EX-99.1 2 dex991.htm UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES Unaudited consolidated financial statements and notes
Table of Contents

Exhibit 99.1

ARAUCO AND CONSTITUTION PULP INC

TABLE OF CONTENTS

 

Item

        Page  

1.

   Ratio Analysis of the Consolidated Financial Statement      1   

2.

   Unaudited Consolidated Financial Statement      7   

3.

   Unaudited Consolidated Financial Income Statement      9   

4.

   Unaudited Consolidated Statement of Changes in Net Equity      11   

5.

   Unaudited Consolidated Statement of Cash Flow      12   

6.

   Unaudited Notes to the Consolidated Financial Statement      13   

7.

   Annex: Press Release   


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

1. VALUATION OF ASSETS AND LIABILITIES

The financial statements of Celulosa Arauco y Constitución S.A., a Chilean corporation (the “Company”) and its subsidiaries (the Company, together with its subsidiaries, “Arauco”) have been prepared on the basis of International Financial Reporting Standards (IFRS). In management’s opinion there is no material difference between the Company’s economic value and the valuation reflected in the Company’s financial statements.

 

2. ANALYSIS OF FINANCIAL POSITION

 

a) Analysis of the Financial Statement

The principal components of assets and liabilities as of September 30, 2010 and December 31, 2009 are as follows:

 

Assets

   09/30/2010
ThU.S.$
     12/31/2009
ThU.S.$
 

Current assets

     3,024,569         2,272,313   

Non-current assets

     9,246,172         9,141,514   
                 

Total assets

     12,270,741         11,413,827   
                 

Liabilities and Shareholders’ Equity

   09/30/2010
ThU.S.$
     12/31/2009
ThU.S.$
 

Current liabilities

     1,259,793         951,413   

Non-current liabilities

     4,364,358         4,079,981   

Non –parent participation

     104,254         113,840   

Net equity attributable to parent company Shareholders’ equity

     6,542,336         6,268,593   
                 

Total net equity and liabilities

     12,270,741         11,413,827   
                 

At September 30, 2010, total assets increased by 7.51% or U.S.$ 857 million compared to December 31, 2009. This increase is mainly attributable to an increase of Trade and Other Receivables offset by a decrease of Cash and Cash Equivalents and Properties, Trade and Other receivables.

Total liabilities increased by U.S.$ 593 million. This increase is mainly attributable to an increase in Other Financial Liabilities for Arauco’s Investment Policy in September 2010 and an increase in minimum dividend provisions partially offset by bank loans.

The main financial and operating ratios are as follows:

 

Liquidity ratios

   09/30/2010      12/31/2009  

Current ratio

     2.40         2.39   

Acid ratio

     1.61         1.41   

Debt indicators

   09/30/2010      12/31/2009  

Debt to equity ratio

     0.85         0.79   

Short-term debt to total debt

     0.22         0.19   

Long-term debt to total debt

     0.78         0.81   
     09/30/2010      09/30/2009  

Financial expenses covered

     4.31         2.56   

 

1


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

2. ANALYSIS OF FINANCIAL POSITION, continued

 

a) Analysis of the Balance Sheet, continued

 

Operational ratios

   09/30/2010      12/31/2009  

Inventory turnover

     2.28         2.23   

Inventory turnover (excluding biological assets)

     3.31         3.28   

Inventory permanence-days

     158.20         161.21   

Inventory permanence (excluding biological assets)

     108.61         109.65   

The liquidity ratio and the acid test for the current period has increased compared to December 31, 2009. This is due to an increase in current assets compared to the proportional increase in the variation of current liabilities, which in turn is explained by an increase of Cash and cash equivalents and Trade and Other Receivables.

As of September 30, 2010, the short-term debt represented 22% of total liabilities compared to 19% as of December 31, 2009.

The ratio of financial expenses covered increased from 2.56 in September 30, 2009 to 4.31 in September 30, 2010. This increase is attributable to higher profits in the current period.

The ratio of inventory turnover does not present significant changes by 2010 as compared to December 31, 2009.

 

b) Analysis of the Income Statement

Profit before Income Tax

Profit before Income Tax registers a profit of U.S.$560 million in 2010 compared to U.S.$202 million in 2009, an increase of U.S.$358 million. The change was attributable to the factors described in the following table:

 

Item

   Million
U.S.$
 

Gross margin

     444   

Other operating income

     36   

Administration cost

     (33

Financial costs

     (40

Foreign currency exchange rate

     (35

Others net

     (14
        

Net change in income before income tax

     358   
        

Gross Margin presents a profit of U.S.$1,091 million in 2010 compared to U.S.$ 647 million in 2009, caused by an increase in revenues due to an increase in sales price.

The proportional increase in administration expenses is mainly due to an increase in the remuneration item (the acquisition of Tafisa Plant).

 

2


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

2. ANALYSIS OF FINANCIAL POSITION, continued

The decrease in the exchange rate difference is principally due to a strong appreciation of the U.S. Dollar against the Chilean peso, the Euro and the Real, the currencies in which the Company owns financial investments, tax receivables and other accounts receivable.

The main indicators related to result accounts and the details of revenues and operation costs are as follows:

 

Revenues

   09/30/2010
ThU.S$
    09/30/2009
ThU.S$
 

Pulp

     1,345,709        1,213,294   

Sawn timber

     447,253        357,368   

Panels

     813,481        585,863   

Forestry

     110,980        60,322   

Other

     15,953        10,757   
                

Total revenues

     2,733,376        2,227,604   
                

Sales costs

   09/30/2010
ThU.S$
    09/30/2009
ThU.S$
 

Wood

     376,279        414,200   

Forestry work

     308,779        250,955   

Depreciation

     133,663        143,744   

Other costs

     823,360        771,515   
                

Total sales costs

     1,642,081        1,580,414   
                

Profitability index

   09/30/2010
ThU.S$
    12/31/2009
ThU.S$
 

Profitability on equity

     8.93        4.92   

Profitability on assets

     4.91        2.81   

Return on operating assets

     7.13        3.13   

Profitability ratios

   09/30/2010     09/30/2009  

Income per share (U.S.$) (1)

     3.85        1.36   

EBITDA (2)

     986,551        485,650   

Income after tax (ThU.S.$) (3)

     436,376        159,198   

Gross margin (ThU.S.$)

     1,091,295        647,190   

Financial costs ( ThU.S.$)

     (169,185     (129,482

 

(1) Earnings per share refer to the profit to net equity to parent company.
(2) Earnings before income tax, interest, depreciation, amortization and financial expenses.
(3) Includes interest.

 

3. DIFFERENCE BETWEEN ECONOMIC VALUES AND BOOK ASSETS

Assets and liabilities are presented in the Financial Statements according to International Financial Reporting Standards and instructions issued by the Chilean Securities Commission.

We believe that there are no substantial differences between the economic value of our assets and the value reflected in these Financial Statements.

 

3


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

4. MARKET SITUATION

Pulp

The third quarter of 2010 was quite stable in terms of global pulp prices. There were adjustments in some markets due to the difficulty of transferring the increases incurred during the previous quarters to the price of end products. These adjustments appeared at the end of the second quarter.

Global inventory, measured in days of production, began to raise from a very low level in late June, from 21 days in short fiber and 29 days in long fiber to 27 and 38 days respectively, late in the third quarter. These levels are still considered within a normal range. However, this increase had an impact in price stabilization and in some cases it has produced downward adjustments, especially in short fiber. The performance of Asia, in general, remains the same as in the late second quarter.

In China it was difficult to transfer pulp prices to paper. The oversupply of paper in China, due to new productions, has influenced the rest of Asia negatively impacting pulp sales, and forcing to make concessions in prices. The adjustments are especially in short fiber due to the aggressiveness of Asian pulp producers (China and Indonesia), with few alternatives of sales outside the region. In part, this is due to the new Rizhao pulp plant that started operations in late second quarter and that during the third quarter began selling large production volumes.

Despite this, the adjustments have been moderate for pulp produced in Asia. There were only major adjustments in short fiber produced in China and Indonesia, and long fiber from Russia. Regarding to the latter, there was an aggressive downward adjust, which was not followed by the market in general and therefore the trend was quickly reversed by the Russian producers. In Asia, the two biggest difficulties of the quarter were the oversupply of paper and the start up of the new short fiber pulp mill.

The situation in Europe has been different. Inventories are still relatively low and paper demand active, even during the European summer months. Due to the market situation in Asia, prices stopped increasing and they remain stable. The paper market is still active in almost all levels: writing, printing, tissue, packaging, etc. It currently bears between 6 and 8 weeks of orders. The lower level of inventories implied that paper customers would like to ensure supply, but consumption as such has not changed and remains stable or with seasonal increases.

In Latin America the market is active, prices are stable and inventories are low. Pulp prices are following the global trend, but the safe and regular supply has become a priority for customers. In the Fluff pulp market, regularity and security of supply has meant a stable price at an appropriate level and there is no evidence of major changes.

Less regular markets used to spot prices, get more supply and prices are no longer as those observed during the second quarter. These are the only markets where prices have fallen more significantly, however, there is no crash and levels still remain high.

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

4. MARKET SITUATION, continued

Sawn Timber

The real estate and construction market in the United States has shown a slight rise during the third quarter of 2010. The housing start index reached 610,000 units per year in September. However, current levels of construction are still low compared to the average of the last 10 years.

During the third quarter of this year, the demand for forestry products registered a slight decrease in all markets. This has caused sales prices to fall, especially in China, Korea, Mexico and Taiwan.

Also, there was a decrease in sale prices of moldings and lumber when compared with last quarter. This is the result of a surplus in inventories held by most distributors.

During this quarter, sales in the local market have been greater than for the previous year, driven mainly by the requirements of the reconstruction of Chile after the earthquake.

Panels

At the end of the third quarter of 2010, consolidated sales of panels showed a significant rise of 39% and sales volume increased 19% compared to the same period last year. Most of all, this allows us to appreciate the strong recovery in sale prices in all product lines.

MDF and Particleboard have led the recovery and have continued showing strong volume increases, 25% and 40% respectively. This has been driven mainly by the demand in Brazil and Argentina, which has been estimated to remain strong until the end of the year.

Although during this period the demand for MDF and Plywood boards maintained its growth in both price and volume in the rest of Latin American markets. The last quarter of this year already shows an adjustment in price and a decrease in demand. This is due mainly to the higher levels of inventory maintained in the different distribution channels and to the aggressive strategies of competitors in the market.

During this period, prices of MDF moldings to USA continued to rise, resulting primarily from the post-earthquake effect. But for the remainder of the year, prices are already being adjusted downward by 4% since the demand in U.S.A. has still not recovered and local moldings manufacturers have taken very aggressive positions to regain market share.

Regarding Plywood, Europe had been showing signs of recovery in terms of volume and price, but after the summer holidays in the northern hemisphere activity has not picked up as expected, leaving importers with high inventories. For the remainder of the year there could be some pressure causing a slight decrease in prices.

In summary, this period has shown positive figures in terms of volume and prices. However, the fourth quarter anticipates some price declines due to the deceleration of the market, high inventories held by clients and more aggressiveness by competitors.

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

5. ANALYSIS OF CASH FLOW

The main components of net cash flow at September 30, 2010 and 2009 are as follows:

 

     09/30/2010
MUS$
    09/30/2009
MUS$
 

Positive (negative) Cash flow

    

Cash flow from operating activities

     582,382        551,870   

Cash flow from financing activities:

    

Loan and bond payments

     212,456        444,275   

Dividend payments

     (56,759     (101,772

Others

     849        945   

Cash flow from investment activities:

    

Purchase and sales of permanent investments

     (41,082     (165,610

Incorporation and sale of property, plant and equipment

     (253,126     (186,828

Incorporation and sale of biological assets

     (88,526     (76,921

Other

     (2,282     (1,089
                

Net cash flow for the period

     353,912        464,870   
                

We had a positive operating cash flow of U.S.$582 million in the current period compared to a positive balance of U.S.$552 million in 2009. The positive operating cash flow resulted from an increase in client recovery and was partially offset by lower payments to suppliers.

Cash flow from financing activities as of September 30, 2010 had a positive balance of U.S.$156 million compared to a positive balance of U.S.$343 million for the same period in 2009. This change resulted from lower received loans in the year 2010.

The investment cash flow decreased of U.S.S$385 million (U.S.$430 million in period 2009) at the end of the current period, due principally to payments for acquisition of property, plant and equipment and capital contribution from associated parties.

 

6. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of September 30, 2010, a ratio of fixed rate debt to total consolidated debt of approximately 92.6%, which it believes is consistent with industry standards. The Company does not engage in futures or other hedging transactions to hedge against variations in the selling prices of pulp and forest products because it believes that risks resulting from price variations are limited, in large part because the Company maintains one of the lowest cost structures in the industry.

The Company and most of its subsidiaries maintain their accounting records and prepare their financial statements in U.S. dollars. Both the accounts receivable and most financial liabilities are denominated in U.S. dollars or are covered by an exchange rate swap, as well as most of their revenues. As a result, exposure to changes in the exchange rate has decreased significantly.

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

CONSOLIDATED BALANCE SHEET

 

     Note      09/30/2010
ThU.S.$
     12/31/2009
ThU.S.$
 

Assets

        

Current Assets

        

Cash and cash equivalents

     4         889,553         534,199   

Other financial current assets

     22         2,902         8,426   

Other current non-financial assets

        155,497         118,133   

Trade and Other receivables-net

     22         912,436         558,441   

Related party receivables

     13         7,922         16,327   

Inventories

     3         701,062         620,058   

Biological assets, current

     20         292,307         310,832   

Tax assets

        62,890         105,897   

Total Current Assets

        3,024,569         2,272,313   

Non-Current Assets

        

Other non-current financial assets

     22         34,198         29,078   

Other non-current and non-financial assets

        45,324         35,196   

Investment accounted through equity method

     15         496,509         476,101   

Intangible assets

     19         11,380         11,154   

Goodwill

        65,460         63,776   

Property, plant and equipment

     7         5,004,044         4,969,753   

Biological assets, non-current

     20         3,467,267         3,446,696   

Deferred tax assets

     6         121,990         109,760   

Total non-current assets

        9,246,172         9,141,514   

Total Assets

        12,270,741         11,413,827   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

CONSOLIDATED BALANCE SHEET (continued)

 

     Note      09/30/2010
ThU.S.$
     12/31/2009
ThU.S.$
 

Liabilities

        

Current Liabilities

        

Other financial liabilities, current

     22         565,928         535,557   

Trade and Other payables

     22         407,639         321,892   

Related party payables

     13         10,377         10,136   

Other provisions, current

     18         5,628         5,169   

Tax liabilities

        59,742         2,202   

Current provision for employee benefits

     10         2,726         2,372   

Other non-current financial liabilities

        207,753         74,085   

Total Current Liabilities

        1,259,793         951,413   

Non-Current Liabilities

        

Other non-current financial liabilities

        2,891,956         2,678,010   

Other non-current provisions

     18         7,387         9,463   

Deferred tax liabilities

     6         1,301,218         1,256,090   

Non-current provision for employee benefits

     10         34,018         25,295   

Other non-current financial liabilities

        129,779         111,123   

Total non-current liabilities

        4,364,358         4,079,981   

Total liabilities

        5,624,151         5,031,394   

Net Equity

        

Issued capital

        353,176         353,176   

Accumulated profit/loss

        6,158,117         5,893,799   

Other reserves

        31,043         21,618   

Net equity attributable to parent company

        6,542,336         6,268,593   

Non-parent participation

        104,254         113,840   

Total net equity

        6,646,590         6,382,433   

Total net equity and liabilities

        12,270,741         11,413,827   

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Income Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

CONSOLIDATED STATEMENTS OF INCOME

 

     Note      January-September     July-September  
        2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Income Statement

           

Revenue

     9         2,733,376        2,227,604        1,035,107        834,664   

Cost of sales

        (1,642,081     (1,580,414     (614,134     (572,003

Gross profit

        1,091,295        647,190        420,973        262,661   

Other operating income

     2         179,617        143,719        80,257        52,209   

Distribution costs

        (271,167     (287,924     (103,361     (105,003

Administrative expenses

        (226,844     (176,631     (74,773     (65,244

Other operating expenses

        (40,684     (35,651     (12,159     (5,626

Other income (loss)

        134        (419     (141     29   

Financial income

        14,026        14,702        3,298        5,417   

Financial costs

     2         (169,185     (129,482     (61,622     (46,037

Participation in (loss) profit in associates and joint ventures accounted through equity method

     15         (3,038     5,682        (919     (265

Exchange rate differences

     11         (14,112     21,161        11,878        20,766   

Income before income tax

        560,042        202,347        263,431        118,907   

Income tax

     6         (123,666     (43,149     (64,332     (23,376

Net Income

        436,376        159,198        199,099        95,531   

Profit attributable to equity holders

           

Profit attributable to parent company

        435,347        153,373        198,818        93,330   

Profit attributable to non-parent company

        1,029        5,825        281        2,201   

Net Income

        436,376        159,198        199,099        95,531   

Basic earnings per share

           

Earnings per share from counting operations

        0.0038474        0.0013555        0.0017571        0.0008248   

Earnings per share from discontinued operations

        0        0        0        0   

Basis earnings per share

        0.0038474        0.001355        0.0017571        0.0008248   

Earnings per diluted shares

           

Earnings per diluted share from counting operations

        0.0038474        0.0013555        0.0017571        0.0008248   

Earnings per diluted share from discontinued operations

        0        0        0        0   

Basic earnings per diluted share

        0.0038474        0.0013555        0.0017571        0.0008248   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Income Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

COMPREHENSIVE INCOME STATEMENT

 

     Note      January-September     July-September  
      2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Net Income

        436,376        159,198        199,099        95,531   

Other comprehensive income, before tax

           

Exchange difference on conversion

           

Profit (loss) for exchange differences before tax

     11         28,775        159,170        54,494        61,106   

Other comprehensive income before tax, exchange difference on conversion

        28,775        159,170        59,494        61,106   

Cash flow hedges

           

Profit (loss) for cash flow hedges before tax

        (23,118     (4,300     (21,222     313   

Other comprehensive income, before tax, cash flow hedges

        (23,118     (4,300     (21,222     313   

Participation in Other comprehensive income in associates and joint ventures through equity method

        928        760        887        (368

Other comprehensive income, before tax

        6,585        155,630        39,159        61,051   

Comprehensive income statement

           

Income tax related to Other comprehensive income

           

Income tax related to Cash flow hedges on Other comprehensive income

        3,930        731        3,608        (53

Income tax related to Other comprehensive income

        3,930        731        3,608        (53

Other comprehensive income

        10,515        156,361        42,767        60,998   

Total comprehensive income

        446,891        315,559        241,866        156,529   

Comprehensive Income Statement attributable to:

           

Comprehensive income statement attributable to parent company

        444,772        296,994        238,715        149,609   

Comprehensive income statement attributable to non-parent company

        2,119        18,565        3,151        6,920   

Total comprehensive income

        446,891        315,559        241,866        156,529   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Statement of Changes in Net Equity

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

CONSOLIDATED STATEMENT OF CHANGES IN NET EQUITY

 

09/30/2010

   Share
Capital
ThU.S.$
     Conversion
Reserves
ThU.S.$
    Hedge
Reserves
ThU.S.$
    Profit or loss on the
remeasurement of
financial assets
available for sale
ThU.S.$
    Other
Reserves
ThU.S.$
    Accumulated
Profit (Loss)
ThU.S.$
    Equity
attributable
to Parent
Company
ThU.S.$
    Non-parent
company
ThU.S.$
    Equity Total
ThU.S.$
 

Opening balance at 01/01/2010

     353,176         27,551        (4,820     (1,113     21,618        5,893,799        6,268,593        113,840        6,382,433   

Changes in equity

                   

Comprehensive income statement

                   

Profit (loss)

     0         0        0        0        0        435,347        435,347        1,029        436,376   

Other comprehensive income

     0         27,685        (19,188     928        9,425        0        9,425        1,090        10,515   

Comprehensive income

     0         27,685        (19,188     928        9,425        435,347        444,772        2,119        446,891   

Dividends

     0         0        0        0        0        (171,029     (171,029     0        (171,029

Increase (decrease) for transfers and Other changes

     0         0        0        0        0        0        0        (11,705     (11,705

Total Changes in equity

     0         27,685        (19,188     928        9,425        264,318        273,743        (9,586     264,157   

Closing balance at 09/30/2010

     353,176         55,236        (24,008     (185     31,043        6,158,117        6,542,336        104,254        6,646,590   

09/30/2009

   Share
Capital
ThU.S.$
     Conversion
Reserves
ThU.S.$
    Hedge
Reserves
ThU.S.$
    Profit or loss on the
remeasurement of
financial assets
available for sale
ThU.S.$
    Other
Reserves
ThU.S.$
    Accumulated
Profit (Loss)
ThU.S.$
    Equity
attributable
to Parent
Company
ThU.S.$
    Non-parent
company
ThU.S.$
    Equity Total
ThU.S.$
 

Opening balance at 01/01/2009

     353,176         (136,223     0        (3,015     (139,238     5,675,616        5,889,554        117,682        6,007,236   

Changes in equity

                   

Comprehensive income statement

                   

Profit (loss)

     0         146,430        (3,569     760        143,621        153,373        153,373        5,825        159,198   

Other comprehensive income

     0         0        0        0        0        0        143,621        12,740        156,361   

Comprehensive income

     0         146,430        (3,569     760        143,621        153,373        296,994        18,565        315,559   

Dividends

     0         0        0        0        0        (51,913     (51,913     0        (51,913

Increase (decrease) for transfers and Other changes

     0         0        0        0        0        0        0        (13,293     (13,293

Total Changes in equity

     0         146,430        (3,569     760        143,621        141,460        245,081        5,272        250,353   

Closing balance at 09/30/2009

     353,176         10,207        (3,569     (2,255     4,383        5,777,076        6,134,635        122,954        6,257,589   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Statement of Cash Flows-Direct Method

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS-DIRECT METHOD

 

Cash Flows from (used in) Operating Activities, Direct Method

   09/30/2010
ThU.S.$
    09/30/2009
ThU.S.$
 

Statement of Cash flows

    

Cash Flows from (used in) Operating Activities

    

Classes of cash receipts from operating activities

    

Receipts from sales of goods and rendering of services

     2,766,001        2,504,731   

Receipts from premiums and claims, annuities and other policy benefits

     100,000        0   

Other cash receipts from operating activities

     119,598        124,805   

Classes of cash payments

    

Payments to suppliers for goods and services

     (2,112,995     (1,879,819

Payments to and behalf of employees

     (159,211     (137,311

Other cash payments from operating activities

     (2,694     (868

Dividends paid

     (10,474     (13,323

Dividends received

     6,353        17,028   

Interest paid

     (151,001     (120,884

Interest received

     5,220        14,928   

Income taxes refund (paid)

     21,221        17,355   

Other inflows (outflows) of cash

     364        11,905   

Net Cash flows from (used in) Operating Activities, Total

     582,382        551,870   

Cash flows from (used in) Investing Activities

    

Cash flows from losing control of subsidiaries or other business

     0        7   

Cash flow used in obtaining control of subsidiaries or other businesses

     (7,523     (165,617

Payments to acquire equity or debt instruments of other entities

     (33,559     0   

Capital contributions to joint ventures

     0        0   

Proceeds from sale of property, plant and equipment

     4,652        1,307   

Purchase of property, plant and equipment

     (257,778     (188,135

Purchase of intangible assets

     (1,705     (966

Proceeds from sale of other financial assets

     829        1,793   

Purchase of biological assets

     (89,355     (78,714

Cash receipts from repayment of advances and loans made to other parties

     0        0   

Other inflows (outflows) of cash

     (577     (123

Cash flows from (used in) Investing Activities

     (385,016     (430,448

Cash flows from (used in) Financing Activities

    

Loans obtained in long term

     612,403        636,457   

Loans obtained in short term

     158,145        687,104   

Total Loans obtained

     770,548        1,323,561   

Loan payments

     (558,092     (879,286

Dividends paid

     (56,759     (88,449

Other inflows (outflows) of cash

     849        945   

Cash flows from (used in) Financing Activities

     156,546        356,771   

Net increase (decrease) of Cash and Cash Equivalents

     353,912        464,870   

Effect of exchange rate variations on cash and cash equivalents

    

Effect of exchange rate s on cash and cash equivalents

     1,442        25,256   

Net increase (decrease) of Cash and Cash equivalents

     355,354        490,126   

Cash and cash equivalents, at the beginning of the period

     534,199        167,308   

Cash and cash equivalents, at the end of the period

     889,553        657,434   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

NOTE 1. PRESENTATION OF FINANCIAL STATEMENTS (IAS 1)

Entity Information

Name of Reporting Entity

Celulosa Arauco y Constitución S.A., Tax No. 93,458,000-1, Closed Company, was registered in the Securities Registry (the “Registry”) of the Superintendency of Securities and Insurance (the “Superintendency”) as No. 042 on June 14, 1982. Forestal Cholguán S.A., a subsidiary of Arauco, is also registered on the Registry as No. 030 and subject to audit by the Superintendency. Arauco is controlled by Empresas Copec S.A., which owns 99.9779% of Arauco, and is registered in the Registry as No. 0028. By virture of their registration in the Registry, each of the above companies is subject to audit by the Superintendency.

The Company’s head office address is El Golf Avenue 150, floor 14, Las Condes, Santiago, Chile.

Celulosa Arauco y Constitución S.A. and subsidiaries (hereinafter “Arauco”) is principally engaged in the production and sale of forestry and wood products. Its main operations are focused on the following business areas: Pulp, Plywood and fiberboard panels, Sawn Timber and Forestry.

The current controllers of the Company are Mrs. Maria Noseda Zambra of Angelini, Mr.Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through Inversiones Angelini y Cia. Ltda., which owns 63.4015% of the shares of AntarChile S.A., the controller of our parent company Empresas Copec S.A.

Arauco’s consolidated financial statements were prepared on a going concern basis.

Presentation of Financial Statements

Financial Statements presented by Arauco as at September 30, 2010:

 

   

Consolidated Balance Sheet

 

   

Consolidated Statement of Income

 

   

Comprehensive Income Statement

 

   

Consolidated Statement of Changes in Net Equity

 

   

Consolidated Statement of Cash Flows – Direct Method

 

   

Disclosure of Explanatory Information (notes)

Period Covered by the Financial Statements

January 1, 2010 to September 30, 2010.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Date of Approval of Financial Statements

The issuance of these interim consolidated financial statements for the period between January 1, 2010 and September 30, 2010 was approved by the Board of Directors of the Company (the “Board”) in Extraordinary Session No. 433 on November 23, 2010.

Functional Currency

Arauco has defined the U.S. Dollar as its functional currency, as most of the Company’s operations are a result of exports, and its costs to a large extent are related to or index-linked to the U.S. Dollar.

For the pulp segment, most of the sales operations are exports, and the costs are related mainly to plantation costs, which are settled in U.S. Dollars.

For the sawmill and panel segments, although total sales include a mix of domestic sales and exports, the prices for the products are established in U.S. Dollars, as is also the case for the cost structure of the related raw materials.

Although the costs of labor and services are generally billed and paid in local currency, these costs are not as significant as the costs of raw materials and depreciation of equipment, which are driven mainly by global conditions and therefore, influenced mostly by the U.S. Dollar.

Arauco has defined the U.S. Dollar as its main functional currency.

The financial information included herein is presented in thousands of U.S. Dollars without decimals.

All significant information required by International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standard Board (“IASB”), is presented in these interim consolidated financial statements.

Additional Information Relevant to the Understanding of the Financial Statements

The company Fondo de Inversión Bío Bío and its subsidiary Forestal Río Grande S.A. are entities that qualify as Special Purpose Entities. However, they are controlled by Arauco, which is determined, in part, by the fact that they maintain exclusive contracts with Arauco for wood provision, forward purchase of land and forest administration. Consequently, the financial information of these companies is consolidated with the financial information of the Company and is included in these consolidated financial statements of Arauco.

Compliance and Adoption of IFRS

The accompanying interim consolidated financial statements of Arauco include the balance sheet, statements of income from operations and cash flows in accordance with IFRS.

This presentation is required to give a faithful representation of the effects of transactions, as well as other events and conditions, according to the definitions and criteria established within the conceptual framework of IFRS for the recognition of assets, liabilities, income and expenses.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

IFRS Compliance Declaration

These interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standard Board (“IASB”), and represent the wholesale adoption, explicitly and without reservation of the mentioned international standards.

Disclosure of Capital Information

Information on Objectives, Policies and Processes applied by the Company

regarding Capital Management

Arauco’s policies on capital management have the objective of:

 

  a) Guaranteeing business continuity and normal operations in the long term;

 

  b) Providing all financing needs for new investments to achieve sustainable growth over time;

 

  c) Maintenance of an adequate capital structure considering all economic cycles that impact the business and the nature of the industry; and

 

  d) Maximizing the Company’s value, as well as providing an adequate return to shareholders.

Qualitative Information on Objectives, Policies and Processes applied by the Company regarding Capital Management

Arauco determines and manages its capital structure based on its equity at book value plus its financial liabilities (bank borrowings and bonds).

Quantitative Information on Capital Management

Financial guarantees of the Company are as follows:

 

Instrument

   Amount at
09/30/2010
(ThU.S. $)
     Amount at
12/31/2009
(ThU.S. $)
     Equity
Hedging
>= 2.0x
  Debt Level(1)
<= 1.2x
   Debt Level(2)
<= 0.75x

Local Bonds

     651,400         398,693       N/A   ü    N/A

Forestal Río Grande S.A. Loan

     112,107         138,837       ü(3)   N/A    ü(3)

Bilateral Bank Loan

     240,737         255,304       ü   ü    N/A

Other Loans

     65,576         156,639       No Financial Covenants Required

Foreign Bonds

     2,356,213         2,252,838       No Financial Covenants Required

 

N/A: Not applicable for the instrument

 

(1) Debt Level (financial debt divided by: equity plus minority interest)

 

(2) Debt Level (financial debt divided by: total assets)

 

(3) Financial guarantees on credits taken by Forestal Río Grande S.A. only apply to financial statements of that company

Arauco has complied with all financial covenants at September 30, 2010.

Debt instruments ratings at September 30, 2010 are as follows:

 

Instrument

   Standard &
Poor’s
   Fitch Ratings    Moody’s    Feller Rate

Local Bonds

   —      AA    —      AA

Foreign Bonds

   BBB    BBB+    Baa2    —  

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Capital requirements are established based on the Company’s financial needs and on maintaining an adequate liquidity level and complying with financial guarantees established in current debt contracts. The company manages its capital structure and makes adjustments based on the prevailing economic conditions in order to mitigate the risks associated with adverse market conditions, and based on opportunities that may arise to improve the Company’s level of liquidity.

Capital (in Thousand of U.S. Dollars) as at September 30, 2010, and December 31, 2009:

 

In ThU.S.$

   09/30/2010      12/31/2009  

Equity

     6,542,336         6,268,593   

Bank Loans

     418,420         550,780   

Financial Leases

     362         608   

Bonds

     3,007,613         2,651,531   
                 

Capital

     9,968,731         9,471,512   
                 

The nature of external capital requirements is determined by the obligation to maintain certain financial ratios that ensure compliance with either bank loans or bond payments, which provide guidelines on the capital ranges required for compliance with these requirements. Arauco has fulfilled all its external requirements.

Arauco considers it unlikely that future uncertainty risks will result in any significant adjustment to the book value of assets and liabilities within the next financial period. In the case of the fair value of biological assets, no risks are foreseen in which the value of forests will change significantly. Notably, the data used to make the foregoing determination contemplates the long-term realization of such risks, and therefore the estimates provided are also relevant for the long term.

Summary of significant accounting policies

The accompanying interim consolidated financial statements as of September 30, 2010 were prepared in accordance with current IFRS accounting policies, uniformly applied to all items in these consolidated financial statements.

a) Basis for Presentation of financial information

These interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standard Board (“IASB”), and represent the wholesale adoption, explicitly and without reservation of the mentioned international standards.

These interim consolidated financial statements have been prepared under IAS 34.

The consolidated financial statements have been prepared under the historic cost convention, as modified for the revaluation of biological assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

b) Critical accounting estimates and judgments

The preparation of consolidated financial statements in accordance with IFRS requires management to make subjective estimates and assumptions that affect the amounts reported. Estimates are based on historical experience and various other assumptions that are believed to be reasonable, though actual results and timing could differ from the estimates. Management believes that the accounting policies below take into account those matters that require the exercise of judgment, but acknowledge that different judgments could result in substantially different results.

 

   

Property, Plant and Equipment

For property, plant and equipment in a business acquisition, an external advisor is used to perform a fair valuation of the acquired fixed assets and to assist in determining their remaining useful lives.

The carrying amounts of fixed assets are reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may be impaired. The recoverable amount of an asset is estimated as the higher of fair value less the cost to sell and the value in use, with an impairment charge being recognized whenever the carrying amount exceeds the recoverable amount. The value in use is calculated using a discounted cash flow model, which is most sensitive to the discount rate as well as the expected future cash inflows.

 

   

Fair Value of Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Arauco uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date.

 

   

Biological Assets

The recovery of forest plantations is based on discounted cash flow models which mean that the fair value of biological assets is calculated using cash flows from continuing operations on a discounted basis, on our sustainable forest management plans and the estimated growth of forests. This recovery is performed on the basis of each stand identified and for each type of tree species.

These discounted cash flows require estimates in growth, harvest, sales prices and costs. It is therefore important that management make appropriate estimates of future levels and trends for sales and costs, as well as conduct regular surveys of the forests to establish the volumes of wood available for harvesting and their current growth rates. The principal considerations used to calculate the valuation of forest plantations are presented in Note 20.

 

   

Lawsuits and Contingencies

Arauco and its subsidiaries are subject to certain ongoing lawsuits, the future effects of which need to be estimated by the management of the Company, in collaboration with its legal advisers. Arauco reserved the appropriate contingency estimates in each balance sheet and/or upon each substantial modification to an underlying cause of any such litigation based on the reports of its legal advisors. Detailed lawsuits information is presented in Note 18.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

c) Consolidation

The interim consolidated financial statements include all entities over which Arauco has the power to govern the financial and operating policies, which usually requires holding shares with more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

Unrealized earnings from subsidiary operations have been eliminated from the interim consolidated financial statements and minority shareholder equity is recognized in the equity balance.

Interim consolidated financial statements for the period between January 1, 2010 and September 30, 2010 include subsidiary balances shown in Note 13 and balances of the Fondo de Inversión Bío Bío, and its subsidiary Forestal Río Grande S.A., both of which qualify as Special Purpose Entities.

Some consolidated subsidiaries report legal financial statements in Brazilian Reales and Chilean Pesos. For consolidation purposes, they have been translated as indicated in Note 11.

d) Segments

Arauco has defined its operating segments according to its business areas, which are defined by products and services sold to customers. This is consistent with the management, resource allocation and performance assessment made by key personnel responsible for making such relevant decisions related to the Company’s operation. The Chief Executive Officer and Corporate Managing Directors of each segment are responsible for these decisions.

Detailed financial information by segment is presented in Note 23.

e) Functional currency

(i) Functional currency

Arauco’s entities are measured using the currency of the primary economic environment in which the Company operates (the functional currency). The interim consolidated financial statements are presented in U.S. Dollars, which is the Company’s functional currency and Arauco’s presentation currency.

(ii) Foreign Currency Translations – Subsidiaries and Associates

The income statements of subsidiaries, whose functional and presentational currencies are not the U.S. Dollar, are translated into the Arauco reporting currency (U.S. Dollars) using the average monthly exchange rates, whereas the balance sheets of such subsidiaries are translated using the exchange rates at the reporting date. Exchange differences arising from the retranslation of net investments in foreign entities are recorded directly in shareholders’ equity as Conversion reserves, as shown in the statement of changes in equity. The cumulative translation differences of divestments and liquidations are combined with their gain or loss on disposal.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

(iii) Foreign Currency Transactions

Transactions in foreign currencies are recorded at the rate of exchange prevailing on the transaction date. Gains and losses on foreign currency resulting from the settlement of such transactions and from the conversion at the closing exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except that which matches the deferral in net equity, such as those derived from cash flow hedges.

f) Cash and cash equivalents

Cash and cash equivalents include cash-in-hand, deposits held on call at banks and other liquid investments with an original maturity of less than three months.

g) Financial Instruments

(i) Financial assets-liabilities at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it was acquired principally for the purpose of selling in the short term.

Derivatives are also classified as acquired for trading unless they are designated as hedges. Assets in this category are classified as current assets and the obligation for these instruments is presented under Other financial liabilities within the Financial Statement.

Regular purchases and sales of financial assets are recognized on the trade-date, which is the date on which the Company commits to purchase or sell the asset.

The financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the income statement. They are subsequently recorded at fair value with the effect of the change in value recorded in income.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months from the balance sheet date, which are classified as non-current assets. Loans and receivables include trade receivables and other receivables.

Loans and receivables are initially recorded at fair value and subsequently at amortized cost according to the effective interest rate method. A provision of bad debts is recorded to reflect uncollective amounts.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

(iii) Financial liabilities valued at amortized cost

Loans, bond obligations and liabilities of a similar nature are recognized initially at fair value, net of transaction costs incurred. In subsequent periods, they are stated at amortized cost and any difference between proceeds (net of transaction costs), and redemption value is recognized in the income statement over the life of the debt according to the effective interest rate method.

Financial obligations are classified as current liabilities unless the Company has an unconditional right to defer settlement for at least 12 months after the balance sheet date.

(iv) Creditors and other payables

These instruments are initially recorded at fair value and subsequently at amortized cost using the effective interest rate method.

(v) Hedging instruments

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the Comprehensive Income Statement. The gain or loss relating to the ineffective portion is recognized immediately in the Income Statement within Other Operating Income by activity or Operating Expenses by activity, respectively.

When a hedging instrument expires or is sold, or when it ceases to meet the criteria to be recognized through the hedge accounting treatment, any cumulative gain or loss in equity at that time remains in equity and is recognized in the Income Statement. When a possible transaction is no longer expected to occur, the cumulative gain or loss in equity is immediately transferred to the Income Statement.

h) Inventories

Inventories are reported at the lower of cost or net realizable value. Cost is determined using the weighted average cost method.

The cost of finished goods and work in progress includes the cost of raw materials, direct labor, other direct costs and general manufacturing expenses, excluding interest expenses.

Initial costs of harvested wood are determined at fair value less cost of sale at the point of harvest.

Biological assets are transferred to inventories when forests are harvested.

Net realizable value is the estimated selling price in the normal course of business, less cost of sale.

When market conditions result in the manufacturing costs of a product exceeding its net realizable value, a valuation allowance is made. This provision also includes obsolescence amounts resulting from slow moving inventories and technical obsolescence.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

i) Business Combinations

Business combinations are recognized using the purchase method. This involves recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value.

The goodwill acquired in a business combination is initially measured at the cost of the business combination less the interest of the company in the net fair value of assets, liabilities and contingent liabilities of the acquisition. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of impairment testing, goodwill acquired in a business combination is allocated as of the acquisition date to the cash generating unit of the group or groups of cash generating units expected to benefit from the synergies of the combination without prejudice to whether other assets or liabilities of Arauco are assigned to those units or groups of units.

If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement as Other profit (loss).

Arauco measures the fair value of the acquired company in the business combination on a step by step basis, recognizing the effects of variation in the income statment in the period in which they occur.

Accounting policies for subsidiaries will be adjusted if necessary to ensure consistency with the policies adopted by Arauco. Minority Interests are presented as a separate component of equity.

j) Investments in associates

Associates are entities over which Arauco exercises significant influence but not control, generally holding between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method and are initially recognized at cost. Their book net equity is increased or decreased proportionately in the income statement and comprehensive income statement of the period as a result of adjustments of conversion arising from the financial statement conversion into other currencies. Arauco’s investment in associates includes goodwill (net of any accumulated impairment loss).

k) Intangible assets

(i) Computer Software

Computer software programs are capitalized in terms of the costs incurred to make them compatible with specific programs. These costs are amortized over the estimated useful lives.

(ii) Rights

This item includes water-rights, right of way and other acquired rights recognized at historical cost and have an unlimited useful life as the expected cash flow generating period is unpredictable. These rights are not amortized as they are perpetual and will not require renewal, but are subject to annual impairment tests.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

l) Goodwill

The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. Goodwill is not amortized but is tested for impairment on annual basis.

m) Property, plant and Equipment

Property, plant and equipment are stated at historical cost less depreciation and accumulated impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.

Asset depreciation is calculated by components using the straight-line method, considering any adjustments for impairment.

The useful life of property, plant and equipment is determined according to expected use of the assets.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, on an annual basis.

n) Leases

Fixed asset leases in which Arauco substantially holds all ownership risks and advantages are classified as Financial leases. Financial leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Leases in which significant risks and rewards are not transferred to the lesee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

o) Biological Assets

IAS 41 requires that biological assets, such as standing trees, are shown on the Balance Sheet at fair value. The forests are thus accounted for at fair value less estimated point-of sale costs at harvest, assuming that the fair value of these assets can be measured reliably.

The valuation of forest plantation assets is based on discounted cash flow models whereby the fair value of the biological assets is calculated using cash flows from continuous operations, which are discounted based on our sustainable forest management plans and the estimated growth of the forests. This valuation is performed on the basis of each identifiable farm block basis and for each type of tree.

Forest plantations shown as current assets are those that will be harvested and sold in the short term.

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Biological growth and changes in fair value are recognized in the income statement within Other income by activity.

p) Deferred income tax

Deferred income tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted as of the balance sheet date that are expected to apply when the related deferred income tax asset or the deferred income tax liability is settled.

The deferred income tax assets are recognized to the extent that it is probable that future taxable benefits profit will be available against which temporary differences can be utilized.

q) Provisions

Provisions are recognized when the Company has a current legal or constructive obligation as a result of past events; it is probable that an outflow will be required to settle the obligation; and the amount has been reliably estimated. This amount is quantified with the best possible estimate at the end of each period.

r) Revenue recognition

Revenues are recognized after Arauco has transferred the risks and rewards of ownership to the buyer and Arauco retains neither a continuing right to dispose of the goods, nor effective control of those goods; this means that revenues are recorded upon delivery of goods to customers in accordance with agreed terms of delivery.

Segment revenues mentioned in Note 23 comply with the conditions indicated above.

Revenues from inter-segment sales (which are made at prices that approximate market prices) are eliminated in the consolidated financial statements.

s) Minimum dividend

Article No. 79 of the Privately Limited Companies Law of Chile provides that, unless otherwise unanimously agreed or adopted by the shareholders, a dividend must be distributed annually in cash to shareholders in proportion to their shares or in the proportion established by the statutes for preferred shares, if any, in the amount of at least 30% of net profits for the current year, except where necessary to absorb accumulated losses from prior years.

The General Shareholders’ Meeting of Arauco resolved to maintain annual dividends at 40% of net distributable profit, including a provisional dividend share distribution at year-end. Dividends payable are recognized as a liability in the financial statements in the period they are declared and approved by the Company’s shareholders or when configuring the corresponding obligation on the basis of existing legislation or distribution policies established by the Shareholders’ Meeting.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

The interim and final dividends are recorded in equity upon their approval by the relevant groups, which include the Company’s Board and the shareholders.

The amount of these dividends is presented in this interim consolidated financial statement under Other non-current Financial Liabilities.

t) Impairment

Non-financial Assets

The carrying amounts of property, plant and equipment are subject to impairment tests whenever some event or change in business circumstances indicates that the book value of assets may not be recoverable, whereas goodwill is tested annually. The recoverable amount of an asset is estimated as the higher of net selling price and value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.

A previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, however, not to an extent higher than the carrying amount that would have been determined and recognized in prior years. For goodwill, however, a recognized impairment loss is not reversed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

“Cash-generating units” are the smallest identifiable groups of assets whose use generates continuous funds largely independent of those produced by the use of other assets or groups of assets.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The distribution is made between cash-generating units or groups of cash generating units expected to benefit from the business combination that resulted in the goodwill.

Financial Assets

At the end of each period, an evaluation is performed in order to measure the existence of any objective evidence that assets or a group of financial assets have been adversely affected. Impairment effects will be recognized in the Consolidated Income Statement only if there is objective evidence that one or more events will occur after initial recognition of financial asset impairment and if these events will affect associated future cash flows.

The provision for doubtful trade receivables is established when there is objective evidence that Arauco will not receive payments under the original terms of sale. Provisions are made when the client is a party to a bankruptcy court agreement or cessation of payments, and are made write-off when Arauco has exhausted all levels of recovery of debt in a reasonable time.

u) Employee Benefit Costs

The Company has severance payment obligations for voluntary cessation services. These are paid to certain workers that have more than 5 years seniority within the Company to conditions established within collective or individual contracts.

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Actuarial gains and losses are recognized in income in the year they are incurred.

These obligations are treated as post-employment benefits in accordance with current standards.

v) Employee Vacations

Arauco recognizes the expense for employee vacation on an accrual basis and it is recorded at nominal value.

This obligation is presented in the Consolidated Balance Sheet in the line Trade payables and Other payables.

w) Joint Venture Equity

Joint venture equity is recognized using the equity method.

x) Recent accounting pronouncements

At the date of issuance of these consolidated financial statements, the following accounting pronouncements were issued by the IASB:

 

Rules and amendments

  

Content

  

Mandatory

application date

IFRS 9    Financial instruments, classification and reasurement    January 1, 2013
Amendment to IAS 24    Related parties disclosures    January 1, 2011
Amendment to IAS 32    Classification for emission rights    January 1, 2010
Amendment Improve to NIIF    Amendments collection to NIIF 7    January 1, 2011
Amendment to IFRIC 14    Pre-payments of a Minimum funding requirement    January 1, 2011
IFRIC Interpretation 19    Extinguishing financial liabilities with equity instruments    July 1, 2010

Arauco believes that the adoption of standards, amendments and interpretations described above will have no significant impact on the financial statements of the Company in the period of initial application.

 

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Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 2. DISCLOSURE OF OTHER INFORMATION

 

a) Disclosure of Information on Capital Issued

Subscribed and paid-in Capital amounts to ThU.S. $353,176.

100% of capital corresponds to ordinary shares.

 

     09/30/2010    12/31/2009

Description of Ordinary Capital Share Types

   100% of Capital corresponds to ordinary shares

Number of Authorized Shares by Type of Capital in Ordinary Shares

   113,152,446

Nominal Value of Shares by Type of Capital in Ordinary Shares

   ThU.S.$ 0.0031211 per share

Amount of Capital in Shares by Type of Ordinary Shares that Constitute Capital

   ThU.S.$353,176

Rights, Privileges and Restrictions by Type of Capital in Ordinary Shares

Liabilities presented under Other Financial Liabilities current and non-current, have certain financial restrictions the Parent Company must comply with; otherwise, debt under these contracts can become payable.

Financial restrictions are the following:

 

i) Debt ratio must not exceed 1.2

 

ii) Interest hedging index cannot be less than 2.0

At closing date Arauco had complied with the totality of these restrictions.

 

     09/30/2010    12/31/2009

Number of Shares Issued and Completely Paid by Type of Capital in Ordinary Shares

   113,152,446

 

b) Disclosure of information on Dividends paid to Ordinary Shares

Dividends paid at September 30, 2010:

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid, Ordinary Shares

     Final Dividend   

Type of Shares for which there is a Dividend Paid, Ordinary Shares

     Unlisted Ordinary Shares   

Date of Dividend Paid, Ordinary Shares

     05-10-2010   

Amount of Dividend, Ordinary Shares, Gross

     ThU.S.$ 56,759   

Number of Shares for which Dividends are Paid, Ordinary Shares

     113,152,446   

Dividend per Share, Ordinary Share

     U.S.$ 0.50161   

Dividends paid during 2009 and the corresponding amount per share:

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid, Ordinary Shares

     Interim Dividend   

Type of Shares for which there is a Dividend Paid, Ordinary Shares

     Unlisted Ordinary Shares   

Date of Dividend Paid, Ordinary Shares

     12-16-2009   

Amount of Dividend, Ordinary Shares, Gross

     ThU.S.$ 25,957   

Number of Shares for which Dividends are Paid, Ordinary Shares

     113,152,446   

Dividend per Share, Ordinary Share

     U.S.$ 0.22940   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid, Ordinary Shares

     Final Dividend   

Type of Shares for which there is a Dividend Paid, Ordinary Shares

     Unlisted Ordinary Shares   

Date of Dividend Paid, Ordinary Shares

     05-07-09   

Amount of Dividend, Ordinary Shares, Gross

     ThU.S.$ 88,449   

Number of Shares for which Dividends are Paid, Ordinary Shares

     113,152,446   

Dividend per Share, Ordinary Share

     U.S.$ 0.78168   

 

c) Disclosure of Information on Reserves

Other Reserves

Other reserves consist of Conversion Reserves, Hedge Reserves and Financial Assets available for sale Reserves.

Arauco does not have restrictions associated with these reserves.

Conversion Reserves

This corresponds to a difference in foreign currency translation as compared to the Arauco’s subsidiaries that do not use the U.S. Dollar as their functional currency.

Hedge Reserves

This corresponds to the portion of profit or swap net loss coverage existing at Arauco as of September 30, 2010.

Financial assets available for sale Reserve

This mainly corresponds to the value in Other comprehensive income of investment in associates.

 

d) Disclosures of other Information

Below are balances of Other Income by activity, Financing Costs and Participation in profit (loss) of associates and joint venture as of September 30, 2010 and 2009, respectively.

 

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Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

     January-September     July-September  
     2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Classes of Other Income by activity

        

Other Operating Income, Total

     179,617        143,719        80,257        52,209   

Gain from changes in fair value of biological assets

     146,692        115,017        74,065        39,097   

Sales revenue from carbon bonds

     0        3,170        0        3,170   

Revenue from export promotion

     4,650        2,507        1,637        0   

Earthquake insurance net effect

     7,471        0        (2,179     0   

Leases received

     1,729        2,823        501        960   

Adjustment selling expense provisions from previous period

     6,295        5,463        741        1,864   

Other operating results

     12,780        14,739        5,492        7,118   

Classes of Financing Costs

        

Financing Costs, Total

     (169,185     (129,482     (61,622     (46,037

Interest costs

     (158,177     (118,729     (57,700     (43,141

Interest on bank loans

     (158,177     (118,729     (57,700     (43,141

Other financing costs

     (11,008     (10,753     (3,922     (2,896

Classes of Participation in Profit (Loss) of associates and joint venture accounted through Equity Method

      

Total

     (3,038     5,682        (919     (265

Investments in associates

     1,876        4,041        1,593        (74

Joint ventures

     (4,914     1,641        (2,512     (191

NOTE 3. INVENTORIES (IAS 2)

 

Components of Inventory

   09/30/2010
ThU.S.$
     12/31/2009
ThU.S.$
 

Raw Materials

     84,076         85,706   

Production Supplies

     57,944         64,978   

Work in progress

     53,391         26,154   

Finished goods

     406,595         335,234   

Parts

     98,886         107,384   

Other Inventories

     170         602   

Total Inventories

     701,062         620,058   

As of September 30, 2010, a cost of sales of inventories of ThU.S.$1,605,969 was recognized (ThU.S.$1,534,015 at September 30, 2009).

As of September 30, 2010, a net increased provision for obsolescence effects mainly caused by the earthquake and tsunami of ThU.S.$18,947 was recognized. As of September 30, 2009 there was a provision for parts obsolescence of ThU.S.$300.

The inventories impairment provision amounted to ThU.S.$26,471 as of September 30, 2010 (ThU.S.$7,524 as of December 31, 2009), whereby ThU.S.$8,551 corresponds to parts and ThU.S.$17,920 materials and supplies.

As of the date of the issuance of these financial statements, no inventories have been pledged as collateral or guarantees.

 

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Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 4. CASH FLOW STATEMENT (IAS 7)

Cash and cash equivalents includes cash flow, bank account balances, fixed term deposits, repurchase agreements and mutual funds. They are short-term investments that are readily convertible into cash, and are subject to an immaterial change in value.

The objective of fixed term deposits is to maximize earnings on short-term cash flow surpluses. This instrument is authorized by Arauco’s Investment Policy, which establishes a mandate that allows investments in fixed income securities. In general, these instruments have a maturity period of less than ninety days.

Arauco invests in local mutual funds to maximize the profitability of cash flow surpluses in Chilean Pesos, or in international mutual funds in foreign currencies such as U.S. Dollars or Euros. These instruments are acceptable under Arauco’s Investment Policy.

As of the date of these consolidated financial statements, there are no significant amounts of cash or cash equivalents that are freely available.

 

Components of Cash and Cash Equivalents

   09/30/2010
ThU.S.$
     12/31/2009
ThU.S.$
 

Cash on hand

     327         244   

Banks

     49,579         28,756   

Short term deposit

     503,910         281,873   

Mutual funds

     335,737         223,326   

Total

     889,553         534,199   

Reconciliation of Cash and Cash Equivalents

     

Bank overdraft used for cash management

     0         0   

Other reconciliations items, cash and cash equivalents

     0         0   

Reconciliation of Cash and Cash Equivalent items, Total

     0         0   

Cash and cash equivalents

     889,553         534,199   

Cash and cash equivalents, reported in the Cash Flow Statement

     889,553         534,199   

The following tables detail the value of the cost of the investment in Dynea Brasil S.A. dated March 15, 2010, Savitar (Forestal Talavera S.A.) dated June 30, 2009 and Arauco do Brasil S.A. (ex-Tafisa Brazil) dated August 26, 2009 (see Note 14), and the net value of assets and liabilities of each acquired entity, discounting both the amount of cash and cash equivalents acquired in order to distinguish those cash flows from those that arise from other operating, investing or financing activities.

 

2010

Purchase of Investments

   ThU.S.$  

Acquisition: Dynea Brasil S.A.

  

Cash paid for acquisitions and cash equivalents

     15,000   

Cash and cash equivalentsheld by acquired entities

     (8,023

Net cash paid to acquire entities

     6,977   
     ThU.S.$  

Net Assets less Cash and Cash equivalents of acquired entity (see Note 14)

     22,613   

 

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Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

 

2009

Purchase of Investments

   ThU.S.$  

Acquisition: Tafisa Brasil S.A. (currently named Arauco do Brasil S.A.)

  

Cash paid for acquisitions and cash equivalents

     166,977   

Cash and cash equivalentsheld by acquired entities

     (2,891

Net cash paid to acquire entities

     164,086   
     ThU.S.$  

Net Assets less Cash and Cash equivalents of acquired entity (see Note 14)

     107,429   

2009

Purchase of Investments

   ThU.S.$  

Acquisition: Savitar (Forestal Talavera S.A.)

  

Cash paid for acquisitions and cash equivalents

     10,131   

Cash and cash equivalentsheld by acquired entities

     (106

Net cash paid to acquire entities

     10,025   
     ThU.S.$  

Net Assets less Cash and Cash equivalents of acquired entity (see Note 14)

     12,367   

NOTE 5. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES (IAS 8)

Changes in Accounting Policies

These policies have been designed in accordance with IFRS in effect as of September 30, 2010 and applied uniformly to all items presented in these interim consolidated financial statements.

Changes in the Treatment of Accounting Policy

The financial statements as of September 30, 2010 do not show changes in accounting policies compared to the same period last year.

The consolidated financial statements of Arauco as of December 31, 2009 are the Group’s first annual financial statements prepared under International Financial Reporting Standards (IFRS). The Group’s previous financial statements were prepared according to Generally Accepted Accounting Principles in Chile.

Standards adopted by the Company in Advance

IAS 27 (Revised), Consolidated and individual financial statements - Modifications arising from changes in IAS 3, adopted in the year 2009.

IAS 3 (Revised), Business combinations, adopted in the year 2009.

 

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Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 6. TAXES (IAS 12)

The tax rate applicable to the major companies in which Arauco participates is 17% in Chile, 35% in Argentina and 34% in Brazil.

Deferred Tax Assets

The following table details deferred tax assets:

 

Deferred Tax Assets

   09/30/2010
ThU.S. $
     12/31/2009
ThU.S. $
 

Deferred Tax Assets related to Provisions

     4,537         3,759   

Deferred Tax Assets related to accrued liabilities

     7,816         6,690   

Deferred Tax Assets related to Post-Employment obligations

     6,216         4,677   

Deferred Tax Assets related to Restatement of Property, Plant and equipment

     3,396         3,065   

Deferred Tax Assets related to Financial Instruments Restatements

     5,403         1,913   

Deferred Tax Assets related to tax losses

     53,578         53,292   

Valuation of biological assets

     9,129         11,424   

Valuation of inventory

     4,194         1,939   

Income provision

     2,713         2,571   

Trade debtors and receivables

     3,961         4,878   

Intangible revaluation differences

     10,503         10,584   

Deferred Tax Assets related to Others

     10,544         4,968   
                 

Deferred Tax Assets Total

     121,990         109,760   
                 

As of the date of the present financial statement some of Arauco’s subsidiaries show tax losses of ThU.S.$244,842 (ThU.S.$241,596 at December 31, 2009) which are mainly due to operational and financial losses.

Arauco believes that the projections of future earnings in subsidiaries that have generated tax losses will allow the recovery of these assets.

Deferred Tax Liability

Deferred tax liability corresponds to income tax amounts payable in future periods related to taxable temporary differences.

Currently Arauco has not recognized deferred taxes associated with temporary differences arising from investments in joint ventures, because it controls dates where temporary differences will be reversed and/or not likely that those differences will change in the foreseeable future. The estimated amount as of September 30, 2010 of unrecognized deferred tax is approximately ThU.S.$8,082.

 

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Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

The following table details deferred tax liabilities:

 

Deferred Tax Liabilities

   09/30/2010
ThU.S. $
     12/31/2009
ThU.S. $
 

Deferred Tax Liabilities related to Restated Property, Plant and equipment

     680,020         682,540   

Deferred Tax Liabilities related to Financial Instrument restatement

     8,559         7,704   

Valuation of biological asset

     510,946         508,285   

Valuation of inventory

     11,891         10,001   

Valuation of prepaid expenses

     31,592         27,006   

Deferred Tax Liabilities related to Others

     58,210         20,554   
                 

Deferred Tax Liabilities Total

     1,301,218         1,256,090   
                 

From the deferred tax assets and deferred tax liabilities listed in the above tables, approximately ThU.S.$29,809 and ThU.S.$109,306 respectively, will be used in a period of 12 months.

Temporary Differences

The following tables summarize current asset and liability timing differences:

 

     09/30/2010      12/31/2009  

Detail of Classes of Deferred

Tax Temporary Differences

   Deductible
Difference

ThU.S.$
     Taxable
Difference
ThU.S.$
     Deductible
Difference

ThU.S.$
     Taxable
Difference
ThU.S.$
 

Deferred Tax Assets

     67,814         0         56,468         0   

Tax Loss

     54,176         0         53,292         0   

Deferred Tax Liabilities

     0         1,301,218         0         1,256,090   

Total

     121,990         1,301,218         109,760         1,256,090   

 

Detail of Temporary Difference Profit and Loss Amounts

   January-September     July-September  
   2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Deferred Tax Assets

     5,482        (3,707     4,312        813   

Tax Loss

     1,933        3,168        (2,692     (557

Deferred Tax Liabilities

     (42,725     (34,960     508        (4,342
                                

Total

     (35,310     (35,499     2,128        (4,086
                                

Income Tax Expenditure (Income)

Income Tax Expenditure consists of the following:

 

Expense due to Current Income Taxes on Earnings

   January-September     July-September  
   2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Current income tax expense

     (93,237     (13,149     (66,073     (18,257

Tax benefit arising from unrecognized tax assets previously used to reduce tax expense

     5,824        2,063        143        (796

Previous period current tax adjustments

     (519     3,980        (250     165   

Other current tax expenses

     (424     (544     (280     (402
                                

Total Income (expense) Current Tax, Net

     (88,356     (7,650     (66,460     (19,290
                                

Deferred expense (income) from taxes relative to the creation and reversion of temporary differences

     (27,943     (38,667     14,120        (3,529

Deferred expense (income) from taxes relative to tax rate changes or new fees

     (9,300     0        (9,300     0   

Tax benefit arising from unrecognized tax assets previously used to reduce expenses due to deferred taxes

     1,933        3,168        (2,692     (557
                                

Total Income (expense) Deferred Tax, Net

     (35,310     (35,499     2,128        (4,086
                                

Income (expense) due to Income Tax Total

     (123,666     (43,149     (64,332     (23,376
                                

 

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Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

The following table details the income tax for foreign and national companies as of September 30, 2010 and 2009, respectively:

 

     January-September     July-September  
   2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Foreign current tax

     (39,179     (17,670     (16,595     (4,324

National current tax

     (49,177     10,020        (49,865     (14,966

Current tax, Total

     (88,356     (7,650     (66,460     (19,290

Foreign deferred tax

     11,708        (5,346     2,773        45   

National deferred tax

     (47,018     (30,153     (645     (4,131

Deferred tax, Total

     (35,310     (35,499     2,128        (4,086
                                

Income (expense) due to Income Tax, Total

     (123,666     (43,149     (64,332     (23,376
                                

Income Tax Expenditure Reconciliation using the Effective Rate method

Income tax expenditure reconciliation is as follows:

 

Reconciliation of Tax Expenses using the Legal Rate

with Tax Expenses using the Effective Rate

   January-September     July-September  
   2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Tax Expense Using Legal Rate

     (95,207     (34,399     (44,783     (20,215

Tax effect of rates in other jurisdictions

     (15,260     (14,642     (10,765     (4,399

Tax effect of non taxable ordinary income

     5,833        12,501        (1,121     6,846   

Tax effect of non tax deductible expenses

     (13,020     (12,704     (5,156     (8,433

Tax effect of tax rates changes

     (9,300     0        (9,300     0   

Tax effect of excess tax for previous periods

     (519     3,821        (250     3   

Other Increases (Decreases) Legal Taxes

     3,807        2,274        7,043        2,822   
                                

Adjustment to Tax Expense using the Legal Rate, Total

     (28,459     (8,750     (19,549     (3,161
                                

Tax Expenses Using the Effective Rate

     (123,666     (43,149     (64,332     (23,376
                                

The deferred taxes related to financial hedging instruments, corresponds to a credit to ThU.S.$3,930 at September 30, 2010 (ThU.S.$ 731 at September 30, 2009), which presents net in Hedge reserves in the Statement of Changes in Net Equity.

On July 30, 2010 Law N. 20.455 for national reconstruction financing was published in the Chilean Official Gazette (Diario Oficial de Chile). One of the most important changes such law introduced was the increase in the First Category Taxes for revenues received and /or accrued during commercial years 2011 and 2012, with rates of 20% and 18.5%, respectively.

The effect on the change in tax rates caused an adjustment to the assets and liabilities accounts for deferred taxes, according to the profile projected for temporary reverse differences, in tax losses benefits and in other events that create differences between book and tax basis of assets and liabilities.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT (IAS 16)

 

Properties, Plant and Equipment, Net

   09/30/2010
ThU.S.$
    12/31/2009
ThU.S.$
 

Construction in progress

     464,430        433,269   

Land

     821,594        743,950   

Buildings

     1,415,626        1,353,461   

Plant and equipment

     2,203,002        2,328,457   

Information technology equipment

     17,333        18,178   

Fixed facilities and accessories

     3,538        5,207   

Motorized vehicles

     9,703        9,791   

Others

     68,818        77,440   
                

Total Net

     5,004,044        4,969,753   
                

Properties, plant and equipment, Gross

    

Construction in progress

     464,430        433,269   

Land

     821,594        743,950   

Buildings

     2,508,885        2,370,295   

Plant and equipment

     4,170,116        4,060,145   

Information technology equipment

     43,568        42,992   

Fixed facilities and accessories

     17,075        18,675   

Motorized vehicles

     32,150        31,066   

Others

     109,731        112,629   
                

Total Gross

     8,167,549        7,813,021   
                

Accumulated depreciation and impairment

    

Buildings

     (1,093,259     (1,016,834

Plant and equipment

     (1,967,114     (1,731,688

Information technology equipment

     (26,235     (24,814

Fixed facilities and accessories

     (13,537     (13,468

Motorized vehicles

     (22,447     (21,275

Others

     (40,913     (35,189
                

Total

     (3,163,505     (2,843,268
                

Description of Property, Plant and Equipment Pledged as Guarantee

Regarding Forestal Río Grande S.A, an affiliate of Fondo de Inversión Bío Bío, a special purpose entity, we note that in October 2006, first and second degree mortgages were executed in favor of JPMorgan Chase Bank N.A. and Arauco, respectively, which prohibited the sale of any property currently belonging to the aforementioned special purpose entity, in order to ensure fulfillment of payments to Fondo de Inversión Bío Bío.

In September 2007, Forestal Río Grande S.A acquired real estate in Yungay, located in Chile’s Region VIII, for which the company executed a first mortgage with prohibition to sell and encumber in favor of, among others, JPMorgan. Similarly, a second mortgage with prohibition to sell and encumber was executed in favor of Arauco.

 

     09/30/2010
ThU.S$
     12/31/2009
ThU.S$
 

Collateral amount of property, plant and equipment

     56,803         56,799   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Commitments for project disbursements or for the acquisition of property, plant and equipment

 

     09/30/2010
ThU.S$
     12/31/2009
ThU.S$
 

Amount committed for the acquisition of property, plant and equipment

     259,960         187,441   
     09/30/2010
ThU.S$
     12/31/2009
ThU.S$
 

Disbursements for property, plant and equipment account under construction

     208,021         196,271   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Movement on Property, Plant and Equipment

The following tables detail the movement of Property, Plant and Equipment as of September 30, 2010 and December 31, 2009:

 

Movement of Fixed Assets

   Construction
in Progress

ThU.S.$
    Land
ThU.S.$
    Buildings
ThU.S.$
    Plant and
equipments

ThU.S.$
    IT
Equipment

ThU.S.$
    Fixed
Facilities

and
Accessories

ThU.S.$
    Motorized
Vehicles

ThU.S.$
    Other
Property,
Plant and
Equipment

ThU.S.$
    Total
ThU.S.$
 

Opening balance 01/01/2010

     433,269        743,950        1,353,461        2,328,457        18,178        5,207        9,791        77,440        4,969,753   

Changes

                  

Additions

     219,113        81,360        16,696        6,507        113        99        1,352        3,556        328,796   

Acquisitions of business

     216        660        4,244        21,420        0        0        14        1,137        27,691   

Dispositions

     (176     (13,865     (3,404     (3,157     0        0        (179     (3,524     (24,305

Withdrawals

     (157     0        (1,011     (2,566     (41     (1     (1     (312     (4,089

Depreciation costs

     0        0        (49,822     (118,414     (1,444     (606     (1,408     (1,285     (172,979

Impairment loss recognized in the Income Statement (note 17)

     0        0        (25,518     (107,295     (63     0        (102     (9,342     (142,320

Exchange rate increase (decrease) of foreign currency

     645        5,207        1,650        14,606        3        (1,431     76        741        21,497   

Other increase/decrease

     (188,480     4,282        119,330        63,444        587        270        160        407        0   

Total Changes

     31,161        77,644        62,165        (125,455     (845     (1,669     (88     (8,622     34,291   

Closing balance 09/30/2010

     464,430        821,594        1,415,626        2,203,002        17,333        3,538        9,703        68,818        5,004,044   

Movement of Fixed Assets

   Construction
in Progress

ThU.S.$
    Land
ThU.S.$
    Buildings
ThU.S.$
    Plant and
equipments

ThU.S.$
    IT
Equipment

ThU.S.$
    Fixed
Facilities

and
Accessories

ThU.S.$
    Motorized
Vehicles

ThU.S.$
    Other
Property,
Plant and
Equipment

ThU.S.$
    Total
ThU.S.$
 

Opening balance 01/01/2009

     348,417        689,900        1,307,391        2,172,162        18,621        4,755        9,569        65,156        4,615,971   

Changes

                  

Additions

     196,271        36,550        8,023        19,792        73        16        1,607        5,161        267,493   

Acquisitions through business combination

     4,951        5,548        44,364        192,216        0        0        458        5,870        253,407   

Dispositions

     (212     (181     (110     (1,003     (177     (114     (425     (942     (3,164

Discontinuation of consolidation by the formation of joint venture registered under the equity method (note 15-16)

     0        (32,014     0        (27     0        0        0        0        (32,041

Withdrawals

     (1,520     (1,265     (82     (2,805     (3     (55     (23     (1,233     (6,986

Depreciation costs

     0        0        (59,311     (155,981     (1,859     (274     (2,050     (1,618     (221,093

Impairment loss recognized in the Income Statement

     0        0        (1,416     (1,694     0        0        0        0        (3,110

Exchange rate increase (decrease) of foreign currency

     1,528        42,315        11,684        38,296        1        0        454        4,998        99,276   

Other increase/decrease

     (116,166     3,097        42,918        67,501        1,522        879        201        48        0   

Total Changes

     84,852        54,050        46,070        156,295        (443     452        222        12,284        353,782   

Closing balance 12/31/2009

     433,269        743,950        1,353,461        2,328,457        18,178        5,207        9,791        77,440        4,969,753   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

The depreciation charged to income as of September 30, 2010 and 2009 is as follows:

 

Depreciation for the period

   09/30/2010
ThU.S.$
     09/30/2009
ThU.S.$
 

Cost of sale

     133,663         143,744   

Administration expenses

     6,083         7,950   

Other operating expenses(*)

     26,179         2,512   

Total

     165,925         154,206   

 

(*) The balance of the period 2010, it refers to the cost of depreciation of plants detained product of the earthquake.

The useful lives of property, plant and equipment according to expected use of the assets are as follows:

 

          Minimum      Maximum      Average  

Buildings

   Useful Life in Years      16         89         39   

Plant and equipment

   Useful Life in Years      8         67         29   

Information technology equipment

   Useful Life in Years      6         18         5   

Fixed facilities and accessories

   Useful Life in Years      6         12         10   

Motorized vehicles

   Useful Life in Years      6         26         13   

Others properties, plants and equipment

   Useful Life in Years      5         27         16   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 8. LEASES (IAS 17)

When assets are leased under a Financial lease, the current value of lease payments is treated as a receivable. The difference between the gross payment to be charged and the current value of said payment is shown as capital return.

Disclosure of Financial Leases Classified by Type of Asset, Leases

 

     09/30/2010
ThU.S.$
     12/31/2009
ThU.S.$
 

Property, Plant & Equipment Financial Leasing

     389         608   

Plant and Equipment

     389         608   

Reconciliation of Financial Lease Minimum Payments, Lessee

 

     09/30/2010  

Minimum lease payments, lease payment obligations

   Gross
ThU.S.$
     Interest
ThU.S.$
     Present
Value
ThU.S.$
 

Due within one year

     307         9         298   

Due within one and five years

     64         0         64   

Due beyond five years

     0         0         0   

Total

     371         9         362   
     12/31/2009  

Financial Lease

   Gross
ThU.S.$
     Interest
ThU.S.$
     Present
Value
ThU.S.$
 

Due within one year

     381         20         361   

Due within one and five years

     253         6         247   

Due beyond five years

     0         0         0   

Total

     634         26         608   

Leasing obligations that accrue interest are presented in the Consolidated Balance Sheet under Other Financial Liabilities Current and Non-current depending on the maturities stated above.

Reconciliation of Financial Lease Minimum Payments, Lessor

 

     09/30/2010  

Minimum Financial Lease Payments

Receivable, Financial Lease

   Gross
ThU.S.$
     Interest
ThU.S.$
     Present
Value
ThU.S.$
 

Due within one year

     4,847         500         4,347   

Due within one and five years

     6,726         432         6,294   

Due beyond five years

     0         0         0   

Total

     11,573         932         10,641   
     12/31/2009  

Minimum Financial Lease Payments

Receivable, Financial Lease

   Gross
ThU.S.$
     Interest
ThU.S.$
     Present
Value
ThU.S.$
 

Due within one year

     4,860         545         4,315   

Due within one and five years

     7,940         490         7,450   

Due beyond five years

     0         0         0   

Total

     12,800         1,035         11,765   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Accounts receivable in leasing are presented in the Consolidated Balance Sheet under Trade and Other Receivables current and non-current depending on the maturities stated above.

Significant Financial Lease Agreements

Arauco holds Financial leases as a lessor and lessee detailed within the previous tables, and therefore, there are no contingent payments or restrictions to note.

NOTE 9. ORDINARY REVENUE (IAS 18)

(a) Policy on Revenue recognition from to the Sale of Goods

Revenue from the sale of goods is recognized when an Arauco entity has transferred to the buyer the significant risks and rewards of ownership, when the amount of revenue can be reliably measured, when Arauco cannot influence the management of the sold goods and when it is probable that the economic benefits associated with the transaction will flow to the entity.

Sales are recognized in terms of the arranged price stated in the sales contract, net of volume discounts and estimated refunds at the date of the sale. Volume discounts are evaluated in terms of estimated annual purchases. There is no significant financing component given that receivables for sales are collected within a low average time period, which is in line with market practices.

(b) Policy on Revenue recognition from to Rendering of Services

Arauco mainly has electric power, port and pest control services whose incomes are derived from fixed price service contracts, generally recognized during the period of the service contract on a straight-line basis throughout the duration of the contract.

 

Classes of Ordinary Revenue

   January-September      July-September  
   2010
ThU.S.$
     2009
ThU.S.$
     2010
ThU.S.$
     2009
ThU.S.$
 

Sale of goods

     2,664,067         2,162,054         1,004,810         816,535   

Service Contracts

     69,309         65,550         30,297         18,129   

Total

     2,733,376         2,227,604         1,035,107         834,664   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 10. EMPLOYEE BENEFITS (IAS 19)

This refers to severance payment obligations for years of service due to termination of service contracts that arise from benefits stated in work contracts and/or as severance payments stated in the Labor Law.

This is an estimate of the years of service-based severance payments to be recognized as a future termination payment liability, in accordance with in force work contracts held with workers and pursuant to actuarial valuation criteria for this type of liability.

The main factors considered for calculating the actuarial value of severance payments for years of service are employee turnover, salary increases and life expectancy of the workers included in this benefit.

Classes of Benefits and Expenses by Employee

 

Classes of Benefits Expenses by Employee

   January-September      July-September  
   2010
ThU.S.$
     2009
ThU.S.$
     2010
ThU.S.$
     2009
ThU.S.$
 

Personnel Expenses

     169,622         140,156         65,345         48,559   

Wages and salaries

     159,211         135,582         60,429         46,772   

Compensation for years of service

     10,411         4,574         4,916         1,787   

The following tables detail the balances and the movement of Payments for years of service provisioned as of September 30, 2010 and December 31, 2009.

 

     09/30/2010
ThU.S.$
    12/31/2009
ThU.S.$
 

Current

     2,726        2,372   

Non-current

     34,018        25,295   
                

Total

     36,744        27,667   
                

Movement

   09/30/2010
ThU.S.$
    12/31/2009
ThU.S.$
 

Opening balance

     27,667        20,297   

Current service cost

     896        840   

Interest cost

     1,716        2,083   

Gain (losses) actuarial

     7,512        (575

Benefits paid

     (2,416     (757

Increase (decrease) for currency exchange

     1,369        5,779   

Closing balance

     36,744        27,667   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 11. EFFECT OF FOREIGN CURRENCY RATE VARIATIONS (IAS 21)

Local and foreign currency

Currency assets and liabilities as of September 30, 2010 and December 31, 2009 are as follows:

 

     09-30-2010
ThU.S.$
     12-31-2009
ThU.S.$
 

Liquid Assets

     892,455         542,625   

US Dollar

     621,698         185,995   

Euro

     77,063         66,935   

Other currencies

     80,168         64,879   

$ not adjustable

     113,529         224,816   

U.F.

     0         0   

Cash and Cash Equivalent

     889,553         534,199   

US Dollar

     618,796         177,569   

Euro

     77,063         66,935   

Other currencies

     80,165         64,879   

$ not adjustable

     113,529         224,816   

U.F.

     0         0   

Other Financial Assets

     2,902         8,426   

US Dollar

     2,902         8,426   

Accounts Receivable in short and long term

     

Accounts Receivable in short and long term

     932,969         585,848   

US Dollar

     667,765         412,826   

Euro

     26,084         19,348   

Other currencies

     111,559         36,090   

$ not adjustable

     116,956         110,394   

U.F.

     10,605         7,190   

Trades and Current Accounts Receivable

     912,436         558,441   

US Dollar

     663,880         397,394   

Euro

     26,084         19,348   

Other currencies

     109,732         35,074   

$ not adjustable

     108,688         102,098   

U.F.

     4,052         4,527   

Trades and Non-Current Accounts Receivable

     12,611         11,080   

US Dollar

     418         4,152   

Other currencies

     935         102   

$ not adjustable

     4,705         4,163   

U.F.

     6,553         2,663   

Accounts Receivable from related parties, current

     7,922         16,327   

US Dollar

     3,467         11,280   

Euro

     0         0   

Other currencies

     892         914   

$ not adjustable

     3,563         4,133   

Other Assets

     10,445,317         10,285,354   

US Dollar

     10,261,338         10,016,050   

Euro

     358         57   

Other currencies

     74,551         86,720   

$ not adjustable

     94,553         163,233   

U.F.

     14,517         19,294   

Total Assets

     12,270,741         11,413,827   

US Dollar

     11,550,801         10,614,871   

Euro

     103,505         86,340   

Other currencies

     266,275         187,689   

$ not adjustable

     325,038         498,443   

U.F.

     25,122         26,484   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Local and foreign currency, continued

 

     09-30-2010      12-31-2009  
   Up to 90
days

ThU.S.$
     From 91
days to 1
year

ThU.S.$
     Up to 90
days

ThU.S.$
     From 91
days to 1
year

ThU.S.$
 

Total Liabilities, current

     809,811         449,982         611,908         339,505   

US Dollar

     703,486         447,989         0         318,247   

Euro

     4,022         0         3,922         0   

Other currencies

     42,181         1,088         16,962         18,959   

$ not adjustable

     48,975         0         24,678         0   

U.F.

     11,147         905         4,060         2,299   

Other Financial Liabilities, current

     115,946         449,982         196,052         339,505   

US Dollar

     96,092         447,989         195,047         318,247   

Other currencies

     13,603         1,088         27         18,959   

U.F.

     6,251         905         978         2,299   

Bank loans

     63,649         50,801         150,964         52,011   

US Dollar

     50,046         49,713         150,937         33,052   

Other currencies

     13,603         1,088         27         18,959   

Financial leases

     111         187         361         0   

U.F.

     111         187         361         0   

Other loans

     52,186         398,994         44,727         287,494   

US Dollar

     46,046         398,276         44,110         285,195   

U.F.

     6,140         718         617         2,299   

Other Financial Liabilities, current

     693,865         0         415,856         0   

US Dollar

     607,394         0         367,239         0   

Euro

     4,022         0         3,922         0   

Other currencies

     28,578         0         16,935         0   

$ not adjustable

     48,975         0         24,678         0   

U.F.

     4,896         0         3,082         0   
     09-30-2010      12-31-2009  
   From 13
months to 5
years

ThU.S.$
     More than
5 years

ThU.S.$
     From 13
months to 5
years

ThU.S.$
     More than
5 years

ThU.S.$
 

Total Liabilities, non-current

     2,544,689         1,819,669         2,479,289         1,600,692   

US Dollar

     1,426,342         1,300,493         1,434,486         1,322,361   

Euros

     0         0         0         0   

Other currencies

     295,362         4,298         271,572         4,220   

$ not adjustable

     692,569         0         651,318         0   

U.F.

     130,416         514,878         121,913         274,111   

Other Financial Liabilities, non-current

     1,072,287         1,819,669         1,077,318         1,600,692   

US Dollar

     935,745         1,300,493         955,080         1,322,361   

Other currencies

     6,126         4,298         325         4,220   

U.F.

     130,416         514,878         121,913         274,111   

Bank loans

     275,269         28,701         271,182         76,623   

US Dollar

     269,143         24,403         270,857         72,403   

Other currencies

     6,126         4,298         325         4,220   

Financial leases

     64         0         247         0   

U.F.

     64         0         247         0   

Other loans

     796,954         1,790,968         805,889         1,524,069   

US Dollar

     666,602         1,276,090         684,223         1,249,958   

U.F.

     130,352         514,878         121,666         274,111   

Other Financial Liabilities, non-current

     1,472,402         0         1,401,971         0   

US Dollar

     490,597         0         479,406         0   

Other currencies

     289,236         0         271,247         0   

$ not adjustable

     692,569         0         651,318         0   

U.F.

     0         0         0         0   

 

42


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Effect of exchange rate variations

The functional currency of Brazilian subsidiaries and associate companies is the Brazilian Real. Therefore, their individual financial statements have been expressed in the presentation currency as follows:

 

(i) Assets and liabilities for each balance sheet are translated at the closing exchange rate;

 

(ii) Incomes and expenses for each income statement are translated at the average monthly exchange rate, given that to date this average has been a fair estimate of the cumulative effect of the exchange rates at the time of the transactions;

 

(iii) All the resulting exchange differences are recognized as a separate component of net equity.

In consolidation, the exchange rate differences arising from the translation of a net investment in companies that use currencies other than the U.S. Dollar, and those from loans and other instruments in foreign currencies recognized as hedging these investments, are assigned to net equity.

 

     January-September      July-September  
   2010
ThU.S.$
    2009
ThU.S.$
     2010
ThU.S.$
     2009
ThU.S.$
 

Exchange differences recognized in profit and loss, except for financial instruments measured at fair value through profit and loss

     (5,751     17,760         3,624         18,750   

Conversion reverse

     27,685        146,430         56,624         56,387   

NOTE 12. BORROWING COSTS (IAS 23)

Arauco capitalized interest on existing investment projects. For the recording of this capitalization Arauco estimated the average rate of loans to Financial these investment projects.

 

      January-September     July-September  

Property, plant and equipment capitalized cost

   2010
ThU.S.$
    2009
ThU.S.$
    2010
ThU.S.$
    2009
ThU.S.$
 

Property, plant and equipment capitalized interest cost rate

     6.03     5.86     6.16     5.84

Amount of the capitalized interest cost, property, plant and equipment

     6,569        8,868        2,051        3,079   

 

43


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

NOTE 13. RELATED PARTIES (IAS 24)

Related Party Disclosure

Related parties are those companies as defined in IAS 24 and under the standards of the Chilean Securities Commission and the Limited Company Law as related parties that do not differ significantly among themselves.

Outstanding balances with related parties at the end of each period correspond mainly to regular commercial operations negotiated in Chilean Pesos, where collection or payment deadlines do not often exceed 30 days and in general do not have adjustment or interest clauses.

At the date of these consolidated financial statements there are no provisions for doubtful debts and no guarantees provided or associated with inter-company balances.

Name of Group’s Main Controller

The ultimate controllers of the Company are Mrs. Maria Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through Inversiones Angelini y Cia. Ltda.

Name of the Intermediate Controlling Entity that Prepares Financial Statements for Public Use

Empresas Copec S.A.

Salaries Received by Key Management Personnel by Category

Key personnel salaries including directors, managers and sub-managers consist of a fixed monthly rate, with a possible annual discretionary bonus.

Pricing Strategy Terms and Conditions Corresponding to Transactions with Related Parties

Transactions with related parties are performed under market conditions.

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statement

September 30, 2010

Amounts in thousands of U.S. dollars, except as indicated

 

 

 

Detail of Relationship between Parent Company and Subsidiary

 

          Origin    Functional    % Share
09/30/2010
     % Share
12/31/2009
 

ID Nº

  

Company Name

  

Country

  

Currency

   Direct      Indirect      Total      Direct      Indirect      Total  

—  

  

Agenciamiento y Servicios Profesionales S.A.

   Mexico    U.S. Dollar      0.0020         99.9966         99.9986         0.0020         99.9966         99.9986   

—  

  

Alto Paraná S.A.

   Argentina    U.S. Dollar      0         99.9762         99.9762         0         99.9762         99.9762   

—  

  

Arauco Australia S.A.

   Australia    U.S. Dollar      0         99.9986         99.9986         0         99.9986         99.9986   

96547510-9

  

Arauco Bio Energía S.A. (Arauco Generación S.A.)

   Chile    U.S. Dollar      98.0000         1.9985         99.9985         98.0000         1.9985         99.9985   

—  

  

Arauco Colombia S.A.

   Colombia    U.S. Dollar      1.5000         98.4976         99.9976         1.5000         98.4976         99.9976   

—  

  

Arauco Denmark Aps

   Denmark    U.S. Dollar      0         99.9991         99.9991         0         99.9991         99.9991   

96765270-9

  

Arauco Distribución S.A.

   Chile    Chilean pesos      0         99.9992         99.9992         0         99.9992         99.9992   

—  

  

Arauco Do Brasil S.A. (ex-Placas do Paraná S.A.)

   Brazil    Real      2.5866         97.4120         99.9986         0         99.9986         99.9986   

—  

  

Arauco Ecuador S.A.

   Ecuador    U.S. Dollar      0.1000         99.8986         99.9986         0.1000         99.8986         99.9986   

—  

  

Arauco Florestal Arapoti S.A.

   Brazil    Real      0         79.9989         79.9989         0         79.9989         79.9989   

—  

  

Arauco Forest Brasil S.A.

   Brazil