||
Bonds issued in Dollars | 2,379,599 | 2,532,222 | 2,374,258 | 2,527,933 | ||||||||||||
Bonds issued in UF (4) | 691,828 | 709,525 | 677,362 | 694,968 | ||||||||||||
Bank Loans in Dollars | 355,858 | 347,126 | 375,309 | 364,751 | ||||||||||||
Bank Loans in other currencies | 24,560 | 23,659 | 22,247 | 18,907 | ||||||||||||
Financial Leasing | 200 | 200 | 393 | 393 | ||||||||||||
Trades and other Payables | 413,617 | 413,617 | 362,182 | 362,182 | ||||||||||||
Financial liabilities with change in Income and Loss(3) | 8,063 | 14,533 |
(1) | Assets measured at fair value through income or loss other than mutual funds classified as cash equivalents, are presented in the Consolidated Balance Sheet in the line Other Financial Assets. |
(2) | Although this item is disclosed in note IFRS 7 as Fair Value with change in income and loss according to expected sales in short term; in this Consolidated Balance Sheet, it is classified as Cash and cash equivalents for its high level of liquidity. |
(3) | Financial liabilities measured at amortized cost, others than Trade creditors and Other accounts payable and financial liabilities held for trading are presented in this Consolidated Balance Sheet in the line Other financial liabilities, current and non-current according to their maturity. |
(4) | UF is a Chilean measure which incorporates the effects of inflation. |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Here are short-term portion of long-term debt of financial debt as of June 30, 2011 and December 31, 2010:
June 2011 ThU.S.$ | December 2010 ThU.S.$ | |||||||
Obligations with banks and financial institutions long term—short term portion | 90,981 | 63,344 | ||||||
Bonds – short term portion | 440,844 | 436,980 | ||||||
Total | 531,825 | 500,324 |
The following table shows Arauco’ net debt to equity ratio level as of June 30, 2011 and December 31, 2010:
June 2011 ThU.S.$ | December 2010 ThU.S.$ | |||||||
Financial debt, current | 569,274 | 540,140 | ||||||
Financial debt, non-current | 2,882,771 | 2,909,429 | ||||||
Total | 3,452,045 | 3,449,569 | ||||||
Cash and cash equivalent | (721,218 | ) | (1,043,834 | ) | ||||
Net financial debt | 2,730,827 | 2,405,735 | ||||||
Non-controlling participation | 104,912 | 108,381 | ||||||
Net equity attributable to parent company | 7,011,198 | 6,732,194 | ||||||
Total consolidated equity | 7,116,110 | 6,840,575 | ||||||
Total net debt to equity ratio | 0.38 | 0.35 |
Fair Value Financial Assets with Changes in Income and Loss (Negotiation)
Fair value financial assets with changes in income and loss are financial assets held for negotiation. Financial assets classified in this category are mainly acquired for sale in the short term. Derivatives are also classified for negotiation purposes unless they are defined as hedging instruments. Assets in this category are classified as current assets and are recorded at fair value, with changes in value recognized in the income statement. These assets are held with the objective of maintaining adequate liquidity levels to meet the Company’s obligations.
The following table details Arauco’s financial assets at fair value with changes in income and loss:
June 2011 ThU.S.$ | December 2010 ThU.S.$ | Period Variation | ||||||||||
Fair value with changes in income and loss (Negotiation) | 330,695 | 270,720 | 22 | % | ||||||||
Interest Rate Swap | 1,458 | 2,909 | -50 | % | ||||||||
Mutual Funds | 329,237 | 267,811 | 33 | % |
Swaps: At the closing balance sheet date, financial assets classified in this category are not considered hedging instruments, as there is no uncertainty as to their underlying liability, so these instruments comply with the management strategy regarding implicit structural liquidity risk for Arauco operations. The fair value of this item decreased by 50% compared to June 30, 2010 due to lower horizon cash flows from swaps. The U.S. Dollar is the original currency of these instruments.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Forwards:Arauco acquires this type of instrument to hedge functional currency exchange rate risks. These instruments are generally acquired with short-term maturity periods. The fair value of this item has decreased by 100% since at the closing balance sheet date, there were no such instruments. The U.S. Dollar is the original currency of these instruments.
Mutual Funds: Arauco invests in local mutual funds to maximize the profitability of cash flow surpluses in Chilean Pesos, or in international mutual funds in foreign currencies such as U.S. Dollars or Euros. These instruments are permitted under the Company’s Investment Policy. As of the date of these consolidated financial statements, the Company has increased its position in this type of instrument by 23% as compared with December 2010.
Loans and Receivables
These are non-derivative financial assets with fixed or determinable payments. These instruments are not available for trading on non quoted market’s or otherwise. In the Consolidated Balance Sheet they are included in Cash and cash equivalent and Trades and Other Receivables.
These assets are recorded at amortized cost using the effective interest method and are subject to impairment testing. Financial assets which comply with this definition are: cash and cash-equivalents, fixed term deposits, repurchase agreements, trades and other receivables current and non-current.
June 2011 ThU.S.$ | December 2010 ThU.S.$ | |||||||
Loans and Receivables | 1,350,125 | 1,562,277 | ||||||
Cash and Cash Equivalents | 391,981 | 776,023 | ||||||
Cash | 25,424 | 69,955 | ||||||
Fixed Term Deposits | 366,554 | 705,694 | ||||||
Pacts | 3 | 374 | ||||||
Receivables (Net) | 958,144 | 786,254 | ||||||
Trades and Other Notes receivable | 768,190 | 619,646 | ||||||
Other Debtors | 189,954 | 166,608 |
Cash and Cash Equivalents:Includes cash on hand, bank account balances, fixed term deposits and repurchase agreements. They are short-term investments that are readily convertible into cash, and are subject to an immaterial change in value.
The following table show cash and cash equivalents classified by currency of origin as of June 30, 2011 and December 31, 2010:
June 2011 ThU.S.$ | December 2010 ThU.S.$ | |||||||
Cash and Cash Equivalents | 721,218 | 1,043,834 | ||||||
US Dollar | 115,417 | 513,292 | ||||||
Euro | 729 | 73,573 | ||||||
Other currencies | 78,175 | 48,511 | ||||||
$ no adjustable | 428,359 | 408,458 | ||||||
U.F | 98,538 | 0 |
Fix Term Deposits and Repurchased Agreements:The objective of this instrument is to maximize the short-term value of cash surpluses. This instrument is authorized by Arauco’s Placement Policy, which establishes a mandate that allows investments in fixed income securities. In general, these instruments have a maturity period of less than ninety days.
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Trades and Notes Receivable:These represent enforceable rights for Arauco resulting from the normal course of the business, namely, operation activity or corporate purposes.
Other Debtors: These correspond to receivables from sales, services or loans that are not considered within the normal course of the business.
Trades receivables are presented at net value, which means that they are presented net of bad debt estimates. This provision is determined when there is evidence that Arauco will not receive the payments agreed to in the original sales terms. These provisions are carried out when a customer files for and commences legal bankruptcy proceedings or is in default of payments, or when Arauco has exhausted all debt collection options within a reasonable period. These include telephone calls, e-mails and debt collection letters.
Trades and account receivables, current and non-current by currencies as of June 30, 2011 and December 31, 2010 as follow:
06/30/2011 2011 ThU.S.$ | 12/31/2011 2010 ThU.S.$ | |||||||
Trades and account receivables, current | 947,980 | 774,289 | ||||||
US Dollar | 546,380 | 528,657 | ||||||
Euro | 30,749 | 31,651 | ||||||
Other currencies | 137,888 | 93,075 | ||||||
$ no adjustable | 228,996 | 115,338 | ||||||
U.F. | 3,967 | 5,568 | ||||||
Trades and account receivables, non-current | 10,164 | 11,965 | ||||||
US Dollar | 1,148 | 4,389 | ||||||
Other currencies | 117 | 205 | ||||||
$ no adjustable | 3,639 | 4,589 | ||||||
U.F. | 5,260 | 2,782 |
The following table summarizes Arauco’s financial assets at closing balance:
June 2011 ThU.S.$ | December 2010 ThU.S.$ | |||||||
Financial Assets | 1,680,820 | 1,832,997 | ||||||
Fair Value with changes in Income | 330,695 | 270,720 | ||||||
Loans and Receivables | 1,350,125 | 1,562,277 |
Financial Liabilities Valued at Amortized Cost
These financial liabilities correspond to non-derivative instruments with contractual cash flow payments, which can either be fixed or subject to variable interest rates.
Also included in this category are non-derivative financial liabilities for services or goods delivered to Arauco at the closing date of this balance sheet that have not yet been paid. These amounts are not insured and are generally paid within thirty days after being recognized.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
As of the closing date of the balance sheet, Arauco includes in this category obligations with banks and financial institutions, publicly issued bonds in U.S. Dollars and UF, creditors and other payables.
Currency | June 2011 | December 2010 | June 2011 | December 2010 | ||||||||||||||
Amortized Cost ThU.S.$ | Fair Value ThU.S.$ | |||||||||||||||||
Total Financial Liabilities | 3,865,662 | 3,811,751 | 4,026,460 | 3,969,134 | ||||||||||||||
Bonds Issued | U.S. Dollar | 2,379,599 | 2,374,258 | 2,532,333 | 2,527,933 | |||||||||||||
Bonds Issued | U.F. | 691,828 | 677,362 | 709,525 | 694,968 | |||||||||||||
Bank Loans | U.S. Dollar | 355,858 | 375,309 | 347,126 | 364,751 | |||||||||||||
Bank Loans | Other currencies | 24,560 | 22,247 | 23,659 | 18,907 | |||||||||||||
Financial Leasing | U.F. | 200 | 393 | 200 | 393 | |||||||||||||
Trades and Other Payables | U.S. Dollar | 65,150 | 296,697 | 65,150 | 296,697 | |||||||||||||
Trades and Other Payables | Euro | 5,071 | 3,220 | 5,071 | 3,220 | |||||||||||||
Trades and Other Payables | Other currencies | 100,284 | 25,368 | 100,284 | 25,368 | |||||||||||||
Trades and Other Payables | $ no adjustable | 240,924 | 35,319 | 240,924 | 35,319 | |||||||||||||
Trades and Other Payables | U.F. | 2,188 | 1,578 | 2,188 | 1,578 |
The disclosure of these liabilities at amortized cost in the Consolidated Balance Sheet as of June 30, 2011 and December 31, 2010 is as follows:
June 2011 | ||||||||||||
Current ThU.S.$ | Non-current ThU.S.$ | Total ThU.S.$ | ||||||||||
Loans that accrue interest | 569,274 | 2,882,770 | 3,452,045 | |||||||||
Trades and Other Payables | 413,617 | 0 | 413,617 | |||||||||
Total Financial Liabilities | 982,891 | 2,882,770 | 3,865,661 |
December 2010 | ||||||||||||
Current ThU.S.$ | Non-current ThU.S.$ | Total ThU.S.$ | ||||||||||
Loans that accrue interest | 540,140 | 2,909,429 | 3,449,569 | |||||||||
Trades and Other Payables | 362,182 | 0 | 362,182 | |||||||||
Total Financial Liabilities | 902,322 | 2,909,429 | 3,811,751 |
Fair Value Financial Liabilities with Changes in Income and Loss
As of the closing date of the balance sheet, Arauco held a rate swap and forward exchange rate as a financial liability at fair value with changes in income and loss. This liability incurred a net decrease of 30%, due to a rate decrease experienced by the economy in the last period.To the closing date, there are no debts for forward exchange rate. Both financial instruments incurred a decrease of 61% as of June, 2011 in financial liability at fair value with changes in income and loss compared to December 2010.
June 2011 ThU.S.$ | December 2010 ThU.S.$ | Period Variation | ||||||||||
Fair value Financial Liabilities with changes in income and loss | 8,063 | 14,533 | -45 | % | ||||||||
Swap | 5,644 | 7,642 | -26 | % | ||||||||
Forward | 2,419 | 6,891 | -65 | % |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
A summary of Arauco’s financial liabilities at closing balance date is as follows:
Financial Liabilities | June 2011 ThU.S.$ | December 2010 ThU.S.$ | ||||||
Total Financial Liabilities | 3,873,725 | 3,826,284 | ||||||
Financial Liabilities at fair value with changes in income (negotiation) | 8,063 | 14,533 | ||||||
Financial Liabilities Measured at Amortized Cost | 3,865,662 | 3,811,751 |
Effect on Income
The following table details reconciliation of balances swap cash flow hedges presented in Comprehensive Income Statement:
January 2011 ThU.S.$ | June 2010 ThU.S.$ | April 2011 ThU.S.$ | June 2010 ThU.S.$ | |||||||||||||
Opening balance | (14,079 | ) | (4,820 | ) | 0 | 0 | ||||||||||
Fair value variation | 6,881 | (18,608 | ) | 20,327 | (17,277 | ) | ||||||||||
Covered bond exchange difference | (10,969 | ) | 16,457 | (21,035 | ) | 9,037 | ||||||||||
Higher financial expense to incomes | 3,187 | 2,452 | 1,405 | 1,126 | ||||||||||||
Swaps liquidations | (3,282 | ) | (2,197 | ) | (587 | ) | (1,292 | ) | ||||||||
Tax | 1,043 | 322 | 588 | 1,429 | ||||||||||||
Closing balance | (17,219 | ) | (6,394 | ) | 698 | (6,977 | ) |
The following table details net income items and expenses recognized in income on financial instruments:
Net Gain (loss) | Impairment | |||||||||||||||||
Assets | Financial Instrument | 06/30/2011 ThU.S.$ | 06/30/2010 ThU.S.$ | 06/30/2011 ThU.S.$ | 06/30/2010 ThU.S.$ | |||||||||||||
At fair value with changes in income | Swap | 2,005 | (2,299 | ) | 0 | 0 | ||||||||||||
Forward | (5,144 | ) | (2,469 | ) | 0 | 0 | ||||||||||||
Mutual Funds | 3,614 | 1,228 | 0 | 0 | ||||||||||||||
Sub-Total | 475 | (3,540 | ) | 0 | 0 | |||||||||||||
Loans and Receivables | Fix terms deposits | 8,676 | 2,122 | 0 | 0 | |||||||||||||
Repurchased agreements | 115 | 0 | 0 | 0 | ||||||||||||||
Trades and Other receivables | 0 | 0 | 2,657 | 1,696 | ||||||||||||||
Sub-Total | 8,791 | 2,122 | 2,657 | 1,696 | ||||||||||||||
Hedge instruments | Cash flow swap | (3,187 | ) | (2,452 | ) | 0 | 0 | |||||||||||
Sub-Total | (3,187 | ) | (2,452 | ) | 0 | 0 | ||||||||||||
Liabilities At amortized cost | Bank loans | (4,209 | ) | (6,574 | ) | 0 | 0 | |||||||||||
Bond issued obligations | (87,270 | ) | (80,051 | ) | 0 | 0 | ||||||||||||
Sub-Total | (91,479 | ) | (86,625 | ) | 0 | 0 |
Fair Value Hierarchy
The assets and liabilities recorded at fair value in the Consolidated Balance Sheet dated March 31, 2011, have been measured based on the methodologies provided in IAS 39. The methodologies applied for each financial instrument are classified according to their hierarchy as follows:
• | Level I: Values or quoted prices in active markets for identical assets and liabilities. |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
• | Level II: Information (“Inputs”) from other sources than the quoted values of Level I, but observable in the market for assets and liabilities either directly (prices) or indirectly (derived from prices). |
• | Level III: Inputs for assets or liabilities that are not based on observable market data. |
Fair Value | Measurement Methodology | |||||||||||||||
June 2011 ThU.S.$ | Level I ThU.S.$ | Level II ThU.S.$ | Level III ThU.S.$ | |||||||||||||
Financial Assets at fair value | ||||||||||||||||
Swap (asset) | 1,458 | 0 | 1,458 | 0 | ||||||||||||
Forward | 0 | 0 | ||||||||||||||
Mutual Funds | 329,237 | 329,237 | 0 | 0 | ||||||||||||
Financial Liabilities at fair value | ||||||||||||||||
Swap (liabilities) | 5,644 | 0 | 5,644 | 0 | ||||||||||||
Forward (liabilities) | 2,419 | 0 | 2,419 | 0 |
Hedging Instruments
Hedging instruments registered as of June 30, 2011 correspond to cash flow hedges. Specifically, at the closing balance date, Arauco recorded rate swaps resulting at fair value for a total of ThU.S.$39,961 which is presented in the Consolidated Balance Sheet in Other financial assets, non-current. Their effects in the present period are presented in Equity as Other comprehensive results, net of exchange rate and deferred taxes.
Nature of Risk
Arauco is exposed to variations in cash flows due to exchange rate risk, mainly resulting from having assets in U.S. Dollars and liabilities in UF (obligations to the public), which causes mismatches that could affect operating results.
Information on Swaps Assigned as Hedging
Hedging Swaps H Series Bond
Hedging Objective
In March 2009, Arauco placed a bond for 2,000,000 UF on the Chilean market with an annual 2.25% coupon and semi-annual interest payments (in March and September). This bond is amortized at the end of the period, with a prepayment option from March 1, 2011. The maturity date is March 1, 2014.
In order to avoid exchange rate risk, Arauco made two cross-currency swap contracts listed below:
1.- Cross Currency Swap with Banco de Chile for 1,000,000 UF
With this swap, Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at a 2.25% annual rate, and pays semi-annual interest (in March and September) based on a notional amount of US$35,700,986.39 (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 4.99%. The market value amounts to ThU.S.$7,559 as of June 30, 2011. The maturity date of this Swap is March 1, 2014.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
2.- Cross Currency Swap with JPMorgan for 1,000,000 UF
With this contract, Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual rate of 2.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$35,281,193.28 (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 4.94%. The market value amounts to ThU.S.$8,076 as of June 30, 2011. The maturity date of this Swap is March 1, 2014.
Through a test of effectiveness, Arauco is able to validate that the instrument is highly effective within an acceptable range for the Company to eliminate exchange rate uncertainty in commitments that are subject of such hedging.
Hedging Swaps F Series Bond
Hedging Objective
Arauco placed an F series bond in November 2008 and, March 2009 for an amount of 7,000,000 UF at an annual rate of 4.25% payable semi-annually. To mitigate the risk of exchange rate, Arauco made four cross-currency swap contracts that partially cover the bond amount fluctuations:
Contract 1: With this contract Arauco receives semi-annual interest payments (in April and October) based on a notional amount of 1,000,000 UF at an annual rate of 4.25%, and pays semi-annual interest (in April and October) based on a notional amount of U.S.$38.38 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.86%. The market value amounts to ThU.S.$ 6,151 as of June, 2011. This contract expires on October 30, 2014.
Contract 2: With this contract Arauco receives semi-annual interest payments (in April and October) based on a notional amount of 1,000,000 UF at an annual rate of 4.25%, and pays semi-annual interest (in April and October) based on a notional amount of U.S.$37.98 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.79%. The markets value amounts to ThU.S.$6,700 as of June 30, 2011. This contract expires on April 30, 2014.
Contract 3: With this contract Arauco receives semi-annual interest payments (in April and October) based on a notional amount of 1,000,000 UF at an annual rate of 4.25%, and pays semi-annual interest (in April and October) based on a notional amount of U.S.$37.98 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.8%. The markets value amounts to ThU.S.$ 6,687 as of June 30, 2011. This contract expires on October 30, 2014.
Contract 4: With this contract Arauco receives semi-annual interest payments (in April and October) based on a notional amount of 1,000,000 UF at an annual rate of 4.25%, and pays semi-annual interest (in April and October) based on a notional amount of U.S.$37.62 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.79%. The markets value amounts to ThU.S.$7,105 as of June 30, 2011. This contract expires on October 30, 2014.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Contract 5: With this contract Arauco receives semi-annual interest payments (in April and October) based on a notional amount of 1,000,000 UF at an annual rate of 4.25%, and pays semi-annual interest (in April and October) based on a notional amount of U.S.$38.42 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.62%. The markets value amounts to ThU.S.$6,414 as of June 30, 2011. This contract expires on October 30, 2014.
Through a test of effectiveness, Arauco can validate that the above-detailed hedging instruments are highly effective within an acceptable range for the Company to eliminate exchange rate uncertainty for commitments that are subject of such hedging.
Hedging Swaps J Series Bond
Hedging Objective
Arauco placed a J series bond in September 2010 for an amount of 5,000,000 UF at an annual rate of 3.25% payable semi-annually. To mitigate the risk of exchange rate, Arauco made four cross-currency swap contracts that partially cover the bond amount fluctuations:
Contract 1: With this contract Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$42.86 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.20%. The market value amounts to ThU.S.$2,256 as of June 30, 2011. This contract expires on September 1, 2020.
Contract 2: With this contract Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$42.86 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.20%. The markets value amounts to ThU.S.$2,256 as of June 30, 2011. This contract expires on September 1, 2020.
Contract 3: With this contract Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$42.86 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.25%. The markets value amounts to ThU.S.$2,076 as of June 30, 2011. This contract expires on September 1, 2020.
Contract 4: With this contract Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$42.87 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.17%. The markets value amounts to ThU.S.$2,355 as of June 30, 2011. This contract expires on September 1, 2020.
Contract 5: With this contract Arauco receives semi-annual interest payments (in March and September) based on a notional amount of 1,000,000 UF at an annual rate of 3.25%, and pays semi-annual interest (in March and September) based on a notional amount of U.S.$42.876 million (equivalent to 1,000,000 UF at the exchange rate at the date of the contract) at a rate of 5.09%. The markets value amounts to ThU.S.$2,652 as of June 30, 2011. This contract expires on September 1, 2020.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Through a test of effectiveness, Arauco can validate that the above-detailed hedging instruments are highly effective within an acceptable range for the Company to eliminate exchange rate uncertainty for commitments that are subject of such hedging.
Hedging Strategy
Given that Arauco holds a high percentage of assets in U.S. Dollars, the Company needs to reduce its exchange rate risk as it has obligations in adjustable-rate Pesos. The aim of this swap is to eliminate exchange rate uncertainty, exchanging cash flows from adjustable-rate Pesos obligations generated by the above mentioned bonds, with U.S. Dollar cash flows (Arauco’s functional currency) at a fixed exchange rate and determined at the date of the contract execution.
Valuation Method
Fair value financial assets with changes in Profit and Loss (Negotiation)
Fair value financial assets with changes in profit and loss are initially recognized at fair value and transaction costs are recognized in the Income Statement. Subsequently, they are recorded at fair value.
Swaps: They are valued using the discounted cash flow method at a discount rate in accordance with operational risk, using specific swap valuation tools provided by the Bloomberg terminal.
Forwards:These instruments are initially recognized at fair value at the date on which the contract is entered into and are subsequently re-measured at fair value. The forwards are recorded as assets when fair value is positive and, as liabilities when fair value is negative.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.
Mutual Funds:Given their nature, they are recognized at fair value at the closing date for the period.
Loans and Receivables
Their value is recorded at amortized cost using the effective interest rate method, discounting the provision for bad debt.
Repurchased Agreements: These are measured at initial investment cost of paper sold plus interest accrued at the closing date of each period.
Hedging
These financial instruments are measured using the discount cash flow method at a rate consistent with the operational risk using the information given by each bank as counterparty.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Financial Liabilities at Amortized Cost
Financial instruments classified in this category are measured at amortized cost using the effective interest rate method.
The fair value estimate of bank obligations is determined using specific valuation techniques using cash flow discounted at rates consistent with the risk of the operation, while bonds are valued at market price.
Financial Liabilities with Changes in Profit and Loss
Swap:These financial instruments are measured using the discounted cash flow method at a rate consistent with the operation risk, using the information given by each bank as a counterpart.
Forward: These instruments are initially recognized at fair value at the date on which the contract is entered into and are subsequently re-measured at fair value. The forwards are recorded as assets when fair value is positive and, as liabilities when fair value is negative.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.
Risk Management
Arauco’s financial assets are exposed to several financial risks: credit risk, liquidity risk and market risk (including exchange rate risks, interest rate risks and price risks). Arauco’s global risk management program focuses on financial market uncertainty and tries to minimize potential adverse effects on Arauco’s financial profitability.
Arauco’s financial risk management is overseen by the Financial Department. This department identifies, assesses and hedges financial risks in close collaboration with Arauco’s operational units. The Company does not actively participate in the trading of its financial assets for speculative purposes.
Type of risks that arise from financial instruments
Type of Risk: Credit Risk
Description
Credit risk refers to financial uncertainty at different time horizons concerning the fulfillment of obligations subscribed to by counterparties, at the time of exercising contract rights to receive cash or other financial assets on behalf of Arauco.
Explanation of Risk Exposure and How These Risks Arise
Arauco’s exposure to credit risk is directly related to each of its customer’s individual capacities to fulfill their contractual commitments, reflected in commercial debtor accounts. Furthermore, credit risk also arises for assets that are in the hands of third parties such as fixed term deposits, agreements and mutual funds.
With regard to trade accounts receivables, as a policy, Arauco holds insurance policies for open account sales. These are intended to cover export sales from the Company, Aserraderos Arauco S.A., Paneles Arauco S.A. and Forestal Arauco S.A., as well as local sales of Arauco Distribución S.A., Arauco México S.A. de C.V., Arauco Wood Inc., Arauco
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Colombia S.A., Arauco Perú S.A. and Alto Paraná S.A. (and affiliates). Arauco works with Continental Credit Insurance Company (AA- Fitch Ratings from January 13, 2011). Arauco do Brasil (Brazil) local sales credits are insured with Euler Hermes Insurance Company. These insurance policies cover 90% of the invoice with no deductible.
In order to guarantee a credit line or an advanced payment to a supplier approved by the Credit Committee, Arauco holds several guarantees, such as mortgages, pledges, standby letters of credit, bank guarantee bonds, checks, promissory notes, consumption loans or any other guarantee that may be needed pursuant to each country’s legislation. Debt covered by this type of guarantee amounted to U.S.$137,73 million in June 2011. The guarantee procedure is regulated by Arauco’s Guarantee Policy, which controls accounting and reporting, maturity dates and value.
The Company’s maximum credit risk exposure is limited to the amortized cost value of the registered trade accounts receivable, at the date of this report, less the sales percentage insured by aforementioned credit insurance companies and by the guarantees provided to Arauco.
During the first two quarters of 2011, Arauco’s consolidated sales amounted to ThU.S.$2,234,797 that according to the agreed term of sales, 59.76 %correspond to credit sales, 29.24% to sales with letters of credit, and 11% to other classes of sales, such as Cash Against Documents (CAD).
As of June 30, 2011, Arauco’s Sales Debtors amounted to ThU.S.$759,338 that according to the agreed term of sales, 62.05% corresponded to credit sales, 32.06% to sales with letters of credit and 5.89% to other classes of sales, such as CAD, distributed among 2,104 clients. The client with the highest open account debt did not exceed 1.76% of total receivables at that date.
The receivables covered by the different insurance and guarantee policies reaches 99.23%, therefore, Arauco’s exposure portfolio is 0.77%.
Secured Debt-Open Account | ||||||||
ThU.S.$ | % | |||||||
Total Open Account receivables | 471,175 | 100.00 | ||||||
Secured debt (*) | 467,545 | 99.23 | ||||||
Uncovered debt | 3,630 | 0.77 |
(*) | Secured Debt is defined as the portion of accounts receivable that is covered by a credit company or guarantees as stand-by, mortgage or guarantee bond (among others). |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Accounts exposed to this type of risk are: trade receivable, financial lease debtors and other debtors.
June 2011 ThU.S.$ | December 2010 ThU.S.$ | |||||||
Current Receivables | ||||||||
Trades and Notes Receivable | 759,338 | 609,189 | ||||||
Financial lease debtors | 3,796 | 4,317 | ||||||
Other Debtors | 184,846 | 160,783 | ||||||
Net Subtotal | 947,980 | 774,289 | ||||||
Trades and Notes Receivable | 772,666 | 622,773 | ||||||
Financial lease debtors | 3,796 | 4,317 | ||||||
Other Debtors | 190,194 | 168,532 | ||||||
Gross Subtotal | 966,656 | 795,622 | ||||||
Estimated Trades and Uncollectable Notes —Bad Debt | 13,328 | 13,584 | ||||||
Estimated Financial leases | 0 | 0 | ||||||
Estimated Miscellaneous— Bad Debt | 5,348 | 7,749 | ||||||
Subtotal Bad Debt | 18,676 | 21,333 | ||||||
Non Current Receivables | ||||||||
Trades and Notes Receivable | 905 | 541 | ||||||
Financial lease debtors | 4,151 | 5,599 | ||||||
Other Debtors | 5,108 | 5,825 | ||||||
Net Subtotal | 10,164 | 11,965 | ||||||
Trades and Notes Receivable | 905 | 541 | ||||||
Financial lease debtors | 4,151 | 5,599 | ||||||
Other Debtors | 5,108 | 5,825 | ||||||
Gross Subtotal | 10,164 | 11,965 | ||||||
Estimated Trades and Uncollectable Notes —Bad Debt | 0 | 0 | ||||||
Estimated Financial leases | 0 | 0 | ||||||
Estimated Miscellaneous— Bad Debt | 0 | 0 | ||||||
Subtotal Bad Debt | 0 | 0 |
Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods
The Credit and Collections Department, which reports to the Financial Department, is responsible for minimizing receivables credit risk and supervising past due accounts. It is also responsible for the approval or rejection of credit limits for all sales. The standards and procedures governing the control and risk management of credit sales are set forth the Company’s Credit Policy.
For customer credit line approval and/or modification, all Arauco group companies must follow an established procedure. All Credit requests are entered into a Credit Evaluation model (EVARIE) where all available information is analyzed, including the credit line given by the credit insurance company. Subsequently, credit requests are approved or rejected by the internal committee of each company within the Arauco group considering the maximum amount authorized by the Credit Policy Department. If the credit line exceeds the maximum established amount, it is subsequently analyzed by the Corporate Committee. Credit lines are renewed on a yearly basis.
Sales with letters of credit are mainly from Asia and the Middle East. Credit assessments of the issuing banks are performed periodically, in order to obtain ratings made by the principal risk classification companies of country and world risk rankings, and of their financial position over the last five years. Depending on this evaluation, it is decided whether the issuing bank is approved or confirmation is requested.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
All sales are controlled by a credit verification system that has set parameters to block orders from clients who have accumulated past due amounts of a defined percentage of the debt and/or clients who at the time of product delivery have exceeded their credit limit or whose credit has expired.
Of the total accounts receivable as of June 30, 2011, 90.55% is current, 7.23% is between 1 and 15 days past due, 0.64% is between 16 and 30 days past due, 0.24% is between 31 and 60 days past due, 0.42% is between 61 and 90 days past due, 0% is between 91 and 180 days past due, being the maximum distribution of credit for Arauco.
The following table shows the percentages in Sales debtors net, as of June 30, 2011:
Accounts receivables
Days | Up to date | 1 to 15 | 16 to 30 | 31 to 60 | 60 to 90 | 90 to 180 | More than 90 | Total | ||||||||||||||||||||||||
ThU.S.$ | 687,556 | 54,897 | 4,841 | 1,833 | 3,182 | 0 | 7,028 | 759,338 | ||||||||||||||||||||||||
% | 90.55 | 7.23 | 0.64 | 0.24 | 0.42 | 0 | 0.93 | 100 | % |
Arauco has recognized impairment over the last five years in the amount of U.S.$8,73 which represents 0.05% of total sales during this period.
Sales debtor impairment as a percentage of total sales
2011 | 2010 | 2009 | 2008 | 2007 | Last 5 years | |||||||||||||||||||
Sales Debtors Impairment | 0.03 | % | 0.01 | % | 0.03 | % | 0.16 | % | 0.03 | % | 0.05 | % |
The amount recovered by guarantee collections, insurance payments or any other credit enhancement during the first two quarters of 2011 amount to U.S.$232,25 million which represents 21.28% of the total impaired financial assets.
Explanation of any changes to risk exposure or changes in objectives, processes and policies regarding previous years’ risk management
In March 2009, Arauco implemented a Guarantee Policy in order to control accounting, valuation and expiration dates.
In December 2009, Arauco Group updated its Corporate Credit Policy.
Regarding the risk of fix term deposits, agreements and mutual funds, Arauco has a placement policy that minimizes the risk through guidelines for management of cash flow surpluses in low-risk institutions.
Currently there is an Uncollectable Debtors Provision Policy under IFRS for all the Arauco group companies.
Investment Policy:
Arauco has an Investment Policy that which identifies and limits financial instruments and companies in which Arauco and its subsidiaries are authorized to invest in, specifically, Celulosa Arauco y Constitución S.A.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
The company’s Treasury Department is centralized with operations in Chile. The Head Office is responsible for carrying out investments, cash flow surplus investments, and short and long term debt subscriptions. Exceptions to this rule are specific investments made through other companies where authorization is required from the Chief Financial Officer.
With regard to financial instruments, the only permitted investments are fixed income investments and instruments with adequate liquidity. Each instrument has defined classifications and limits, which depend on duration and on the issuer.
With regard to intermediaries (such as banks, brokers dealers and mutual funds), a methodology is used with the objective of determining the relative risk level of each bank or entity’s financial position and debt and asset security using a point system that gives each subject entity a relative risk ranking. Arauco uses this system to define investment limits.
The required records for evaluation of the various criteria are obtained from official Financial statements provided by the banks under evaluation and from the classification of in-effect short and long term debt securities, as defined by the controlling entity (the Superintendency of Banks and Financial Institutions) and used by risk classification companies authorized by the controlling entity, which in this case include Fitch Ratings Chile, Humphreys and Feller Rate.
Evaluated criteria are: Capital and Reserves, Current Ratio, Equity Share in Total Investments in Financial System, Capital Yield, Operational Income Net Profit Ratio, Debt / Capital Ratio and the Risk Classifications of each entity.
Any necessary exceptions regarding investment limits in each particular instrument or entity must have the authorization from Arauco’s Chief Financial Officer.
Type of Risk: Liquidity Risk
Description
This risk corresponds to Arauco’s ability to fulfill debt obligations at the time of expiration.
Explanation of Risk Exposure and How These Arise
Arauco’s exposure to liquidity risk is found mainly in its obligations to the public, banks and financial institutions, creditors and other payables. These may arise if Arauco is unable to meet net cash flow requirements, which sustain its operations under both normal and exceptional circumstances.
Explanation of Objectives, Policies and Processes for Risk Management, and Measurement Methods
The Financial Management Department constantly monitors the Company’s cash flow forecasts based on short and long term forecasts and available financing alternatives. In order to control the risk level of available financial assets, Arauco follows its investment policy.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
The following table shows the capital commitment of the main financial liabilities subject to liquidity risk, presented without discounting and grouped according to their maturity dates:
June, 2011 (1):
Tax ID | Name | Currency | Name-country Loans with banks | Maturity ThU.S.$ | Total ThU.S.$ | Type of amortization | Effective Rate % | Nominal Rate | ||||||||||||||||||||||||||||||||||||
0 to 1 month | 1 to 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | Current | Non- current | ||||||||||||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Alfa-Brazil | 152 | 0 | 0 | 329 | 0 | 152 | 329 | Monthly | TJLP+1.2 | % | TJLP+1.2 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Alfa-Brazil | 173 | 0 | 0 | 257 | 0 | 173 | 257 | Monthly | TJLP+1.2 | % | TJLP+1.2 | % | |||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Banco BBVA-United States | 0 | 24,000 | 24,234 | 194,651 | 0 | 48,234 | 194,651 | (l) semiannual; (k) semiannually from 2011 |
| Libor 6 months +0.2 | % |
| Libor 6 months +0.2 | % | |||||||||||||||||||||||||||
- | Industrias Forestales S.A. | U.S. Dollar | Banco BBVA | 0 | 4,004 | 0 | 0 | 0 | 4,004 | 0 | Maturity | 0.80 | % | 0.80 | % | |||||||||||||||||||||||||||||
- | Industrias Forestales S.A. | U.S. Dollar | Banco BBVA | 0 | 0 | 10,013 | 0 | 0 | 10,013 | 0 | Maturity | 0.95 | % | 0.95 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco HSBC | 64 | 0 | 0 | 220 | 0 | 64 | 220 | Maturity | 5.50 | % | 5.50 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Bradesco | 0 | 0 | 96 | 683 | 0 | 96 | 683 | Maturity | 5.50 | % | 5.50 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Do Brazil -Brazil | 5,597 | 0 | 0 | 0 | 0 | 5,597 | 0 | Maturity | 6.75 | % | 6.75 | % | |||||||||||||||||||||||||||||
- | Arauco Forest Brasil S.A. | Real | Banco Votorantim-Brazil | 85 | 0 | 0 | 1,082 | 4,270 | 85 | 5,352 | Monthly | TJLP+3.80 | % | TJLP+3.80 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Votorantim-Brazil | 227 | 0 | 0 | 714 | 0 | 227 | 714 | Maturity | TJLP+1.10 | % | TJLP+1.10 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Votorantim-Brazil | 6,018 | 0 | 0 | 1,023 | 0 | 6,018 | 3,024 | Monthly | 11.25 | % | 11.25 | % | |||||||||||||||||||||||||||||
- | Arauco Forest Brasil S.A. | U.S.Dollar | Banco Votorantim-Brazil | 6 | 0 | 0 | 109 | 369 | 6 | 478 | Maturity | 3.30 | % | 3.30 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Itau-Brazil | 81 | 0 | 0 | 249 | 0 | 81 | 249 | Monthly | 4.50 | % | 4.50 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Itau-Brazil | 0 | 10 | 23 | 0 | 0 | 33 | 0 | Maturity | 5.50 | % | 5.50 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Itau-Brazil | 0 | 0 | 0 | 164 | 0 | 0 | 164 | Maturity | 5.50 | % | 5.50 | % | |||||||||||||||||||||||||||||
Arauco Forest Brasil S.A. | Real | Banco Itau-Brazil | 316 | 0 | 0 | 1,093 | 0 | 316 | 1,093 | Maturity | 4,50 | % | 4,50 | % | ||||||||||||||||||||||||||||||
- | Arauco Forest Brasil S.A. | Real | Banco Santander | 3,238 | 0 | 0 | 0 | 0 | 3,238 | 0 | Maturity | 6.75 | % | 6.75 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Badesco | 50 | 0 | 0 | 0 | 0 | 50 | 0 | Maturity | 5.50 | % | 5.50 | % | |||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S.Dollar | American Express | 390 | 0 | 0 | 0 | 0 | 390 | 0 | Maturity | 1.05 | % | 1.05 | % | |||||||||||||||||||||||||||||
- | Industrias Forestales S.A. | U.S. Dollar | Banco Macro | 0 | 2,003 | 0 | 0 | 0 | 2,003 | 0 | Maturity | 1.00 | % | 1.00 | % | |||||||||||||||||||||||||||||
- | Industrias Forestales S.A. | U.S. Dollar | Banco Galicia | 0 | 2,002 | 0 | 0 | 0 | 2,002 | 0 | Maturity | 0.90 | % | 0.90 | % | |||||||||||||||||||||||||||||
- | Industrias Forestales S.A. | U.S. Dollar | Banco Galicia | 0 | 0 | 5,008 | 0 | 0 | 5,008 | 0 | Maturity | 1.10 | % | 1.10 | % | |||||||||||||||||||||||||||||
- | Industrias Forestales S.A. | U.S. Dollar | Citibank | 0 | 0 | 5,007 | 0 | 0 | 5,007 | 0 | Maturity | 1.00 | % | 1.00 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Fundo de Desenvolvimiento Econom.-Brazil | 87 | 0 | 0 | 350 | 0 | 87 | 350 | Monthly | 0.00 | % | 0.00 | % | |||||||||||||||||||||||||||||
76,721,630-0 | Forestal Rio Grande S.A. | U.S. Dollar | J.P.Morgan-United States | 9,646 | 0 | 25,713 | 51,708 | 0 | 35,359 | 55,520 | Quarterly |
| Libor 3 months +0.375 | % |
| Libor 3 months +0.375 | % | |||||||||||||||||||||||||||
Total | 26,130 | 32,019 | 70,094 | 252,632 | 4,639 | 128,243 | 257,271 | |||||||||||||||||||||||||||||||||||||
Tax ID | Name | Currency | Name-country Bonds obligation | Maturity ThU.S.$ | Total ThU.S.$ | Type of amortization | Effective Rate % | Nominal Rate % | ||||||||||||||||||||||||||||||||||||
0 to 1 month | 1 to 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | Current | Non- current | ||||||||||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-E | 0 | 0 | 309 | 48,353 | 0 | 309 | 48,353 | (l) semiannual; (k) maturity | 4.02 | 4.00 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-F | 0 | 0 | 2,295 | 55,063 | 427,149 | 2,295 | 482,212 | (l) semiannual; (k) maturity | 4.24 | 4.25 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-H | 0 | 697 | 0 | 97,003 | 0 | 697 | 97,003 | (l) semiannual; (k) maturity | 2.40 | 2.25 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-J | 0 | 2,512 | 0 | 47,486 | 275,789 | 2,512 | 323,275 | (l) semiannual; (k) maturity | 3.22 | 3.22 | |||||||||||||||||||||||||||||||
- | Alto Paraná S.A. | U.S. Dollar | Bonds 144 A-Argentina | 0 | 0 | 1,004 | 335,773 | 17,213 | 1,004 | 352,986 | (l) semiannual; (k) maturity | 6.39 | 6.38 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 2019 | 15,205 | 0 | 0 | 145,000 | 620,645 | 15,205 | 765,455 | (l) semiannual; (k) maturity | 7.26 | 7.25 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 2ª emission | 0 | 2,734 | 0 | 37,500 | 138,172 | 2,734 | 175,672 | (l) semiannual; (k) maturity | 7.50 | 7.50 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 4ª emission | 0 | 395,849 | 0 | 0 | 0 | 395,849 | 0 | (l) semiannual; (k) maturity | 7.77 | 7.75 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 5ª emission | 7,303 | 0 | 0 | 322,123 | 0 | 7,303 | 322,123 | (l) semiannual; (k) maturity | 5.14 | 5.13 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 6ª emission | 0 | 0 | 4,047 | 430,145 | 0 | 4,047 | 430,145 | (l) semiannual; (k) maturity | 5.64 | 5.63 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee 2021 | 8,889 | 0 | 0 | 80,000 | 492,998 | 3,889 | 572,998 | (l) semiannual; (k) maturity | 5.02 | 5.00 | |||||||||||||||||||||||||||||||
Total | 31,397 | 401,792 | 7,655 | 1,598,446 | 1,971,966 | 440,844 | 3,570,412 | |||||||||||||||||||||||||||||||||||||
Tax ID | Name | Currency | Name-country Bonds obligation | Maturity ThU.S.$ | Total ThU.S.$ | Type of amortization | Effective Rate % | Nominal Rate % | ||||||||||||||||||||||||||||||||||||
0 to 1 month | 1 to 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | Current | Non- current | ||||||||||||||||||||||||||||||||||||||
82,152,700-7 | Bosques Arauco S.A. | U.F. | Banco Santander Chile-97,036,000-K | 24 | 50 | 113 | 13 | 0 | 187 | 13 | Monthly | 4.50 | 4.50 | |||||||||||||||||||||||||||||||
Total | 24 | 50 | 113 | 13 | 0 | 187 | 13 |
(!) | Arauco’ politics considered to meet with all Accounts payable related to or third parties (see Note 13), no later than 30 days. |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
December 31, 2010 (1):
Tax ID | Name | Currency | Name-country Loans with banks | Maturity ThU.S.$ | Total ThU.S.$ | Type of amortization | Effective Rate % | Nominal Rate | ||||||||||||||||||||||||||||||||||||
0 to 1 month | 1 to 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | Current | Non- current | ||||||||||||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Alfa-Brazil | 144 | 0 | 0 | 406 | 0 | 144 | 406 | Monthly | TJLP+1.2 | % | TJLP+1.2 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Alfa-Brazil | 161 | 0 | 0 | 308 | 0 | 161 | 308 | Monthly | TJLP+1.2 | % | TJLP+1.2 | % | |||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Banco BBVA-United States | 0 | 260 | 24,000 | 219,463 | 79 | 24,260 | 219,542 | (l) semiannual; (k) semiannually from 2011 |
| Libor 6 months +0.2 | % |
| Libor 6 months +0.2 | % | |||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Banco BBVA | 30,001 | 0 | 0 | 0 | 0 | 30,001 | 0 | Maturity | 0.26 | % | 0.26 | % | |||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | American Express | 495 | 0 | 0 | 0 | 0 | 495 | 0 | Maturity | 0.00 | % | 0.00 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco do Brasil-Brazil | 0 | 8,905 | 0 | 0 | 0 | 8,905 | 0 | Maturity | 6.75 | % | 6.75 | % | |||||||||||||||||||||||||||||
- | Arauco Forest Brasil S.A. | Real | Banco Votorantim-Brazil | 82 | 0 | 0 | 1,267 | 3,480 | 82 | 4,747 | Monthly | TJLP+3.80 | % | TJLP+3.80 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Votorantim-Brazil | 213 | 0 | 0 | 806 | 260 | 213 | 1,066 | Maturity | 11.25 | % | 11.25 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Votorantim-Brazil | 137 | 0 | 2,501 | 3,989 | 260 | 2,638 | 4,249 | Monthly | TJLP+3.80 | % | TJLP+3.80 | % | |||||||||||||||||||||||||||||
- | Arauco Forest Brasil S.A. | U.S.Dollar | Banco Votorantim-Brazil | 6 | 0 | 0 | 109 | 375 | 6 | 484 | Maturity | 11.25 | % | 11.25 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Banco Itau-Brazil | 71 | 0 | 0 | 271 | 0 | 71 | 271 | Monthly | 4.50 | % | 4.50 | % | |||||||||||||||||||||||||||||
- | Arauco Forest Brasil S.A. | Real | Banco Itau-Brazil | 186 | 0 | 0 | 647 | 0 | 186 | 647 | Maturity | 4.50 | % | 4.50 | % | |||||||||||||||||||||||||||||
- | Arauco do Brasil S.A. | Real | Fundo de Desenvolvimiento Econom.-Brazil | 81 | 0 | 0 | 0 | 358 | 81 | 358 | Monthly | 0.00 | % | 0.00 | % | |||||||||||||||||||||||||||||
76,721,630-0 | Forestal Rio Grande S.A. | U.S. Dollar | J.P.Morgan-United States | 9,860 | 0 | 25,713 | 69,094 | 0 | 35,573 | 69,094 | Quarterly |
| Libor 3 months +0.375 | % |
| Libor 3 months +0.375 | % | |||||||||||||||||||||||||||
Total | 41,437 | 9,165 | 52,214 | 296,360 | 4,812 | 102,816 | 301,172 | |||||||||||||||||||||||||||||||||||||
Tax ID | Name | Currency | Name-country Bonds obligation | Maturity ThU.S.$ | Total ThU.S.$ | Type of amortization | Effective Rate % | Nominal Rate % | ||||||||||||||||||||||||||||||||||||
0 to 1 month | 1 to 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | Current | Non- current | ||||||||||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-E | 0 | 0 | 303 | 48,190 | 0 | 303 | 48,190 | (l) semiannual; (k) maturity | 4.02 | 4.00 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-F | 0 | 0 | 2,250 | 53,987 | 424,911 | 2,250 | 478,898 | (l) semiannual; (k) maturity | 4.24 | 4.25 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-H | 0 | 684 | 0 | 96,006 | 0 | 684 | 96,006 | (l) semiannual; (k) maturity | 2.40 | 2.25 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.F. | Barau-J | 0 | 2,422 | 0 | 41,385 | 280,729 | 2,422 | 322,114 | (l) semiannual; (k) maturity | 3.23 | 3.22 | |||||||||||||||||||||||||||||||
- | Alto Paraná S.A. | U.S. Dollar | Bonds 144 A-Argentina | 1,004 | 0 | 0 | 68,850 | 292,482 | 1,004 | 361,332 | (l) semiannual; (k) maturity | 6.39 | 6.38 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 2019 | 15,205 | 0 | 0 | 145,000 | 638,387 | 15,205 | 783,387 | (l) semiannual; (k) maturity | 7.26 | 7.25 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 2ª emission | 0 | 2,734 | 0 | 37,500 | 142,808 | 2,734 | 180,308 | (l) semiannual; (k) maturity | 7.50 | 7.50 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 4ª emission | 0 | 8,914 | 386,558 | 0 | 0 | 395,472 | 0 | (l) semiannual; (k) maturity | 7.77 | 7.75 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 5ª emission | 7,303 | 0 | 0 | 329,510 | 0 | 7,303 | 329,510 | (l) semiannual; (k) maturity | 5.14 | 5.13 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee bonds 6ª emission | 0 | 0 | 4,047 | 440,252 | 0 | 4,047 | 440,252 | (l) semiannual; (k) maturity | 5.64 | 5.63 | |||||||||||||||||||||||||||||||
93,458,000-1 | Celulosa Arauco y Constitución S.A. | U.S. Dollar | Yankee 2021 | 5,556 | 0 | 0 | 80,000 | 502,661 | 5,556 | 582,661 | (l) semiannual; (k) maturity | 5.02 | 5.00 | |||||||||||||||||||||||||||||||
Total | 29,068 | 14,754 | 393,158 | 1,340,680 | 2,281,978 | 436,980 | 3,622,658 | |||||||||||||||||||||||||||||||||||||
Tax ID | Name | Currency | Name-country Bonds obligation | Maturity ThU.S.$ | Total ThU.S.$ | Type of amortization | Effective Rate % | Nominal Rate % | ||||||||||||||||||||||||||||||||||||
0 to 1 month | 1 to 3 months | 3 to 12 months | 1 to 5 years | More than 5 years | Current | Non- current | ||||||||||||||||||||||||||||||||||||||
82,152,700-7 | Bosques Arauco S.A. | U.F. | Banco Santander Chile-97,036,000-K | 27 | 54 | 250 | 49 | 0 | 331 | 49 | Monthly | 4.50 | 4.50 | |||||||||||||||||||||||||||||||
96,567,940-5 | Forestal Valdivia S.A. | U.F. | Banco Santander Chile-97,036,000-K | 13 | 0 | 0 | 0 | 0 | 13 | 0 | Monthly | 4.50 | 4.50 | |||||||||||||||||||||||||||||||
Total | 40 | 54 | 250 | 49 | 0 | 344 | 49 |
(!) | Arauco’ politics considered to meet with all Accounts payable related to or third parties (see Note 13), no later than 30 days. |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Guarantees given
As of the date of these financial statements, Arauco holds ThU.S.$13,246 as financial assets passed to third parties (beneficiaries), as a direct guarantee. If Arauco does not meet its obligation, the beneficiaries can seek relief under the warranty.
As of June 30, 2011, the assets covered by an indirect guarantee amounted to ThU.S.$571,158. The indirect guarantees are given to protect the obligation assumed by a third party, either a related company (the full guarantee of Celulosa Arauco y Constitución S.A. on Alto Paraná bonds amounted to ThU.S.$ 270,000) or an unrelated company (the buy-back operations that guarantee the obligation of forest service enterprises amounted to ThU.S.$51,678, which in the event of default, Arauco can cancel the obligation to obtain the asset exchange contract).
Direct and indirect guarantees granted by Arauco:
Direct:
Subsidiary reporting | Guarantee | Involved assets | Currency | ThU.S.$ | Creditor of the guarantee | |||||||||
Bosques Arauco | Guarantee Letter | — | CH Pesos | 30 | Chilean Tax Authority | |||||||||
Bosques Arauco | Guarantee Letter | — | CH Pesos | 1 | Direction of civil aeronautic | |||||||||
Bosques Arauco | Guarantee Letter | — | CH Pesos | 1 | Direction of civil aeronautic | |||||||||
Bosques Arauco | Guarantee Letter | — | CH Pesos | 14 | State Railway Company | |||||||||
Bosques Arauco | Guarantee Letter | — | CH Pesos | 5 | State Railway Company | |||||||||
Forestal Valdivia | Guarantee Letter | — | CH Pesos | 1 | General Directoate of Maritime Territory | |||||||||
Forestal Celco | Bank Ballot | — | CH Pesos | 4 | Direction of civil aeronautic | |||||||||
Arauco Forest Brasil | Guarantee Letter | — | USDollars | 7,500 | Banco Votorantim S.A. | |||||||||
Arauco Forest Brasil | Guarantee Letter | — | US Dollar | 1,922 | Banco Santander S.A. | |||||||||
Arauco do Brasil S.A. | Bank Ballot | — | US Dollar | 2,490 | Tradener Ltda. | |||||||||
Arauco do Brasil S.A. | Pledge | | Property, plant and equipment - | | 1,278 | Banco Alfa S.A. | ||||||||
TOTAL | 13,246 | |||||||||||||
Indirect:
| ||||||||||||||
Subsidiary reporting | Guarantee | Involved assets | Currency | ThU.S.$ | Creditor of the guarantee | |||||||||
Celulosa Arauco y Constitución S.A. | Not joint and cumulative guarantee | — | Euros | 249,480 | Montes del Plata | |||||||||
Celulosa Arauco y Constitución S.A. | Full Guarantee | — | US Dollar | 270,000 | Alto Paraná S.A. (Bonds Holders 144 A) | |||||||||
Bosques Arauco S.A. | Buy-back | — | UF | 3,384 | Leasing Banco Santander | |||||||||
Bosques Arauco S.A. | Buy-back | — | UF | 2,146 | Leasing Banco Chile | |||||||||
Forestal Valdivia S.A. | Buy-back | — | UF | 1,099 | Leasing Banco Santander | |||||||||
Forestal Valdivia S.A. | Buy-back | — | UF | 1,221 | Leasing Banco Chile | |||||||||
Forestal Celco S.A. | Buy-back | — | UF | 19,216 | Banco Santander | |||||||||
Forestal Celco S.A. | Buy-back | — | UF | 1,278 | Banco Chile | |||||||||
TOTAL | 571,158 |
Type of Risk: Market Risk – Exchange Rate
Description
This risk arises from the probability of being affected by losses from fluctuations in exchange rate in currencies in which assets and liabilities are denominated, in a functional currency different than the one defined by Arauco.
Explanation of Risk Exposures and How these Arise
Arauco is exposed to the risk of U.S. Dollar (functional currency) fluctuations for sales, purchases and obligations in other currencies, such as the Chilean Peso, Euro, Brazilian Real or others. In the case of significant exchange rate variations, the Chilean Peso is the currency that represents the main risk.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods
Arauco performs sensitivity analyses to measure the effect of this variable on EBITDA and Income.
Sensitivity analysis considers a variation of + / -10% of the exchange rate as of March 31, 2011 over the Chilean Peso. This fluctuation range is considered possible given current market conditions at the closing date. With all other variables at a constant rate, a U.S. Dollar exchange rate variation of + / -10% in relation to the Chilean Peso would mean an EBITDA an annual variation of + / - 0.01% on the income after tax and + / -2.68% and 1.85% on equity.
The main financial instruments subject to exchange rate risk are local bonds issued in UF. These are not covered by swaps described in the Hedging chapter.
Amounts expressed in UF | 06/30/2011 | 12/31/2010 | ||||||
Bonds Issued in UF (E Series) (*) | 1,000,000 | 1,000,000 | ||||||
Bonds Issued in UF (F Series) | 2,000,000 | 3,000,000 |
(*) | Arauco placed an E series bond in November 2008 for an amount of 1,000,000 UF at an annual rate of 4.00% payable semi-annually. |
Type of Risk: Market Risk – Interest rate
Description
This risk refers to the sensitivity of the value of financial assets and liabilities in terms of interest rate fluctuations.
Explanation of Risk Exposure and How These Arise
Arauco is exposed to risks due to interest rate fluctuations for obligations to the public, banks and financial institutions and financial instruments that accrue interest at a variable rate.
Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods
Arauco completes its risk analysis by reviewing its exposure to changes in interest rates. As of June 30, 2011, 7.1% of the Company’s bonds and bank loans bear interest at variable rates. A change of + /—10% interest rate, is considered a possible range of fluctuation. Such market conditions would affect the income after tax at rate of + /—0.02% and equity would not be affected.
June 2011 ThU.S.$ | Total | |||||||
Fixed rate | 3,205,734 | 92.9 | % | |||||
Bonds issued | 3,071,427 | |||||||
Loans with Banks (*) | 134,107 | |||||||
Financial leasing | 200 | |||||||
Variable rate | 246,311 | 7.1 | % | |||||
Bonds issued | 0 | |||||||
Loans with banks | 246,311 | |||||||
Total | 3,452,045 | 100.00 | % |
(*) | Includes bank loans with variable rate swapped to fixed rate. |
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AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
12/31/2010 ThU.S.$ | Total | |||||||
Fixed rate | 3,197,239 | 92.7 | % | |||||
Bonds issued | 3,051,620 | |||||||
Loans with Banks (*) | 145,226 | |||||||
Financial leasing | 393 | |||||||
Variable rate | 252,330 | 7.3 | % | |||||
Bonds issued | 0 | |||||||
Loans with banks | 252,330 | |||||||
Total | 3,449,569 | 100.00 | % |
Type of Risk: Market Risk – Price of Pulp
Description
Pulp price is determined by world and regional market conditions. Prices fluctuate based on demand, production capacity, commercial strategies adopted by large-scale forestry companies, pulp and paper producers and by the availability of substitutes.
Explanation of Risk Exposure and How These Arise
Pulp prices are reflected in operational sales and directly affect the net income for the period.
As of June 30, 2011, operational income due to pulp sales accounted for 48.1% of total sales. Pulp prices are fixed on a monthly basis in accordance with the market. Forward contracts or other financial instruments are not used for pulp sales.
Explanation of Risk Management Objectives, Policies and Processes, and Measurement Methods
This risk is approached in different ways. Arauco has a team of specialists who perform periodic market and competition analyses, providing tools to analyze and evaluate trends and adjust forecasts. Similarly, Arauco performs price financial sensitivity analysis in order to take the necessary safeguards to confront different scenarios in the best possible manner.
Sensitivity analysis considers a variation of + / - 10% in the average pulp price, a possible fluctuation range given current market conditions at the date of the closing balance. With all other variables constant, a variation of + / -10% in the average pulp price would mean an EBITDA annual variation of + / -22.89%, on the income after tax and + / -10.72% and + / -1.88% on equity.
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 24. OPERATING SEGMENTS (IFRS 8)
Operating segments were defined in accordance with Arauco’s senior management internal reporting structure, which is used to support operating decisions and resource allocation. Furthermore, the availability of relevant financial information has been considered in order to define operating segments. The persons responsible for making the decisions mentioned above are the Chief Executive Officer and Corporate Managing Directors of each business area (segment).
In line with the above, the Company established operating segments according to the following business units:
• | Pulp |
• | Panels |
• | Sawn Timber |
• | Forestry |
Description of Products and Services that Provide Ordinary Income for each disclosed Segment
Following below are the main products that provide ordinary income for each operational segment:
• | Pulp: The main products sold by this department are long fiber bleached pulp (BSKP), short fiber bleached pulp (BHKP), long fiber raw pulp (UKP), and pulp fluff. |
• | Panels: The main products sold in this area are plywood panels, MDF panels (medium density fiberboard), Hardboard Panels, PB Panels (agglomerated) and MDF Moldings. |
• | Sawn Timber: The range of products sold by this business unit includes different sizes of sawn wood and remanufactured products such as moldings, precut pieces and finger joints, among others. |
• | Forestry: This area produces and sells sawn logs, pulpable logs, posts and chips made from owned forests of Radiata and Taeda pine, eucalyptus globulus and nitens forests. Additionally, the Company purchases logs and woodchip from third parties, which it sells to its other business areas. |
Explanation on the measurements of Earnings, Assets and Liability of Each Segment
Pulp
The Pulp business unit uses wood exclusively from pine and eucalyptus plantations for the production of different classes of wood cellulose or pulp. Bleached pulp is mainly used as raw material for producing printing and writing paper, as well as toilet paper and high quality wrapping paper. Unbleached pulp is used to produce packing paper, filters, fiber cement products, dielectric paper and others. On the other hand fluff pulp is mainly used in the production of diapers and female hygiene products.
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
Arauco has six plants, five in Chile and one in Argentina, and they have a total production capacity of approximately 3.2 million tons per year. Pulp is sold in more than 40 countries, mainly in Asia and Europe.
Panels
The Panels business unit produces a wide range of panels products and several kinds of moldings aimed at the furniture, decoration and construction industries. In its 8 industrial plants, 3 in Chile, 2 in Argentina and 3 in Brazil, the Company has a total annual production capacity of 3.2 million cubic meters of plywood, PBO, MDF, Hardboards and moldings.
Sawn Timber
The Sawn Timber business unit produces a wide range of wood and remanufactured products with different kinds of uses and appearances, which include a wide variety of uses in the furniture, packing, construction and refurbishing industries.
With 9 saw mills in operation, 8 in Chile and 1 in Argentina, the Company has a production capacity of 2.8 million cubic meters of sawn wood.
Furthermore, the company has 5 remanufacturing plants, 4 in Chile and 1 in Argentina. These plants reprocess sawn wood and produce high quality remanufactured products, such as finger joint and solid moldings as well as precut pieces. These products are sold in more than 28 countries.
Forestry
The Forestry Division is Arauco’s core business. It provides raw material for all products manufactured and sold by the Company. By directly controlling the growth of the forests to be processed, Arauco guarantees itself quality wood for each of its products.
Arauco holds forestry assets distributed throughout Chile, Argentina and Brazil, reaching 1.5 million hectares, of which 927 thousand hectares are used for plantations, 377 thousand hectares for native forests, 156 thousand hectares for other uses and 78 thousand hectares are to be planted. Arauco’s principal plantations consist of Radiata and taeda pine. These are species that have fast growth rates and short harvest cycles compared with other long fiber commercial woods.
Additionally, Arauco owns a forestry asset of 128 thousand hectares in Uruguay through a joint venture with Stora Enso, which is presented under Investment in associates and accounted for the equity method (see Note 15 and 16).
Summary financial information of assets, liabilities and income by segment, are as follows:
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
For the 6 months period ended June 30, 2011 | Pulp ThU.S.$ | Sawn timber ThU.S.$ | Forestry ThU.S.$ | Panels ThU.S.$ | Others ThU.S.$ | Corporate ThU.S.$ | Sub Total ThU.S.$ | Elimination ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Income due to ordinary activities from external customers | 1,139,575 | 363,085 | 78,417 | 641,310 | 12,433 | 0 | 2,234,820 | 0 | 2,234,820 | |||||||||||||||||||||||||||
Ordinary activity income among segments | 18,853 | 6 | 422,488 | 9,186 | 13,287 | 0 | 483,820 | (483,820 | ) | 0 | ||||||||||||||||||||||||||
Financial income | 0 | 0 | 0 | 0 | 0 | 11,406 | 11,406 | 0 | 11,406 | |||||||||||||||||||||||||||
Financial costs | 0 | 0 | 0 | 0 | 0 | (104,095 | ) | (104,095 | ) | 0 | (104,095 | ) | ||||||||||||||||||||||||
Financial costs, net | 0 | 0 | 0 | 0 | 0 | (92,689 | ) | (92,689 | ) | 0 | (92,689 | ) | ||||||||||||||||||||||||
Depreciation and amortizations | 68,540 | 9,608 | 5,934 | 27,294 | 1,936 | 1,308 | 114,620 | 0 | 114,620 | |||||||||||||||||||||||||||
Sum of significant income accounts | 0 | 0 | 114,976 | 0 | 0 | 0 | 114,976 | 0 | 114,976 | |||||||||||||||||||||||||||
Sum of significant expense accounts | 0 | 0 | 3,745 | 0 | 0 | 0 | 3,745 | 0 | 3,745 | |||||||||||||||||||||||||||
Income (loss) of each specific segment | 399,023 | 30.622 | 35,718 | 80,672 | 1,715 | (188,151 | ) | 359,599 | 0 | 359,599 | ||||||||||||||||||||||||||
Company equity in profit and loss of associates and joint ventures through equity method | ||||||||||||||||||||||||||||||||||||
Associates | 0 | 0 | 0 | 0 | 0 | (940 | ) | (940 | ) | 0 | (940 | ) | ||||||||||||||||||||||||
Joint ventures | (2,355 | ) | 0 | (6,361 | ) | 0 | 0 | 1,379 | (7,337 | ) | 0 | (7,337 | ) | |||||||||||||||||||||||
Income tax expense | 0 | 0 | 0 | 0 | 0 | (93.651 | ) | (93,651 | ) | 0 | (93,651 | ) | ||||||||||||||||||||||||
Non-monetary asset disbursements of the segment | ||||||||||||||||||||||||||||||||||||
Acquisition of property, plant and equipment and biological assets | 123,246 | 39,258 | 79,591 | 99,000 | 122 | 461 | 341,678 | 0 | 341,678 | |||||||||||||||||||||||||||
Acquisition and contribution of investments in associates and joint venture | 19,459 | 0 | 16,279 | 0 | 0 | 0 | 35,738 | 0 | 35,738 | |||||||||||||||||||||||||||
Nationality of Ordinary Income | ||||||||||||||||||||||||||||||||||||
Ordinary income (Chilean companies) | 1,000,785 | 331,823 | 42,975 | 343,785 | 353 | 0 | 1,719,721 | 0 | 1,719,721 | |||||||||||||||||||||||||||
Ordinary income—foreign (Foreign companies) | 138,790 | 31,262 | 35,442 | 297,525 | 12.080 | 0 | 515,099 | 0 | 515,099 | |||||||||||||||||||||||||||
Total Ordinary Income | 1,139,575 | 363,085 | 78,417 | 641,310 | 12,433 | 0 | 2,234,820 | 0 | 2,234,820 | |||||||||||||||||||||||||||
For the period ended June 30, 2011 | Pulp ThU.S.$ | Sawn timber ThU.S.$ | Forestry ThU.S.$ | Panels ThU.S.$ | Others ThU.S.$ | Corporate ThU.S.$ | Sub Total ThU.S.$ | Elimination ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Segment assets | 4,027,809 | 549,840 | 5,350,236 | 1,596,512 | 46,800 | 1,277,184 | 12,848,381 | (9,791 | ) | 12,838,590 | ||||||||||||||||||||||||||
Investments accounted through equity method | ||||||||||||||||||||||||||||||||||||
Associates | 0 | 0 | 0 | 0 | 0 | 118,018 | 118,018 | 0 | 118,018 | |||||||||||||||||||||||||||
Joint Ventures | 50,693 | 0 | 337,761 | 0 | 0 | 21,738 | 410,192 | 0 | 410,192 | |||||||||||||||||||||||||||
Segment liabilities | 69,692 | 52,122 | 124,924 | 295,208 | 15,897 | 5,164,637 | 5,722,480 | 0 | 5,722,480 | |||||||||||||||||||||||||||
Chile | 2,661,500 | 262,929 | 3,446,385 | 345,108 | 33 | 233,401 | 6,949,356 | 1,519 | 6,950,875 | |||||||||||||||||||||||||||
Foreign | 522,063 | 24,773 | 1,316,331 | 690,467 | 32,784 | 113,377 | 2,699,795 | 0 | 2,699,795 | |||||||||||||||||||||||||||
Non-current assets, Total | 3,183,563 | 287,702 | 4,762,716 | 1,035,575 | 32,817 | 346,778 | 9,649,151 | 1,519 | 9,650,670 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
For the 6 months period ended June 30, 2010 | Pulp ThU.S.$ | Sawn timber ThU.S.$ | Forestry ThU.S.$ | Panels ThU.S.$ | Others ThU.S.$ | Corporate ThU.S.$ | Sub Total ThU.S.$ | Elimination ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Income due to ordinary activities from external customers | 814,667 | 274,661 | 69,535 | 528,323 | 11,083 | 0 | 1,698,269 | 0 | 1,698,269 | |||||||||||||||||||||||||||
Ordinary activity income among segments | 12,194 | 16,200 | 285,281 | 7,056 | 9,546 | 0 | 330,277 | (330,277 | ) | 0 | ||||||||||||||||||||||||||
Financial income | 0 | 0 | 0 | 0 | 0 | 10,728 | 10,728 | 0 | 10,728 | |||||||||||||||||||||||||||
Financial costs | 0 | 0 | 0 | 0 | 0 | (107,563 | ) | (107,563 | ) | 0 | (107,563 | ) | ||||||||||||||||||||||||
Financial costs, net | 0 | 0 | 0 | 0 | 0 | (96,835 | ) | (96,835 | ) | 0 | (96,835 | ) | ||||||||||||||||||||||||
Depreciation and amortizations | 67,219 | 9,625 | 4,657 | 25,395 | 1,907 | 1,358 | 110,161 | 0 | 110,161 | |||||||||||||||||||||||||||
Sum of significant income accounts | 22,447 | 1,069 | 72,627 | 2,150 | 0 | 0 | 98,293 | 0 | 98,293 | |||||||||||||||||||||||||||
Sum of significant expense accounts | 819 | 6,457 | 9,140 | 4,366 | 0 | 0 | 20,781 | 0 | 20,781 | |||||||||||||||||||||||||||
Income (loss) of each specific segment | 304,923 | 24,861 | 20,787 | 74,577 | 1,967 | (190,586 | ) | 236,529 | 0 | 236,529 | ||||||||||||||||||||||||||
Company equity in profit and loss of associates and joint ventures through equity method | ||||||||||||||||||||||||||||||||||||
Associates | 0 | 0 | 0 | 0 | 0 | 283 | 283 | 0 | 283 | |||||||||||||||||||||||||||
Joint ventures | (453 | ) | 0 | (2,510 | ) | 0 | 0 | 561 | (2,402 | ) | 0 | (2,402 | ) | |||||||||||||||||||||||
Income tax expense | 0 | 0 | 0 | 0 | 0 | (59,334 | ) | (59,334 | ) | 0 | (59,334 | ) | ||||||||||||||||||||||||
Non-monetary asset disbursements of the segment | ||||||||||||||||||||||||||||||||||||
Acquisition of property, plant and equipment and biological assets | 122,888 | 10,775 | 120,096 | 24,705 | 627 | 466 | 279,557 | 0 | 279,557 | |||||||||||||||||||||||||||
Acquisition and contribution of investments in associates and joint venture | 4,650 | 0 | 0 | 0 | 0 | 6,977 | 11,627 | 0 | 11,627 | |||||||||||||||||||||||||||
Nationality of Ordinary Income | ||||||||||||||||||||||||||||||||||||
Ordinary income (Chilean companies) | 674,728 | 246,229 | 46,935 | 276,413 | 557 | 0 | 1,244,862 | 0 | 1,244,862 | |||||||||||||||||||||||||||
Ordinary income—foreign (Foreign companies) | 139,939 | 28,432 | 22,600 | 251,910 | 10,526 | 0 | 453,407 | 0 | 453,407 | |||||||||||||||||||||||||||
Total Ordinary Income | 814,667 | 274,661 | 69,535 | 528,323 | 11,083 | 0 | 1,698,269 | 0 | 1,698,269 | |||||||||||||||||||||||||||
Year ending December 31, 2010 | Pulp ThU.S.$ | Sawn timber ThU.S.$ | Forestry ThU.S.$ | Panels ThU.S.$ | Others ThU.S.$ | Corporate ThU.S.$ | Sub Total ThU.S.$ | Elimination ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Segment assets | 3,840,362 | 546,386 | 5,237,801 | 1,438,486 | 50,120 | 1,412,275 | 12,525,430 | (19,098 | ) | 12,506,332 | ||||||||||||||||||||||||||
Investments accounted through equity method | ||||||||||||||||||||||||||||||||||||
Associates | 0 | 0 | 0 | 0 | 0 | 114,155 | 114,155 | 0 | 114,155 | |||||||||||||||||||||||||||
Joint Ventures | 33,588 | 0 | 328,622 | 0 | 0 | 21,839 | 384,049 | 0 | 384,049 | |||||||||||||||||||||||||||
Segment liabilities | 153,270 | 54,132 | 112,374 | 256,864 | 13,469 | 5,075,648 | 5,665,757 | 0 | 5,665,757 | |||||||||||||||||||||||||||
Chile | 2,594,804 | 234,382 | 3,425,316 | 295,677 | 1,978 | 225,815 | 6,777,972 | 2,486 | 6,780,458 | |||||||||||||||||||||||||||
Foreign | 531,107 | 31,550 | 1,242,324 | 644,501 | 35,367 | 88,909 | 2,573,758 | 0 | 2,573,758 | |||||||||||||||||||||||||||
Non-current assets, Total | 3,125,911 | 265,932 | 4,667,640 | 940,178 | 37,345 | 314,724 | 9,351,730 | 2,486 | 9,354,216 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
For quarter April-June 2011 | Pulp ThU.S.$ | Sawn timber ThU.S.$ | Forestry ThU.S.$ | Panels ThU.S.$ | Others ThU.S.$ | Corporate ThU.S.$ | Sub Total ThU.S.$ | Elimination ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Income due to ordinary activities from external customers | 609,384 | 185,513 | 43,840 | 342,299 | 6,735 | 0 | 1,187,771 | 0 | 1,187,771 | |||||||||||||||||||||||||||
Ordinary activity income among segments | 9,472 | 0 | 285,735 | 4,618 | 6,561 | 0 | 306,386 | (306,386 | ) | 0 | ||||||||||||||||||||||||||
Financial income | 0 | 0 | 0 | 0 | 0 | 4,120 | 4,120 | 0 | 4,120 | |||||||||||||||||||||||||||
Financial costs | 0 | 0 | 0 | 0 | 0 | (52,520 | ) | (52,520 | ) | 0 | (52,520 | ) | ||||||||||||||||||||||||
Financial costs, net | 0 | 0 | 0 | 0 | 0 | (48,400 | ) | (48,400 | ) | 0 | (48,400 | ) | ||||||||||||||||||||||||
Depreciation and amortizations | 34,497 | 4,731 | 3,000 | 13,712 | 974 | 657 | 57,571 | 0 | (57,571 | ) | ||||||||||||||||||||||||||
Sum of significant income accounts | 0 | 0 | 57,630 | 0 | 0 | 0 | 57,630 | 0 | 57,630 | |||||||||||||||||||||||||||
Sum of significant expense accounts | 0 | 0 | 260 | 0 | 0 | 0 | 260 | 0 | 260 | |||||||||||||||||||||||||||
Income (loss) of each specific segment | 210,783 | 17,259 | 15,435 | 39,472 | 750 | (100,603 | ) | 183,096 | 0 | 183,096 | ||||||||||||||||||||||||||
Company equity in profit and loss of associates and joint ventures through equity method | ||||||||||||||||||||||||||||||||||||
Associates | 0 | 0 | 0 | 0 | 0 | (1,109 | ) | (1,109 | ) | 0 | (1,109 | ) | ||||||||||||||||||||||||
Joint ventures | (1,873 | ) | 0 | (2,160 | ) | 0 | 0 | 761 | (3,272 | ) | 0 | (3,272 | ) | |||||||||||||||||||||||
Income tax expense | 0 | 0 | 0 | 0 | 0 | (46,491 | ) | (46,491 | ) | 0 | (46,491 | ) | ||||||||||||||||||||||||
Non-monetary asset disbursements of the segment | ||||||||||||||||||||||||||||||||||||
Acquisition of property, plant and equipment and biological assets | 58,676 | 23,911 | 44,530 | 67,839 | 107 | 276 | 195,339 | 0 | 195,339 | |||||||||||||||||||||||||||
Acquisition and contribution of investments in associates and joint venture | 15,959 | 0 | 779 | 0 | 0 | 0 | 16,738 | 0 | 16,738 | |||||||||||||||||||||||||||
Nationality of Ordinary Income | ||||||||||||||||||||||||||||||||||||
Ordinary income (Chilean companies) | 541,061 | 166,638 | 24,580 | 174,076 | 189 | 0 | 906,544 | 0 | 906,544 | |||||||||||||||||||||||||||
Ordinary income-foreign (Foreign companies) | 68,323 | 18,875 | 19,260 | 168,223 | 6,546 | 0 | 281,227 | 0 | 281,227 | |||||||||||||||||||||||||||
Total Ordinary Income | 609,384 | 185,513 | 43,840 | 342,299 | 6,735 | 0 | 1,187,771 | 0 | 1,187,771 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
For quarter April-June 2010 | Pulp ThU.S.$ | Sawn timber ThU.S.$ | Forestry ThU.S.$ | Panels ThU.S.$ | Others ThU.S.$ | Corporate ThU.S.$ | Sub Total ThU.S.$ | Elimination ThU.S.$ | Total ThU.S.$ | |||||||||||||||||||||||||||
Income due to ordinary activities from external customers | 428,415 | 161,639 | 42,061 | 275,341 | 5,933 | 0 | 913,390 | 913,390 | ||||||||||||||||||||||||||||
Ordinary activity income among segments | 9,680 | 15,112 | 149,374 | 3,698 | 5,499 | 0 | 183,363 | (183,363 | ) | 0 | ||||||||||||||||||||||||||
Financial income | 0 | 0 | 0 | 0 | 0 | 2,144 | 2,144 | 0 | 2,144 | |||||||||||||||||||||||||||
Financial costs | 0 | 0 | 0 | 0 | 0 | (57,628 | ) | (57,628 | ) | 0 | (57,628 | ) | ||||||||||||||||||||||||
Financial costs, net | 0 | 0 | 0 | 0 | 0 | (55,484 | ) | (55,484 | ) | 0 | (55,484 | ) | ||||||||||||||||||||||||
Depreciation and amortizations | 41,733 | 5,445 | 2,631 | 13,961 | 1,009 | 0 | 64,779 | 0 | 64,779 | |||||||||||||||||||||||||||
Sum of significant income accounts | 41,346 | 2,150 | 0 | 0 | 43,496 | 0 | 43,496 | |||||||||||||||||||||||||||||
Sum of significant expense accounts | (16,110 | ) | 2,235 | 4,879 | 608 | 0 | 0 | (8,388 | ) | 0 | (8,388 | ) | ||||||||||||||||||||||||
Income (loss) of each specific segment | 199,543 | 24,609 | 4,075 | 50,681 | 2,865 | (107,771 | ) | 174,002 | 0 | 174,002 | ||||||||||||||||||||||||||
Company equity in profit and loss of associates and joint ventures through equity method | ||||||||||||||||||||||||||||||||||||
Associates | 0 | 0 | 0 | 0 | 0 | 118 | 118 | 0 | 118 | |||||||||||||||||||||||||||
Joint ventures | 440 | 0 | (1,989 | ) | 0 | 0 | 816 | (733 | ) | 0 | (733 | ) | ||||||||||||||||||||||||
Income tax expense | (46,623 | ) | (46,623 | ) | 0 | (46,623 | ) | |||||||||||||||||||||||||||||
Non-monetary asset disbursements of the segment | ||||||||||||||||||||||||||||||||||||
Acquisition of property, plant and equipment and biological assets | 80,789 | 2,951 | 55,675 | 13,412 | 627 | 466 | 153,920 | 0 | 153,920 | |||||||||||||||||||||||||||
Acquisition and contribution of investments in associates and joint venture | 0 | 0 | (7,350 | ) | 0 | 0 | 2,977 | (4,373 | ) | 0 | (4,373 | ) | ||||||||||||||||||||||||
Nationality of Ordinary Income | ||||||||||||||||||||||||||||||||||||
Ordinary income (Chilean companies) | 349,960 | 145,697 | 29.209 | 141,275 | 393 | 0 | 666,535 | 0 | 666,535 | |||||||||||||||||||||||||||
Ordinary income-foreign (Foreign companies) | 78,455 | 15,942 | 12,852 | 134,066 | 5,540 | 0 | 246,855 | 0 | 246,855 | |||||||||||||||||||||||||||
Total Ordinary Income | 428,415 | 161,639 | 42,061 | 275,341 | 5,933 | 0 | 913,390 | 0 | 913,390 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 25. DISTRIBUTABLE NET INCOME AND EARNINGS PER SHARE
Distributable net income
As a general policy, the Board of Directors of Arauco agreed that the net income to be distributed as dividend payment is determined based on the effective realized income, net of any relevant variations in the value of unrealized assets and liabilities, which are excluded from the calculation of net income during the period such changes are made.
As a result of the foregoing, for purposes of determining the distributable net income of the Company, which is the same considered for calculating the minimum required and additional dividend, the following unrealized results are excluded from the results of the exercise:
1) | Those relating to the fair value recorded for forestry assets covered by IAS 41, restoring them to the net income at the time of its completion. For these purposes, this includes the realized portion of such increases in fair value for assets sold or disposed by other means. |
2) | Those generated through the acquisition of entities. These results will be restored to the net income at the time of their realization. For this purpose, the results are realized when acquired entities generate an income after their acquisition or when such entities are sold. |
The deferred taxes associated with the amounts described in points 1) and 2) are also excluded.
The following table details adjustments made for the determination of distributable net income as of June 30, 2011 and December 31, 2010 corresponding to 40% of the distributable net income for each period:
Distributable Net Profit ThU.S.$ | ||||
Income attributable to the Parent Company at 06/30/2011 | 354,065 | |||
Adjustments | ||||
Biological Assets | ||||
Unrealized | (114,969 | ) | ||
Realized | 117,951 | |||
Deferred income taxes | (3,545 | ) | ||
Total adjustments | (563 | ) | ||
Distributable Net Income at 06/30/2011 | 353,502 |
Distributable Net Profit ThU.S.$ | ||||
Income attributable to the Parent Company at 12/31/2010 | 694,750 | |||
Adjustments | ||||
Biological Assets | ||||
Unrealized | (221,502 | ) | ||
Realized | 200,320 | |||
Deferred income taxes | (1,744 | ) | ||
Biological Assets (net) | (22,926 | ) | ||
Negative Goodwill | (1,113 | ) | ||
Total adjustments | (24,039 | ) | ||
Distributable Net Income at 12/31/2010 | 670,711 |
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Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
As a general matter, the Company expects to maintain its policy on dividends, for all future tax periods, with around 40% of net income to be distributed for each tax year, but will also consider the alternative of distributing a provisional dividend at year end.
Other non-current financial liabilities included in the Consolidated Balance Sheet dated June 30, 2010 shows ThU.S.$197,734 and ThU.S.$141,401 correspond to the provision of minimum dividend for the year 2011.
Earnings per share
The earnings per share are calculated by dividing the income attributable to shareholders of the Company with the weighted average of outstanding common shares. Arauco has no dilutive shares.
Gains (losses) per Shares | January-June | April- June | ||||||||||||||
2011 ThU.S.$ | 2010 ThU.S.$ | 2011 ThU.S.$ | 2010 ThU.S.$ | |||||||||||||
Gain (loss) attributable to holders of instruments in net equity participation of the Controller | 354,065 | 236,529 | 181,578 | 174,073 | ||||||||||||
Weighted average of number of shares, basic | 113,152,446 | 113,152,446 | 113,152,446 | 113,152,446 | ||||||||||||
Gain (loss) per share (U.S.$ per share) | 3.13 | 2.09 | 1.60 | 1.54 |
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June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
NOTE 26. EVENTS AFTER REPORTING PERIOD (IAS 10)
1) According to information provided by the Company as a material fact on January 18, 2011, Inversiones Arauco Internacional Limitada—a subsidiary of the Company—and Stora Enso approved a project to build a state of the art pulp mill with a guaranteed annual capacity of 1.3 million tons, a dock and a power plant that generates energy from renewable sources in Punta Pereira, an area located in the Colonia department in Uruguay.
In connection with this project, we hereby announce that, during the Company’s 24th Extraordinary Shareholders Meeting held on July, 29, 2011, the Company’s shareholders approved the granting of a limited several but not joint guarantee (fianza no solidaria y limitada), to secure the obligations that the Uruguayan corporations Celulosa y Energía Punta Pereira S.A. and Zona Franca Punta Pereira S.A. assume, on the one hand, in respect of certain loans granted by Banco Interamericano de Desarrollo (BID) of up to US$600,000,000 (of which US$200,000,000 would be directly granted by BID and the rest by BNP Paribas, DnB Nor, Nordea, Santander or other financial institutions to which BID will syndicate the loan) and, on the other hand, in respect of a credit agreement that is being negotiated with Finnvera, a Finnish financial institution for export credit (Export Credit Agency, or ECA), of up to US$900,000,000 to be granted by BNP Paribas, DnB Nor, Nordea and Santander, which agreement may later be assigned to Finnish Export Credit Limited, all of the above, in order to finance a portion of the construction of the pulp mill mentioned before.
The total amount to be granted pursuant to the abovementioned loans will not exceed US$1,354,000,000, and the abovementioned guarantee to be granted by Celulosa Arauco y Constitución S.A. will severally but not jointly guarantee an amount equal to 50% of such loans.
2) At the meeting held on July14, 2011, the Board of Directors of Celulosa Arauco y Constitución S.A. passed the following resolution:
a) To create the position of Executive Vice President in the Company’s top management, appointing Mr. Matías Domeyko Cassel, who, until the date thereof, served as General Manager of Arauco.
The creation of the position of Executive Vice President responds to the significant growth of Arauco’s group of companies in recent years, both in their business lines and in their international expansion. For such reason, it was deemed convenient to incorporate into Arauco’s organization the best international practices of corporate governance of companies of similar size and importance in order to strength the management and development of the Company and its subsidiaries.
The Executive Vice President will directly report to the Company’s board of directors, and will primarily focus on Arauco’s strategic planning, its development and international expansion, to strengthen the integration of the different businesses of Arauco’s group of companies, to incorporate the best international practices of corporate governance, and in general to strengthen the management and development of the Company and its subsidiaries and to coordinate the compliance of the guidelines set forth by the Company’s board of directors. The General Manager (discussed below) will directly report to the Executive Vice President.
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Table of Contents
CELULOSA ARAUCO Y CONSTITUCION S.A.
AND SUBSIDIARIES
Unaudited Notes to the Consolidated Financial Statement
June 30, 2011
Amounts in thousands of U.S. dollars, except as indicated
b) To appoint, as the new General Manager of the Company, Mr. Cristián Infante Bilbao, who, until the date thereof, served as the Corporate Management and Development Director. Mr. Cristián Infante Bilbao has broad experience with the Company’s various lines of business, and in past years has served as the head of Arauco’s subsidiaries in Argentina and Brazil, and has also made significant contributions to the Montes del Plata pulp project in Uruguay.
As of the date thereof, both Mr. Domeyko and Mr. Infante have assumed their new positions in the Company.
c) The authorization of the issuance and publication of these interim Cosolidated Financial Statements for the period ended on June 30, 2011 was approved on the Company’s Number 452 Extraordinary Board of Directors Meeting held on August 23, 2011.
After June 30, 2011 and until date of issuance of these financial statements , there have been no other event of financial or other nature to inform.
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