REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
SHELL COMPANY REPORT PURSUANT TO SECTION 23 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class | Name of each exchange on which registered |
Series A shares, in the form of American Depositary Shares Series B shares, in the form of American Depositary Shares | New York Stock Exchange New York Stock Exchange |
Series A shares | 142,819,552 |
Series B shares | 120,376,972 |
YES NO
Page | |||
PRESENTATION OF INFORMATION | |||
GLOSSARY | |||
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | |||
PART I | |||
PART II | 91 | ||
PART III | 94 | ||
SIGNATURES | |||
CONSOLIDATED FINANCIAL STATEMENTS | |||
EXHIBIT 1.1 | |||
EXHIBIT 8.1 | |||
EXHIBIT 12.1 | |||
EXHIBIT 12.2 | |||
EXHIBIT 13.1 | |||
EXHIBIT 13.2 |
ii
iii
A deposit may be classified as an Indicated Mineral Resource when the nature, quality, amount and distribution of data are such as to allow the Competent Person determining the Mineral Resource to confidently interpret the geological framework and to assume continuity of mineralization. Confidence in the estimate is sufficient to allow the appropriate application of technical and economic parameters and to enable an evaluation of economic viability. |
iv
A deposit may be classified as a Measured Mineral Resource when the nature, quality, amount and distribution of data are such as to leave no reasonable doubt, in the opinion of the Competent Person determining the Mineral Resource, that the tonnage and grade of the deposit can be estimated within close limits and that any variation from the estimate would not significantly affect potential economic viability. This category requires a high level of confidence in, and understanding of, the geology and controls of the mineral deposit. Confidence in the estimate is sufficient to allow the appropriate application of technical and economic parameters and to enable an evaluation of economic viability. |
v
· | the Company's capital investment program and development of new products; |
· | trends affecting the Company's financial condition or results of operations; |
· | level of production, quality of the ore and brines, and production yields; |
· | the future impact of competition; |
· | any statements preceded by, followed by, or that include the words "believe," "expect," "predict," "anticipate," "intend," "estimate," "should," "may," "could" or similar expressions; and |
· | other statements contained in this Form 20-F that are not historical facts. |
· | SQM's ability to implement its capital expenditures, including its ability to arrange financing when required; |
· | the nature and extent of future competition in SQM's principal markets; |
· | political, economic and demographic developments in the emerging market countries of Latin America and Asia where SQM conducts a large portion of its business; and |
· | the factors discussed below under Item 3. Key Information—Risk Factors. |
vi
Year ended December 31, | ||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||
Income Statement Data | (in millions of US$) (1) | |||||||||||||||
Chilean GAAP | ||||||||||||||||
Total Revenues | 896.0 | 788.5 | 691.8 | 553.8 | 526.4 | |||||||||||
Operating Income | 181.2 | 124.1 | 87.3 | 82.7 | 73.7 | |||||||||||
Non-operating results, net | (34.4 | ) | (17.6 | ) | (21.2 | ) | (30.0 | ) | (29.2 | ) | ||||||
Net income | 113.5 | 74.2 | 46.8 | 40.2 | 30.1 | |||||||||||
Net earnings per share (2) | 0.43 | 0.28 | 0.18 | 0.15 | 0.11 | |||||||||||
Net earnings per ADS (2) | 4.31 | 2.82 | 1.78 | 1.53 | 1.14 | |||||||||||
Dividend per share (3)(4) | 0.279 | 0.182 | 0.088 | 0.076 | 0.056 | |||||||||||
Weighted average shares Outstanding (000s) (2) | 263,197 | 263,197 | 263,197 | 263,197 | 263,197 | |||||||||||
U.S. GAAP (4) | ||||||||||||||||
Total Revenues | 896.0 | 788.5 | 691.8 | 553.8 | 526.4 | |||||||||||
Operating Income | 163.9 | 117.1 | 76.4 | 86.4 | 74.6 | |||||||||||
Non-operating results, net | (6.1 | ) | (4.1 | ) | (4.0 | ) | (25.9 | ) | (41.6 | ) | ||||||
Effect of change in accounting principles | — | — | — | 0.5 | — | |||||||||||
Net income | 125.2 | 86.8 | 57.8 | 46.9 | 24.4 | |||||||||||
Basic and diluted earnings per share | 0.48 | 0.33 | 0.22 | 0.18 | 0.09 | |||||||||||
Basic and diluted earnings per ADS | 4.76 | 3.30 | 2.19 | 1.78 | 0.93 | |||||||||||
Weighted average shares Outstanding (000s)(2) | 263,197 | 263,197 | 263,197 | 263,197 | 263,197 | |||||||||||
1
Year ended December 31, | ||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||
Balance Sheet Data: | (In millions of US$) (1) | |||||||||||||||
Chilean GAAP: | ||||||||||||||||
Total assets | 1,640.6 | 1,361.4 | 1,363.5 | 1,322.3 | 1,413.4 | |||||||||||
Long-term debt | 100.0 | 200.0 | 260.0 | 324.0 | 412.0 | |||||||||||
Total shareholders' equity | 1,020.4 | 948.6 | 890.0 | 849.7 | 831.7 | |||||||||||
Capital Stock | 477.4 | 477.4 | 477.4 | 477.4 | 477.4 | |||||||||||
U.S. GAAP | ||||||||||||||||
Total assets | 1,609.0 | 1,318.5 | 1,319.4 | 1,274.6 | 1,354.8 | |||||||||||
Long-term debt | 100.0 | 200.0 | 260.0 | 324.0 | 412.0 | |||||||||||
Total shareholders' equity | 923.4 | 856.9 | 794.7 | 747.3 | 721.4 | |||||||||||
Capital Stock | 479.3 | 479.3 | 479.3 | 479.3 | 479.3 |
(1) | Except shares outstanding, dividend and net earnings per share and net earnings per ADS. |
(2) | There are no authoritative pronouncements related to the calculation of earnings per share in accordance with Chilean GAAP. For comparative purposes the calculation has been based on the same number of weighted average shares outstanding as used for the U.S. GAAP calculation. |
(3) | Dividends per share are calculated based on 263,197 thousand shares for the periods ended December 31, 2001, 2002, 2003, 2004 and 2005. |
(4) | Dividends may only be paid from net income before amortization of negative goodwill as determined in accordance with Chilean GAAP; see Item 8.A.8. Dividend Policy. For dividends in Ch$ see Item 8.A.8.Dividend Policy — Dividends. |
2
Observed Exchange Rate (1) | |||||||||||||
Ch$ per US$ | |||||||||||||
Year/Month | Low (1) | High (1) | Average (2)(3) | Year/Month End | |||||||||
2001 | 557.13 | 716.62 | 634.76 | 654.79 | |||||||||
2002 | 641.75 | 756.56 | 692.32 | 718.61 | |||||||||
2003 | 593.10 | 758.21 | 687.50 | 599.40 | |||||||||
2004 | 559.21 | 649.45 | 612.13 | 559.83 | |||||||||
2005 | 509.70 | 592.75 | 559.27 | 514.21 | |||||||||
December 2005 | 509.70 | 518.63 | 514.33 | 514.21 | |||||||||
January 2006 | 512.00 | 535.36 | 524.48 | 524.78 | |||||||||
February 2006 | 516.91 | 532.35 | 525.70 | 517.76 | |||||||||
March 2006 | 516.75 | 536.16 | 528.77 | 527.70 | |||||||||
April 2006 | 511.44 | 526.18 | 517.33 | 518.62 | |||||||||
May 2006 | 512.76 | 532.92 | 520.79 | 531.11 |
(1) | Observed exchange rates are the actual high and low on a day-to-day basis, for each period. |
(2) | The yearly average rate is calculated as the average of the exchange rates on the last day of each month during the period. |
(3) | The monthly average rate is calculated on a day-to-day basis for each month. |
3
4
6
7
8
9
10
11
2005(4) | 2004(3) | 2003(2) | ||||||||
(in millions of US$) | ||||||||||
Expenditures (1) | 198.1 | 91.4 | 57.4 |
(1) | Includes investments in related companies. These amounts will not match the consolidated statements of cashflows, as the Company does not consolidate development stage companies. |
(2) | Includes acquisition of La Coruña. (US$13 million). |
(3) | Includes acquisition of PCS Yumbes (US$35 million). The Yumbes mine is not currently being mined and we expect that part of the facilities will be relocated to the first Region, to be used in the development of the nitrates expansion project. |
(4) | Includes acquisition of Kefco in Dubai (US$9.3 million) |
12
13
2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||
Specialty Plant Nutrition | 54 | % | 54 | % | 52 | % | 51 | % | 49 | % | ||||||
Iodine and derivatives | 17 | % | 14 | % | 12 | % | 15 | % | 16 | % | ||||||
Lithium and derivatives | 9 | % | 8 | % | 7 | % | 7 | % | 7 | % | ||||||
Industrial Chemicals | 8 | % | 9 | % | 11 | % | 13 | % | 13 | % | ||||||
Other Products | 12 | % | 15 | % | 18 | % | 14 | % | 15 | % | ||||||
100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
(1) | participate in businesses where we are or will be a cost leader supported by strong fundamentals; |
(2) | differentiate ourselves from commodity producers by manufacturing, marketing and distributing specialty products that sell at high value; |
(3) | continually increase the efficiency of our production processes and reduce costs in order to increase our productivity; |
(4) | maintain leadership in our principal business areas – specialty plant nutrients, iodine and lithium – in terms of installed capacity, costs, production, pricing and development of new products; and |
14
(5) | vertically integrate towards more value added markets. |
· | Caliche ore deposits: contain nitrates, iodine and sodium sulfate. |
15
· | Atacama Salar brines: contain potassium, lithium, sulfates and boron. |
17
18
· | are fully water soluble, allowing their use in hydroponics, fertigation, foliar applications and other advanced agricultural techniques; |
· | are absorbed more rapidly by plants because they do not require nitrification like ammonia based fertilizers; |
· | are free of chlorine content, reducing the risk of scorching roots; |
· | do not release hydrogen after application, avoiding increased soil acidity; |
· | possess trace elements, which promote disease resistance in plants and have other beneficial effects; |
· | are more attractive to customers who prefer products of natural origin; and |
· | are more efficient than commodity fertilizers because they deliver more plant nutrients per unit of nutrient applied. |
Sales Volume (in metric tons) | 2005 | 2004(3) | 2003 | 2002 | 2001 | |||||||||||
Sodium nitrate | 63,300 | 58,900 | 62,500 | 59,500 | 63,100 | |||||||||||
Potassium nitrate and sodium potassium nitrate(1) | 690,200 | 707,600 | 696,500 | 558,600 | 544,800 | |||||||||||
Potassium Sulfate | 178,600 | 157,700 | 143,200 | 161,000 | 156,600 | |||||||||||
Blended and other specialty plant nutrients(2) | 350,700 | 374,400 | 377,100 | 276,600 | 241,800 | |||||||||||
Revenues (in US$ millions) | 487.8 | 426.8 | 362.8 | 281.4 | 259.1 |
(1) | Includes re-sales of potassium nitrate purchased from PCS Yumbes. |
(2) | Includes blended and other specialty plant nutrients. It also includes Yara’s products sold pursuant to our commercial agreement. |
(3) | 2004 figures have been restated to reflect a reclassification affecting specialty plant nutrients. Products that used to be included under SPN were relocated to reflect their industrial status. |
Sales Breakdown | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Central and South America | 29 | % | 29 | % | 26 | % | 30 | % | 24 | % | ||||||
North America | 22 | % | 22 | % | 18 | % | 17 | % | 18 | % | ||||||
Europe | 20 | % | 19 | % | 20 | % | 15 | % | 14 | % | ||||||
Others | 20 | % | 20 | % | 27 | % | 27 | % | 31 | % | ||||||
Chile | 9 | % | 10 | % | 9 | % | 11 | % | 13 | % |
21
22
Sales Volume (in metric tons) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Iodine and iodine derivatives | 8,100 | 7,700 | 6,600 | 6,400 | 5,600 | |||||||||||
Revenues (in US$ millions) | 149.1 | 110.5 | 84.6 | 84.1 | 81.4 |
Sales Breakdown | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Europe | 30 | % | 27 | % | 34 | % | 36 | % | 37 | % | ||||||
North America | 37 | % | 38 | % | 40 | % | 41 | % | 45 | % | ||||||
Central and South America | 13 | % | 13 | % | 6 | % | 13 | % | 9 | % | ||||||
Others | 20 | % | 22 | % | 20 | % | 10 | % | 9 | % |
24
Sales Volume (in metric tons) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Lithium carbonate and derivatives | 27,800 | 31,200* | 27,400 | 22,300 | 21,700 | |||||||||||
Revenues (in US$ millions) | 81.4 | 62.6 | 49.7 | 37.3 | 37.0 |
Sales Breakdown | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
Europe | 33 | % | 32 | % | 31 | % | 40 | % | 31 | % | ||||||
North America | 25 | % | 26 | % | 29 | % | 37 | % | 43 | % | ||||||
Asia and Oceania | 31 | % | 37 | % | 37 | % | 21 | % | 25 | % | ||||||
Others | 11 | % | 5 | % | 3 | % | 2 | % | 1 | % |
Sales Volume (in metric tons) | 2005 | 2004(1) | 2003 | 2002 | 2001 | |||||||||||
Industrial nitrates | 176,300 | 192,800 | 193,200 | 187,300 | 186,999 | |||||||||||
Sodium Sulfate | 25,300 | 29,900 | 54,200 | 63,200 | 66,742 | |||||||||||
Boric Acid | 6,300 | 6,120 | 10,700 | 11,300 | 12,822 | |||||||||||
Revenues (in US$ millions) | 74.0 | 73.1 | 73.7 | 70.8 | 69.6 |
(1) | 2004 figures have been restated to reflect a reclassification affecting Industrial nitrates. Products that used to be included under SPN were relocated to reflect their industrial status. |
27
Sales Breakdown | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||
North America | 42 | % | 38 | % | 39 | % | 31 | % | 37 | % | ||||||
Europe | 28 | % | 23 | % | 25 | % | 17 | % | 20 | % | ||||||
Central and South America | 17 | % | 24 | % | 12 | % | 24 | % | 27 | % | ||||||
Others | 13 | % | 15 | % | 24 | % | 28 | % | 16 | % |
28
29
30
31
Main subsidiaries | Activity | Country of Incorporation | SQM Beneficial Ownership Interest (Direct/Indirect) | |||
SQM Nitratos S.A. | Extracts and sells Caliche ore to subsidiaries and affiliates of SQM | Chile | 100% | |||
SQM Industrial S.A. | Produces and markets the Company’s products directly and through other subsidiaries and affiliates of SQM | Chile | 100% | |||
SQM Salar S.A. | Exploits the Atacama Salar to produce and market the Company’s products directly and through other subsidiaries and affiliates of SQM | Chile | 100% | |||
Minera Nueva Victoria S.A. | Produces and markets the Company’s products directly and through other subsidiaries and affiliates of SQM | Chile | 100% | |||
Servicios Integrales de Tránsitos y Transferencias S.A. (SIT) | Owns and operates a rail transport system and also owns and operates the Tocopilla port facilities | Chile | 100% | |||
Soquimich Comercial S.A. | Markets domestically the Company’s specialty plant nutrition products and imports fertilizers for re-sale in Chile | Chile | 61% | |||
Ajay-SQM Chile S.A. | Produces and markets the Company’s iodine and iodine derivatives | Chile | 51% | |||
Sales and distribution affiliates in the United States, Belgium, Brazil, Venezuela, Ecuador, Peru, Argentina, Mexico, South Africa and other locations. | Market the Company’s products throughout the world | Various |
32
33
34
Exploitation Concessions | Exploration Concessions | ||||||||||||||||||
Mines(*) | Total number | hectares | Total number | hectares | Total number | hectares | |||||||||||||
Pedro de Valdivia | 698 | 93,252 | 15 | 619 | 713 | 93,871 | |||||||||||||
Maria Elena | 651 | 126,000 | 29 | 1,102 | 680 | 127,102 | |||||||||||||
Pampa Blanca | 513 | 96,908 | 5 | 340 | 518 | 97,248 | |||||||||||||
Nueva Victoria | 63 | 8,128 | 7 | 1,369 | 70 | 9,497 | |||||||||||||
Mapocho | 61 | 8,240 | 11 | 367 | 72 | 8,607 | |||||||||||||
Soronal | 311 | 42,605 | 18 | 1,824 | 329 | 44,429 | |||||||||||||
Atacama Salar | 133 | 197,708 | 487 | 141,000 | 620 | 338,708 | |||||||||||||
Sub total mines | 2,430 | 572,841 | 572 | 146,621 | 3,002 | 719,462 | |||||||||||||
Other caliche areas | 5,277 | 1,425,147 | 2,401 | 635,429 | 7,678 | 2,060,576 | |||||||||||||
Salars and other areas | 267 | 50,008 | 126 | 33,500 | 393 | 83,508 | |||||||||||||
Sub total other areas | 5,544 | 1,475,155 | 2,527 | 668,929 | 8,071 | 2,144,084 | |||||||||||||
Total | 7,974 | 2,047,996 | 3,099 | 815,550 | 11,073 | 2,863,546 | |||||||||||||
35
2005 | 2004 | 2003 | ||||||||
Pedro de Valdivia | ||||||||||
Metric tons of ore mined | 12,362 | 12,029 | 11,583 | |||||||
Average grade Nitrate (% by weight) | 7.2 | 7.2 | 6.9 | |||||||
Iodine (parts per million (ppm)) | 402 | 378 | 391 | |||||||
Metric tons of Crystallized Nitrate Produced | 476 | 458 | 430 | |||||||
Metric tons of Iodine Produced | 2.6 | 2.3 | 2.0 | |||||||
María Elena (2) | ||||||||||
Metric tons of ore mined | 5,917 | 5,835 | 5,783 | |||||||
Average grade Nitrate (% by weight) | 8.0 | 8.6 | 8.5 | |||||||
Iodine (ppm) | 428 | 485 | 468 | |||||||
Metric tons of Crystallized Nitrate Produced | 479 | 480 | 440 | |||||||
Metric tons of Iodine Produced (Eq. 97%) | 1.4 | 1.5 | 1.4 | |||||||
Pampa Blanca | ||||||||||
Metric tons of ore recovered | 5,309 | 4,976 | 4,838 | |||||||
Iodine (ppm) | 520 | 560 | 560 | |||||||
Metric tons of Iodine Produced | 1.5 | 1.4 | 1.3 | |||||||
Nueva Victoria | ||||||||||
Metric tons of ore recovered | 7,140 | 6,776 | 5.010 | |||||||
Iodine (ppm) | 504 | 505 | 549 | |||||||
Metric tons of Iodine Produced | 2.2 | 2.0 | 1.6 | |||||||
SQM Salar | ||||||||||
Metric tons of Lithium Carbonate Produced | 27 | 27 | 24 | |||||||
Metric tons of Potash Produced | 632 | 638 | 651 | |||||||
Metric tons of Potassium Sulfate Produced | 162 | 178 | 157 | |||||||
Metric tons of Boric Acid | 9 | 9 | 9 |
(1) | Note that because the Mapocho and Soronal mines are not currently being mined, there is no data to report with respect to extraction Yields. Additionally the DSM iodine business acquisition was not included. |
(2) | Includes production at Coya Sur from treatment of fines and nitrates from pile treatment at Pampa Blanca, María Elena and Pedro de Valdivia. |
36
Mine | Proven Reserves (millions of metric tons) | Nitrate Average Grade (percentage by weight) | Iodine Average Grade (parts per million) | |||
Pedro de Valdivia | 144.0 | 7.2% | 387 | |||
María Elena | 146.8 | 7.3% | 415 | |||
Pampa Blanca | 81.4 | 6.3% | 546 | |||
Nueva Victoria | 95.3 | 4.2% | 467 | |||
Mapocho | 4.6 | 5.3% | 436 | |||
Soronal | 158.9 | 7.1% | 405 |
Mine | Probable Reserves (millions of metric tons) | Nitrate Average Grade (percentage by weight) | Iodine Average Grade (parts per million) | |||
Pedro de Valdivia | 134.7 | 6.9% | 441 | |||
María Elena | 97.6 | 7.3% | 380 | |||
Pampa Blanca | 423.1 | 6.0% | 526 | |||
Nueva Victoria | 66.0 | 3.7% | 443 | |||
Soronal | 59.1 | 7.6% | 362 |
37
Proven Reserves (millions of metric tons) | Probable Reserves (millions of metric tons) | |||
Potassium | 39.8 | 5.0 | ||
Sulfate | 35.9 | 1.6 | ||
Lithium | 2.0 | 1.4 | ||
Boron | 1.1 | 0.2 |
38
39
40
Location | Type of Facility | Approximate Size (1) (Hectares) | ||
Pedro de Valdivia | Nitrate, sulfate and iodine production | 126 | ||
María Elena | Nitrate, sulfate and iodine production | 110 | ||
Coya Sur | Nitrate, sulfate and iodine production | 232 | ||
Pampa Blanca | Concentrated nitrate salts and iodine production | 86 | ||
Nueva Victoria | Iodine production | 11 | ||
Atacama Salar(2) | Potassium chloride, lithium chloride, potassium sulfate and boric acid | 2,288 | ||
Salar del Carmen, Antofagasta | Lithium carbonate and lithium hydroxide production | 28 | ||
Salar del Carmen, Antofagasta | Boron production | 4 | ||
Tocopilla | Port facilities | 24 |
(1) | Includes production facilities, solar evaporation ponds and leaching heaps, if any. |
(2) | We lease the exploitation rights used at the Atacama Salar from Corfo. |
43
44
· | Specialty plant nutrition: production and commercialization of fertilizers with unique characteristics. |
· | Iodine and derivatives: production and commercialization of iodine and derivatives. |
· | Lithium and derivates: production and commercialization of lithium and derivatives. |
· | Industrial chemicals: production and commercialization of industrial nitrates, sodium sulfate and boric acid. |
· | Trends in demand for our products. See Item 5.D. Trend Information; |
· | Our efficiency in operating our facilities as they are generally running at nameplate capacity; |
· | Our ability to accomplish our capital expenditures program in a timely manner, as we are the main supplier in our core businesses; |
· | Trends in the exchange rate between the US dollar and Chilean peso, as a significant portion of the cost of sales is related to the Chilean peso; |
46
· | Logistics, raw materials and maintenance costs, which have been increasing in the last two years; and |
· | Energy costs, which have increased due to the high cost of oil and the potential interruption of our natural gas supply. |
Year ended December 31, | |||||||||||||||||||
2005 | 2004 | 2003 | |||||||||||||||||
US$ | % | US$ | % | US$ | % | ||||||||||||||
Specialty plant nutrition | 487.8 | 54 | 426.8 | 54 | 362.8 | 52 | |||||||||||||
Iodine and derivatives | 149.1 | 17 | 110.5 | 14 | 84.6 | 12 | |||||||||||||
Lithium and derivatives | 81.4 | 9 | 62.6 | 8 | 49.7 | 7 | |||||||||||||
Industrial chemicals | 74.0 | 8 | 73.1 | 9 | 73.7 | 11 | |||||||||||||
Other products(1) | 103.7 | 12 | 115.5 | 15 | 121.0 | 18 | |||||||||||||
Total | 896.0 | 100 | 788.5 | 100 | 691.8 | 100 | |||||||||||||
(1) | Primarily imported fertilizers distributed in Chile and Mexico and potassium chloride sold to third parties. |
Year ended December 31, | |||||||||||||||||||
2005 | 2004 | 2003 | |||||||||||||||||
US$ | % | US$ | % | US$ | % | ||||||||||||||
Total revenues | 896.0 | 100.0 | 788.5 | 100.0 | 691.8 | 100.0 | |||||||||||||
Cost of goods sold | (652.9 | ) | (72.9 | ) | (608.7 | ) | (77.2 | ) | (554.0 | ) | (80.1 | ) | |||||||
Gross margin | 243.1 | 27.1 | 179.8 | 22.8 | 137.8 | 19.9 | |||||||||||||
Selling and administrative expenses | (61.9 | ) | (6.9 | ) | (55.7 | ) | (7.1 | ) | (50.6 | ) | (7.3 | ) | |||||||
Operating income | 181.2 | 20.2 | 124.1 | 15.7 | 87.2 | 12.6 | |||||||||||||
Non-operating income | 16.4 | 1.8 | 20.8 | 2.7 | 18.7 | 2.7 | |||||||||||||
Non-operating expenses | (50.8 | ) | (5.7 | ) | (38.4 | ) | (4.9 | ) | (39.8 | ) | (5.8 | ) | |||||||
Income before income taxes | 146.8 | 16.3 | 106.5 | 13.5 | 66.1 | 9.5 | |||||||||||||
Income tax | (32.5 | ) | (3.6 | ) | (27.3 | ) | (3.5 | ) | (16.0 | ) | (2.3 | ) | |||||||
Minority interest | (1.0 | ) | (0.1 | ) | (5.1 | ) | (0.6 | ) | (3.7 | ) | (0.5 | ) | |||||||
Amortization of negative goodwill | 0.2 | 0.0 | 0.2 | 0.0 | 0.4 | 0.1 | |||||||||||||
Net income | 113.5 | 12.7 | 74.2 | 9.4 | 46.8 | 6.8 | |||||||||||||
47
Year 2005 | Year 2004 (1) | % Change | |||||||||||
Sodium nitrate | Th. Ton | 63.3 | 58.9 | 8 | % | ||||||||
Potassium nitrate and sodium potassium nitrate | Th. Ton | 690.2 | 707.6 | -3 | % | ||||||||
Blended and other specialty fertilizers | Th. Ton | 217.5 | 243.3 | -11 | % | ||||||||
Other non - SQM Specialty plant nutrients (2) | Th. Ton | 133.2 | 131.1 | 2 | % | ||||||||
Potassium sulfate | Th. Ton | 178.6 | 157.7 | 13 | % | ||||||||
(1) | 2004 figures have been restated to reflect a reclassification affecting specialty plant nutrients. Products that used to be included under Specialty Plant Nutrition were relocated to reflect their industrial status. |
(2) | Includes resales of purchased products. |
Year 2005 | Year 2004 | % Change | |||||||||||
Iodine and derivatives | Th. Ton | 8.1 | 7.7 | 5 | % |
48
Year 2005 | Year 2004 | % Change | |||||||||||
Lithium carbonate and derivatives | Th. Ton | 27.8 | 31.2* | -11 | % | ||||||||
49
Year 2005 | Year 2004(1) | % Change | |||||||||||
Industrial nitrates | Th. Ton | 176.3 | 192.9 | -9 | % | ||||||||
Soum Sulfate | Th. Ton | 25.3 | 29.9 | -15 | % | ||||||||
Boric acid | Th. Ton | 6.3 | 6.1 | 3 | % | ||||||||
(1) | 2004 figures have been restated to reflect a reclassification affecting Industrial nitrates. Products that used to be included under Specialty Plant Nutrition were relocated to reflect their industrial status. 2004 boric acid volumes have been restated to reflect a reclassification from Industrial Chemicals to Specialty Plant Nutrition. Revenues were also reclassified. |
Year 2005 | Year 2004 | % Change | |||||||||||
Potassium Chloride | Th. Ton | 128.7 | 211.9 | -39 | % |
· | higher energy and raw materials costs; |
· | less favorable exchange rates; and |
· | maintenance and depreciation cost increase. |
50
· | During 2004, SQM sold its 14.05% stake in Empresas Melón S.A., or Empresas Melón, at a public auction carried out in the Santiago Stock Exchange on August 18, 2004. The transaction resulted in a before-tax profit of approximately US$8.2 million. |
· | The income derived from the investments in related companies decreased to US$2.6 million in the year 2005 from US$4.5 million during 2004 (including Empresas Melón). |
· | During 2005 there were exchange losses of approximately US$3.8 million compared to approximately US$0.5 million during 2004. This was due to the Chilean peso exchange rate and Euro exchange rate. |
· | Other losses were approximately US$4.0 million greater in 2005 than those of 2004, including writeoff of investments, amortization of goodwill and others. |
51
Year 2004(1) | Year 2003 (2) | % Change | |||||||||||
Sodium nitrate | Th. Ton | 58.9 | 62.5 | -6 | % | ||||||||
Potassium nitrate and sodium potassium nitrate | Th. Ton | 707.6 | 696.5 | 2 | % | ||||||||
Blended and other specialty fertilizers | Th. Ton | 243.3 | 252.1 | -3 | % | ||||||||
Other non- SQM specialty plant nutrients (3) | Th. Ton | 131.1 | 125.0 | 5 | % | ||||||||
Potassium sulfate | Th. Ton | 157.7 | 143.2 | 10 | % | ||||||||
(1) | 2004 figures have been restated to reflect a reclassification affecting specialty plant nutrients. Products that used to be included under Specialty Plant Nutrition were relocated to reflect their industrial status. |
(2) | 2003 figures have been restated to reflect a reclassification affecting specialty plant nutrients. Products that used to be included under Other Products were reallocated to reflect their specialty status. |
(3) | Includes resales of purchased products. |
· | The decrease in sodium nitrate sales only reflects the availability of this product to be sold as agricultural sodium nitrate, as we have the alternative of using it to produce potassium nitrate or industrial sodium nitrate. During 2004 more of this product was destined to produce potassium nitrate. |
· | The increase in potassium-related plant nutrients reflects an increase in shipments to Europe, North America and Latin America, especially to Brazil, which was partially offset by lower volumes delivered to China. The decrease in shipments to China is the result of our decision, facing a tight supply situation, to focus on markets with higher returns. |
· | The increase in non-SQM product sales reflects an overall increase in market demand. |
· | The increase in potassium sulfate shipments was due to our ability to produce greater quantities and thereby keep pace with growing market demand. |
52
Year 2004 | Year 2003 | % Change | |||||||||||
Iodine and derivatives | Th. Ton | 7.7 | 6.6 | 17 | % |
· | Sales of iodine to the x-ray contrast media, biocides and pharmaceutical markets on average experienced growth of approximately 7%. |
· | We increased sales to the Chinese markets, mainly to the pharmaceutical and disinfectant industries. |
· | We increased our sales of iodine for use in LCD screens, a relatively new development in iodine applications. Iodine destined to this market increased by approximately 50% in 2004. Though iodine sales to this market constituted only approximately 3% of iodine sales volume in 2004, we expect that the demand for iodine for use in LCD screens may contribute significantly to the worldwide demand for iodine in the next few years. |
Year 2004 | Year 2003 | % Change | |||||||||||
Lithium carbonate and derivatives | Th. Ton | 31.2* | 27.4 | 14 | % | ||||||||
· | The increase in revenues in 2004 was mainly due to a strong increase in sales to the lithium ion battery market, continuing the trend of the previous two years. Lithium carbonate sales destined to this market accounted for approximately 20% of volume sales. |
· | Other important lithium carbonate markets were the Asia-Pacific markets, where uses related to infrastructure growth, such as glass, frits and air conditioning, have been growing at higher rates than the world economy growth. |
· | Our lithium hydroxide sales grew in volume by approximately 20% during 2004, as a consequence of the increased global demand for lithium-based lubricating greases. |
· | Pricing conditions also improved in 2004. The average increase in lithium carbonate sales prices was approximately 8% during 2004. Similarly, lithium hydroxide sales prices increased by approximately 10% during the year 2004. |
53
Year 2004(1) | Year 2003 | % Change | |||||||||||
Industrial nitrates | Th. Ton | 192.9 | 193.2 | 0 | % | ||||||||
Sodium sulfate | Th. Ton | 29.9 | 54.2 | -45 | % | ||||||||
Boric acid | Th. Ton | 6.1 | 10.7 | -43 | % | ||||||||
(1) | 2004 figures have been restated to reflect a reclassification affecting Industrial nitrates. Products that used to be included under Specialty Plant Nutrition were relocated to reflect their industrial status. 2004 boric acid volumes have been restated to reflect a reclassification from Industrial Chemicals to Specialty Plant Nutrition. Revenues were also reclassified. |
· | Industrial nitrates have seen a slight reduction in sales volumes, mainly in Asia, due to high logistical costs and low prices. Despite a decrease in volumes of industrial nitrates, an increase by approximately 10% in industrial nitrates prices allowed us to obtain higher revenues for this product. |
· | The significant decrease in sodium sulfate and boric acid sales was due to lower production. Prices for these two product lines have increased on average by approximately 7% due to increased demand for raw materials in the pulp and paper and detergent industries. |
· | World demand for industrial chemicals is growing at a moderate pace of 2%, mainly driven by increased mining activity and infrastructure development. |
Year 2004 | Year 2003 | % Change | |||||||||||
Potassium Chloride | Th. Ton | 211.9 | 284.1 | -25 | % | ||||||||
54
· | Logistics costs increased by approximately 15% due to a worldwide low shipping capacity in the world and higher oil prices; |
· | The Chilean peso strengthened against the U.S. dollar by approximately 13% on average (calculated as the percentage change between the average exchange rates for the years 2004 and 2003), thereby increasing the U.S. dollar amount of our costs denominated in Chilean pesos, mainly salaries and certain local contracts; |
· | Natural gas shortages, extending through a period of approximately six weeks in 2004, increased our operation costs because we had to replace the natural gas with higher cost diesel. |
Year ended December 31, | |||||||
2004 | 2003 | ||||||
(in millions of US$) | |||||||
Net Financial income (expense) (1) | -15.1 | -18.8 | |||||
Exchange gain (loss) | -0.5 | 6.6 | |||||
Others | -1.9 | -8.9 | |||||
Total Non-Operating | -17.6 | -21.2 |
55
· | On August 18, 2004, we sold our 14.05% stake in Empresas Melón at a public auction carried out on the Santiago Stock Exchange. We recorded a pretax profit of approximately US$8.2 million. This non-core asset had been held by us since 1998 when we sold our cement project to Empresas Melón. The sale of our investment in Empresas Melón is consistent with our strategy to focus on our core businesses. |
· | Net financial expenses decreased from US$(21.0) million in 2003 to US$(16.8) million in 2004. The Company reduced its net financial debt by approximately US$106.7 million, partly as a result of the sale of our stake in Empresas Melón S.A. |
· | Partially offsetting the positive effects of the foregoing, during 2003 we recorded exchange gains of approximately US$6.6 million, whereas during 2004 we recorded exchange losses of approximately US$0.5 million. |
56
2005 | 2004 | ||||||
Th US$ | Th US$ | ||||||
Chilean pesos | 53,167 | 66,980 | |||||
Brazilian real | (941 | ) | (448 | ) | |||
Euro | 19,373 | 20,069 | |||||
Japanese yen | 6,333 | 3,693 | |||||
Mexican pesos | 8,101 | (2,770 | ) | ||||
South African rand | 7,529 | 7,074 | |||||
Dirhams | 11,543 | ||||||
Other currencies | 3,282 | 2,224 |
57
Years | Amount (millions of US$) | |||
2006 | 200.0 | |||
2010 | 100.0 |
58
2005 | 2004 | ||||||
Weighted-average discount rate | 7.5 | % | 7.5. | % | |||
Rate of increase in compensation levels | 0.0 | % | 0.0 | % | |||
Cost of living | 2.5 | % | 2.5 | % | |||
Long-term rate of return on plan assets | 8.5 | % | 8.5 | % |
59
60
Total ThUS$ | Less Than 1 year ThUS$ | 1 - 3 years ThUS$ | 3 - 5 years ThUS$ | More Than 5 years ThUS$ | ||||||||||||
Long- and Short-Term Debt | 389,902 | 289,902 | — | 100,000 | — | |||||||||||
Capital lease obligations | 1,249 | 184 | 416 | 490 | 159 | |||||||||||
Operating leases | 98,630 | 3,945 | 7,890 | 7,890 | 78,905 | |||||||||||
Purchase commitments | 64,046 | 64,046 | — | — | — | |||||||||||
Staff severance indemnities | 16,415 | — | — | — | 16,415 | |||||||||||
Total Contractual Obligations and Commitments | 570,242 | 358,077 | 8,306 | 108,380 | 95,479 |
61
Directors Name | Position | Current position held since | ||
Julio Ponce L. (1) | Chairman of the Board and Director | September 1987 | ||
Mr. Ponce is a Forestry Engineer from the Universidad de Chile. He joined the Company in 1981. He is also Chairman of the Board of the following corporations: Sociedad de Inversiones Pampa Calichera S.A., Sociedad de Inversiones Oro Blanco S.A., Norte Grande S.A. and Soquimich Comercial S.A. He is the brother of Luis Eugenio Ponce. | ||||
Wayne R. Brownlee | Vice Chairman of the Board and Director | May 2002 | ||
Mr. Brownlee is Executive Vice-President, Treasurer and Chief Financial Officer of Potash Corporation of Saskatchewan, Inc. Mr. Brownlee earned degrees in Science and Business Administration from the University of Saskatchewan. He is on the Board of Great Western Brewing Company as well as PhilomBios, an agricultural biotechnology company. He became director at SQM on December 2001. | ||||
Hernán Büchi B. | Director | April 1993 | ||
Mr. Büchi is a Civil Engineer from the Universidad de Chile. He served as Vice Chairman of SQM's Board from January 2000 to April 2002. He is currently a Board member in Quiñenco S.A., P y S S.A., Alto Palermo S.A., S.A.C.I. Falabella and Madeco S.A., among others. | ||||
62
José María Eyzaguirre B. | Director | December 2001 | ||
Mr. Eyzaguirre is a lawyer, partner of the Chilean law firm Claro y Cia. He obtained his law degree from the Universidad de Chile and was admitted to the Chilean Bar in 1985. In 1987, he obtained a Master's Degree from New York University School of Law. He was admitted to the New York Bar in 1988. He is also a member of the board of directors of Gasoducto del Pacífico S.A., a transandean gas pipeline, and Chairman of the Board of directors of Club de Golf Valle Escondido. | ||||
Daniel Yarur E. (2) | Director | April 2003 | ||
Mr. Yarur is an Information Engineer from the Universidad de Chile and holds an MSc in Finance at the London School of Economics and an AMP at Harvard Business School. He is a member of the Board of Banco de Credito e Inversiones, Antofagasta P.L.C. (based in London), Antogasta Minerals and Invertec Pesquera Mar de Chiloe S.A. Mr Yarur was Chairman of the Chilean Securities and Exchange Commission from 1994 to 2000 and was also Chairman of the Council Organization of the Securities Regulators of America. He is also a Professor at the Faculty of Economic and Administrative Sciences, Universidad de Chile. | ||||
Wolf von Appen | Director | May 2005 | ||
Mr. Von Appen is an entrepreneur. He is currently a Board member of Sociedad de Fomento Fabril and Vice president of Centro de Estudios Publicos. | ||||
José Antonio Silva B. | Director | December 2001 | ||
Mr. Silva is a lawyer from the Pontificia Universidad Católica de Chile and holds a Master's Degree in law at Harvard Law School. Currently, he is Senior Partner of the Chilean law firm Silva, Rencoret, Schultz & Lehuedé Abogados. He is also a sustitute member of the board of directors of HQI Transelec Chile S.A. and Embotelladora Andina S.A. | ||||
63
Kendrick T. Wallace | Director | December 2001 | ||
Mr. Wallace is a lawyer who graduated from Harvard Law School. He is now Senior Vice President and General Counsel of Yara International ASA in Oslo, Norway. Prior to the spin-off of Yara International ASA from Norsk Hydro ASA, he was the chief legal counsel of Norsk Hydro ASA for North and South America in Tampa, Florida. Before that he was a partner in the law firm of Bryan Cave LLP in Kansas City, Missouri. Mr. Wallace is a member of the Board of Directors of Adubos Trevo S.A. in Brasil, OAO Minudobreniya (Rossosh) in Russia and of a number of subsidiaries of Yara International ASA. He is also on the Board of Directors of Norte Grande S.A., Sociedad de Inversiones Oro Blanco S.A. and Sociedad de Inversiones Pampa Calichera S.A. | ||||
64
Executive Officers Name | Position | Current position held since | ||
Patricio Contesse G. (2) | Chief Executive Officer | March 1990 | ||
Mr. Contesse is a Forestry Engineer from the Universidad de Chile. He joined the Company in 1981 as CEO, a position he held until 1982, and again in 1988. In the past, he was CEO of Celco Limitada, Schwager S.A. and Compañía de Aceros del Pacífico S.A. He has also served as Operations Senior Executive Vice President of Codelco Chile, President of Codelco USA and Executive President of Codelco Chile. Mr. Contesse is also a member of the Board of Soquimich Comercial. | ||||
Patricio de Solminihac T. (2) | Chief Operating Officer and Executive Vice President | January 2000 | ||
Mr. de Solminihac is a Chemical Engineer from the Pontificia Universidad Católica de Chile and holds a Master in Business Administration from the University of Chicago. He joined the Company in 1988 as Business Development Vice President. In 1989, he became General Manager and later on he became Vice Chairman of the Board of SQM, a position he held from 1989 through January 2000. Mr. de Solminihac was Country Manager for Raychem Corporation. Currently he is a member of the Board of Empresas Melón S.A. and CEM. Mr. de Solminihac is also a member of the Board of Soquimich Comercial. | ||||
Matías Astaburuaga S. (2) | General Counsel | February 1989 | ||
Mr. Astaburuaga is a lawyer from the Pontificia Universidad Católica de Chile. He joined the Company in 1989. Before that, he was Regional Counsel of The Coca Cola Export Corporation, Andean Region and Regional Counsel of American Life Insurance Company, Latin America Region. | ||||
Ricardo Ramos R. (2) | Chief Financial Officer and Business Development Senior Vice President | November 1994 | ||
Mr. Ramos is an Industrial Engineer from the Pontificia Universidad Católica de Chile. He joined SQM in 1989 as an advisor in the Finance area. In 1991, he moved to the Sales department, where he was in charge of the coordination between operations and sales. In 1993, he returned to the Finance department and became deputy CFO. Mr. Ramos is also a member of the Board of Soquimich Comercial. | ||||
65
Jaime San Martín L. (2) | Mine Affairs and Internal Audit Senior Vice President | June 2005 | ||
Mr. San Martín is a Transportation Engineer from the Pontificia Universidad Católica de Chile. He joined the Company in 1995 as Project Manager. He became Metallic Mining Development Manager in 1997, and Development Manager in 1998, Business Development and Mining Property Vice President in 1999 and Technical Senior Vice President in 2001. | ||||
Luis Eugenio Ponce L. | Corporate Commercial Senior Vice President | March 1999 | ||
Mr. Ponce is a Mechanical Engineer from the Universidad Católica de Valparaíso. In 1981, he joined the Company as a Sales Manager. He became Commercial Manager in 1982, Commercial and Operations Manager in 1988 and Chief Executive Officer of SQM Nitratos S.A. in 1991. In the past he was member of the Board of IANSA. Currently he is a member of the board of Cerámicas Florencia S.A. Mr. Ponce is also a member of the Board of Soquimich Comercial. He is the brother of Julio Ponce. | ||||
Carlos Nakousi S. (2) | Salar-Lithium Operations Senior Vice President | May 2003 | ||
Mr. Nakousi is an Industrial Engineer from the Pontificia Universidad Católica de Chile and a Harvard Business School alumni, after completing the Advanced Management Program in 2002. He joined the Company in 1989 as Head of Process Development. He became Deputy Development Manager in 1993, Development Manager of SQM Salar S.A. in 1995, Senior Vice President Salar Operations of SQM in 1999 and Operations Senior Vice President in 2003 | ||||
Camila Merino C. (2) | Human Resources and Administration Senior Vice President Senior Vice President | March 2001 | ||
Mrs. Merino is an Industrial Engineer from the Pontificia Universidad Católica de Chile and holds a Master in Business Administration degree from the Sloan School of Management at MIT. She joined the Company in 1991, and after a two-year period at MIT, she re-joined the Company in 1998 as Nitrates Operations Manager. In the same year she became Finance and Administration Manager of SQM Nitratos S.A. and later on, in 1999, Corporate Services Manager. | ||||
66
Mauricio Cabello. | Nitrates-Iodine Operations Senior Vice President | June 2005 | ||
Mr. Cabello is a Mechanical Engineer from the Universidad de Santiago de Chile. He joined the Company in 2000 as Maintenance Superintendent of SQM Salar. He became Maintenance Manager of SQM Nitratos- Yodo in 2002 and Production Manager of SQM Nitratos-Yodo in 2004. He previously worked in various engineering-related positions in Pesquera San José S.A., Pesquera Coloso S.A. and Cintac S.A. | ||||
Pauline de Vidts S. (2) | Safety, Health & Environment and Technology Senior Vice President | June 2005 | ||
Mrs. De Vidts is an Industrial Engineer from the Pontificia Universidad Católica de Chile and holds a Ph.D. in Chemical Engineering from Texas A&M University. She joined the company in 1996 to work in process development for the Salar de Atacama Operations, becoming Development Manager for this operations in 1998, and later on, in 2001, she became Corporate R&D and Environmental Issues Vice President. |
(1) | Mr. Julio Ponce’s ownership interest in SQM is explained in Item 6.E. Share Ownership. |
(2) | The individual beneficially owns less than one percent of the Company’s shares. |
67
Total per subsidiaries Ch$ | Annual Total Ch$ | |||||||||||||||
SQM S.A. | SQMC | |||||||||||||||
Name | Meeting | Committee | Meeting | Committee | ||||||||||||
Ponce Lerou, Julio | 343,650,861 | 63,194,463 | 406,845,324 | |||||||||||||
Büchi Buc, Hernán | 50,597,279 | 50,597,279 | ||||||||||||||
Brownlee, Wayne R. | 50,597,279 | 10,530,061 | 61,127,340 | |||||||||||||
Eyzaguirre, José María | 50,597,279 | 50,597,279 | ||||||||||||||
Silva, José Antonio | 50,597,279 | 10,530,061 | 61,127,340 | |||||||||||||
Wallace, Kendrick T. | 50,597,279 | 50,597,279 | ||||||||||||||
Yarur, Daniel | 50,597,279 | 8,804,534 | 59,401,813 | |||||||||||||
Von Appen Wolf | 7,081,298 | 7,081,298 | ||||||||||||||
Milstein, Avi (1) | 40,931,363 | 864,145 | 41,795,508 | |||||||||||||
Total | 695,247,196 | 30,728,801 | 63,194,463 | 0 | 789,170,460 |
(a) | Examine and issue an opinion regarding the external auditor's report including financial statements prior to its final presentation for approval at the Ordinary Shareholders Meeting |
(b) | Propose to the Board of Directors the external auditors and the rating agencies that will be presented to the Ordinary Shareholders Meeting |
(c) | Examine and elaborate a report concerning the operations covered by articles 44 and 89 of Law Nº18.046 |
(d) | Examine the remuneration and compensation plans of the senior management |
68
69
Section | NYSE Standards | SQM practices pursuant to Chilean regulations | ||
303A.01 | The majority of the listed company directors must be independent. | There is no legal obligation to have a majority of independent directors on the Board. | ||
303A.02 | Independence Test | A Director is considered independent if he would have been elected without the vote of the controlling shareholder and related persons and entities. | ||
303A.03 | Non-management directors must meet at regularly scheduled executive sessions without management. | These meetings are not needed given that directors do not also serve as executive officers. | ||
303A.04 | Listed companies must have a nominating/corporate governance committee composed entirely of independent directors, and must have a written charter. | This committee is not contemplated as such in the Chilean regulations. Pursuant to Chilean regulations SQM has a Directors' Committee (see Board practices above). | ||
303A.05 | Listed companies must have a compensation committee composed entirely of independent directors, and must have a written charter | This committee is not contemplated as such in the Chilean regulations. Pursuant to chilena regulations SQM has a Director’s Committee (see Board practices above) that is in charge of reviewing management’s compensation. | ||
303A.06 | Listed companies must have an audit committee. | This committee is not contemplated as such in the Chilean regulations. On june 21, 2005, the Board of directors approved the establishment of an audit committee to comply with the requirements of the NYSE corporate governance rules. | ||
303A.07 | The audit committe must have a minimum of three members. Each of them must satisfy requirements of independence and the committee must have a written charter. | Pursuant to Section 303A.00, SQM is not required to comply with requirements in 303A.07. Pursuant to Chilean Regulations SQM has a Director’ Committee( see Board practices above) with Certain requirements of independence. | ||
303A.08 | Shareholders must have the opportunity to vote on all equity-compensation plans involving directors, executives, employees, or other service providers. | SQM does not have equity compensation plans. Directors and executives may only acquire SQM shares by individual purchases. The purchaser must give notice of such purchases to the Company and the Superintendence of Securities and Insurance. | ||
303A.09 | Listed companies must adopt and disclose corporate governance guidelines. | Chilean law does not require that corporate governance guidelines be adopted. Directors' responsibilities and access to management and independent advisors are directly provided for by applicable law. Directors' compensation is approved at the annual meeting of shareholders, pursuant to applicable law. | ||
303A.10 | Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees. | Not contemplated in the Chilean regulations. SQM has adopted and disclosed a Code of Business Conduct and Ethics, available at the company's website, www.sqm.com. | ||
303A.11 | Listed foreing private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listed standards. | Pursuant to 303A.11, This table sets forth a comparative summary of differences in corporate governance practices followed by SQM under Chilean regulations and those applicable to U.S. domestic issuers pursuant to Section 303A. | ||
303A.12 | Each listed company CEO must (a) certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards.(b) promptly notify the NYSE in writing after any executive officer becomes aware of any material non- compliance with any applicable provisions of Section 303A; (c) must submit an executed Written Affirmation annually to the NYSE. | Not contemplated in the Chilean regulations. The CEO must only comply with Section 303A.12 (b) and (c). |
70
2005 | 2004 | 2003 | 2002 | ||||||||||
Permanent employees | 3,672 | 3,418 | 3,455 | 3,050 | |||||||||
Employees in Chile | 3,350 | 3,138 | 3,154 | 2,869 | |||||||||
Employees outside of Chile | 322 | 280 | 301 | 181 |
71
% Beneficial ownership | ||
2006 (1) | 24.96% | |
2005 | 24.96% | |
2004 | 22.63% | |
2003 | 20.35% |
72
Shareholder | Number of Series A Shares Beneficially Owned | % Series A Shares | Number of Series B Shares Beneficially Owned | % Series B Shares | % Total Shares | |||||||||||
Sociedad de Inversiones Pampa Calichera S.A. (1) (2) | 52,434,256 | 36.71 | % | — | 0.00 | % | 19.92 | % | ||||||||
Inversiones El Boldo Ltda. (3) | 43,861,795 | 30.71 | % | — | 0.00 | % | 16.67 | % | ||||||||
The Bank of New York | 146,370 | 0.10 | % | 32,924,920 | 27.35 | % | 12.57 | % | ||||||||
Inversiones RAC Chile Ltda. (3) | 19,200,242 | 13.44 | % | 2,699,773 | 2.24 | % | 8.32 | % | ||||||||
A.F.P. Habitat S.A. (4) | — | 0.00 | % | 8,426,384 | 7.00 | % | 3.20 | % | ||||||||
A.F.P. Provida S.A. (4) | — | 0.00 | % | 8,325,985 | 6.92 | % | 3.16 | % | ||||||||
Larrain Vial S.A. | 3,005,558 | 2.10 | % | 4,725,709 | 3.93 | % | 2.94 | % | ||||||||
Global Mining Investments (Chile ) S.A. | 7,123,076 | 4.99 | % | — | 0.00 | % | 2.71 | % | ||||||||
Inversiones SQYA S.A. (1) | 6,145,092 | 4.30 | % | — | 0.00 | % | 2.33 | % | ||||||||
A.F.P. Cuprum S.A. (4) | — | 0.00 | % | 5,167,609 | 4.29 | % | 1.96 | % |
(1) | Mr. Julio Ponce L., Chairman of the Board of SQM, and related persons control Inversiones SQ Holding S.A, which in turn, together with Yara International ASA beneficially own 51% and 49%, respectively, of Inversiones SQYA S.A. Inversiones SQYA S.A. indirectly controls and beneficially owns Sociedad de Inversiones Pampa Calichera S.A., which in turn owns 100% of Global Mining Investments (Chile) S.A. Therefore, Mr. Ponce and related persons beneficially own through the above entities 65,702,424 Series A Shares, constituting 46% of the outstanding Series A Shares and 24.96% of the total shares of SQM. This stake resulted from successive purchases carried out in the Santiago Stock Exchange during the last part of 2004 and the first months of 2005. The stake held by Mr. Ponce and related parties as of December 31, 2004, 2003, and 2002 was, respectively, 24.96%, 20.35% and 20.35% of the total shares of SQM. |
(2) | Pampa Calichera is an open stock corporation whose shares are traded on the Santiago Stock Exchange. Originally, the shareholders of Pampa Calichera were employees of SQM. Pampa Calichera was formed to hold the capital stock of SQM contributed by such employees or later acquired in the open market. Approximately 53 of our employees are shareholders of Pampa Calichera, either directly or indirectly. |
(3) | Potash Corporation of Saskatchewan Inc. owns 100% of Inversiones el Boldo Limitada and 100% of Inversiones RAC Ltda., being therefore the beneficial owner of 65,761,810 SMQ's shares that represent 24.99% of SQM's total shares. This stake resulted from successive purchases carried out in the Santiago Stock Exchange during the last part of 2004 and the first months of 2005. The stake held by Potash Corporation of Saskatchewan as of December 31, 2004, 2003, and 2002 was respectively 24.99%, 20. 35%, and 20.35% of the total shares of SQM. |
(4) | A.F.P.s are legal entities that manage pension funds and are the registered holders of Series A shares and Series B shares acquired with pension funds resources. |
73
Th. US$ | 2005 | 2004 | 2003 | |||||||
Foreign sales | 739,924 | 629,671 | 534,651 | |||||||
Total sales | 895,970 | 788,516 | 691,806 | |||||||
% of foreign sales | 82.6 | 79.9 | 77.3 |
76
Dividends | Per Share | Per ADS | Per Share | Per ADS | ||||||||||||
Declared for the business year | Paid on | Ch$ | Ch$ | US$ | US$ | |||||||||||
2001 | 2002 | 37.03 | 370.3 | 0.056 | 0.56 | |||||||||||
2002 | 2003 | 53.31 | 533.1 | 0.076 | 0.76 | |||||||||||
2003 | 2004 | 55.05 | 550.5 | 0.088 | 0.88 | |||||||||||
2004 | 2005 | 106.56 | 1,065.6 | 0.182 | 1.82 | |||||||||||
2005 | 2006 | 145.11 | 1,451.1 | 0.279 | 2.79 |
(a) | Last 5 years |
Santiago Stock Exchange Per Share (2) | NYSE per ADS | ||||||||||||||||
Series A | Series B (1) | Series A (3) | Series B (1) | ||||||||||||||
High | Low | High | Low | High | Low | High | Low | ||||||||||
Ch$ | Ch$ | Ch$ | Ch$ | US$ | US$ | US$ | US$ | ||||||||||
2001 | 1,940 | 1,310 | 1,635 | 1,150 | 28.55 | 22.60 | 24.20 | 16.00 | |||||||||
2002 | 3,000 | 1,620 | 1,660 | 1,305 | 44.75 | 23.00 | 24.44 | 18.41 | |||||||||
2003 | 3,050 | 1,630 | 2,995 | 1,580 | 47.10 | 22.00 | 46.26 | 21.60 | |||||||||
2004 | 3,900 | 2,350 | 3,580 | 2,160 | 68.00 | 37.05 | 62.75 | 32.98 | |||||||||
2005 | 7,000 | 3,600 | 7,170 | 3,269 | 129.40 | 66.80 | 133.37 | 57.50 |
(b) | Last 10 quarters |
Santiago Stock Exchange Per Share (2) | NYSE per ADS | ||||||||||||||||
Series A | Series B (1) | Series A (3) | Series B (1) | ||||||||||||||
High | Low | High | Low | High | Low | High | Low | ||||||||||
Ch$ | Ch$ | Ch$ | Ch$ | US$ | US$ | US$ | US$ | ||||||||||
2004 | |||||||||||||||||
First quarter | 2,500 | 2,350 | 2,610 | 2,229 | 43.99 | 40.25 | 44.10 | 37.25 | |||||||||
Second quarter | 2,600 | 2,380 | 2,590 | 2,160 | 42.75 | 37.05 | 41.10 | 32.98 | |||||||||
Third quarter | 3,000 | 2,575 | 2,935 | 2,530 | 48.25 | 40.90 | 48.20 | 39.23 | |||||||||
Fourth quarter | 3,900 | 3,000 | 3,580 | 2,955 | 68.00 | 48.75 | 62.75 | 43.51 | |||||||||
2005 | |||||||||||||||||
First quarter | 4,900 | 3,600 | 4,760 | 3,269 | 83.50 | 66.80 | 80.55 | 57.50 | |||||||||
Second quarter | 6,010 | 4,900 | 5,900 | 4,597 | 103.00 | 84.95 | 101.75 | 78.98 | |||||||||
Third quarter | 7,000 | 6,000 | 7,170 | 5,889 | 127.25 | 101.50 | 128.38 | 101.45 | |||||||||
Fourth quarter | 6,800 | 5,600 | 6,989 | 5,382 | 129.40 | 103.18 | 133.37 | 104.23 | |||||||||
2006 | |||||||||||||||||
First quarter | 6,000 | 5,599 | 6,390 | 5,540 | 115.50 | 105.02 | 122.53 | 109.88 | |||||||||
Second quarter (through May 31) | 5,950 | 5,599 | 6,001 | 5,390 | 109.01 | 95.70 | 120.31 | 100.58 | |||||||||
c) | Last 6 months |
Santiago Stock Exchange Per Share (2) | NYSE per ADS | ||||||||||||||||
Series A | Series B (1) | Series A (3) | Series B (1) | ||||||||||||||
High | Low | High | Low | High | Low | High | Low | ||||||||||
Ch$ | Ch$ | Ch$ | Ch$ | US$ | US$ | US$ | US$ | ||||||||||
December 2005 | 6,450 | 5,600 | 6,168 | 5,382 | 115.05 | 103.18 | 120.10 | 104.23 | |||||||||
January 2006 | 6,000 | 5,599 | 6,251 | 5,540 | 112.02 | 105.02 | 119.82 | 109.88 | |||||||||
February 2006 | 5,901 | 5,860 | 6,390 | 6,050 | 115.50 | 108.04 | 122.53 | 114.28 | |||||||||
March 2006 | 5,955 | 5,901 | 6,300 | 6,050 | 113.51 | 109.53 | 120.95 | 113.50 | |||||||||
April 2006 | 5,950 | 5,730 | 6,001 | 5,640 | 109.01 | 103.01 | 116.25 | 109.30 | |||||||||
May-06 | 5,800 | 5,680 | 5,951 | 5,390 | 104.10 | 95.70 | 116.03 | 100.58 |
(1) | Series B shares began trading on the New York Stock Exchange on September 1993. |
(2) | Pesos per share of Common Stock reflect nominal price at trade date. |
(3) | Series A shares started trading on the New York Stock Exchange in April 9, 1999. |
81
(1) | When an investor wants to take control of a company's stock. |
(2) | When a controlling shareholder holds two-thirds of the company's stock. If such shareholder buys one more share, it will be mandatory to offer to acquire the rest of the outstanding stock within 30 days of surpassing that threshold. |
(3) | When an investor wants to take control of a corporation, which, in turn, controls an open stock corporation that represents 75% or more of the consolidated assets of the former corporation. |
· | On February 12, 1999, SQM S.A. entered into an Electrical Energy Supply contract with Electroandina S.A. The term of this contract runs through February 12, 2009 and the anticipated termination is subject to payment of non amortized investments. |
· | On March 21, 1997, SQM Salar S.A. entered into an Electricity Supply agreement with Norgener S.A. The term of this contract runs through July 31, 2017, and anticipated termination is subject to fines for un-received income. |
· | On January 13, 1998, SQM Nitratos S.A. entered into an Electrical Energy Supply agreement with Norgener S.A. The term of this contract runs through January 31, 2013 and the anticipated termination is subject to payment of non amortized investments. |
· | On May 22, 2001, SQM S.A. entered into a Natural Gas Supply agreement with Distrinor S.A. The term of this contract runs through May 21, 2011 and the anticipated termination is subject to payment of non amortized investments. |
83
84
85
87
Expected Maturity Date | ||||||||||||||||||||||
On Balance Sheet Financial Instruments | 2006 | 2007 | 2008 | 2009 | 2010 and thereafter | Total | Fair Value | |||||||||||||||
(in thousands of U.S. dollars) | ||||||||||||||||||||||
Fixed Rate ($US) | 207,700 | — | — | — | — | 207,700 | 208,154 | |||||||||||||||
Average interest rate: 7.7% | 207,700 | — | — | — | — | 207,700 | 208,154 | |||||||||||||||
Variable Rate ($US) | 72,910 | 5,200 | 5,200 | 5,200 | 101,300 | 189,810 | 167,710 | |||||||||||||||
Average interest rate: 5.2% | 5,200 | 5,200 | 5,200 | 5,200 | 101,300 | 122,100 | 101,221 | |||||||||||||||
Average Interest rate: 4.7% (*) | 67,710 | — | — | — | — | 67,710 | 67,710 | |||||||||||||||
Total | 280,610 | 5,200 | 5,200 | 5,200 | 101,300 | 397,510 | 375,864 |
2005 | 2004 | ||||||
Th US$ | Th US$ | ||||||
Chilean pesos | 53,167 | 66,980 | |||||
Brazilian real | (941 | ) | (448 | ) | |||
Euro | 19,373 | 20,069 | |||||
Japanese yen | 6,333 | 3,693 | |||||
Mexican pesos | 8,101 | (2,770 | ) | ||||
South African rand | 7,529 | 7,074 | |||||
Dirhams | 11,543 | ||||||
Other currencies | 3,282 | 2,224 | |||||
90
91
Year ended December 31, | |||||||
2005 | 2004 | ||||||
Audit fees | 523.0 | 446.9 | |||||
Audit-related fees | 11.8 | ||||||
Tax fees | 94.4 | 16.0 | |||||
Other fees | 106.7 | — | |||||
Total fees | 724.1 | 474.7 |
92
93
Supplementary Schedules* |
Exhibit No. | Exhibit | |
1.1 | By-laws (Estatutos) of the Company** | |
8.1 | Significant subsidiaries of the Company | |
12.1 | Section 302 Chief Executive Officer Certification | |
12.2 | Section 302 Chief Financial Officer Certification | |
13.1 | Section 906 Chief Executive Officer Certification | |
13.2 | Section 906 Chief Financial Officer Certification |
94
95
Consolidated Financial Statements: | |
Ch$ | - | Chilean pesos |
ThCh $ | - | Thousands of Chilean pesos |
US$ | - | United States dollars |
ThUS$ | - | Thousands of United States dollars |
UF | - | “Unidad de Fomento”. The UF is an inflation-indexed, Chilean peso-denominated monetary unit. The UF rate is set daily in advance, based on the change in the Consumer Price Index of the previous month |
96
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Sociedad Química y Minera de Chile S.A.:
We have audited the accompanying consolidated balance sheets of Sociedad Química y Minera de Chile S.A. and subsidiaries (“the Company”) as of December 31, 2004 and 2005, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sociedad Química y Minera de Chile S.A. and subsidiaries at December 31, 2004 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in Chile, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 29 to the consolidated financial statements).
ERNST & YOUNG LTDA. |
Santiago, Chile
February 17, 2006
(Except for Notes 28 and 29 for which the date is June 20, 2006)
As of December 31, | ||||||||||
Note | 2005 | 2004 | ||||||||
ThUS$ | ThUS$ | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | 2 (e) | 147,956 | 66,753 | |||||||
Accounts receivable, net | 4 | 155,836 | 169,840 | |||||||
Other accounts receivable, net | 4 | 9,737 | 8,343 | |||||||
Accounts receivable from related companies | 5 | 56,459 | 26,029 | |||||||
Inventories, net | 6 | 327,232 | 274,602 | |||||||
Recoverable taxes | 31,212 | 19,185 | ||||||||
Prepaid expenses | 3,189 | 2,735 | ||||||||
Deferred income taxes | 13 | 2,528 | — | |||||||
Other current assets | 8,634 | 7,963 | ||||||||
Total current assets | 742,783 | 575,450 | ||||||||
Property, plant and equipment, net | 7 | 794,647 | 694,762 | |||||||
Other Assets | ||||||||||
Investments in related companies | 8 | 20,676 | 15,987 | |||||||
Goodwill, net | 9 | 27,209 | 17,470 | |||||||
Negative goodwill, net | 9 | (68 | ) | (271 | ) | |||||
Intangible assets, net | 4,783 | 4,544 | ||||||||
Long-term accounts receivable, net | 4 | 379 | 289 | |||||||
Long-term accounts receivable from related companies | 5 | 2,000 | — | |||||||
Other long-term assets | 10 | 48,159 | 53,141 | |||||||
Total other assets | 103,138 | 91,160 | ||||||||
Total assets Total assets | 1,640,568 | 1,361,372 | ||||||||
As of December 31, | ||||||||||
Note | 2005 | 2004 | ||||||||
ThUS$ | ThUS$ | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
Current liabilities | ||||||||||
Short-term bank debt | 11 | 85,022 | 7,955 | |||||||
Current portion of long-term bank debt | 11 | 204,880 | 4,577 | |||||||
Dividends payable | 229 | 183 | ||||||||
Accounts payable | 70,292 | 57,859 | ||||||||
Other accounts payable | 1,036 | 2,054 | ||||||||
Notes and accounts payable to related companies | 5 | 7,662 | 14,025 | |||||||
Accrued liabilities and provisions | 12 | 23,750 | 12,267 | |||||||
Withholdings | 13,092 | 11,103 | ||||||||
Income taxes | 20,675 | 11,641 | ||||||||
Deferred income taxes | 13 | — | 7,933 | |||||||
Deferred income | 1,262 | 441 | ||||||||
Other current liabilities | 368 | 1,206 | ||||||||
Total current liabilities | 428,268 | 131,244 | ||||||||
Long-term liabilities | ||||||||||
Long-term bank debt | 11 | 100,000 | 200,000 | |||||||
Other accounts payable | 1,065 | 1,106 | ||||||||
Deferred income taxes | 13 | 38,895 | 34,089 | |||||||
Staff severance indemnities | 14 | 16,415 | 11,875 | |||||||
Total long-term liabilities | 156,375 | 247,070 | ||||||||
Minority interest | 15 | 35,509 | 34,430 | |||||||
Commitments and contingencies | 22 | — | — | |||||||
Shareholders' equity | 16 | |||||||||
Paid-in capital | 477,386 | 477,386 | ||||||||
Other reserves | 157,287 | 150,887 | ||||||||
Retained earnings | 385,743 | 320,355 | ||||||||
Total shareholders’ equity | 1,020,416 | 948,628 | ||||||||
Total liabilities and shareholders’ equity | 1,640,568 | 1361,372 | ||||||||
For the years ended December 31, | |||||||||||||
Note | 2005 | 2004 | 2003 | ||||||||||
ThUS$ | ThUS$ | ThUS$ | |||||||||||
Operating income | |||||||||||||
Sales | 895,970 | 788,516 | 691,806 | ||||||||||
Cost of sales | (652,901 | ) | (608,744 | ) | (553,964 | ) | |||||||
Gross margin | 243,069 | 179,772 | 137,842 | ||||||||||
Selling and administrative expenses | (61,878 | ) | (55,705 | ) | (50,590 | ) | |||||||
Operating income | 181,191 | 124,067 | 87,252 | ||||||||||
Non-operating income and expense | |||||||||||||
Non-operating income | 18 | 16,433 | 20,829 | 18,654 | |||||||||
Non-operating expenses | 18 | (50,755 | ) | (38,420 | ) | (39,813 | ) | ||||||
Non-operating loss | (34,322 | ) | (17,591 | ) | (21,159 | ) | |||||||
Income before income taxes, minority interest and amortization of negative goodwill | 146,869 | 106,476 | 66,093 | ||||||||||
Income tax expense | 13 | (32,527 | ) | (27,308 | ) | (16,056 | ) | ||||||
Income before minority interest and amortization of negative goodwill | 114,342 | 79,168 | 50,037 | ||||||||||
Minority interest | 15 | (1,039 | ) | (5,139 | ) | (3,654 | ) | ||||||
Income before amortization of negative goodwill | 113,303 | 74,029 | 46,383 | ||||||||||
Amortization of negative goodwill | 9 | 203 | 203 | 370 | |||||||||
Net income for the year | 113,506 | 74,232 | 46,753 | ||||||||||
F-4
For the years ended December 31 | |||||||||||||
Note | 2005 | 2004 | 2003 | ||||||||||
ThUS$ | ThUS$ | ThUS$ | |||||||||||
Cash flows from operating activities | |||||||||||||
Net income | 113,506 | 74,232 | 46,753 | ||||||||||
Charges (credits) to income not representing cash flows | |||||||||||||
Depreciation expense | 7 | 70,054 | 62,690 | 61,728 | |||||||||
Amortization of intangible assets | 498 | 173 | 298 | ||||||||||
Write-offs and accruals | 17,034 | 23,584 | 25,230 | ||||||||||
Equity participation in net income of unconsolidated investees | (3,073 | ) | (4,897 | ) | (5,529 | ) | |||||||
Equity participation in net losses of unconsolidated investees | 477 | 387 | 1 | ||||||||||
Amortization of goodwill | 9 | 2,070 | 1,073 | 1,134 | |||||||||
Amortization of negative goodwill | 9 | (203 | ) | (203 | ) | (370 | ) | ||||||
(Gains) losses on sales of assets | 216 | 283 | (13 | ) | |||||||||
Gain on sale of investment | — | (8,820 | ) | — | |||||||||
Foreign currency translation, net | 18 | 3,804 | 475 | (6,590 | ) | ||||||||
Other credits to income not representing cash flows | (10,109 | ) | (1,919 | ) | (2,793 | ) | |||||||
Other charges to income not representing cash flows | 87,689 | 59,092 | 29,433 | ||||||||||
Net changes in operating assets and liabilities: | |||||||||||||
(Increase) decrease in trade accounts receivable | (15,838 | ) | (9,447 | ) | (18,124 | ) | |||||||
Increase in inventories | (58,807 | ) | (40,665 | ) | (12,578 | ) | |||||||
(Increase) decrease in other assets | (10,783 | ) | (770 | ) | 15,534 | ||||||||
Increase (decrease) in accounts payable | (6,520 | ) | (6,829 | ) | (16,236 | ) | |||||||
Increase (decrease) in interest payable | 349 | (38 | ) | 134 | |||||||||
Increase (decrease) in net income taxes payable | (25,620 | ) | 1,284 | (2,246 | ) | ||||||||
Increase (decrease) in other accounts payable | (10,517 | ) | (2,935 | ) | (1,062 | ) | |||||||
Increase (decrease) in VAT and taxes payable | (3,282 | ) | 137 | (2,215 | ) | ||||||||
Minority interest | 15 | 1,039 | 5,139 | 3,654 | |||||||||
Net cash provided from operating activities | 151,984 | 152,026 | 116,143 | ||||||||||
Cash flows from financing activities | |||||||||||||
Proceeds from short term bank financing | 185,000 | 83,307 | 57,324 | ||||||||||
Loans to related companies | — | — | (5,275 | ) | |||||||||
Payment of dividends | (51,732 | ) | (25,706 | ) | (21,361 | ) | |||||||
Repayment of bank financing | (6,000 | ) | (192,696 | ) | (82,559 | ) | |||||||
Net cash used in financing activities | 127,268 | (135,095 | ) | (51,871 | ) | ||||||||
Cash flows from investing activities | |||||||||||||
Sales of property, plant and equipment | 2,546 | 741 | 264 | ||||||||||
Sales of investments in related companies | — | 69,337 | — | ||||||||||
Sales of other investments | — | 210 | 542 | ||||||||||
Other investing income | 1,345 | 877 | 7,699 | ||||||||||
Additions to property, plant and equipment | (185,603 | ) | (51,758 | ) | (55,084 | ) | |||||||
Capitalized interest | (5,140 | ) | (1,708 | ) | (2,149 | ) | |||||||
Purchase of investments in related companies, net of cash acquired | (12,026 | ) | (37,079 | ) | (11,150 | ) | |||||||
Purchase of other investments | (2 | ) | (13 | ) | (210 | ) | |||||||
Other disbursements | (666 | ) | — | (56 | ) | ||||||||
Net cash used in investing activities | (199,546 | ) | (19,393 | ) | (60,144 | ) | |||||||
Effect of inflation on cash and cash equivalents | 1,497 | (58 | ) | (59 | ) | ||||||||
Net change in cash and cash equivalents | 81,203 | (2,520 | ) | 4,069 | |||||||||
Beginning balance of cash and cash equivalents | 66,753 | 69,273 | 65,204 | ||||||||||
Ending balance of cash and cash equivalents | 2e) | 147,956 | 66,753 | 69,273 | |||||||||
Supplemental cash flow information: | |||||||||||||
Interest paid | 20,315 | 18,986 | 22,379 | ||||||||||
Income taxes paid | 22,330 | 2,466 | 2,347 | ||||||||||
apital lease obligations incurred during the year | — | — | 98 |
F-5
F-6
Direct or indirect ownership | ||||||||||
2005 | 2004 | 2003 | ||||||||
Foreign subsidiaries: | % | % | % | |||||||
Nitrate Corp. of Chile Limited (United Kingdom) | 100.00 | 100.00 | 100.00 | |||||||
Soquimich SRL (Argentina) | 100.00 | 100.00 | 100.00 | |||||||
Nitratos Naturais do Chile Ltda. (Brazil) | 100.00 | 100.00 | 100.00 | |||||||
SQM Europe NV (Belgium) | 100.00 | 100.00 | 100.00 | |||||||
SQM North America Corp. (USA) | 100.00 | 100.00 | 100.00 | |||||||
North American Trading Company (USA) | 100.00 | 100.00 | 100.00 | |||||||
SQM Peru S.A. | 100.00 | 100.00 | 100.00 | |||||||
SQM Corporation NV (Dutch Antilles) | 100.00 | 100.00 | 100.00 | |||||||
S.Q.I. Corporation NV (Dutch Antilles) | 100.00 | 100.00 | 100.00 | |||||||
Soquimich European Holding BV (Holland) | 100.00 | 100.00 | 100.00 | |||||||
PTM - SQM Ibérica S.A. (Spain) | 100.00 | 100.00 | 100.00 | |||||||
SQMC Holding Corporation LLP (USA) | 100.00 | 100.00 | 100.00 | |||||||
SQM Ecuador S.A. | 100.00 | 100.00 | 100.00 | |||||||
Cape Fear Bulk LLC (USA) | 51.00 | 51.00 | 51.00 | |||||||
SQM Investment Corporation NV (Dutch Antilles) | 100.00 | 100.00 | 100.00 | |||||||
SQM Brasil Ltda. | 100.00 | 100.00 | 100.00 | |||||||
Royal Seed Trading Corporation AVV (Aruba) | 100.00 | 100.00 | 100.00 | |||||||
SQM Japan K.K. | 100.00 | 100.00 | 100.00 | |||||||
SQM Oceanía PTY Limited (Australia) | 100.00 | 100.00 | 100.00 | |||||||
SQM France S.A. | 100.00 | 100.00 | 100.00 | |||||||
RS Agro-Chemical Trading AVV (Aruba) | 100.00 | 100.00 | 100.00 | |||||||
SQM Comercial de México S.A. de C.V. | 100.00 | 100.00 | 100.00 | |||||||
SQM Indonesia | 80.00 | 80.00 | 80.00 | |||||||
SQM Virginia LLC (USA) | 100.00 | 100.00 | 100.00 | |||||||
Agricolima S.A. de C.V. (Mexico) | 100.00 | 100.00 | 100.00 | |||||||
SQM Venezuela S.A. | 100.00 | 100.00 | 100.00 | |||||||
SQM Italia SRL (Italy) | 95.00 | 95.00 | 95.00 | |||||||
Comercial Caiman Internacional S.A. (Cayman Islands) | 100.00 | 100.00 | 100.00 | |||||||
Mineag SQM Africa Limited (South Africa) | 100.00 | 100.00 | 100.00 | |||||||
Fertilizantes Olmeca y SQM S.A. de C.V. (Mexico) | 100.00 | 100.00 | 100.00 | |||||||
Administración y Servicios Santiago S.A. de C.V. (Mexico) | 100.00 | 100.00 | 100.00 | |||||||
SQM Lithium Specialties LLC (USA) | 100.00 | 100.00 | 100.00 | |||||||
SQM Nitratos México S.A. de C.V. (Mexico) | 51.00 | 51.00 | 51.00 | |||||||
SQM Dubai - Fzco (United Arab Emirates). | 100.00 | — | — | |||||||
Fertilizantes Naturales S.A. (Spain) (1) | — | 50.00 | 50.00 |
(1) | Up to December 31, 2004 the Company exerted control over Fertilizantes Naturales S.A. and that entity was included in the consolidation for the years ended December 31, 2004 and 2003. Beginning January 1, 2005, the Company no longer controls this entity and therefore it has been excluded from consolidation for the year ended December 31, 2005. |
F-7
Direct or indirect ownership | |||||||
2005 | 2004 | ||||||
% | % | ||||||
Domestic subsidiaries: | |||||||
Servicios Integrales de Tránsitos y Transferencias S.A. | 100.00 | 100.00 | |||||
Soquimich Comercial S.A. | 60.64 | 60.64 | |||||
Isapre Norte Grande Ltda. | 100.00 | 100.00 | |||||
Almacenes y Depósitos Ltda. | 100.00 | 100.00 | |||||
Ajay SQM Chile S.A. | 51.00 | 51.00 | |||||
SQM Nitratos S.A. | 99.99 | 99.99 | |||||
Proinsa Ltda. | 60.58 | 60.58 | |||||
SQM Potasio S.A. | 100.00 | 100.00 | |||||
SQMC International Limitada | 60.64 | 60.64 | |||||
SQM Salar S.A. | 100.00 | 100.00 | |||||
SQM Industrial S.A.(ex-PCS Yumbes) | 100.00 | 100.00 | |||||
Comercial Hydro S.A. | 60.64 | 60.64 |
F-8
US$ | ||||
December 31, 2003 | 28.28 | |||
December 31, 2004 | 31.07 | |||
December 31, 2005 | 35.07 |
(i) | Foreign currency transactions |
(ii) | Translation of non-US dollar financial statements |
a) | Domestic subsidiaries |
- | Balance sheet accounts are translated to US dollars at the year-end exchange rate without eliminating the effects of price-level restatement. The assets and liabilities were translated into US dollars at the exchange rates as of the respective balance sheet dates of Ch$ 512.50 and Ch$ 557.40 per US$ 1 as of December 31, 2005 and 2004, respectively. |
- | Income statement accounts are translated to US dollars at the average exchange rate each month. The monetary correction account on the income statement, which is generated by the inclusion of price-level restatement on the non-monetary assets and liabilities and shareholders’ equity, is translated to US dollars at the average exchange rate for each month. |
- | Translation gains and losses, as well as price-level restatement, are included as an adjustment in shareholders’ equity, in conformity with Circular No. 1697 of the SVS. |
F-9
(ii) | Translation of non-US dollar financial statements (continued) |
b) | Foreign subsidiaries |
- | Monetary assets and liabilities are translated at year-end exchange rates between the US dollar and the local currency. |
- | All non-monetary assets and liabilities and shareholders’ equity are translated at historical exchange rates between the US dollar and the local currency. |
- | Income and expense accounts, except for such accounts that are calculated using historical rates (e.g. depreciation and amortization) are translated at average exchange rates between the US dollar and the local currency. |
- | Any foreign currency translation differences are included in the results of operations for the period. |
As of December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||
Brazilian Real | 2.34 | 2.65 | 2.89 | |||||||
New Peruvian Sol | 3.34 | 3.47 | 3.46 | |||||||
Argentine Peso | 3.03 | 2.98 | 2.96 | |||||||
Japanese Yen | 118.07 | 104.21 | 107.13 | |||||||
Euro | 0.85 | 0.73 | 0.79 | |||||||
Mexican Peso | 10.71 | 11.22 | 11.20 | |||||||
Indonesian Rupee | 9,290.00 | 9,289.97 | 8,465.00 | |||||||
Australian Dollar | 1.36 | 1.28 | 1.33 | |||||||
Pound Sterling | 0.52 | 0.52 | 0.58 | |||||||
South African Rand | 6.33 | 5.80 | 6.59 |
F-10
As of December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Cash | 13,273 | 18,559 | 15,251 | |||||||
Time deposits | 1,483 | 15,854 | 13,203 | |||||||
Mutual funds | 132,303 | 30,797 | 38,629 | |||||||
Repurchase agreements | 897 | 1,543 | 2,190 | |||||||
Total | 147,956 | 66,753 | 69,273 | |||||||
F-11
Estimated years of useful life | ||||
Mining Concessions | 7 – 13 | |||
Building and infrastructure | 3 – 80 | |||
Machinery and equipment | 3 – 35 | |||
Other | 2 – 30 |
a) | Current and long-term accounts receivable and other accounts receivable as of December 31, are detailed as follows: |
Up to 90 days | Between 90 days and 1 year | Total Short-term (net) | |||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||
Short-term | |||||||||||||||||||
Trade accounts receivable | 105,618 | 124,724 | 12,570 | 7,137 | 118,188 | 131,861 | |||||||||||||
Allowance for doubtful accounts | (7,737 | ) | (6,970 | ) | |||||||||||||||
Notes receivable | 34,950 | 38,439 | 14,772 | 10,517 | 48,844 | 48,192 | |||||||||||||
Allowance for doubtful accounts | (3,459 | ) | (3,243 | ) | |||||||||||||||
Accounts receivable, net | 155,836 | 169,840 | |||||||||||||||||
Other accounts receivable | 9,454 | 8,908 | 999 | 113 | 10,453 | 9,021 | |||||||||||||
Allowance for doubtful accounts | (716 | ) | (678 | ) | |||||||||||||||
Other accounts receivable, net | 9,737 | 8,343 | |||||||||||||||||
Long-term receivables | 379 | 289 | |||||||||||||||||
b) | Changes in the allowance for doubtful accounts for the years ended December 31 are as follows: |
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
At January 1, | 10,891 | 9,985 | 8,568 | |||||||
Charged to expenses | 1,741 | 3,537 | 2,216 | |||||||
Deductions (release) | (1,097 | ) | (2,937 | ) | (1,372 | ) | ||||
Exchange rate differences | 377 | 306 | 332 | |||||||
Companies not previously consolidated | — | — | 241 | |||||||
At December 31, | 11,912 | 10,891 | 9,985 | |||||||
F-15
(c) | Consolidated Current and Long-term Receivables – by Geographic Location as of December 31, are detailed as follows: |
Chile | Europe, Africa and the Middle East | Asia and Oceania | USA, Mexico and Canada | Latin America and the Caribbean | Total | ||||||||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||||||
Net current trade accounts receivable Balance | 35,860 | 31,490 | 26,345 | 40,914 | 7,069 | 3,489 | 27,433 | 36,273 | 13,744 | 12,725 | 110,451 | 124,891 | |||||||||||||||||||||||||
% of total | 32.47 | % | 25.21 | % | 23.85 | % | 32.76 | % | 6.40 | % | 2.79 | % | 24.84 | % | 29.05 | % | 12.44 | % | 10.19 | % | 100.00 | % | 100.00 | % | |||||||||||||
Net current notes receivable balance | 38,016 | 39,065 | 2,826 | 2,524 | 563 | 515 | 357 | 120 | 3,623 | 2,725 | 45,385 | 44,949 | |||||||||||||||||||||||||
% of total | 83.76 | % | 86.91 | % | 6.23 | % | 5.62 | % | 1.24 | % | 1.15 | % | 0.79 | % | 0.26 | % | 7.98 | % | 6.06 | % | 100.00 | % | 100.00 | % | |||||||||||||
Net current other accounts receivable Balance | 4,631 | 3,558 | 1,504 | 1,943 | 11 | 2 | 3,064 | 2,591 | 527 | 249 | 9,737 | 8,343 | |||||||||||||||||||||||||
% of total | 47.56 | % | 42.65 | % | 15.45 | % | 23.29 | % | 0.11 | % | 0.02 | % | 31.47 | % | 31.06 | % | 5.41 | % | 2.98 | % | 100.00 | % | 100.00 | % | |||||||||||||
Total net current accounts receivable Balance | 78,507 | 74,113 | 30,675 | 45,381 | 7,643 | 4,006 | 30,854 | 38,984 | 17,894 | 15,699 | 165,573 | 178,183 | |||||||||||||||||||||||||
% of total | 47.42 | % | 41.59 | % | 18.53 | % | 25.47 | % | 4.62 | % | 2.25 | % | 18.62 | % | 21.88 | % | 10.81 | % | 8.81 | % | 100.00 | % | 100.00 | % | |||||||||||||
Long-term accounts receivable, net Balance | 322 | 199 | — | 75 | 42 | — | — | — | 15 | 15 | 379 | 289 | |||||||||||||||||||||||||
% of total | 84.96 | % | 68.86 | % | — | 25.95 | % | 11.08 | % | — | — | — | 3.96 | % | 5.19 | % | 100.00 | % | 100.00 | % | |||||||||||||||||
Total current and long-term accounts receivable, net Balance | 78,829 | 74,312 | 30,675 | 45,456 | 7,685 | 4,006 | 30,854 | 38,984 | 17,909 | 15,714 | 165,952 | 178,472 | |||||||||||||||||||||||||
% of total | 47.50 | % | 41.64 | % | 18.48 | % | 25.47 | % | 4.63 | % | 2.24 | % | 18.60 | % | 21.84 | % | 10.79 | % | 8.81 | % | 100.00 | % | 100.00 | % |
F-16
a) | Amounts included in balances with related parties as of December 31, 2005 and 2004 are as follows: |
Short-term | Long-term | ||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||
Accounts receivable | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||
Ajay Europe S.A.R.L. | 1,948 | 3,583 | — | — | |||||||||
Nutrisi Holding N.V. | 1,432 | 1,653 | — | — | |||||||||
Generale de Nutrition Vegetale S.A. | 132 | 132 | — | — | |||||||||
Abu Dhabi Fertilizer Ind. WLL | 3,354 | 5,284 | 2,000 | — | |||||||||
NU3 B.V. | 467 | 607 | — | — | |||||||||
Doktor Tarsa - SQM Turkey | 12,688 | 4,813 | — | — | |||||||||
Fertilizantes Naturales S.A. | 5,887 | — | — | — | |||||||||
Sales de Magnesio S.A. | 72 | 52 | — | — | |||||||||
Soc.Inv. Pampa Calichera S.A. | 4 | — | — | — | |||||||||
Sac S.A. | 4 | — | — | — | |||||||||
Ajay North America LLC | 2,420 | — | — | — | |||||||||
PCS Sales Inc. | — | 31 | — | — | |||||||||
Impronta SRL | 5,042 | 2,568 | — | — | |||||||||
Adubo Trevo S.A. | 16 | 16 | — | — | |||||||||
Yara International Asia Trade | 1,359 | 1,682 | — | — | |||||||||
Yara East Africa Limited | 681 | — | — | — | |||||||||
Yara Poland Sp. z o.o. | 103 | 45 | — | — | |||||||||
Yara Benelux B.V. | 222 | 237 | — | — | |||||||||
Yara Hellas S.A. | 116 | 80 | — | — | |||||||||
Yara International Australia PTY. | 670 | 829 | — | — | |||||||||
Yara UK Ltd. | 132 | 144 | — | — | |||||||||
Yara GMBH & CO KG | 148 | 96 | — | — | |||||||||
Yara Colombia Ltda. | 1,480 | 355 | — | — | |||||||||
Yara Fertilizers (Philippines) | 60 | — | — | — | |||||||||
Yara Fertilizers (New Zealand) | 171 | — | — | — | |||||||||
Yara Iberian S.A. | 1,958 | 1,565 | — | — | |||||||||
Yara North America LLC | 7,727 | 218 | — | — | |||||||||
Yara France BU Africa | 1,025 | 743 | — | — | |||||||||
Yara France BU Latin America | — | 1,296 | — | — | |||||||||
Yara Argentina S.A. | 43 | — | — | — | |||||||||
Yara Internacional ASA | 7,098 | — | — | — | |||||||||
Total | 56,459 | 26,029 | 2,000 | — | |||||||||
F-17
a) | Amounts included in balances with related parties as of December 31, 2005 and 2004, continued: |
Short-term | |||||||
2005 | 2004 | ||||||
Accounts payable | ThUS$ | ThUS$ | |||||
SQM Industrial S.A. | — | 6,645 | |||||
Charlee SQM Thailand CO. | 88 | — | |||||
NU3 N.V. | 813 | 1,319 | |||||
Rotem Amfert Negev Limited | — | 1,424 | |||||
Yara Int. Wholesale Sudafrica (South Africa) | 362 | — | |||||
Yara Argentina S.A. | — | 4 | |||||
Yara AB | 1 | 14 | |||||
Yara Business Suport | 4,130 | 2,761 | |||||
Yara Internacional ASA | — | 446 | |||||
Yara Fertilizantes Ltda. | 575 | — | |||||
Yara France S.A. | 191 | 1,412 | |||||
Yara France BU Latin America | 1,502 | — | |||||
Total | 7,662 | 14,025 | |||||
F-18
a) | During 2005, 2004 and 2003, principal transactions with related parties were as follows: |
Company | Relationship | Type of Transaction | Amount of Transaction | Impact in income (charge) credit | |||||||||||||||||||||
2005 | 2004 | 2003 | 2005 | 2004 | 2003 | ||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||
NU3 N.V. | Indirect | Sales of products | 5,018 | 5,036 | 4,054 | 1,892 | 1,521 | 1,023 | |||||||||||||||||
Doktor Tarsa | Indirect | Sales of products | 14,977 | 6,718 | 5,086 | 3,872 | 1,416 | 1,299 | |||||||||||||||||
Abu Dhabi Fertilizer WLL | Indirect | Sales of products | 3,834 | 3,932 | 3,463 | 1,222 | 1,126 | 619 | |||||||||||||||||
Impronta SRL | Indirect | Sales of products | 4,471 | 4,282 | — | 1,613 | 970 | — | |||||||||||||||||
Ajay Europe S.A.R.L | Indirect | Sales of products | 8,017 | 5,964 | 6,836 | 4,743 | 2,937 | 2,485 | |||||||||||||||||
NU3 B.V. | Indirect | Sales of products | 6,035 | 5,904 | 4,735 | 2,846 | 2,276 | 1,944 | |||||||||||||||||
Fertilizantes Naturales S.A. | Indirect | Sales of products | 19,916 | — | — | 6,663 | — | — | |||||||||||||||||
Ajay North America LLC. | Indirect | Sales of products | 12,401 | 8,519 | 6,909 | 7,031 | 4,009 | 1,921 | |||||||||||||||||
Sales de Magnesio Ltda. | Indirect | Sales of products | — | 333 | — | — | 152 | — | |||||||||||||||||
Yara UK Ltd. | Shareholder | Sales of products | 1,276 | 1,060 | 485 | 315 | — | ||||||||||||||||||
Yara International Asia Trade Pte Ltd. | Shareholder | Sales of products | 6,782 | 6,035 | 5,370 | 1,984 | 1,284 | 1,029 | |||||||||||||||||
Yara France BU Africa | Shareholder | Sales of products | 8,748 | 917 | 2,640 | 253 | — | ||||||||||||||||||
Yara Benelux B.V. | Shareholder | Sales of products | 6,698 | 5,593 | 5,384 | 2,385 | 1,345 | 1,002 | |||||||||||||||||
Yara AB Sweden | Shareholder | Sales of products | 808 | 705 | 561 | 284 | 184 | 165 | |||||||||||||||||
Yara International Australia Pty Ltd. | Shareholder | Sales of products | 2,853 | 2,530 | 1,722 | 999 | 682 | 456 | |||||||||||||||||
Yara Iberian S.A. | Shareholder | Sales of products | 8,900 | 6,665 | 4,739 | 3,060 | 1,638 | 801 | |||||||||||||||||
Yara Colombia Ltda. | Shareholder | Sales of products | 5,004 | 3,537 | 2,760 | 1,543 | 777 | 715 | |||||||||||||||||
Yara Poland Sp. z o.o. | Shareholder | Sales of products | 1,623 | 1,525 | 703 | 512 | — | ||||||||||||||||||
Yara GMBH & Co Kg | Shareholder | Sales of products | 1,603 | 1,381 | 1,082 | 635 | 417 | 305 | |||||||||||||||||
Yara France | Shareholder | Sales of products | 7,622 | 7,755 | 2,458 | 1,908 | — | ||||||||||||||||||
Yara France S.A. | Shareholder | Sales of products | 209 | 1,729 | 6,054 | 73 | 478 | 1,222 | |||||||||||||||||
Yara Hellas S.A. | Shareholder | Sales of products | 1,448 | 1,022 | 1,138 | 473 | 252 | 225 | |||||||||||||||||
Yara France BU Latin America | Shareholder | Sales of products | 1,192 | 2,296 | — | 288 | 680 | — | |||||||||||||||||
Yara Argentina S.A. | Shareholder | Sales of products | 9,441 | 7,724 | 6,425 | 2,658 | 1,629 | 1,271 | |||||||||||||||||
Adubo Trevo S.A. | Shareholder | Sales of products | 3,991 | 5,564 | 5,148 | 1,746 | 1,512 | 1,816 | |||||||||||||||||
PCS Yumbes SCM (currently SQM Industrial S.A.) (1) | Shareholder | Sales of products | — | 7,221 | 13,617 | — | 3,414 | 8,463 | |||||||||||||||||
PCS Yumbes SCM (currently SQM Industrial S.A.) (1) | Shareholder | Purchases of products | — | 29,466 | 25,558 | — | — | — | |||||||||||||||||
Yara Internacional ASA. | Shareholder | Sales of products | 8,250 | 340 | 2,991 | 2,120 | 120 | 195 | |||||||||||||||||
Yara North America | Shareholder | Sales of products | 43,386 | 40,491 | 13,137 | 8,317 | — | ||||||||||||||||||
Yara International Wholesale | Shareholder | Sales of products | 20,013 | — | 5,733 | — | — | ||||||||||||||||||
Yara Business Support | Shareholder | Services | 4,129 | 2,761 | 2,093 | (4,129 | ) | (2,761 | ) | (2,093 | ) | ||||||||||||||
Yara Planta Nutrition, Cis Reg. | Shareholder | Sales of products | — | — | 1,070 | — | — | 449 | |||||||||||||||||
Yara East Africa | Shareholder | Sales of products | 1,311 | — | 474 | — | — |
(1) | On December 23, 2004, SQM acquired 100% participation in PCS Yumbes SCM (currently SQM Industrial S.A.) (see Note 8) and consequently that entity ceased to be related party and instead is included in consolidated financial statements of SQM. |
F-19
As of December 31, | |||||||
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Finished products | 207,195 | 165,436 | |||||
Work in process | 102,187 | 96,616 | |||||
Supplies | 17,850 | 12,550 | |||||
Total | 327,232 | 274,602 | |||||
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Land | |||||||
Land | 20,003 | 20,003 | |||||
Mining Concessions | 44,784 | 44,223 | |||||
64,787 | 64,226 | ||||||
Buildings and infrastructure | |||||||
Buildings | 174,843 | 163,075 | |||||
Installations | 173,326 | 343,168 | |||||
Construction-in-progress | 136,225 | 47,727 | |||||
Other | 177,141 | 587 | |||||
661,535 | 554,557 | ||||||
Machinery and Equipment | |||||||
Machinery | 445,683 | 415,801 | |||||
Equipment | 121,086 | 99,417 | |||||
Project-in-progress | 9,832 | 16,278 | |||||
Other | 17,809 | 18,671 | |||||
594,410 | 550,167 | ||||||
Other property, plant and equipment | |||||||
Tools | 8,804 | 8,019 | |||||
Furniture and office equipment | 12,315 | 12,339 | |||||
Projects in progress | 14,180 | 10,876 | |||||
Other | 7,653 | 12,836 | |||||
42,952 | 44,070 | ||||||
Amounts relating to technical revaluation of property, plant and equipment | |||||||
Land | 7,839 | 7,839 | |||||
Buildings and infrastructure | 41,439 | 41,439 | |||||
Machinery and equipment | 12,091 | 12,091 | |||||
Other assets | 53 | 53 | |||||
61,422 | 61,422 | ||||||
Total property, plant and equipment | 1,425,106 | 1,274,442 | |||||
F-20
Less: Accumulated depreciation | |||||||
Buildings and infrastructure | (257,063 | ) | (230,740 | ) | |||
Machinery and equipment | (319,388 | ) | (295,584 | ) | |||
Other property, plant and equipment | (18,466 | ) | (19,012 | ) | |||
Technical appraisal | (35,542 | ) | (34,344 | ) | |||
Total accumulated depreciation | (630,459 | ) | (579,680 | ) | |||
Net property, plant and equipment | 794,647 | 694,762 | |||||
For the year ended December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Buildings and infrastructure | (30,286 | ) | (26,547 | ) | (26,492 | ) | ||||
Machinery and equipment | (37,108 | ) | (33,552 | ) | (32,022 | ) | ||||
Other property, plant and equipment | (1,462 | ) | (1,300 | ) | (1,471 | ) | ||||
Technical revaluation | (1,198 | ) | (1,291 | ) | (1,743 | ) | ||||
Total depreciation | (70,054 | ) | (62,690 | ) | (61,728 | ) | ||||
As of December 31, | |||||||
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Administrative office buildings | 1,988 | 1,988 | |||||
Leased vehicles | 98 | 98 | |||||
Accumulated depreciation | (525 | ) | (468 | ) | |||
Total assets in leasing | 1,561 | 1,618 | |||||
a) | Information on foreign investments |
F-21
b) | Significant events and transactions involving related companies in the years 2003-2005 |
· | Up to December 31, 2004, the financial statements of Fertilizantes Naturales S.A. (“Fenasa”) in which SQM has 50% participation were included in consolidation given that the Company maintained the control over that entity (managed its financial and operating policies) based on ability to appoint General Manager. Beginning January 2005, the Company lost its ability to control Fenasa and consequently it has been excluded from consolidation. The Company accounted for its investment in that entity for the year ended December 31, 2005 using equity method. |
· | In March 2005, the subsidiary Soquimich European Holding B.V. made a capital increase of ThUS$ 411 in its related company Misr Specialty Fertilizers. In accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants and the regulations in Circular No. 1697 issued by the Chilean Superintendency of Securities and Insurance, the valuation was performed in consideration of the book value of the equity of Misr Specialty Fertilizers as of December 31, 2004, which does not significantly differ from its fair value determined at that date. This operation gave rise to no goodwill or negative goodwill. |
· | In April 2005, the subsidiary SQM Corporation N.V. acquired additional 13% participation in of the affiliate Abu Dhabi Fertilizers for a sum of ThUS$484. In accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants and Circular No. 1697 issued by the Chilean Superintendency of Securities and Insurance the Company valued this investment in consideration of the book value of equity of Abu Dhabi Fertilizers as of December 31, 2004, which does not significantly differ from its fair value at that date. This operation gave rise to no goodwill or negative goodwill. |
· | On August 9, 2005, SQM Nitratos S.A. and SQM S.A. acquired 99 and 1 shares, respectively of Kemira Emirates Fertilizer Company - Fzco for ThUS$ 9,282 paid in cash at the date of the acquisition. Acquired shares represent in total 100% of the capital of that entity. In accordance with the provisions of Technical Bulletin No. 72 issued by the Chilean Association of Accountants and Circular No. 1697 issued by the SVS, the preliminary valuation of identifiable assets and liabilities of Kemira Emirates Fertilizer Company - Fzco as of July 31, 2005 was performed. Such valuation indicated that those fair values do not significantly differ from assets’ and liabilities’ carrying amounts at that date. Goodwill determined on the acquisition amounted to ThUS$ 2,058 and will be amortized over a period of 20 years. |
· | In September 2005, the subsidiary Soquimich European Holding B.V. and Charlee Industries Co, Ltd. incorporated Charlee SQM (Thailand) Co. Ltd. Soquimich European Holding B.V. contributed ThUS$ 800 for 40% participation in Charlee SQM (Thailand) Co. Ltd. This operation did not generate any negative goodwill or goodwill. |
F-22
b) | Significant events and transactions involving related companies in the years 2003-2005 |
· | At the Fifth General Extraordinary Shareholders’ Meeting of SQM Nitratos S.A. held on October 31, 2005, the shareholders unanimously agreed the following: |
- | Change the line of business of SQM Nitratos S.A. with the purpose of limiting it to mining exploitation operations. |
- | Spin-off SQM Nitratos S.A. in two companies, SQM Nitratos S.A., which maintains its name and a newly incorporated company SQM Procesos S.A. |
- | This spin-off will be effective on January 1, 2006. |
· | On December 23, 2004, SQM S.A. and SQM Nitratos S.A. acquired 43,733,165 and 2,000 shares, respectively (equivalent to 99.9954% and 0.0046% participation, respectively), of PCS Yumbes SCM for ThUS$ 39,707. Subsequent to the acquisition (in December 2005) PCS Yumbes SCM changed its name to SQM Industrial S.A. |
Book value | Adjustments | Fair value | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Current assets | 10,958 | — | 10,958 | |||||||
Property, plant and equipment | 25,708 | (7,954 | ) | 17,754 | ||||||
Other assets | 293 | — | 293 | |||||||
Current liabilities | 1,935 | — | 1,935 | |||||||
Equity | 35,024 | (7,954 | ) | 27,070 |
F-23
b) | Significant events and transactions involving related companies in the years 2003-2005 |
Book value | ||||
ThUS$ | ||||
Current assets | 28,495 | |||
Property, plant and equipment | 9,710 | |||
Other assets | 672 | |||
Current liabilities | 26,795 | |||
Long-term liabilities | 23 | |||
Equity | 12,059 |
· | In January, April and October 2004, the subsidiary Soquimich European Holding B.V. made a capital contributions totaling to ThUS$ 1,425 to its affiliate Misr Specialty Fertilizers. In accordance with BT 72 of the Chilean Association of Accountants and SVS Circular No. 1697, the investment in Misr Specialty Fertilizers was valued using the book value of net assets as of the dates of contributions, which did not differ significantly from its fair value determined as of that dates. |
· | At the shareholders’ meeting of Empresas Melón S.A. held on February 25, 2004, the shareholders agreed its spin-off in 2 companies, Empresas Melón S.A. and Inmobiliaria San Patricio S.A. As a result, SQM S.A. maintained its ownership of 14.05% in Empresas Melón S.A. and received the same ownership percentage in the new company. |
· | On November 18, 2004, the subsidiary Soquimich European Holding B.V. contributed ThUS$ 268 to a joint venture with SQM Eastmed Turkey. |
· | On January 27, 2003, SQM Comercial de México S.A. de C.V. and SQM Nitratos S.A. acquired 8,750 shares of the related company Fertilizantes Olmeca y SQM S.A. de C.V. which represented 50% of its share capital. Consequently, Fertilizantes Olmeca y SQM S.A. de C.V. became a 100% subsidiary of SQM. This transaction generated goodwill of ThUS$ 279. Subsequently, SQM Nitratos S.A. acquired from SQM Comercial de México S.A. de C.V. 8,749 shares in Fertilizantes Olmeca y SQM S.A. de C.V. This transaction did not produce goodwill. |
· | On March 30, 2003, Soquimich European Holding acquired 50% ownership of Mineag SQM Africa Ltd. from Ravlin Investment Limited for ThUS$ 990. Consequently, Mineag SQM Africa Ltd. became a subsidiary of SQM. This transaction did not produce goodwill. |
F-24
b) | Significant events and transactions involving related companies in the years 2003-2005 |
· | On April 28, 2003, SQM Comercial S.A. (“SQMC”) acquired from Norsk Hydro ASA, 819,999 shares in Norsk Hydro Chile S.A. Simultaneously SQM Comercial Internacional Ltda., a subsidiary of SQMC, acquired the one remaining share in Norsk Hydro Chile S.A. and SQMC became the sole owner of 100% ownership of Norsk Hydro Chile S.A. This transaction generated goodwill of ThUS$ 1,282. Subsequently Norsk Hydro Chile changed its name to Comercial Hydro S.A. |
· | On June 30, 2003, SQM Nitratos S.A. acquired the shares owned by SQM S.A. in Sociedad Energía y Servicios S.A. The shares amounted to ThUS$ 2,422. This transaction resulted in the consolidation of all the shares of Energía y Servicios S.A. by one shareolder, SQM Nitratos S.A. Consequently under Chilean law, Energía y Servicios S.A. was dissolved and SQM Nitratos S.A. assumed all its assets and liabilities. |
· | On November 10, 2003, SQM Nitratos S.A. and SQM S.A. liquidated the subsidiary SQM Colombia Limitada. |
· | On November 18, 2003, the subsidiary Soquimich European Holding BV, provided capital of ThUS$ 676 to initiate a joint venture with the company Misr Specialty Fertilizer in Egypt. |
c) | Investments with less than 20% participation |
F-25
Company | Ownership interest as of December 31, | Equity of investment as of December 31, | Net income (loss) for the year ended | Carrying value as of December 31, | Equity participation in net income (loss) for the year December 31, | |||||||||||||||||||||||||||||||||||||||||
Currency | ||||||||||||||||||||||||||||||||||||||||||||||
of origin | 2005 | 2004 | 2003 | 2005 | 2004 | 2005 | 2004 | 2003 | 2005 | 2004 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||
% | % | % | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||||||||||||||
Ajay North America LLC | USA | US$ | 49.00 | 49.00 | 49.00 | 13,372 | 11,726 | 2,810 | 940 | 378 | 6,271 | 5,746 | 1,377 | 461 | 185 | |||||||||||||||||||||||||||||||
SQM Lithium Specialties LLC (1) | USA | US$ | — | — | 100.00 | — | — | — | — | (2,858 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||
Nutrisi Holding N.V. | Belgium | US$ | 50.00 | 50.00 | 50.00 | 6,658 | 5,559 | 1,609 | 1,480 | 1,104 | 3,329 | 2,649 | 805 | 724 | 520 | |||||||||||||||||||||||||||||||
Misr Specialty Fertilizers | Egypt | US$ | 47.49 | 47.49 | 25.00 | 4,504 | 3,803 | (708 | ) | (789 | ) | — | 2,139 | 1,806 | (336 | ) | (375 | ) | — | |||||||||||||||||||||||||||
Ajay Europe S.A.R.L. | France | US$ | 50.00 | 50.00 | 50.00 | 5,086 | 4,646 | 1,063 | 140 | — | 2,258 | 2,323 | 532 | 70 | — | |||||||||||||||||||||||||||||||
Doktor Tarsa | Turkey | Euros$ | 50.00 | 50.00 | 50.00 | 4,876 | 2,170 | 429 | 590 | 738 | 2,438 | 1,085 | 214 | 295 | 369 | |||||||||||||||||||||||||||||||
Abu Dhabi Fertilizer Industries WLL Industries WLL | UAE | US$ | 50.00 | 37.00 | 37.00 | 3,520 | 3,227 | 13 | 84 | 174 | 1,760 | 1,194 | 6 | 31 | 64 | |||||||||||||||||||||||||||||||
Charlee SQM Thailand Co. Ltd. | Thailand | US$ | 40.00 | — | 2,000 | — | — | — | — | 800 | — | — | — | — | ||||||||||||||||||||||||||||||||
Impronta SRL | Italia | Euros$ | 50.00 | 50.00 | 50.00 | 1,778 | 1,016 | (281 | ) | 342 | 755 | 889 | 508 | (141 | ) | 171 | 377 | |||||||||||||||||||||||||||||
Sales de Magnesio Ltda. | Chile | Ch$ | 50.00 | 50.00 | 50.00 | 844 | 518 | 259 | 480 | 155 | 422 | 259 | 130 | 240 | 78 | |||||||||||||||||||||||||||||||
SQM Eastmed Turkey | Turkey | Euros$ | 50.00 | 50.00 | — | 464 | 536 | — | — | — | 232 | 268 | — | — | — | |||||||||||||||||||||||||||||||
Rui Xin Packaging Materials Sanhe Co.Ltd. | China | US$ | 25.00 | 25.00 | 25.00 | — | 482 | — | — | — | — | 121 | — | — | — | |||||||||||||||||||||||||||||||
Fertilizantes Naturales S.A. | Spain | Euros$ | 25.00 | — | 430 | — | 37 | — | — | 108 | — | 9 | — | — | ||||||||||||||||||||||||||||||||
Empresas Melón S.A. | Chile | — | — | — | 14.05 | — | — | — | — | 28,005 | — | — | — | 2,905 | 3,935 | |||||||||||||||||||||||||||||||
Inmobiliaria San Patricio S.A. | Chile | — | — | — | — | — | — | — | — | — | — | — | — | (12 | ) | — | ||||||||||||||||||||||||||||||
Asociación Garantizadora dePensiones | Chile | Ch$ | 3.31 | 3.31 | 3.31 | 908 | 835 | — | — | — | 30 | 28 | — | — | — | |||||||||||||||||||||||||||||||
20,676 | 15,987 | 2,596 | 4,510 | 5,528 | ||||||||||||||||||||||||||||||||||||||||||
(1) | SQM Lithium Specialties LLC was company in development stage up to June 2004 and its net loss for the year 2003 was included directly in Other reserves in equity. |
F-26
a) | Goodwill |
Amortization for the year ended December 31, | Net Balance as of December 31, | |||||||||||||||
Company | 2005 | 2004 | 2003 | 2005 | 2004 | |||||||||||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||||||||||||
Doktor Tarsa | 18 | 76 | 69 | — | 23 | |||||||||||
Soquimich Comercial S.A. | 122 | 150 | 150 | — | 122 | |||||||||||
Empresas Melón S.A. | — | 324 | 503 | — | — | |||||||||||
SQM Salar S.A. | 40 | 43 | 43 | — | 40 | |||||||||||
SQM México S.A. de C.V. | 56 | 56 | 56 | 891 | 947 | |||||||||||
SQM Potassium S.A. | 144 | 144 | 144 | 1,591 | 1,735 | |||||||||||
Comercial Caiman Internacional S.A. | 23 | 23 | 23 | 154 | 177 | |||||||||||
Fertilizantes Olmeca S.A. de C.V. | 56 | 56 | 56 | 111 | 167 | |||||||||||
Comercial Hydro S.A. | 176 | 140 | 90 | 1,294 | 1,305 | |||||||||||
Saftnits Pty Ltd. | 290 | 61 | — | — | 317 | |||||||||||
SQM Dubai – FZCO | 73 | — | — | 1,985 | — | |||||||||||
SQM Industrial S.A. (1) | 1,072 | — | — | 21,183 | 12,637 | |||||||||||
Total | 2,070 | 1,073 | 1,134 | 27,209 | 17,470 | |||||||||||
(1) | As described in note 8 b), review of preliminary estimation of fair values of assets acquired and liabilities assumed in transaction of purchase of PCS Yumbes SCM (currently SQM Industrial S.A.) performed during 2005 resulted in adjustments to amounts previously determined and in consequence increase in value of goodwill. |
b) | Negative Goodwill |
Amortization for the year ended December 31, | Net Balance as of December 31, | |||||||||||||||
Company | 2005 | 2004 | 2003 | 2005 | 2004 | |||||||||||
ThCh$ | ThCh$ | ThCh$ | ThCh$ | ThCh$ | ||||||||||||
SQM Salar S.A. | — | — | 167 | — | — | |||||||||||
Minera Mapocho S.A. | 203 | 203 | 203 | 68 | 271 | |||||||||||
Total | 203 | 203 | 370 | 68 | 271 | |||||||||||
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Engine and equipment spare-parts, net | 19,289 | 24,734 | |||||
Mine development costs | 24,282 | 23,208 | |||||
Pension plan | 1,133 | 1,165 | |||||
Construction of Salar-Baquedano road (1) | 1,410 | 1,650 | |||||
Deferred loan issuance costs | 323 | 866 | |||||
Other | 1,722 | 1,518 | |||||
Total | 48,159 | 53,141 | |||||
(1) | Amortized on a straight line basis over a period of 30- years. |
F-27
2005 | 2004 | ||||||
Bank or financial institution | ThUS$ | ThUS$ | |||||
Banco de Crédito e Inversiones | 65,017 | — | |||||
Banco Santander Santiago | 20,005 | — | |||||
Banco de Chile | — | 6,019 | |||||
CAM Caja Ahorros Mediterráneo | — | 698 | |||||
Fortis Bank | — | 836 | |||||
BBVA banco Bilbao Vizcaya Argentaria | — | 240 | |||||
Banco Atlántico | — | 162 | |||||
Total | 85,022 | 7,955 | |||||
Annual average interest rate | 4.65 | % | 2.48 | % |
2005 | 2004 | ||||||
Bank or financial institution | ThUS$ | ThUS$ | |||||
Union Bank of Switzerland (1) | 204,577 | 204,577 | |||||
BBVA Banco Bilbao Vizcaya Argentaria (2) | 100,303 | — | |||||
Total | 304,880 | 204,577 | |||||
Less: current portion | (204,880 | ) | (4,577 | ) | |||
Long-term portion | 100,000 | 200,000 | |||||
(1) | US dollar-denominated loan, interest rate of 7.7% per annum, paid semi-annually. The principal is due on September 15, 2006. |
(2) | US dollar-denominated loan without guarantee, interest rate of Libor + 0.325% per annum, paid quarterly. The principal is due on March 3, 2010. |
2005 | 2004 | ||||||
Years to maturity | ThUS$ | ThUS$ | |||||
Current portion (due within 1 year) | 204,880 | 4,577 | |||||
1 to 2 years | — | 200,000 | |||||
2 to 3 years | — | — | |||||
3 to 5 years | 100,000 | — | |||||
Total | 304,880 | 204,577 | |||||
F-28
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Provision for royalties | 1,855 | 1,360 | |||||
Provision for employee compensation and legal costs | 7,145 | 1,570 | |||||
Taxes and monthly income tax installment payments | 2,909 | 861 | |||||
Vacation accrual | 8,126 | 6,932 | |||||
Accrued employee benefits | 186 | 216 | |||||
Marketing expenses | 246 | 246 | |||||
Other accruals | 3,283 | 1,082 | |||||
Total current liabilities | 23,750 | 12,267 | |||||
a) | As of December 31, 2005 and 2004, the Company has the following consolidated balances for distributable retained taxed earnings, income not subject to taxes, tax loss carry-forwards and credits for shareholders: |
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Accumulated tax basis retained earnings with tax credit | 206,777 | 86,518 | |||||
Accumulated tax basis retained earnings without tax credit | 93,732 | — | |||||
Tax loss carry-forwards (1) | 232,644 | 225,638 | |||||
Credit for shareholders | 42,046 | 17,355 |
(1) | Income tax losses in Chile can be carried forward indefinitely. |
F-29
As of December 31, 2005 | Deferred tax asset | Deferred tax liability | |||||||||||
Short-term | Long-term | Short-term | Long-term | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||
Temporary differences | |||||||||||||
Allowance for doubtful accounts | 1,345 | — | — | — | |||||||||
Other long-term provisions | — | 620 | — | — | |||||||||
Vacation accrual | 1,322 | — | — | — | |||||||||
Unrealized gain on sale of products | 15,053 | — | — | — | |||||||||
Provision for obsolescence of long-term assets | — | 2,075 | — | — | |||||||||
Production expenses | — | — | 18,123 | — | |||||||||
Accelerated depreciation | — | — | — | 58,031 | |||||||||
Exploration expenses | — | — | — | 5,375 | |||||||||
Capitalized interest | — | — | — | 6,040 | |||||||||
Staff severance indemnities | — | — | — | 2,448 | |||||||||
Accrued expenses | — | — | — | 147 | |||||||||
Tax losses carry-forwards | — | 40,624 | — | — | |||||||||
Accrued interest | 149 | — | — | — | |||||||||
Fair value acquisition adjustments | — | 2,535 | — | — | |||||||||
Other | 1,462 | 3,834 | — | 182 | |||||||||
Total gross deferred taxes | 19,331 | 49,688 | 18,123 | 72,223 | |||||||||
Complementary accounts | — | (4,692 | ) | (1,508 | ) | (23,850 | ) | ||||||
Valuation allowance | (188 | ) | (35,518 | ) | — | — | |||||||
Deferred taxes | 19,143 | 9,478 | 16,615 | 48,373 | |||||||||
Total deferred taxes, net | 2,528 | — | — | 38,895 | |||||||||
F-30
As of December 31, 2004 | Deferred tax asset | Deferred tax liability | |||||||||||
Short-term | Long-term | Short-term | Long-term | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||
Temporary differences | |||||||||||||
Allowance for doubtful accounts | 1,324 | — | — | — | |||||||||
Other long-term provisions | — | 386 | — | — | |||||||||
Vacation accrual | 1,165 | — | — | — | |||||||||
Unrealized gain on sale of products | 8,748 | — | — | — | |||||||||
Provision for obsolescence of long-term assets | — | 1,835 | — | — | |||||||||
Production expenses | 7,872 | — | 23,044 | — | |||||||||
Accelerated depreciation | — | — | — | 53,890 | |||||||||
Exploration expenses | — | — | — | 5,336 | |||||||||
Capitalized interest | — | — | — | 5,849 | |||||||||
Staff severance indemnities | — | 467 | — | 2,028 | |||||||||
Capitalized expenses | — | — | — | 344 | |||||||||
Tax losses carry-forwards | — | 36,472 | — | — | |||||||||
Losses on derivative transactions | 85 | — | — | — | |||||||||
Accrued interest | 130 | — | — | — | |||||||||
Other | 1,466 | 1,856 | 217 | 179 | |||||||||
Total gross deferred taxes | 20,790 | 41,016 | 23,261 | 67,626 | |||||||||
Complementary accounts | — | (5,815 | ) | (2,584 | ) | (25,955 | ) | ||||||
Valuation allowance | (8,046 | ) | (27,619 | ) | — | — | |||||||
Deferred taxes | 12,744 | 7,582 | 20,677 | 41,671 | |||||||||
Total deferred taxes, net | — | — | 7,933 | 34,089 | |||||||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Provision for current income tax | (37,428 | ) | (14,435 | ) | (2,829 | ) | ||||
Effect of deferred tax assets and liabilities | 10,844 | (6,613 | ) | (7,731 | ) | |||||
Adjustment for tax expense (previous year) | (945 | ) | (144 | ) | 56 | |||||
Effect of amortization of complementary accounts | (3,084 | ) | (6,022 | ) | (5,917 | ) | ||||
Effect on deferred tax assets and liabilities due to changes in valuation allowance | (1,350 | ) | — | 236 | ||||||
Other tax charges and credits | (564 | ) | (94 | ) | 129 | |||||
Total income tax expense | (32,527 | ) | (27,308 | ) | (16,056 | ) | ||||
F-31
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Opening balance | 11,875 | 10,127 | 9,143 | |||||||
Increases in obligation | 5,193 | 3,301 | 2,283 | |||||||
Benefits paid | (3,379 | ) | (2,245 | ) | (2,802 | ) | ||||
Foreign currency translation | 1,000 | 692 | 1,503 | |||||||
Other changes | 1,726 | — | — | |||||||
Balance as of December 31 | 16,415 | 11,875 | 10,127 | |||||||
Participation in equity as of December 31, | Participation in income (loss) for the years ended December 31, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | 2003 | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||
Soquimich Comercial S.A. | 32,234 | 30,741 | (84 | ) | (4,442 | ) | (3,107 | ) | ||||||||
Ajay SQM Chile S.A. | 3,200 | 3,313 | (827 | ) | (488 | ) | (250 | ) | ||||||||
Cape Fear Bulk LLC | 93 | 146 | (118 | ) | (144 | ) | (94 | ) | ||||||||
SQM Italia S.R.L | 23 | 20 | (3 | ) | 2 | — | ||||||||||
SQM Nitratos México S.A. de C.V. | (39 | ) | (46 | ) | (7 | ) | (37 | ) | 86 | |||||||
Fertilizantes Naturales S.A. | — | 258 | — | (32 | ) | (63 | ) | |||||||||
SQM Indonesia S.A. | (2 | ) | (2 | ) | — | 2 | (1 | ) | ||||||||
Mineag SQM Africa Ltda. | — | — | — | — | (225 | ) | ||||||||||
Total | 35,509 | 34,430 | (1,039 | ) | (5,139 | ) | (3,654 | ) | ||||||||
F-32
a) | Changes to shareholders’ equity consisted of: |
Number of shares | Paid-in capital ThUS$ | Other reserves ThUS$ | Accumulated deficit of subsidiaries in development stage ThUS$ | Retained earnings ThUS$ | Net income ThUS$ | Total ThUS$ | ||||||||||||||||
Balance as of January 1, 2003 | 263,196,524 | 477,386 | 125,111 | (3,661 | ) | 210,624 | 40,202 | 849,662 | ||||||||||||||
Transfer 2001 net income to retained earnings | — | — | — | — | 40,202 | (40,202 | ) | — | ||||||||||||||
Declared dividends 2003 | — | — | — | — | (19,894 | ) | — | (19,894 | ) | |||||||||||||
Accumulated deficit from subsidiaries in development stage (1) | — | — | — | (2,858 | ) | — | — | (2,858 | ) | |||||||||||||
Other comprehensive income (2) | — | — | 16,309 | — | — | — | 16,309 | |||||||||||||||
Net income | — | — | — | — | — | 46,753 | 46,753 | |||||||||||||||
Balance as of December 31, 2003 | 263,196,524 | 477,386 | 141,420 | (6,519 | ) | 230,932 | 46,753 | 889,972 | ||||||||||||||
Balance as of January 1, 2004 | 263,196,524 | 477,386 | 141,420 | (6,519 | ) | 230,932 | 46,753 | 889,972 | ||||||||||||||
Transfer 2003 net income to retained earnings | — | — | — | — | 46,753 | (46,753 | ) | — | ||||||||||||||
Declared dividends 2004 | — | — | — | — | (23,192 | ) | — | (23,192 | ) | |||||||||||||
Accumulated deficit from subsidiaries in development stage (1) | — | — | — | (1,851 | ) | — | — | (1,851 | ) | |||||||||||||
Other comprehensive income (2) | — | — | 9,467 | — | — | — | 9,467 | |||||||||||||||
Net income for the year | — | — | — | — | — | 74,232 | 74,232 | |||||||||||||||
Balance as of December 31, 2004 | 263,196,524 | 477,386 | 150,887 | (8,370 | ) | 254,493 | 74,232 | 948,628 | ||||||||||||||
Balance January 1, 2005 | 263,196,524 | 477,386 | 150,887 | (8,370 | ) | 254,493 | 74,232 | 948,628 | ||||||||||||||
Transfer 2004 net income to retained earnings | — | — | — | — | 74,232 | (74,232 | ) | — | ||||||||||||||
Declared dividends 2005 | — | — | — | — | (48,118 | ) | — | (48,118 | ) | |||||||||||||
Other comprehensive income (2) | — | — | 6,400 | — | — | — | 6,400 | |||||||||||||||
Net income for the year | — | — | — | — | — | 113,506 | 113,506 | |||||||||||||||
Balance as of December 31, 2005 | 263,196,524 | 477,386 | 157,287 | (8,370 | ) | 280,607 | 113,506 | 1,020,416 | ||||||||||||||
(1) | The only subsidiary that was in a development stage during 2003 and 2004 was SQM Lithium Specialties LLC and therefore was not included in the consolidation. The equity value of this investment was recorded under caption Investments in related companies and the proportional share of the accumulated deficit during the development stage was included in Other reserves within shareholders’ equity. Since July, 2004 results of this entity are included in the consolidated financial statements. |
(2) | Movements of Other comprehensive income during the years ended December 31, 2003, 2004 and 2005 include cumulative translation adjustment related to Chilean investments measured in Chilean pesos, foreign investments and the effect of changes in the valuation of the Company’s pension plan. Details are presented in point b) below. |
F-33
b) | Other comprehensive income in the years ended December 31, 2003, 2004 and 2005 and other reserves balance as of December 31, 2004 and 2005 are as follows: |
For the year ended December 31, | As of December 31, | |||||||||||||||
2005 | 2004 | 2003 | 2005 | 2004 | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||
Technical appraisal | — | — | — | 151,345 | 151,345 | |||||||||||
Changes in other comprehensive income related to investments: | ||||||||||||||||
Soquimich Comercial S.A. (1) | 5,522 | 3,242 | 6,421 | 6,268 | 746 | |||||||||||
Isapre Norte Grande Ltda. (1) | — | 14 | — | (83 | ) | (83 | ) | |||||||||
Inversiones Augusta S.A. (1) | — | — | — | (761 | ) | (761 | ) | |||||||||
SQM Ecuador S.A.1 | — | — | — | (271 | ) | (271 | ) | |||||||||
Almacenes y Depósitos Ltda.(1) | 78 | 34 | 1 | 22 | (56 | ) | ||||||||||
Asociación Garantizadora de Pensiones (1) | 2 | 2 | 2 | (11 | ) | (13 | ) | |||||||||
Empresas Melón S.A. (1) | — | 6,190 | 9,446 | — | — | |||||||||||
Sales de Magnesio Ltda. (1) | 7 | — | 69 | 59 | 52 | |||||||||||
SQM North America Corp. (2) | 792 | (15 | ) | 370 | — | (792 | ) | |||||||||
Other Companies (1) | (1 | ) | — | — | 719 | 720 | ||||||||||
Total other comprehensive income | 6,400 | 9,467 | 16,309 | 157,287 | 150,887 | |||||||||||
(1) | Corresponds to translation adjustments and price-level restatement |
(2) | Corresponds to a change in the valuation of the Company’s pension plan. |
c) | Paid-in capital consists of 263,196,524 fully authorized, subscribed and paid shares with no par value, divided into 142,819,552 Series A shares and 120,376,972 Series B shares. |
Series A: | If the election of the president of the Company results in a tied vote, the Company's directors may vote once again, without the vote of the director elected by the Series B shareholders. | ||
Series B: | (1) | A general or extraordinary shareholders' meeting may be called at the request of shareholders representing 5% of the Company's Series B shares. | |
(2) | An extraordinary meeting of the Board of Directors may be called with or without the agreement of the Company's president, at the request of a director elected by Series B shareholders. |
F-34
Type of derivative | Notional or covered amount ThUS$ | Expiration | Risk type | Position Purchase/Sale (P/S) | (Liability)Asset amount ThUS$ | Income (loss) effect ThUS$ | |||||||||||||
Currency Option | 31,279 | 1st quarter of 2006 | Exchange rate | P | 62 | 62 | |||||||||||||
Currency Option Option | 5,747 | 1st quarter of 2006 | Exchange rate | P | (49 | ) | (49 | ) | |||||||||||
US dollar Forward | 7,726 | 1st quarter of 2006 | Exchange rate | P | (176 | ) | (176 | ) | |||||||||||
44,752 | (163 | ) | (163 | ) | |||||||||||||||
Type of derivative | Notional or covered amount ThUS$ | Expiration | Risk type | Position Purchase/Sale (P/S) | (Liability)Asset amount ThUS$ | Income (loss) effect ThUS$ | |||||||||||||
US dollar Forward | 1,013 | 1st quarter of 2005 | Exchange rate | P | (108 | ) | (108 | ) | |||||||||||
US dollar Forward | 4,629 | 1st quarter of 2005 | Exchange rate | S | 110 | 110 | |||||||||||||
US dollar Forward | 399 | 2nd quarter of 2005 | Exchange rate | S | 42 | 42 | |||||||||||||
US dollar Forward | 10,004 | 1st quarter of 2005 | Arbitration | P | (539 | ) | (539 | ) | |||||||||||
US dollar Forward | 5,187 | 1st quarter of 2005 | Exchange rate | S | (207 | ) | (207 | ) | |||||||||||
Currency Option | 38,721 | 1st quarter of 2005 | Exchange rate | P | (893 | ) | (893 | ) | |||||||||||
Currency Option | 43,884 | 2nd quarter of 2005 | Exchange rate | P | (1,012 | ) | (1,012 | ) | |||||||||||
Currency Option | 25,814 | 3nd quarter of 2005 | Exchange rate | P | (595 | ) | (595 | ) | |||||||||||
Currency Option | 20,651 | 4st quarter of 2005 | Exchange rate | P | (476 | ) | (476 | ) | |||||||||||
150,302 | (3,678 | ) | (3,678 | ) | |||||||||||||||
F-35
a) | Details of non-operating income for the years ended December 31, 2003, 2004 and 2005 are as follows: |
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Interest income | 5,530 | 3,650 | 2,957 | |||||||
Equity participation in net income of unconsolidated investees | 3,073 | 4,897 | 5,529 | |||||||
Insurance recoveries | 213 | 546 | 154 | |||||||
Write-off of liabilities | 2,204 | 388 | 422 | |||||||
Net foreign exchange gain and price-level restatement | — | — | 6,590 | |||||||
Sale of mining concessions | 298 | 635 | 135 | |||||||
Sale of materials and services | 438 | 190 | 628 | |||||||
Gain on sale of investments in related companies | — | 8,179 | — | |||||||
Rental of property, plant and equipment | 1,015 | 774 | 736 | |||||||
Compensation obtained from third parties | 737 | — | — | |||||||
Payment discounts obtained from suppliers | 1,026 | 452 | 606 | |||||||
Other income | 1,899 | 1,118 | 897 | |||||||
Total | 16,433 | 20,829 | 18,654 | |||||||
b) | Details of non-operating expenses for the years ended December 31, 2003, 2004 and 2005 are as follows: |
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Interest expense | 16,663 | 18,782 | 21,777 | |||||||
Net foreign currency exchange loss and price-level restatement | 3,804 | 475 | — | |||||||
Non-capitalizable exploration project expenses and provisions for damages and liquidation of assets | 13,489 | 9,262 | 8,965 | |||||||
Equity participation in net losses of unconsolidated investees | 477 | 387 | 1 | |||||||
Amortization of goodwill | 2,070 | 1,073 | 1,134 | |||||||
Work disruption expenses | 584 | 568 | 1,640 | |||||||
Increase in provision for employee compensation and legal costs | 7,986 | 533 | 1,442 | |||||||
Change of discount rate for staff severance indemnities provision | 678 | — | — | |||||||
Allowances for materials, spare parts and supplies | 1,188 | 1,628 | 881 | |||||||
Allowance for doubtful accounts | 151 | 2,500 | 687 | |||||||
Non-recoverable taxes | 647 | 531 | 690 | |||||||
Consulting services | 314 | 175 | 282 | |||||||
Donations | 896 | 533 | 235 | |||||||
Penalties | 238 | 161 | 415 | |||||||
Other expenses | 1,570 | 1,812 | 1,664 | |||||||
Total | 50,755 | 38,420 | 39,813 | |||||||
F-36
(Charge) credit to income from operations for the year ended December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Property, plant and equipment | 239 | 173 | 60 | |||||||
Other assets and liabilities | (248 | ) | (286 | ) | 193 | |||||
Shareholders’ equity | (2,846 | ) | (1,577 | ) | (459 | ) | ||||
Subtotal price-level restatement | (2,855 | ) | (1,690 | ) | (206 | ) | ||||
Net adjustment of assets and liabilities denominated in UF | — | (23 | ) | 188 | ||||||
Net price-level restatement | (2,855 | ) | (1,713 | ) | (18 | ) | ||||
As of December 31, | |||||||
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Assets | |||||||
Chilean pesos | 81,583 | 81,886 | |||||
US dollars | 1,433,629 | 1,175,983 | |||||
Euros | 24,742 | 30,996 | |||||
Japanese Yen | 6,466 | 3,889 | |||||
Brazilian Real | 304 | 348 | |||||
Mexican pesos | 11,331 | 6,926 | |||||
UF | 57,906 | 49,785 | |||||
South African Rand | 9,321 | 9,214 | |||||
Dirhams | 11,954 | — | |||||
Other currencies | 3,332 | 2,345 | |||||
Current liabilities | |||||||
Chilean pesos | 65,355 | 51,877 | |||||
US dollars | 347,141 | 54,437 | |||||
Euros | 5,369 | 10,927 | |||||
Japanese Yen | 133 | 75 | |||||
Brazilian Real | 1,245 | 796 | |||||
Mexican pesos | 3,230 | 9,696 | |||||
UF | 3,544 | 1,177 | |||||
South African Rand | 1,792 | 2,140 | |||||
Dirhams | 411 | — | |||||
Other currencies | 48 | 119 | |||||
Long-term liabilities | |||||||
Chilean pesos | 16,358 | 10,531 | |||||
US dollars | 138,950 | 235,310 | |||||
Japanese Yen | — | 121 | |||||
UF | 1,065 | 1,106 | |||||
Other currencies | 2 | 2 |
F-37
For the years ended December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Loans to employees (made) received, net | (75 | ) | 219 | 3,221 | ||||||
Cash of acquired and newly consolidated entities (1) | 911 | 23 | 4,343 | |||||||
Sale of mining concessions | 509 | 635 | 135 | |||||||
Total | 1,345 | 877 | 7,699 | |||||||
(1) | In 2003 corresponds to the consolidation of newly acquired subsidiaries Mineag SQM Africa Limited, Fertilizantes Olmeca SQM S.A. de C.V. and Comercial Hydro S.A. In 2004 corresponds to consolidation of subsidiary previously being in development stage (SQM Lithium Specialities LLP) and acquisition of PCS Yumbes SCM (currently SQM Industrial S.A.). In 2005 corresponds to acquisition of SQM Dubai - Fzco. |
1. | Plaintiff: | Miguel Negrete Ubeda | ||
Defendants: | Marco Antonio Ortiz Castillo y SQM Nitratos S.A. and its insurers | |||
Date of lawsuit: | May 2004 | |||
Court: | First Civil Court of Antofagasta | |||
Cause: | Work accident | |||
Instance: | Evidence provided | |||
Nominal amount: | ThUS$ 150 | |||
2. | Plaintiff: | Mario Miles Andrade | ||
Defendants: | Constructora Fe Grande S.A. and subsidiary and jointly and severally SQM S.A. and its insurers | |||
Date of lawsuit: | June 2005 | |||
Court: | Labor Court of Antofagasta | |||
Cause: | Work accident | |||
Instance: | The demand has been contested | |||
Nominal amount: | ThUS$ 270 | |||
3. | Plaintiff: | Gabriela Véliz Huanchicay | ||
Defendants: | Gilberto Mercado Barreda and subsidiary and jointly and severally | |||
SQM Nitratos S.A. and its insurers | ||||
Date of lawsuit: | August 2005 | |||
Court: | 4th Civil Court of Santiago | |||
Cause: | Work accident | |||
Instance: | The demand has been contested | |||
Nominal amount: | ThUS$ 1,350 |
F-38
4. | Plaintiff: | Marina Arnéz Valencia | ||
Defendants: | Intro Ingeniería Limitada and subsidiary and joint and severally | |||
SQM S.A. and its insurers | ||||
Date of lawsuit: | September 2005 | |||
Court: | Labor Court of Antofagasta | |||
Cause: | Work accident | |||
Instance: | Evidence provided | |||
Nominal amount: | ThUS$ 475 | |||
5. | Plaintiff: | Electroandina S.A. | ||
Defendants: | Sociedad Química y Minera de Chile S.A. | |||
Date of lawsuit: | September 2005 | |||
Court: | Court of arbitration | |||
Cause: | Early termination or partial modification or temporary suspension | |||
of the Electrical Supply Agreement entered on February 12, 1999 by virtue | ||||
of supposedly unforeseen events that would result in an increase in the cost | ||||
of or restricted the supply of natural gas from Argentina. | ||||
Instance: | Evidentiary stage | |||
Nominal amount: | The amount has not been determined yet | |||
6. | Plaintiff: | Juana Muraña Quispe | ||
Defendants: | Intro Ingenieria Limitada and subsidiary and jointly and severally | |||
SQM S.A. and its insurers | ||||
Date of lawsuit: | October 2005 | |||
Court: | 25th Civil Court of Santiago | |||
Cause: | Work accident | |||
Instance: | Rejoinder | |||
Nominal amount: | ThUS$ 1,500 |
F-39
1. | The subsidiary SQM Salar S.A. maintains an agreement with a government agency, whereby the Company must make annual payments until 2030 based on the Company’s annual sales. This fee that is being paid since the beginning of the agreement in 1996 amounted to ThUS$ 6,752 in 2005 (ThUS$ 4,910 in 2004 and ThUS$ 4,024 in 2003). |
2. | The Company has certain indirect guarantees, which relate to agreements with no remaining payments pending. These guarantees are still in effect and have been approved by the Company’s Board of Directors; however, they have not been used by the subsidiaries. |
3. | Bank debt of SQM S.A. and its subsidiaries has no restrictions or terms other than those that might usually be found in similar debt instruments issued on the financial markets, such as maximum indebtedness and minimum equity among others. |
Debtor | Balances outstanding | ||||||||||||
Beneficiary | Name | Relationship | 2005 | 2004 | |||||||||
ThUS$ | ThUS$ | ||||||||||||
Phelps Dodge Corporation | SQM Potasio S.A. | Subsidiary | — | 957 | |||||||||
BBVA Banco Bilbao Vizcaya Argentaria | Royal Seed Trading Corp. A.V.V. | Subsidiary | 100,303 | — |
F-40
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Project | ||||||||||
Environmental department | 596 | 544 | 383 | |||||||
Risk and security management | 424 | — | — | |||||||
Dust emission control | 962 | — | — | |||||||
Light normalization | 378 | — | — | |||||||
Improvement of mining operations | 220 | — | — | |||||||
Boratos sewage treatment plant | — | 281 | 555 | |||||||
Tocopilla project | — | 615 | 792 | |||||||
Engineering and building of María Elena piles | — | 2,667 | 2,014 | |||||||
Treatment plant MOP | — | 208 | 208 | |||||||
Other | 811 | 1,242 | 408 | |||||||
Total | 3,391 | 5,557 | 4,360 | |||||||
F-41
· | On January 19, 2005, the Company’s Board of Directors informed the SVS that, in an Ordinary Session of the Board on January 18, 2005, they accepted the voluntary and irrevocable resignation of Mr. Avi Milstein as Director and appointed Mr. Daniel Yarur E. in his place. |
· | On February 25, 2005, Royal Seed Trading Corp A.V.V., a subsidiary of Sociedad Química y Minera de Chile S.A., entered into a syndicated loan for ThUS$ 100,000, guaranteed by its Parent Company, with the following banks: BBVA Securities Inc., BNP Paribas and Rabobank Curacao N.V. The loan matures in 5 years, with quarterly interest payments at an initial annual interest rate of Libor + 0.325%, which could vary depending on any possible future modifications in the subsidiary’s external debt classification. There are no real guarantees associated with this loan. |
· | Inversiones El Boldo Limitada, owner of more than 10% of voting right shares issued of SQM S.A. and subsidiary of Potash Corporation of Saskatchewan Inc., on April 25, 2005 requested from the Board of directors of SQM S.A. that it requests an Extraordinary Shareholders' Meeting of the Company to vote as to the convenience of either eliminating or not Series A and B shares - and preferences related to these series - in which the Company's capital is currently divided through the amendment of the pertinent articles of the Company's by-laws required to reflect this possible elimination and; alternately, and provided that the shareholders do not approve this elimination, to modify article 31 of these by-laws with the purpose of incorporating in this article the concept of “related persons” already included in Article 31 Bis of the aforementioned by-laws. The Company's Board of Directors unanimously agreed on its meeting held on April 26, 2005 to summon such a meeting for May 25, 2005. |
· | At the General Ordinary Shareholders’ Meeting of April 29, 2005, the shareholders, among others, agreed the following: |
(i) | Approved the distribution and payment of a final dividend from 2004 net income for a total of Ch$ 106.56029 per share in one single payment from May 12, 2005. |
(ii) | Approved the payment of UF 50 to each member of the Board of Directors’ Committee regardless of the number of meetings that this Committee may or not have during the respective month and establish an annual budget for expenses for this Committee and its advisors of UF 1,800. |
(iii) | Appoint Wayne R. Brownlee, Hernán Büchi B., José María Eyzaguirre B., Julio Ponce L., José Antonio Silva B., Wolf von Appen, Kendrick T. Wallace and Daniel Yarur E. as new directors of SQM S.A. and approved remuneration payable to these members of the Board during the next twelve months, which are the same as those approved at the Company’s previous General Ordinary Shareholders’ Meeting. |
F-42
· | During July 2005, the French Arbitrage Association (“AFA”) pronounced its sentence in the process that Compagnie du Guano de Poisson Angibaud S.A. and Generale de Nutrition Vegetales SAS, which are member companies of the Angibaud Group (“Angibaud”), filed in Paris, France during 2002 a lawsuit against Soquimich European Holdings B.V., NU3 and SQM France S.A., all of which are subsidiaries of SQM for damages that Angibaud would have experienced due to the termination of business relationships between both groups of companies. |
F-43
· | At the First General Extraordinary Shareholders’ Meeting of SQM Industrial S.A. held on January 9, 2006, the shareholders approved the merger of SQM Procesos S.A. into SQM Industrial S.A. through the dissolution of SQM Procesos S.A. and its incorporation into SQM Industrial S.A., which in effect acquires all assets and liabilities of SQM Procesos S.A. |
· | On January 19, 2006, the Company informed the SVS that Sociedad Química y Minera de Chile S.A. and some of its subsidiaries have acquired, on the same date from the DSM Group based in the Netherlands, the total amount of shares of certain companies that participate in the markets of the production and commercialization of iodine and iodine derivatives in Chile and abroad. Accordingly, SQM has acquired the mining rights and water rights, industrial plants, regulatory permits and other pertinent assets of these companies which will allow it to have proper installed capacity to produce 2,200 additional tons of iodine per year in Chile. |
· | On January 24, 2006, Sociedad Química y Minera de Chile S.A has placed in the Chilean market an unguaranteed bond for the nominal amount of UF 3 million with a term of 21 years and an annual interest rate of 4.18% to refinance liabilities and fund investments projects for the year 2006. |
· | On January 24, 2006, Soquimich European Holding B.V. and Nutrisi Holding N.V. acquired 334 and 666 shares, respectively of Fertilizantes Naturales S.A. in ThEuro 75,100 thereby increasing their ownership to 33.35% and 66.65%, respectively. |
· | On April 15, 2006, SQM placed in the US market a bond, of US$ 200 million with an annual interest rate of 6.125%. The interest will be paid semi-annually and the capital will be paid in a single amortization in April 2016. The Funds obtained will be used to refinance existing indebtedness maturing in September 2006. |
F-44
F-45
c) | Translation of foreign currency financial statements and price-level restatement |
· | Monetary assets and liabilities are translated at the year-end exchange rate; and |
· | Non-monetary assets and liabilities and shareholders' equity are translated at historical exchange rates. |
· | Depreciation and amortization expense and other accounts derived from non-monetary assets and liabilities are translated at historical rates; and |
· | All other accounts are translated at monthly-average exchange rates, which approximate the actual rates of exchange at the date the transactions occurred. |
F-46
d-2) | Accounting for participation in Melón on US GAAP basis |
d-3) | Sale of investment in Melón on US GAAP basis |
f) | Minimum Dividend |
F-47
g) | Loans to Employees |
h) | Staff Severance Indemnities |
h) | Staff Severance Indemnities (continued) |
i) | Marketable securities |
j) | Derivatives |
j-1) | Sale of swaps |
F-48
j) | Derivatives (continued) |
j-2) | Fair value accounting of derivatives |
k) | Business combinations and Goodwill |
l) | Negative goodwill |
F-49
l) | Negative goodwill (continued) |
l-1: | The reversal of negative goodwill amortization recorded under Chilean GAAP. |
l-2: | The effects of reducing depreciation expense, due to the allocation of the excess purchase price to property, plant and equipment; |
m) | Capitalized interest |
n) | Minority interest |
F-50
o) | Effects of conforming to US GAAP |
For the years ended December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Net income in accordance with Chilean GAAP | 113,506 | 74,232 | 46,753 | |||||||
Revaluation of property, plant and equipment (paragraph a) | 2,132 | 4,367 | 4,580 | |||||||
Deferred income taxes (paragraph b) | 2,236 | 6,022 | 5,917 | |||||||
Translation of foreign currency financial statements (paragraph c) | 8,994 | 5,318 | 7,455 | |||||||
Purchase accounting adjustments - Empresas Melón S.A. (paragraph d-1) | — | (34 | ) | (264 | ) | |||||
Accounting for participation in Melón on US GAAP basis (paragraph d-2) | — | (467 | ) | 250 | ||||||
Cost of sale of Empresas Melón S.A. on US GAAP basis (paragraph d) | — | 2,336 | — | |||||||
Consolidation of subsidiaries in the development stage (paragraph e) | — | (1,851 | ) | (2,858 | ) | |||||
Staff severance indemnities (paragraph h) | (836 | ) | (618 | ) | (1,902 | ) | ||||
Derivatives - sale of swaps (paragraph j-1) | — | — | 175 | |||||||
Derivatives - fair value accounting of derivatives (paragraph j-2) | 1,483 | (1,483 | ) | 309 | ||||||
Goodwill (paragraph k) | 1,718 | 749 | 631 | |||||||
Negative goodwill (paragraph l) | ||||||||||
l-1: Reversal of negative goodwill amortization | (203 | ) | (213 | ) | (370 | ) | ||||
l-2: Depreciation of property, plant and equipment | 113 | 123 | 104 | |||||||
Capitalized interest (paragraph m) | (91 | ) | (91 | ) | — | |||||
Minority interest (paragraph n) | (3,576 | ) | (2,115 | ) | (3,041 | ) | ||||
Deferred income tax effect of the above US GAAP adjustments | (272 | ) | 551 | 35 | ||||||
Net income under US GAAP | 125,204 | 86,826 | 57,774 | |||||||
Other comprehensive income (loss), net of tax: | ||||||||||
Minimum pension liability adjustment | 792 | (15 | ) | 370 | ||||||
Translation adjustment | — | 6,460 | 8,802 | |||||||
Deferred gain from sale of swaps (paragraph j-1) | — | — | (146 | ) | ||||||
Total comprehensive income under US GAAP | 125,996 | 93,271 | 66,800 | |||||||
F-51
o) | Effects of conforming to US GAAP (continued) |
As of December 31, | |||||||
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Shareholders’ equity in accordance with Chilean GAAP | 1,020,416 | 948,628 | |||||
Revaluation of property, plant and equipment: (paragraph a) | |||||||
a-1: Property, plant and equipment | (133,768 | ) | (133,768 | ) | |||
a-2: Accumulated depreciation | 99,729 | 97,597 | |||||
Deferred income taxes (paragraph b) | (26,648 | ) | (28,884 | ) | |||
Translation of foreign currency financial statements (paragraph c) | |||||||
c-1: Property, plant and equipment, net | (2,377 | ) | (1,637 | ) | |||
c-2: Accumulated depreciation | 921 | 722 | |||||
c-3: Inventory | (728 | ) | (1,198 | ) | |||
c-4: Goodwill, net | (408 | ) | (297 | ) | |||
Minimum dividend (paragraph f) | (34,053 | ) | (22,270 | ) | |||
Employer loans used to purchase shares (paragraph g) | (288 | ) | (764 | ) | |||
Staff severance indemnities (paragraph h) | (4,926 | ) | (4,090 | ) | |||
Fair value of derivatives (paragraph j-2) | — | (1,483 | ) | ||||
Goodwill (paragraph k) | 3,813 | 2,094 | |||||
Negative goodwill: (paragraph l) | |||||||
l-1: Property, plant and equipment | (3,156 | ) | (3,156 | ) | |||
l-1: Accumulated depreciation of property, plant and equipment | 1,796 | 1,683 | |||||
l-2: Negative goodwill | 3,156 | 3,156 | |||||
l-2: Accumulated amortization of negative goodwill | (3,088 | ) | (2,885 | ) | |||
Capitalized interest (paragraph m) | |||||||
m-1: Property, plant and equipment | 1,643 | 1,643 | |||||
m-2: Accumulated depreciation | (182 | ) | (91 | ) | |||
Effect of minority interest on US GAAP adjustments (paragraph n) | 1,001 | 1,009 | |||||
Deferred income tax effect of the above US GAAP adjustments | 589 | 862 | |||||
Shareholders' equity in accordance with US GAAP | 923,442 | 856,871 | |||||
o) | Effects of conforming to US GAAP, continued |
ThUS$ | ||||
Balance at January 1, 2003 | 747,332 | |||
Reversal of accrued minimum divided at December 31, 2002 | 11,685 | |||
Distribution of final 2002 dividend | (19,894 | ) | ||
Accrued minimum dividend at December 31, 2003 | (14,026 | ) | ||
Employer loans used to purchase shares | 2,801 | |||
Other comprehensive income | 9,026 | |||
Net income for the year | 57,774 | |||
Balance at December 31, 2003 | 794,698 | |||
Reversal of accrued minimum divided at December 31, 2003 | 14,026 | |||
Distribution of final 2003 dividend | (23,192 | ) | ||
Accrued minimum dividend at December 31, 2004 | (22,270 | ) | ||
Employer loans used to purchase shares | 338 | |||
Other comprehensive income | 6,445 | |||
Net income for the year | 86,826 | |||
Balance at December 31, 2004 | 856,871 | |||
Reversal of accrued minimum divided at December 31, 2004 | 22,270 | |||
Distribution of final 2004 dividend | (48,118 | ) | ||
Accrued minimum dividend at December 31, 2005 | (34,053 | ) | ||
Employer loans used to purchase shares | 476 | |||
Other comprehensive income | 792 | |||
Net income for the year | 125,204 | |||
Balance at December 31, 2005 | 923,442 | |||
F-53
II. | Additional Disclosure Requirements |
a) | Earnings per share |
2005 | 2004 | 2003 | ||||||||
(Expressed in single US dollars) | ||||||||||
Basic and diluted earnings per share under Chilean GAAP | 0.43 | 0.28 | 0.18 | |||||||
Basic and diluted earnings per share under US GAAP | 0.48 | 0.33 | 0.22 | |||||||
Dividends declared per share (1) | 0.28 | 0.18 | 0.09 | |||||||
Weighted average number of common shares outstanding (thousands) | 263,197 | 263,197 | 263,197 |
(1) | Represents dividends declared and paid in accordance with Chilean GAAP. |
b) | Income taxes |
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Consolidated pretax income under US GAAP | 160,382 | 114,815 | 74,573 | |||||||
Statutory tax rate | 17 | % | 17 | % | 16.5 | % | ||||
Theoretical tax at statutory rate | 27,265 | 19,519 | 12,305 | |||||||
Non-deductible items | 892 | 91 | (2,325 | ) | ||||||
Difference in tax rates in foreign jurisdictions | 1,056 | 553 | 360 | |||||||
Valuation allowance | 1,350 | 572 | (236 | ) | ||||||
Other | — | — | ||||||||
Total income tax under US GAAP | 30,563 | 20,735 | 10,104 | |||||||
F-54
b) | Income taxes (continued) |
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Deferred Tax Assets | |||||||
Allowance for doubtful debts | 1,965 | 1,710 | |||||
Vacation accrual | 1,322 | 1,165 | |||||
Unrealized gains on sales of products | 15,053 | 8,749 | |||||
Provision for obsolescence | 2,075 | 1,836 | |||||
Losses from derivative transactions | — | 336 | |||||
Tax loss carryforwards (1) | 40,624 | 36,472 | |||||
Fair value acquisition adjustments | 2,535 | — | |||||
Other accruals | 5,445 | 3,451 | |||||
Gross deferred tax assets | 69,019 | 53,719 | |||||
Valuation allowance | (35,706 | ) | (35,665 | ) | |||
Total deferred tax assets | 33,313 | 18,054 | |||||
Deferred Tax Liabilities | |||||||
Production expenses | (18,123 | ) | (15,172 | ) | |||
Accelerated depreciation | (58,031 | ) | (53,890 | ) | |||
Staff severance indemnities | (1,611 | ) | (866 | ) | |||
Exploration expenses | (5,375 | ) | (5,336 | ) | |||
Capitalized interest | (6,288 | ) | (6,113 | ) | |||
Other | (329 | ) | (740 | ) | |||
Total deferred tax liabilities | (89,757 | ) | (82,117 | ) | |||
(1) | The Company’s tax loss carry forwards were primarily generated from losses incurred in Chile and Mexico. In accordance with current laws, in Chile tax losses may be carried forward indefinitely and in Mexico they expire after 10 years. For the years ended December 31, 2005, 2004 and 2003 the Company realized benefits from the use of tax loss carry forwards amounting to ThUS$ 3,541, ThUS$ 9,324 and ThUS$ 6,567, respectively. |
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Chile | 38,385 | 31,081 | |||||
Mexico | — | 3,833 | |||||
Other | 2,239 | 1,558 | �� | ||||
Total | 40,624 | 36,472 | |||||
F-55
b) | Income taxes (continued) |
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Short-term | 1,020 | (10,264 | ) | ||||
Long-term | (57,464 | ) | (53,799 | ) | |||
Net deferred tax liabilities | (56,444 | ) | (64,063 | ) | |||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Income tax expense under Chilean GAAP (Note 13) | 32,527 | 27,308 | 16,056 | |||||||
Additional deferred tax under US GAAP | 272 | (551 | ) | (35 | ) | |||||
Reversal of amortization of complementary accounts | (2,236 | ) | (6,022 | ) | (5,917 | ) | ||||
Total tax provision US GAAP | 30,563 | 20,735 | 10,104 | |||||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Chile | 134,411 | 113,683 | 59,625 | |||||||
Foreign | 25,972 | 1,132 | 14,948 | |||||||
Total | 160,382 | 114,815 | 74,573 | |||||||
2005 | 2004 | 2003 | ||||||||||||||||||||||||||
Deferred | Current | Total | Deferred | Current | Total | Deferred | Current | Total | ||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||
Chile | (5,777 | ) | 33,537 | 27,760 | 5,045 | 14,001 | 19,046 | 7,193 | 1,301 | 8,494 | ||||||||||||||||||
Foreign | (1,088 | ) | 3,891 | 2,803 | 1,255 | 434 | 1,689 | 711 | 899 | 1,610 | ||||||||||||||||||
Total | (6,865 | ) | 37,428 | 30,563 | 6,300 | 14,435 | 20,735 | 7,904 | 2,200 | 10,104 | ||||||||||||||||||
F-56
c) | Other Comprehensive Income |
Year ended December 31, 2003 | ||||||||||
Before-tax amount | Tax (expense) or benefit | Net-of-tax amount | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Beginning balance | (16,934 | ) | 671 | (16,263 | ) | |||||
Translation adjustment | 8,802 | — | 8,802 | |||||||
Deferred gain on sale of swaps | (175 | ) | 29 | (146 | ) | |||||
Minimum pension liability adjustment | 597 | (227 | ) | 370 | ||||||
Net change | 9,224 | (198 | ) | 9,026 | ||||||
Ending balance | (7,710 | ) | 473 | (7,237 | ) | |||||
Year ended December 31, 2004 | ||||||||||
Before-tax amount | Tax (expense) or benefit | Net-of-tax amount | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Beginning balance | (7,710 | ) | 473 | (7,237 | ) | |||||
Translation adjustment | 6,460 | — | 6,460 | |||||||
Minimum pension liability adjustment | (24 | ) | 9 | (15 | ) | |||||
Net change | 6,436 | 9 | 6,445 | |||||||
Ending balance | (1,274 | ) | 482 | (792 | ) | |||||
Year ended December 31, 2005 | ||||||||||
Before-tax amount | Tax (expense) or benefit | Net-of-tax amount | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Beginning balance | (1,274 | ) | 482 | (792 | ) | |||||
Translation adjustment | — | — | — | |||||||
Minimum pension liability adjustment | 1,274 | (482 | ) | 792 | ||||||
Net change | 1,274 | (482 | ) | 792 | ||||||
Ending balance | — | — | — | |||||||
F-57
d) | Credit Agreements |
e) | Lease commitments |
Minimum lease payments | ||||
Year ended December 31, | ThUS$ | |||
2006 | 279 | |||
2007 | 455 | |||
2008 | 455 | |||
2009 | 175 | |||
2010 | 175 | |||
Thereafter | 21 | |||
Total future minimum lease payments | 1,560 | |||
Interest | (311 | ) | ||
Present value of net minimum lease payments | 1,249 | |||
F-58
e) | Lease commitments (continued) |
Minimum annual rentals | ||||
Year ended December 31, | ThUS$ | |||
2006 | 3,945 | |||
2007 | 3,945 | |||
2008 | 3,945 | |||
2009 | 3,945 | |||
2010 | 3,945 | |||
Thereafter | 78,905 | |||
Total | 98,630 | |||
f) | Foreign exchange gain and losses |
g) | Concentration of credit risk |
F-59
h) | Advertising and Research and development costs |
i) | Business combinations and goodwill |
2005 | 2004 | ||||||
ThUS$ | ThUS$ | ||||||
Goodwill | 30,528 | 19,181 | |||||
Accumulated amortization and impairment | (1,425 | ) | (1,425 | ) | |||
Goodwill, net | 29,103 | 17,756 | |||||
F-60
j) | Reclassification differences between Chilean GAAP and US GAAP |
(i) | Non-operating income and expense under US GAAP calculated in accordance with Chilean GAAP |
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Non-operating income under Chilean GAAP | 16,433 | 20,829 | 18,654 | |||||||
Less: | ||||||||||
Sale of mining concessions | 298 | 635 | 135 | |||||||
Sale of material and services | 438 | 190 | 628 | |||||||
Insurance recoveries | 213 | 546 | 154 | |||||||
Write-off of liabilities | 2,204 | 388 | 422 | |||||||
Payment discount obtained from suppliers | 1,026 | 452 | 606 | |||||||
Rental of property, plant and equipment | 1,015 | 774 | 736 | |||||||
Compensation obtained from third parties | 737 | — | — | |||||||
Other income | 1,899 | 1,118 | 897 | |||||||
Non-operating income as classified under US GAAP, but calculated in accordance with Chilean GAAP | 8,603 | 16,726 | 15,076 | |||||||
Non-operating expenses under Chilean GAAP | 50,755 | 38,420 | 39,813 | |||||||
Less: | ||||||||||
Amortization of goodwill | 2,070 | 1,073 | 1,134 | |||||||
Work disruption expenses | 584 | 568 | 1,640 | |||||||
Increase in allowance for doubtful accounts | 151 | 2,500 | 687 | |||||||
Non-capitalizable exploration project expenses and provisions for damages and liquidation of assets | 13,489 | 9,262 | 8,965 | |||||||
Unrecoverable taxes | 647 | 531 | 690 | |||||||
Provision for compensation and legal costs | 7,986 | 533 | 1,442 | |||||||
Change of discount rate for staff severance indemnities provision | 678 | — | — | |||||||
Allowances for materials, spare parts and supplies | 1,188 | 1,628 | 881 | |||||||
Consulting services | 314 | 175 | 282 | |||||||
Donations | 896 | 533 | 235 | |||||||
Penalties | 238 | 161 | 415 | |||||||
Other expenses | 1,570 | 1,812 | 1,664 | |||||||
Non-operating expense as classified under US GAAP, but calculated in accordance with Chilean GAAP | 20,944 | 19,644 | 21,778 | |||||||
F-61
j) | Reclassification differences between Chilean GAAP and US GAAP (continued) |
As of December 31, | |||||||
2005 | 2004 | ||||||
Assets | ThUS$ | ThUS$ | |||||
Current assets | 743,692 | 573,524 | |||||
Property, plant and equipment | 1,287,448 | 1,137,524 | |||||
Accumulated depreciation | (528,195 | ) | (479,769 | ) | |||
Property plant and equipment, net | 759,253 | 657,755 | |||||
Goodwill | 29,103 | 17,756 | |||||
Other assets | 76,947 | 69,368 | |||||
Total assets | 1,608,995 | 1,318,403 | |||||
Liabilities and shareholders’ equity | |||||||
Current liabilities | 464,852 | 157,328 | |||||
Long-term liabilities | 186,193 | 270,783 | |||||
Minority interest | 34,508 | 33,421 | |||||
Shareholders’ equity | 923,442 | 856,871 | |||||
Total liabilities and shareholders’ equity | 1,608,995 | 1,318,403 | |||||
F-62
j) | Reclassification differences between Chilean GAAP and US GAAP (continued) |
For the years ended December 31, | ||||||||||
2005 | 2004 | 2003 | ||||||||
Operating income | ThUS$ | ThUS$ | ThUS$ | |||||||
Sales | 895,970 | 788,516 | 691,806 | |||||||
Cost of sales | (670,213 | ) | (618,213 | ) | (564,495 | ) | ||||
Gross margin | 225,757 | 170,303 | 127,311 | |||||||
Selling and administrative expense | (61,878 | ) | (55,705 | ) | (50,590 | ) | ||||
Operating income | 163,879 | 114,598 | 76,721 | |||||||
Non-operating income and expense, net | (6,093 | ) | (1,618 | ) | (4,301 | ) | ||||
Income taxes | (30,563 | ) | (20,735 | ) | (10,104 | ) | ||||
Minority interest | (4,615 | ) | (7,254 | ) | (6,695 | ) | ||||
Equity participation in income (loss) of related companies, net | 2,596 | 1,835 | 2,153 | |||||||
Net income | 125,204 | 86,826 | 57,774 | |||||||
Other comprehensive income (loss), net of tax: | ||||||||||
Minimum pension liability adjustment | 792 | (15 | ) | 370 | ||||||
Translation adjustment | — | 6,460 | 8,802 | |||||||
Deferred gain from sale of swap | — | — | (146 | ) | ||||||
Total comprehensive income under US GAAP | 125,996 | 93,271 | 66,800 | |||||||
k) | Industry segment and geographic area information |
Chile | Latin America and Caribbean except Chile | Europe | North America | Asia and other | Elimination | Consolidated | ||||||||||||||||
For the year ended December 31, 2005 | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||
Sales to unaffiliated customers | 156,086 | 128,187 | 258,296 | 270,006 | 83,395 | — | 895,970 | |||||||||||||||
Transfers between geographic areas | 278,325 | 15,604 | 287,129 | 224,714 | 38,389 | (844,161 | ) | — | ||||||||||||||
Total revenues | 434,411 | 143,791 | 545,425 | 494,720 | 121,784 | (844,161 | ) | 895,970 | ||||||||||||||
Exports by region | — | 116,427 | 243,964 | 172,060 | 51,908 | — | 584,359 | |||||||||||||||
Net assets | 1,731,058 | 33,188 | 39,107 | 91,241 | 338 | (874,516 | ) | 1,020,416 | ||||||||||||||
Goodwill | 27,055 | 154 | — | — | — | — | 27,209 | |||||||||||||||
Long-lived assets | 2,342,510 | 71,670 | 30,870 | 85,219 | 237 | (1,632,720 | ) | 897,786 | ||||||||||||||
Expenditures on long-lived assets | 199,242 | 102 | 2,159 | 1,268 | — | — | 202,771 |
k) | Industry segment and geographic area information (continued) |
Chile | Latin America and Caribbean except Chile | Europe | North America | Asia and other | Elimination | Consolidated | ||||||||||||||||
For the year ended December 31, 2004 | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||
Sales to unaffiliated customers | 158,846 | 111,066 | 228,287 | 233,506 | 56,811 | — | 788,516 | |||||||||||||||
Transfers between geographic areas | 202,293 | 11,231 | 245,585 | 175,859 | 36,689 | (671,657 | ) | — | ||||||||||||||
Total revenues | 361,139 | 122,297 | 473,872 | 409,365 | 93,500 | (671,657 | ) | 788,516 | ||||||||||||||
Exports by region | — | 102,266 | 171,861 | 142,970 | 43,124 | — | 460,221 | |||||||||||||||
Net assets | 1,862,554 | 16,005 | 12,519 | 92,582 | 332 | (1,035,364 | ) | 948,628 | ||||||||||||||
Goodwill | 16,952 | 177 | 341 | — | — | — | 17,470 | |||||||||||||||
Long-lived assets | 2,478,562 | 15,255 | 11,615 | 91,597 | 228 | (1,811,335 | ) | 785,922 | ||||||||||||||
Expenditures on long-lived assets | 87,309 | 132 | 2,488 | 616 | 13 | — | 90,558 |
Chile | Latin America and Caribbean except Chile | Europe | North America | Asia and other | Elimination | Consolidated | ||||||||||||||||
For the year ended December 31, 2003 | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||
Sales to unaffiliated customers | 216,820 | 36,433 | 219,239 | 185,224 | 34,090 | — | 691,806 | |||||||||||||||
Transfers between geographic areas | 167,098 | 11,671 | 236,119 | 129,760 | 22,614 | (567,262 | ) | — | ||||||||||||||
Total revenues | 383,918 | 48,104 | 455,358 | 314,984 | 56,704 | (567,262 | ) | 691,806 | ||||||||||||||
Exports by region | — | 79,400 | 164,072 | 110,834 | 31,169 | — | 385,475 | |||||||||||||||
Net assets | 1,682,653 | 69,481 | 14,931 | 66,084 | (100 | ) | (943,077 | ) | 889,972 | |||||||||||||
Goodwill | 13,289 | 200 | 98 | — | — | — | 13,587 | |||||||||||||||
Long-lived assets | 2,448,591 | 17,686 | 12,853 | 65,991 | 134 | (1,716,249 | ) | 829,006 | ||||||||||||||
Expenditures on long-lived assets | 58,765 | 1,614 | 2,856 | 5,358 | — | — | 68,593 |
k) | Industry segment and geographic area information (continued) |
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Specialty plant nutrition | 487,802 | 426,836 | 362,791 | |||||||
Iodine and derivatives | 149,103 | 110,495 | 84,557 | |||||||
Lithium and derivatives | 81,360 | 62,623 | 49,695 | |||||||
Industrial chemicals | 73,983 | 73,050 | 73,748 | |||||||
Others | 103,722 | 115,512 | 121,015 | |||||||
Sales to unaffiliated customers | 895,970 | 788,516 | 691,806 | |||||||
l) | Estimated Fair Value of Financial Instruments and Derivative Financial Instruments |
- | The data excludes non-financial assets and liabilities, such as property, plant and equipment, and goodwill. |
- | While the data represents management’s best estimates, the data is subjective and involves significant estimates regarding current economic and market conditions and risk characteristics, |
- | Cash and time deposits approximate fair value because of the short-term maturity of these instruments. |
- | Marketable securities with a readily determinable market value are recorded at fair value, |
- | Current liabilities that are contracted at variable interest rates, are considered to have a fair value equal to book value. |
- | For interest-bearing liabilities with an original contractual maturity of greater than one year, the fair values are calculated by discounting contractual cash flows at current market origination rates with similar terms. |
- | For forward contracts and swap agreements, fair value is determined using quoted market prices of financial instruments with similar characteristics. |
F-66
l) | Estimated Fair Value of Financial Instruments and Derivative Financial Instruments (continued) |
As of December 31, | |||||||||||||
2005 | 2004 | ||||||||||||
US GAAP Carrying Amount | Estimated Fair Value | US GAAP Carrying Amount | Estimated Fair Value | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||
Assets: | |||||||||||||
Cash and cash equivalents | 147,956 | 147,956 | 66,753 | 66,753 | |||||||||
Short-term accounts receivable | 222,032 | 222,032 | 204,213 | 204,213 | |||||||||
Long-term accounts receivable | 2,379 | 2,379 | 289 | 289 | |||||||||
Liabilities: | |||||||||||||
Short-term bank debt | 85,022 | 85,022 | (7,955 | ) | (7,955 | ) | |||||||
Short-term notes and accounts payable | 78,990 | 78,990 | (73,938 | ) | (73,938 | ) | |||||||
Derivative instruments | 163 | 163 | (702 | ) | (2,185 | ) | |||||||
Current and long-term portions of long-term bank debt | 304,881 | 306,102 | (204,577 | ) | (216,965 | ) | |||||||
Long-term other accounts payable | 1,065 | 1,065 | (1,106 | ) | (1,106 | ) |
m) | Post-retirement obligations and staff severance indemnities |
2005 | 2004 | ||||||
Weighted-average discount rate | 7.5 | % | 7.5 | % | |||
Rate of increase in compensation levels | 0.0 | % | 0.0 | % | |||
Long-term rate of return on plan assets | 8.5 | % | 8.5 | % |
F-67
m) | Post-retirement obligations and staff severance indemnities (continued) |
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Change in benefit obligation: | ||||||||||
Benefit obligation at beginning of year | 5,080 | 4,831 | 4,903 | |||||||
Service cost | 16 | 15 | 13 | |||||||
Interest cost | 369 | 362 | 345 | |||||||
Actuarial loss | (37 | ) | 115 | (186 | ) | |||||
Benefits paid | (244 | ) | (243 | ) | (244 | ) | ||||
Benefit obligation at end of the year | 5,184 | 5,080 | 4,831 | |||||||
Change in plan assets: | ||||||||||
Fair value of plan assets at beginning of year | 4,966 | 4,713 | 4,049 | |||||||
Employer contributions | — | 82 | — | |||||||
Actual return (loss) on plan assets | 501 | 414 | 908 | |||||||
Benefits paid | (244 | ) | (243 | ) | (244 | ) | ||||
Fair value of plan assets at end of year | 5,223 | 4,966 | 4,713 | |||||||
Funded status | 39 | (114 | ) | (118 | ) | |||||
Unrecognized transitional asset | — | — | ||||||||
Unrecognized net actuarial loss | 1,133 | 1,165 | 1,137 | |||||||
Adjustment to recognize minimum pension liability | (1,094 | ) | (1,279 | ) | (1,255 | ) | ||||
Accrued pension (liability)/ prepaid pension cost | 39 | (114 | ) | (118 | ) | |||||
2005 | 2004 | 2003 | ||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||
Service cost or benefits earned during the period | 16 | 15 | 13 | |||||||
Interest cost on benefit obligation | 369 | 362 | 345 | |||||||
Actual return on plan assets | (501 | ) | (414 | ) | (908 | ) | ||||
Amortization of unrecognized transitional asset | — | — | (45 | ) | ||||||
Other | 148 | 91 | 682 | |||||||
Net periodic pension expense | 32 | 54 | 87 | |||||||
F-68
m) | Post-retirement obligations and staff severance indemnities (continued) |
2004 | 2005 | ||||||
Growth securities | 69 | % | 68 | % | |||
Treasury securities | 2 | % | 1 | % | |||
International securities | 14 | % | 15 | % | |||
Growth & income securities | 14 | % | 15 | % | |||
Money market funds | 1 | % | 1 | % | |||
Total | 100 | % | 100 | % |
US$ | ||||
2006 | 260,500 | |||
2007 | 269,500 | |||
2008 | 288,200 | |||
2009 | 354,600 | |||
2010 | 371,400 | |||
Years 2011-2015 | 2,384,900 |
n) | Cash and cash equivalents |
F-69
o) | Recently issued accounting pronouncements |
F-70