EX-99.1 2 d341192dex991.htm UNAUDITED CONSOLIDATED FINANCIAL STMTS AND NOTES, DEC. 31, 2011 Unaudited Consolidated Financial Stmts and notes, Dec. 31, 2011

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

     8   

3.

  

Unaudited Consolidated Financial Income Statement

     10   

4.

  

Unaudited Consolidated Statement of Changes in Net Equity

     12   

5.

  

Unaudited Consolidated Statement of Cash Flow

     13   

6.

  

Unaudited Notes to the Consolidated Financial Statement

     14   

7.

  

Annex: Press Release

  


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

December 31, 2011

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

 

1. ANALYSIS OF FINANCIAL POSITION

 

a) Analysis of the Financial Statement

The principal components of assets and liabilities as of December 31, 2011 and 2010 are as follows:

 

Assets

   12/31/2011
ThU.S.$
     12/31/2010
ThU.S.$
 

Current assets

     2,462,660         3,152,116   

Non-current assets

     9,995,062         9,354,216   
  

 

 

    

 

 

 

Total assets

     12,457,722         12,506,332   
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

   12/31/2011
ThU.S.$
     12/31/2010
ThU.S.$
 

Current liabilities

     1,031,945         1,209,061   

Non-current liabilities

     4,395,627         4,456,696   

Non –parent participation

     90,543         108,381   

Net equity attributable to parent company Shareholders’ equity

     6,939,607         6,732,194   
  

 

 

    

 

 

 

Total net equity and liabilities

     12,457,722         12,506,332   
  

 

 

    

 

 

 

As of December 31, 2011, total assets decreased by 0.39% or U.S.$49 million compared to December 31, 2010. This decrease is mainly attributable to a decrease -in the balance of Cash and cash equivalents compensated by an increase in Trade and other receivables, Related party receivables, Inventories, Investments in associates and Property, Plant and Equipment.

Moreover, total liabilities decreased by U.S.$238 million. This drop is mainly attributable to a decrease in the category Financial Liabilities for payments of issued bonds.

The main financial and operating ratios are as follows:

 

Liquidity ratios

   12/31/2011      12/31/2010  

Current ratio

     2.39         2.61   

Acid ratio

     1.34         1.72   

Debt indicators

   12/31/2011      12/31/2010  

Debt to equity ratio

     0.77         0.83   

Short-term debt to total debt

     0.19         0.21   

Long-term debt to total debt

     0.81         0.79   
     12/31/2011      12/31/2010  

Financial expenses covered

     4.94         5.33   

 

1


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

December 31, 2011

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

 

 

ANALYSIS OF FINANCIAL POSITION, continued

 

a) Analysis of the Balance Sheet, continued

 

Operational ratios

   12/31/2011      12/31/2010  

Inventory turnover

     2.71         2.30   

Inventory turnover (excluding biological assets)

     3.82         3.41   

Inventory permanence-days

     132.95         156.84   

Inventory permanence (excluding biological assets)

     94.23         105.55   

The liquidity ratio for the current period has decreased compared to the period 2010. This is due to a major proportional decrease in current assets compared to a proportional reduction in the variation of current liabilities, which in turn is explained by a decrease in the Cash and cash equivalents.

As of December 31, 2011, the short-term debt represented 19% of total liabilities compared to 21% as of December 31, 2010.

The ratio of financial expenses covered decreased from 5.33 to 4.94. This drop is mainly attributable to a lower net income in 2011 year.

 

b) Analysis of the Income Statement

Profit before Income Tax

Profit before Income Tax registers a profit of U.S.$773 million in 2011 compared to U.S.$899 million in 2010, a decrease of U.S.$126 million. The change is explained by the factors described in the following table:

 

Item

   Million
U.S.$
 

Gross margin

     (3

Other operating income

     96   

Administrative expenses and Distribution costs

     (183

Other operating expenses

     (41

Financial costs

     11   

Others net

     (6
  

 

 

 

Net change in income before income tax

     (126
  

 

 

 

Gross Margin presents a profit of U.S.$1,466 million, a decrease of U.S.$3 million compared to last year (U.S.$1,469 million) caused by a proportional increase in Cost of sales, despite the increase in sales volumes mainly in cellulose business.

 

2


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

December 31, 2011

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

 

 

ANALYSIS OF FINANCIAL POSITION, continued

 

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

 

Revenues

   12/31/2011
ThU.S$
    12/31/2010
ThU.S$
 

Pulp

     2,161,214        1,866,517   

Sawn timber

     734,889        620,816   

Panels

     1,289,737        1,102,360   

Forestry

     164,079        156,217   

Other

     24,576        21,474   
  

 

 

   

 

 

 

Total revenues

     4,374,495        3,767,384   
  

 

 

   

 

 

 

Sales costs

   12/31/2011
ThU.S$
    12/31/2010
ThU.S$
 

Wood

     707,655        613,536   

Forestry work

     588,779        470,283   

Depreciation

     216,967        187,208   

Other costs

     1,395,062        1,027,164   
  

 

 

   

 

 

 

Total sales costs

     2,908,463        2,298,191   
  

 

 

   

 

 

 

Profitability index

   12/31/2011     12/31/2010  

Profitability on equity

     8.95        10.60   

Profitability on assets

     4.97        5.86   

Return on operating assets

     5.23        7.04   

Profitability ratios

   12/31/2011     12/31/2010  

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

     5.41        6.14   

EBITDA (MThU.S.$)

     1,307.7        1,390.5   

Income after tax (ThU.S.$) (2)

     620,786        700,749   

Gross margin (ThU.S.$)

     1,466,032        1,469,193   

Financial costs (ThU.S.$)

     (196,356     (207,519

 

(1) Earnings per share refer to the profit to net equity to parent company.
(2) Includes interest.

2. 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


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

December 31, 2011

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

 

 

3. MARKET SITUATION

Pulp Division

Pulp sales reached U.S.$ 480.8 million (net of energy sales) for the fourth quarter of 2011, a decrease of 4.8% compared to the previous quarter. This decrease was mainly due to lower average prices of 19.4% partially offset by higher sales volume of 18.1%.

When compared with the U.S.$ 509.5 million (net of energy sales) reached in the same quarter of 2010, pulp sales decreased 4.2%. This decrease is mainly explained by lower average prices of 19.1% partially offset by higher sales volume of 16.6%.

During the last quarter of 2011 world pulp prices reached its lowest level of the year, and maybe the lowest of this economic downturn. The main reasons behind this decline were a lower demand in Europe and an oversupply in Asia, credit restrictions in China and a generalized uncertainty about the market. All these factors caused purchasers in the pulp markets to be more cautious and prioritize existing inventories and lower spot buy, in hopes of better upcoming prices. Paper production was stable in Asia and North America, however, in Europe there was a Sharp decline because of lack of demand.

At the end of the fourth quarter, China had an increase in demand in order to recover trader and paper manufacturer inventory levels. After a couple of months with buy restrictions and consuming inventory, paper producers commenced buying pulp at normal levels, also driven by expectations of higher price levels or expectations of pulp prices having bottomed. Some pulp producers offered big volumes that had been stocked during the previous months trying to manage the price declines, and even shifting volumes from Europe to a China, with an increasing demand. Prices of such offers were approximately US$20 to US$40 under market price, which was already at a low price level. Credit restrictions coming from the Chinese government continued during all the fourth quarter, however, in December the authorities announced a reduction in its credit restrictions. Paper inventories also declined and pressure over prices eased too. Albeit paper demand was not active, producers had a relatively positive quarter due to a decline in cost of raw materials, especially pulp, which depending on paper grades it may add up to 70% of total cost. Other Asian countries such as Korea, Taiwan and Japan had stable demand for pulp and paper, and taking advantage of low pulp prices they had an important increase in margins.

Europe had a hard quarter, without showing any signs of recovery. Paper demand continued down in almost all grades: Most producers had to cut production, stopping mills activities during days and even weeks in December. This was experienced even with tissue producers despite its growth rate in Europe. Lack of paper demand and low productions levels reduced demand for pulp, however the most negative effect for the pulp market was caused by integrated paper producers that cut paper production without stopping its pulp capacity and consequently adding additional pulp supply to the European and some Asian markets. Such situation mainly affected pine long fiber pulp, the most common pulp grade produced in that region. As opposed to the Asian market, there were no clear signs of recovery for the pulp market in Europe, being the economic uncertainty one of the main drivers.

 

4


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

December 31, 2011

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

 

 

North America did not show any significant change, yet only towards the end of the quarter there were some signs of economic recovery but was not reflected in more demand of pulp or paper. Latin America continued with good levels of demand and prices, much higher than the rest of the markets.

Production of our mills normalized, achieving the highest production of the year during the fourth quarter, and despite adverse market conditions it was the quarter with the highest sales of the year.

Sawn Timber Division

Compared to the U.S. $191.2 million sold during the third quarter of 2011, sawn timber sales decreased by 5.6% during the fourth quarter, reaching sales of U.S. $180.6 million. This decrease was mainly due to lower average prices of 6.1%. partially offset by higher sales volume of 0.5%.

When compared with the same period of 2010, sawn timber and remanufactured wood products sales increased by 3.7% or U.S.$ 6.4 million, during the fourth quarter of 2011, mainly due to an increase in average prices of 13.3% partially offset by lower sales volume of 8.5%.

The real estate and construction markets in the United States remained at low levels during the fourth quarter of 2011. The housing starts index reached 657,000 units. Current construction remain at low levels when compared to the historical 10 year average. During the fourth quarter of 2011 prices for our molding and timber products did not vary significantly when we compared to the previous quarter.

During the fourth quarter of 2011, markets have shown a downward trend, especially in Asia. As consequence, sales prices and volumes decreased in China, Korea, Japan and Taiwan.

Since past December there has been a decrease in log inventories in China, which is driving prices and more demand for wood. This could positively affect the market for wood at the end of the first quarter of 2012.

 

5


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

December 31, 2011

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

 

 

Panels Division

Panel’s sales reached U.S.$ 302.4 million in the fourth quarter of this year, a decrease of 12.6% when compared to the U.S.$ 346.0 million obtained in the third quarter of 2011. This decrease was mainly explained by lower average prices of 8.6% and lower sales volume of 4.3%.

Panel sales were 2.1% higher than the U.S.$ 296.3 million reached during the fourth quarter 2010. This increase in sales can be explained by higher average prices of 9.4% partially offset by a decrease in sales volume of 6.7%.

The Panels business ended its fourth quarter of the year with a 15.6% increase in sales to end-clients, when compared to the same period of 2010. On the other hand, sales volume for this period increased 6.3% when compared to the fourth quarter of 2010. During this quarter prices for panels continued its recovery followed by an increase in sales volume.

Plywood sales to end-clients showed an increase in sales volume of 26%, driven by more shipments to Europe and Asia, in particular Japan, where prices had also strong increases. In the United States there was an increase in sales volume but a slight decline in prices.

MDF’s sales volume had a small increase of approximately 2% when compared to the same period of last year, explained by a higher demand from the United States and Mexico, along with an increase in sales in South America and Asia, with Japan increasing its demand for this product.

In terms of hard board panels, sales dropped by 1% compared to the same period of year 2010.

Our MDF moldings had a drop in sales volume of approximately 10% mainly caused by the continuous fragile North American housing market. Nonetheless, during year 2011 we started selling our MDF moldings to the European market. Despite the decrease in sales volume, prices benefitted with a 3% increase in prices.

 

6


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

December 31, 2011

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

 

 

4. ANALYSIS OF CASH FLOW

The main components of net cash flow as of December 31, 2011 and 2010 are as follows:

 

     12/31/2011
thU.S.$
    12/31/2010
thU.S.$
 

Positive (negative) Cash flow

    

Cash flow from operating activities

     982,237        1,137,275   

Cash flow from financing activities:

    

Loan and bond payments

     (187,686     191,122   

Dividend payments

     (291,512     (158,781

Others

     (1,986     1,511   

Cash flow from investment activities:

    

Purchase and sales of permanent investments

     (426,729     (54,536

Incorporation and sale of property, plant and equipment

     (577,305     (507,332

Incorporation and sale of biological assets

     (133,124     (114,720

Loan to related companies

     (65,500     10,559   

Other

     (6,199     (3,385
  

 

 

   

 

 

 

Net cash flow for the period

     (707,804     501,713   
  

 

 

   

 

 

 

We had a positive operating cash flow of U.S.$982 million in the current year compared to a U.S.$1,137 million in 2010, due to the increase in payments for income tax.

Cash flow from financing activities had a negative balance of U.S.$728 million compared to a positive balance of U.S.$502 million for the year 2010. This variation resulted from lower loans obtained and higher loans and dividend payments in 2011 compared to 2010.

The investment cash flow, at the end of the year, decreased U.S.$1,209 million (U.S.$669 million in 2010), mainly due to an increase in capital contributions loans made to affiliated companies and higher payments for acquisition of property, plant, equipment and biological assets in 2011.

5. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of December 31, 2011, a ratio of fixed rate debt to total consolidated debt of approximately 84.8%, which it believes is consistent with industry standards. The Company does not engage in futures against variations in the selling prices of pulp and forest products because it believes that risks resulting from price variations are limited, in large part because 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.

 

7


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

December 31, 2011

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

 

CONSOLIDATED BALANCE SHEET

 

          12-31-2011      12-31-2010  
     Note    ThU.S.$      ThU.S.$  

Assets

        

Current Assets

        

Cash and cash equivalents

   4      315,901         1,043,834   

Other financial current assets

   23      0         2,909   

Other current non-financial assets

   25      207,196         177,140   

Trade and Other receivables -net

   23      740,416         774,289   

Related party receivables

   13      70,179         18,074   

Inventories

   3      795,104         727,535   

Biological assets, current

   20      281,418         344,096   

Tax receivables

        37,153         50,131   

Total Current Assets other than assets or disposal groups classified as held for sale or as held for distribution to owners

        2,447,367         3,138,008   

Non-Current Assets or disposal groups classified as held for sale

   22      15,293         14,108   

Non-Current Assets or disposal groups classified as held for sale or as held for distribution to owners

        15,293         14,108   

Total Current Assets

        2,462,660         3,152,116   

Non-Current Assets

        

Other non-current financial assets

   23      1,162         53,407   

Other non-current and non-financial assets

   25      99,901         52,352   

Trade receivables, non current

   23      7,332         11,965   

Investment in associates accounted for using equity method

   15-16      886,706         498,204   

Intangible assets

   19      17,609         11,127   

Goodwill

        59,124         66,231   

Property, plant and equipment

   7      5,324,172         5,088,745   

Biological assets, non-current

   20      3,463,166         3,446,862   

Deferred tax assets

   6      135,890         125,323   

Total non-Current Assets

        9,995,062         9,354,216   

Total Assets

        12,457,722         12,506,332   

The accompanying notes are an integral part of these consolidated financial statements.

 

8


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

December 31, 2011

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

 

 

CONSOLIDATED BALANCE SHEET (continued)

 

          12-31-2011     12-31-2010  
     Note    ThU.S.$     ThU.S.$  

Equity and liabilities

       

Liabilities

       

Current Liabilities

       

Other current financial liabilities

   23      248,992        554,673   

Trade and other payables

   23      397,073        362,182   

Related party payables

   13      9,785        9,209   

Other provisions, current

   18      8,607        5,842   

Tax liabilities

        144,989        62,887   

Current provision for employee benefits

   10      3,307        3,312   

Other current non financial liabilities

   25      219,192        210,956   

Total current liabilities other than assets included in disposal groups classified as held for sale

        1,031,945        1,209,061   

Total Current Liabilities

        1,031,945        1,209,061   

Non-Current Liabilities

       

Other non-current financial liabilities

   23      2,969,015        2,909,429   

Other non - current provisions

   18      9,688        7,609   

Deferred tax liabilities

   6      1,256,233        1,369,489   

Non-current provision for employee benefits

   10      36,102        35,964   

Other non - current non financial liabilities

   25      124,589        134,205   

Total non - current liabilities

        4,395,627        4,456,696   

Total liabilities

        5,427,572        5,665,757   

Net Equity

       

Issued capital stock

        353,176        353,176   

Accumulated earnings

        6,683,252        6,320,264   

Other reserves

        (96,821     58,754   

Net equity attributable to parent company

        6,939,607        6,732,194   

Non-controlling interest

        90,543        108,381   

Total net equity

        7,030,150        6,840,575   

Total net equity and liabilities

        12,457,722        12,506,332   

The accompanying notes are an integral part of these consolidated financial statements.

 

9


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

December 31, 2011

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

 

 

CONSOLIDATED STATEMENTS OF INCOME

 

          January-December  
          2011     2010  
     Nota    ThU.S.$     ThU.S.$  

Income Statement

       

Revenue

   9      4,374,495        3,767,384   

Cost of sales

        (2,908,463     (2,298,191

Gross Income

        1,466,032        1,469,193   

Other operating income

   2      475,014        378,480   

Distribution costs

   2      (451,620     (360,188

Administrative expenses

   2      (415,521     (323,916

Other operating expenses

   2      (90,313     (49,063

Other income (Loss)

        0        0   

Financial income

        24,589        15,761   

Financial costs

   2      (196,356     (207,519

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

   15      (11,897     (7,693

Exchange rate differences

        (26,643     (16,288

Income before income tax

        773,285        898,767   

Income Tax

   6      (152,499     (198,018

Income from continuing operations

        620,786        700,749   

Net Income

        620,786        700,749   
     

 

 

   

 

 

 

Income attributable to equity holders

       

Income attributable to parent company

        612,553        694,750   

Income attributable to non-parent company

        8,233        5,999   

Net Income

        620,786        700,749   
     

 

 

   

 

 

 

Basic earnings per share

       

Earnings per share from continuing operations

        0.0054135        0.0061399   
     

 

 

   

 

 

 
        0.0054135        0.0061399   
     

 

 

   

 

 

 

Earnings per diluted shares

       

Earnings per diluted share from continuing operations

        0.0054135        0.0061399   
     

 

 

   

 

 

 

Basic earnings per diluted share

        0.0054135        0.0061399   
     

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

10


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

December 31, 2011

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

 

 

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

 

          January-December  
          2011     2010  
     Nota    ThU.S.$     ThU.S.$  

Net Income

        620,786        700,749   

Other comprehensive income, net of tax

       

Exchange difference on conversion

       

Gain (loss) for exchange differences, before tax

   11      (145,775     47,070   

Cash flow hedges

       

Gain (loss) for cash flow hedges, before tax

   23      (12,767     (11,155

Participation in Other comprehensive income in associates and joint ventures accounted for using equity method

        (3,502     1,247   

Other comprehensive income, net of tax

        (162,044     37,162   

Income tax related to Cash flow hedges on Other comprehensive income

   6-23      932        1,896   

Other comprehensive income

        (161,112     39,058   

Total comprehensive income

        459,674        739,807   

Comprehensive Income Statement attributable to:

       

Comprehensive income statement attributable to parent company

        456,978        731,886   

Comprehensive income statement attributable to non-controlling interest

        2,696        7,921   

Total comprehensive income

        459,674        739,807   

The accompanying notes are an integral part of these consolidated financial statements.

 

11


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

December 31, 2011

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

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

12-31-2011

  Share
Capital
ThU.S.$
    Conversion
Reserves
ThU.S.$
    Hedge
Reserves
ThU.S.$
    Participation  in
other
Comprehensive
Income in
Associates and
Joint Venture
ThU.S.$
    Other
Reserves
ThU.S.$
    Accumulated
Earnings
ThU.S.$
    Equity
attributable
to parent
Company
T.hU.S.$
    Non -
controlling
interest
ThU.S.$
    Equity
Total
ThU.S.$
 

Opening balance at 01/01/2011

    353,176        72,699        (14,079     134        58,754        6,320,264        6,732,194        108,381        6,840,575   

Comprehensive income statement

                 

Net income

              612,553        612,553        8,233        620,786   

Other comprehensive income, net of tax

      (140,238     (11,835     (3,502     (155,575       (155,575     (5,537     (161,112

Comprehensive income

      (140,238     (11,835     (3,502     (155,575     612,553        456,978        2,696        459,674   

Dividens

              (249,565     (249,565     (20,534     (270,099

Total Changes in equity

    0        (140,238     (11,835     (3,502     (155,575     362,988        207,413        (17,838     189,575   

Closing balance at 12/31/2011

    353,176        (67,539     (25,914     (3,368     (96,821     6,683,252        6,939,607        90,543        7,030,150   

12-31-2010

  Share
Capital
ThU.S.$
    Conversion
Reserves
ThU.S.$
    Hedge
Reserves
ThU.S.$
    Participation in
other
Comprehensive
Income in
Associates and
Joint Venture
ThU.S.$
    Other
Reserves
ThU.S.$
    Accumulated
Earnings
ThU.S.$
    Equity
attributable
to parent
Company
T.hU.S.$
    Non -
controlling
interest
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   
                0       

Comprehensive income statement

                0       

Net income

            0        694,750        694,750        5,999        700,749   

Other comprehensive income, net of tax

      45,148        (9,259     1,247        37,136          37,136        1,922        39,058   

Comprehensive income

      45,148        (9,259     1,247        37,136        694,750        731,886        7,921        739,807   

Dividens

            0        (268,285     (268,285     (13,380     (281,665

Total Changes in equity

    0        45,148        (9,259     1,247        37,136        426,465        463,601        (5,459     458,142   

Closing balance at 12/31/2010

    353,176        72,699        (14,079     134        58,754        6,320,264        6,732,194        108,381        6,840,575   

The accompanying notes are an integral part of these consolidated financial statements.

 

12


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

December 31, 2011

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS-DIRECT METHOD

 

     12/31/2011     12/31/2010  
     ThU.S.$     ThU.S.$  

STATEMENTS 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

     4,606,542        3,984,173   

Receipts from premiums and claims, annuities and other policy benefits

     270,663        292,240   

Other cash receipts from operating activities

     276,650        172,278   

Classes of cash payments

    

Payments to suppliers for goods and services

     (3,532,728     (2,877,218

Payments to and behalf of employees

     (329,158     (263,151

Other cash payments from operating activities

     (5,151     (2,338

Dividends received

     1,720        6,353   

Interest paid

     (180,046     (190,351

Interest received

     14,009        6,528   

Income taxes refund (paid)

     (138,621     10,964   

Other (outflows) inflows of cash, net

     (1,643     (2,203

Net Cash flows from Operating Activities

     982,237        1,137,275   

Cash Flows from (used in) Investing Activities

    

Cash flow used in obtaining control of subsidiaries or other businesses

     (6,972     (6,977

Cash flow used to contributions in associates

     (8,306     (8,000

Cash flow used in purchase of associates and joint ventures

     (234,054     0   

Capital contributions to joint ventures

     (177,397     (39,559

Loans to related parties

     (199,666     0   

Proceeds from sale of property, plant and equipment

     14,023        8,669   

Purchase of property, plant and equipment

     (591,328     (516,001

Purchase of intangible assets

     (7,619     (1,594

Proceeds from other long-term assets

     5,074        1,471   

Purchase of biological assets

     (138,198     (116,191

Purchase of other non current assets

     (1,162     0   

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

     134,166        10,559   

Other outflows of cash, net

     2,582        (1,791

Cash flows used in Investing Activities

     (1,208,857     (669,414

Cash flows from (used in) Financing Activities

    

Loans obtained

     713,624        825,268   

Repayments of borrowings

     (901,310     (634,146

Dividends paid by the parent company

     (270,767     (142,273

Dividends paid by subsidiaries or special purpose companies

     (20,745     (16,508

Other inflows of cash, net

     (1,986     1,511   

Cash flows from (used in) Financing Activities

     (481,184     33,852   

Net increase (decrease) in Cash and Cash Equivalents before effect of exchange rate changes

     (707,804     501,713   

Effect of exchange rate changes on cash and cash equivalents

     (20,129     7,922   

Net increase (decrease) of Cash and Cash equivalents

     (727,933     509,635   

Cash and cash equivalents, at the beginning of the period

     1,043,834        534,199   

Cash and cash equivalents, at the end of the period

     315,901        1,043,834   

The accompanying notes are an integral part of these consolidated financial statements.

 

13


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

 

NOTE 1. PRESENTATION OF FINANCIAL STATEMENTS

Entity Information

Name of Reporting Entity

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

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

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 99.9780 % 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

The Financial Statements presented by Arauco cover the following periods:

 

   

Consolidated Balance Sheet as of December 31, 2011 and December 31, 2010.

 

   

Consolidated Statements of Income for the year ended 2011 and 2010.

 

   

Consolidated Comprehensive Income Statements for the year ended 2011 and 2010.

 

   

Consolidated Statements of Changes in Net Equity for the year ended 2011 and 2010.

 

   

Consolidated Statements of Cash Flows – Direct Method for the year ended 2011 and 2010.

 

   

Disclosure of Explanatory Information (notes).

Date of Approval of Financial Statements

The issuance of these consolidated financial statements for the year ended on December 31, 2011 was approved by the Board of Directors of the Company (the “Board”) in Extraordinary Session No. 463 of March 5, 2012.

 

14


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Functional and Reporting Currency

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

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

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

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

The financial information included herein is presented in thousands of U.S. Dollars.

Additional Information Relevant to the Understanding of the Financial Statements

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

Compliance and Adoption of IFRS

The accompanying consolidated financial statements of Arauco include the Balance Sheet, Statement of Income, Comprehensive Income Statement, Statement of Changes in Net Equity and Statement of Cash Flows in accordance with IFRS as issued by the IASB.

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.

 

15


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Summary of significant accounting policies

The accompanying consolidated financial statements as of December 31, 2011 were prepared in accordance with Arauco’s accounting policies, uniformly applied to all items in these consolidated financial statements.

 

a) Basis for Presentation of financial statements

The actual Consolidated financial statements have been prepared according to international basis of financial information issued by the International Accounting Standards Board (IASB) and they represent the integral, explicit and unreserved adoption of the mentioned international standards.

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.

There have been some minor reclassifications to prior year financial statements, for presentation purposes.

 

b) Critical accounting estimates and judgments

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

- Property, Plant and Equipment

In a businness acquisition, management prepared the corresponding valuations based on a report issued by a third party expert.

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

Sensitivity analysis associated to the estimated useful lifes are disclosed in Note 7.

 

16


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

- 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 makes assumptions that are mainly based on market conditions existing at each balance sheet date.

Detailed financial information of Fair Value of Financial Instruments and sensitivity analysis are presented in Note 23.

-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.

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

-Lawsuits and Contingencies

Arauco and its subsidiaries are subject to certain ongoing lawsuits. Future effects on Arauco’s financial condition resulting from these lawsuits are estimated by the management of the Company, in collaboration with its legal advisors. Arauco reserves appropriate contingency estimates on each balance sheet and/or upon each substantial modification to an underlying cause of any such litigation, which decisions are based on the reports of its legal advisors. Detailed lawsuits information is presented in Note 18.

 

c) Consolidation

The 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.

The intercompany transactions and unrealized earnings from subsidiary operations have been eliminated from the consolidated financial statements and non-controlling interest is recognized in the equity balance.

The consolidated financial statements for year ended on December 31, 2011 and 2010, include subsidiary balances shown in Note 13 and balances of the Fondo de Inversión Bío Bío, and its subsidiary Forestal Río Grande S.A., both of which qualify as Special Purpose Entities.

Certain consolidated subsidiaries report statutory financial statements in Brazilian Reales and Chilean Pesos, their main functional currencies. For consolidation purposes, they have been translated as indicated in Note 1 (e) (ii).

 

17


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Accounting policies for subsidiaries will be adjusted if necessary to ensure consistency with the policies adopted by Arauco. Non-controlling interest is presented as a separate component of equity.

All intercompany transactions, accounts receivable, accounts payable and intercompany unrealized income are eliminated.

 

d) Segments

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

In line with the above, the Company established operating segments according to the following business units:

 

   

Pulp

 

   

Panels

 

   

Sawn Timber

 

   

Forestry

Detailed financial information by segment is presented in Note 24.

 

e) Functional currency

(i) Functional currency

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

(ii) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

   

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

 

   

income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

 

   

all resulting exchange differences are recognised in other comprehensive income.

 

18


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in equity.

(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 when deferred in other comprehensive income as qualifyng 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.

Swaps: These are valued using the discounted cash flow method at a discount rate consistent with the risk of the operation.

Forwards: These instruments are initially recognized at fair value at the date on which the contract is entered into and are subsequently re-measured at fair value. The forwards are recorded as assets when fair value is positive and, as liabilities when fair value is negative.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

The fair value of forward rate contracts is calculated by reference to differential of the existing interest rates between the rate agreed and the market interest rate deadlines.

Mutual Funds: Given their nature, they are recognized at fair value at the closing date for the period.

 

19


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

(ii) Loans and receivables

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

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

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.

Repurchased Agreements: These are valued at the initial cost of the investment plus accrued interest investment cost of the short term instrument.

(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.

The fair value estimate of bank obligations is determined using specific valuation techniques using cash flow discounted at rates consistent with the risk of the operation, while bonds are valued at market price.

(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

 

20


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

at that time recognized in the Income Statement. When a possible transaction is no longer expected to occur, the cumulative gain or loss in equity is immediately transferred to the Income Statement.

These financial instruments are measured using the discount cash flow method at a rate consistent with the operational risk using the information given by each bank as counterparty.

 

h) Inventories

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

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

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

Biological assets are transferred to inventories when forests are harvested.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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

Replacement parts that will be consumed in less than a period of 12 months, are presented in Inventories and record as an expense within the period consumed.

 

i) Assets held for sale

Non-current assets held for sale are measured at the lower of book and fair value, less costs for sale. Assets are classified in this line when the book value may be recovered through a sale transaction that is highly likely to be carried out. Management must be committed to a plan to sell the asset and should have initiated an active program to find a buyer and complete the plan. Likewise, management must also expect that the sale will be qualified for full recognition within one year following the date of its classification, except for the existence of facts or circumstances (beyond the entity control) that extend the period of sale beyond one year.

Non-current assets classified as held for sale are not depreciated.

 

j) Business Combinations

Arauco applies the purchase method to record a business combination. Acquisition cost is the fair value of assets delivered, of equity instruments issued and of the liabilities incurred or committed at the date of exchange, plus all direct costs attributable to the acquisition. Identifiable acquired assets and liabilities as well as the contingencies committed to in business combinations are initially recognized at fair value at the date of acquisition, despite minority interest scope. Excess of acquisition cost over the Fair Value of the Company’s

 

21


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

share of the identifiable net assets acquired is recorded as goodwill. If this is less than Fair Value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income.

The goodwill in a business combination is initially measured at the cost of the business combination less the interest of the company in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquisition. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of impairment testing, goodwill 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.

The transaction costs are treated as expenses when incurred.

Arauco measures the fair value of the acquired company in the business combination on a step by step basis, recognizing the effects of variation in the income statement.

 

k) Investments in associates and in joint ventures

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 and in joint ventures are accounted for using the equity method and are initially recognized at cost. Their book net equity is increased or decreased proportionately in the profit or loss and comprehensive income statement of the period as a result of adjustments of conversion arising from the financial statement conversion into other currencies. Arauco’s investment in associates includes goodwill (net of any accumulated impairment loss).

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

These investments are presented in the Consolidated Balance Sheet together with Investments in associates and measured by using the equity method.

If any of these investments incurs negative equity as a result of legal or implicit obligations of its associate, or has made payments on behalf of its associate or joint venture, then it must recognize a liability by reducing the value of the investment to zero until this generates income that would reverse the negative equity previously generated due to the losses. Otherwise, a liability is not recognized but the investment left at zero equally.

 

l) Intangible assets

After initial recognition, intangible assets are carried at cost, including any accumulated amortization and impairment losses.

Amortization of an intangible asset with a finite useful life shall be carried on a systematic basis over the asset’s useful life. Amortization begins when the asset is available for use, which is when it complies with all the necessary conditions to operate in the manner foreseen by the Company.

 

22


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

(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.

 

m) Goodwill

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

The goodwill recorded in Brazilian subsidiary whose functional currency is the real, is converted to U.S. dollars at the closing exchange rate. At the date of these financial statements, the currency conversion is the only movement that has the amount of goodwill.

 

n) Property, Plant and Equipment

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

Subsequent costs such as improvements and replacement of components 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. The value of the replaced part is capitalized as part of the property, plant & equipment, the remaining part which corresponds to repairs and maintenance are charged to the income statement.

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

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

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

 

o) Leases

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

When assets are leased under a finance lease, the present value of lease payments are recognized as financial account receivables. Interest income which is the difference between the gross receivable and the present value of such amount is recognized as the capital’s financial performance.

 

23


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

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

 

p) Biological Assets

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

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

The assessment of new plantations during the current year, is made at the least economic cost, which corresponds to the fair value to that date. After 12 months, the valuation methodology isi as explained in the previous paragraph.

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

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

The Company holds fire insurance policies for its forestry plantations, which together with company resources and efficient protection measures for these forestry assets allow financial and operational risks to be minimized.

 

q) Deferred income tax

Deferred income tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted as of the balance sheet date that are expected to apply when the related deferred income tax asset or the deferred income tax liability is settled.

The deferred income tax assets are recognized to the extent that it is probable that future taxable benefits will be available.

 

r) Provisions

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

 

24


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

s) Revenue recognition

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

(i) Policy on Revenue recognition from the Sale of Goods

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

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

(ii) Policy on Revenue recognition from Rendering of Services

Arauco, mainly provides power supply services which are trade in the spot market of the Interconnected Central System. According current laws, the prices on that market called “Marginal Costs” are calculated by Load Economical Dispatch Center of the Interconnected Central System (CDEC-SIC). And are generally recognized in the period in which the services are provided.

Electrical energy is generated as a by-product of the pulp process and is a complementary business to it, which at first is supplied to the group’s subsidiaries and the surplus is sold to the central grid.

Arauco provides other services such as port and pest control 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.

Segment revenues mentioned in Note 24 comply with the conditions indicated above.

Revenues from inter-segment sales (arising from prices similar to market prices) are eliminated in the consolidated financial statements.

 

t) Minimum dividend

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

 

25


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

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

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 consolidated financial statement under Other non-current Financial Liabilities.

Dividends are paid only if profits in society and do not affect taxes.

 

u) Impairment

Non-financial Assets

The recoverable amount of property, plant and equipment is measured whenever there is an indication that the asset may have suffered deterioration of its value. Among the factors to consider as evidence of impairment are the diminution in market value of assets, significant changes in the technological environment, obsolescence or physical impairment of assets and changes in the way the asset is used or expected to be used (which could involve its disuse). Arauco evaluates at the end of each reporting period whether there is any evidence of the factors above mentioned.

For this evaluation, assets are grouped into the smallest group of assets that generates cash inflows independently.

The goodwill and intangible assets with indefinite useful life are tested annually or whenever circumstances indicate. 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.

 

26


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Financial Assets

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

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

The impairment loss is measured as the difference between the book value of assets and the current value of estimated future cash flows. The asset value will be presented net of the loss recognized directly in income. If the impairment loss decreases in later periods, it is reversed either directly or by adjusting the provision for doubtful accounts, with effect in income.

 

v) Employee Benefits

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

This is an estimate of the years of service-based severance payments to be recognized as a future termination payment liability, in accordance with contracts between Arauco and its employees 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 the employee turnover, salary increases and life expectancy of the workers included in this benefit.

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

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

 

w) Employee Vacations

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

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

 

x) Recent accounting pronouncements

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

 

27


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

New issued standards, interpretations and amendments not in effect for year 2011, for which Arauco is evaluating the impact of their adoption.

 

Standards and interpretations

  

Contents

  

Obligatory application for
years beginning after

IAS 19 revised

  

Employee Benefit

 

Issued in June 2011, replaces IAS 19 (1998). This revised standard changes the recognition and measurement of the cost of defined benefit plans and termination benefits. Additionally, it includes modifications to the revelations of all employee benefits.

   January 01, 2013

IAS 27

  

Separate Financial Statements

 

Issued in May 2011, replaces IAS 27 (2008). The scope of this standard is restricted from this change only separate financial statements, as aspects relating to the definition of control and consolidation were removed and included in the IFRS 10. Early adoption is permitted in conjunction with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 28.

  

January 01, 2013

IFRS 9

  

Financial Instruments

 

Issued in December 2009, amending the classification and measurement of financial assets.

 

Later this rule was amended in November 2010 to include treatment and classification of liabilities. Early adoption is permitted.

   January 01, 2015

IFRS 10

  

Consolidated Financial Statements

 

Issued in May 2011, replaces the SIC 12 “Consolidation of special purpose entities and parts of IAS 27” Consolidated Financial Statements. “Clarifications and establishing new parameters for the definition of control, and the principles for the preparation of consolidated financial statements. Early adoption is permitted in conjunction with IFRS 11, 12 and IFRS amendments to IAS 27 and 28.

   January 01, 2013

IFRS 11

  

Joint Arrangements

 

Issued in May 2011, replaces IAS 31 “Interests in Joint Ventures” and SIC 13 “jointly controlled entities”. Among its modifications include eliminating the concept of jointly controlled assets and the possibility of proportional consolidation of entities under common control. Early adoption is permitted in conjunction with IFRS 10, 12 and IFRS amendments to IAS 27 and 28.

   January 01, 2013

IFRS 12

   Disclosure of shareholdings in other entities Issued in May 2011, applies to those entities that hold investments in subsidiaries, joint ventures, associates. Early adoption is permitted in conjunction with IFRS 10, 11 and IFRS amendments to IAS 27 and 28.    January 01, 2013

IFRS 13

  

Fair Value Measurement

 

Issued in May 2011, brings together in one standard way to measure the fair value of assets and liabilities and the disclosures necessary on it, and incorporates new concepts and explanations for measurement.

   January 01, 2013

 

28


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Amendments and improvements

  

Contents

  

Obligatory application for
years beginning after

IFRIC 20

   Stripping Costs in the production phase of open pit mines Issued in October 2011, regulates the recognition of costs for the removal of waste overload “Stripping Costs” in the production phase of a mine as an asset, the initial and subsequent measurement of this asset. Additionally, the interpretation requires entities to produce financial statements mining IFRS assets punish “Stripping Costs” existing retained earnings when they cannot be attributed to an identifiable component of a reservoir.    January 01, 2013

IAS 12

  

Income tax

 

This amendment, issued in December 2010, provides an exception to the general principles of IAS 12 for investment property is measured using the fair value model in IAS 40 “Investment Property”, the exception also applies to investment property acquired in a business combination if, after the business combination the acquirer applies the fair value model in IAS 40 content. The amendment incorporates the assumption that investment property valued at fair value, are made through their sale, thus requiring apply to these temporary differences arising from the tax rate for sales operations. Early adoption is permitted.

   January 01, 2012

IAS 28

   Investments in associates and joint ventures Issued in May 2011, regulates the accounting treatment of these investments by applying the equity method. Early adoption is permitted in conjunction with IFRS 10, IFRS 11 and IFRS 12 and the amendment to IAS 27.    January 01, 2013

IFRS 7

   Disclosures of Financial Instruments Issued in October 2010, increases the disclosure requirements for transactions involving transfers of financial assets.    July 01, 2011

IAS 1

   Presentation of Financial Statements Issued in June 2011. The main modification of this amendment requires that the items of Other Comprehensive Income will be categorized and grouped by evaluating whether they will be potentially reclassified to earnings in subsequent periods. Early adoption is permitted    July 01, 2012

IFRS 1

  

First-time Adoption of International Financial Reporting Standards

 

Issued in December 2010, covers the following topics: i) Exemption for severe hyperinflation: allows companies whose transition date is after the normalization of its functional currency, valuing assets and liabilities at fair value as deemed cost, ii) Removal of requirements for fixed dates: adapts the fixed date included in IFRS 1 at the transition date for those operations that involve lower financial assets and liabilities at fair value on initial recognition results.

   July 01, 2011

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.

 

29


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

NOTE 2. DISCLOSURE OF OTHER INFORMATION

 

a) Disclosure of Information on Capital Issued

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

100% of capital corresponds to ordinary shares.

 

     12/31/2011    12/31/2010

Description of Ordinary Capital Share Types

   100% of Capital corresponds to ordinary shares

Number of Authorized Shares by Type of Capital in Ordinary Shares

   113,152,446

Nominal Value of Shares by Type of Capital in Ordinary Shares

   ThU.S.$ 0.0031211 per share

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

   ThU.S.$353,176
     12/31/2011    12/31/2010

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

   113,152,446

 

b) Disclosure of information on Dividends paid to Ordinary Shares

The interim dividend paid each year is equivalent to 20% of the distributable net income calculated as of the end of September of each year and presented in the Consolidated Statement of Changes in Net Equity.

Dividend paid each year corresponds to the spread between the 40% of net income distributable at the end of last year and the amount of interim dividend paid at the end of last fiscal year.

The ThU.S.$249,565 (ThU.S.$268,285 as of December 31, 2010) presented in Consolidated Statement of Changes in Net Equity corresponds to the provision of minimum dividend registered (see Note 26).

In the Statements of cash flows, are presented in line paid dividends the amount ThU.S.$291,512 (ThU.S.$158,781 as of December 31, 2010), of which ThU.S.$270,767 (ThU.S.$142,273 as of December 31, 2010) corresponds to the paid dividends made by Celulosa Arauco y Constitucion S.A. The additional amount corresponds to subsidiaries minority interest and special purpose companies .

Dividends paid during years 2011 and 2010 and the corresponding amount per share

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid

   Provisional Dividend

Type of Shares for which there is a Dividend Paid

   Unlisted Ordinary Shares

Date of Dividend Paid

   12-13-2011

Amount of Dividend

   ThU.S.$ 87,997 (1)

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share, Ordinary Share

   U.S.$ 0.77768

 

(1) This interim dividend more ThU.S.$ 161,568 recognized in the provision of minimum dividend as reported in note 26, conform the ThU.S.$ 249,565 lowered from the statements of changes in equity.

 

30


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid

   Final Dividend

Type of Shares for which there is a Dividend Paid

   Unlisted Ordinary Shares

Date of Dividend Paid

   05-10-2011

Amount of Dividend

   ThU.S.$ 182,770 (2)

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share, Ordinary Share

   U.S.$ 1.61525

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid

   Provisional Dividend

Type of Shares for which there is a Dividend Paid

   Unlisted Ordinary Shares

Date of Dividend Paid

   12-15-2010

Amount of Dividend

   ThU.S.$ 85,515 (2)

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share, Ordinary Share

   U.S.$ 0.7557

 

(2) The total amount is ThU.S.$ 268,285, corresponding to provisioned and lowered dividend in the Statements of Changes in Equity as of December 31, 2010.

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid

   Final Dividend

Type of Shares for which there is a Dividend Paid

   Unlisted Ordinary Shares

Date of Dividend Paid

   05-10-2010

Amount of Dividend

   ThU.S.$ 56,758

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share, Ordinary Share

   U.S.$ 0.50161

 

c) Disclosure of Information on Reserves

Other Reserves

Other reserves consist of Conversion Reserves, Hedge Reserves and Other.

Arauco does not have restrictions associated with these reserves.

Conversion Reserves

This corresponds to foreign currency translation of those Arauco’s subsidiaries that do not use the U.S. Dollar as their functional currency.

Hedge Reserves

This corresponds to Arauco’s portion of gains or swap net losses resulting from hedging as of the end of each fiscal year.

The effective portion of the hedge is shown in equity.

Other

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

 

31


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

d) Disclosures of other Information

Below are balances of Other Income by activity, Other Expenses by activity, Financing Costs and Participation in income (loss) of associates and joint venture as of December 31, 2011 and 2010, respectively.

 

     2011
ThU.S.$
    2010
ThU.S.$
 

Classes of Other Income by activity

    

Other Operating Income, Total

     475,014        378,480   

Gain from changes in fair value of biological assets (See note 20)

     229,889        221,501   

Sales revenue from carbon bonds

     —          —     

Revenue from export promotion

     5,545        6,171   

Insurance compensation, net of earthquake related losses (*)

     193,986        107,658   

Leases received

     4,124        2,707   

Gain on sales of assets

     9,046        8,670   

Other operating results (sale materials and waste, Rigth of way, indemnity insurance)

     32,424        31,773   

Classes of Other Expenses by activity

    

Total of other expenses by activity

     (90,313     (49,063

Depreciations

     (1,176     (1,356

Contingent provision

     (4,973     (2,351

Provision Impairment fixed assets and others

     (7,631     (2,769

Closed plant expenses

     (6,148     (2,898

Plant operating expenses for improvements or upgrades arrested

     (8,214     (276

Expenses projects

     (16,867     —     

Loss on sale / Loss of assets

     (2,447     (5,170

Loss of forest due to fires

     (16,503     (8,223

Other Taxes

     (5,209     (4,730

Research and development expenses

     (3,446     (3,119

Compensation and eviction

     (1,238     (973

Other expenses (cost of projects and studies, donations, fines, udjustmens, repayments insurance )

     (16,461     (17,198

Classes of financing Costs

    

Financing Costs, Total

     (196,356     (207,519

Interest expense, Loans banks

     (8,919     (11,883

Interest expense, Bonds

     (164,790     (165,335

Interest expense, financial instruments

     (6,564     (14,527

Other financial costs

     (16,083     (15,774

Classes of Participation in Income (Loss) of associates and joint ventures accounted througt Equity Method

    

Total

     (11,897     (7,693

Investments in associates

     (1,012     1,906   

Joint ventures

     (10,885     (9,599

 

(*) Correspond to the income net of insurance compensation due to charges for punishments produced by damages and operating expenses of stopped plant.

 

32


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Balance of Expenses by nature:

 

Cost of sales

   2011
ThU.S.$
     2010
ThU.S.$
 

Timber

     707,655         613,536   

Forestry labor costs

     588,779         470,283   

Depreciation

     216,967         187,208   

Maintenance costs

     139,984         94,751   

Chemical costs

     334,549         240,850   

Sawmill Services

     170,861         141,116   

Others Raw Materials

     223,749         159,378   

Indirect costs

     93,504         56,182   

Energy and fuel

     159,912         116,260   

Cost of electricity

     60,705         44,166   

Port Costs

     27,499         21,745   

Wage and salaries

     184,299         152,716   

Total

     2,908,463         2,298,191   

Distribution expenses

   2011
ThU.S.$
     2010
ThU.S.$
 

Sale costs

     39,321         32,805   

Commissions

     14,752         11,818   

Insurances

     4,406         2,709   

Doubtful assets

     7,024         1,579   

Other sales expenses

     13,139         16,699   

Shipping and freight costs

     412,299         327,383   

Port services

     2,301         4,698   

Freights

     391,813         305,719   

Otrher shipping and freight costs

     18,185         16,966   

Total

     451,620         360,188   

Administration expenses

   2011
ThU.S.$
     2010
ThU.S.$
 

Wage and salaries

     156,961         142,683   

Marketing, advertising, promotion and publications expenses

     7,699         9,089   

Insurances

     20,108         9,227   

Depreciations and amortizacion not paid

     10,614         12,495   

Computer services

     15,737         14,191   

Office, warehouse and machinery leases

     14,383         8,004   

External audits

     4,729         3,325   

Donations, contribitions, grants

     13,603         11,876   

Fees (advices technical. Legal …)

     63,923         54,299   

Property taxes, patents and municipal rigths

     18,096         15,536   

Other administration expenses (travel within and outside the country, cleaning services, security, basic services)

     89,668         43,191   

Total

     415,521         323,916   

 

      Note      January-December  

Expenses for

      2011
ThU.S.$
     2010
ThU.S.$
 

Depreciations

     7         228,839         232,023   

Employee benefits

     10         341,260         295,399   

Amortization

     19         1,898         1,632   

 

33


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

NOTE 3. INVENTORIES

 

Components of Inventory

   12-31-2011
ThU.S.$
     12-31-2010
ThU.S.$
 

Raw Materials

     90,587         86,617   

Production Supplies

     74,658         65,154   

Work in progress

     58,594         62,612   

Finished goods

     446,289         426,447   

Parts

     123,071         86,532   

Other Inventories

     1,905         173   

Total Inventories

     795,104         727,535   

As of December 31 2011, a cost of sales of inventories amounted to ThU.S.$2,894,250 (ThU.S.$2,249,689 as of December 31, 2010).

In order to allow the registered inventories to net realizable value, at December 31, 2011, has recognized a reduction of inventories, related to allowance of obsolescence as of ThU.S.$2,957 (ThU.S.$324 as of December , 2010) and impaired inventories (ThU.S.$ 23,438 as of December 31, 2010) mainly relating to the effect of the earthquake and tsunami.

The obsolescence provision is calculated according to the historical information and the age of the inventories.

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

Agricultural Products

Agricultural Products relate mainly to forestry products that are intended for sale pertaining to the operation and are valued at fair value at the closing period. These are presented in the Consolidated Balance Sheet under Inventories in the Raw Material item.

NOTE 4. CASH FLOW STATEMENT

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. 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 on hand.

 

34


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Components of Cash and Cash Equivalents

   12-31-2011
ThU.S.$
     12-31-2010
ThU.S.$
 

Cash on hand

     527         263   

Banks

     31,097         69,692   

Short term deposit

     128,526         705,694   

Mutual Funds

     155,751         267,811   

Other cash and cash equivalents

     —           374   

Total

     315,901         1,043,834   

The following tables detail the value of the cost of the investments in Greenagro S.A. and Dynea Brasil S.A. dated December 20, 2011 and March 15, 2010 (see Note 14), respectively, and the net value of assets and liabilities of each acquired entity, net of cash and cash equivalents acquired.

 

2011

Purchase of Investments

   ThU.S.$  

Acquisition: Greenagro S.A.

  

Cash paid for acquisitions and cash equivalents

     10,768   

Cash and cash equivalents held by acquired entities

     (537

Net cash paid to acquire entities

     10,231   
  

 

 

 

Net Assets less Cash and Cash equivalents of acquired entity

     10,231   
  

 

 

 

 

2010

Purchase of Investments

   ThU.S.$  

Acquisition: Dynea Brasil S.A.

  

Cash paid for acquisitions and cash equivalents

     15,000   

Cash and cash equivalents held by acquired entities

     (8,023

Net cash paid to acquire entities

     6,977   
  

 

 

 

Net Assets less Cash and Cash equivalents of acquired entity

     22,613   
  

 

 

 

NOTE 5. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES

Changes in Accounting Policies

These policies have been designed in accordance with IFRS in effect as of December 31, 2011 and applied uniformly to all items presented in these consolidated financial statements.

Changes in the Treatment of Accounting Policy

The financial statements as of December 31, 2011 do not show changes in accounting policies compared to the same period last year.

NOTE 6. TAXES

The tax rate applicable to the major companies in which Arauco participates is 20% in Chile, 35% in Argentina and 34% in Brazil.

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.

 

35


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

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.

Deferred Tax Assets

The following table details deferred tax assets:

 

Deferred Tax Assets

   12-31-2011
ThU.S.$
     12-31-2010
ThU.S.$
 

Deferred Tax Assets related to Provisions

     7,878         4,658   

Deferred Tax Assets related to accrued liabilities

     4,766         4,601   

Deferred Tax Assets related to Post-Employment obligations

     6,625         6,616   

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

     1,721         2,339   

Deferred Tax Assets related to Financial Instruments Restatements

     789         1,370   

Deferred Tax Assets related to tax losses

     71,870         56,724   

Valuation of biological assets

     5,244         8,805   

Valuation of inventory

     3,543         9,034   

Income provision

     4,064         2,765   

Trade debtors and receivables

     4,458         3,940   

Defferred tax Assets related to Others

     24,932         24,471   

Deferred Tax Assets Total

     135,890         125,323   

As of the date of the present financial statement some of Arauco’s subsidiaries present tax losses of ThU.S.$343,311 (ThU.S.$260,701 as of December 31, 2010) which are mainly due to operational and financial losses.

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

Deferred Tax Liability

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

 

36


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

The following table details deferred tax liabilities:

 

Deferred Tax Liabilities

   12/31/2011
ThU.S.$
     12/31/2010
ThU.S.$
 

Deferred Tax Liabilities related to Revaluated Property, Plant and equipment

     747,450         686,408   

Deferred Tax Liabilities related to Financial Instrument restatement

     3,723         13,751   

Valuation of biological asset

     426,250         511,401   

Valuation of inventory

     14,509         12,450   

Valuation of prepaid expenses

     0         76,539   

Differences in valuation of deferred expenditures

     41,487         35,130   

Deferred Tax Liabilities related to Others (associates investments, unemployement insurance)

     22,814         33,810   
  

 

 

    

 

 

 

Deferred Tax Liabilities Total

     1,256,233         1,369,489   
  

 

 

    

 

 

 

The effect of deferred taxes related to financial hedging instruments corresponds to a credit (subscription) of ThU.S.$ 932 as of December 31, 2011 (ThU.S.$1,896 as of December 31, 2010), which is presented under Hedge reserves in the Statement of Changes in Net Equity.

From the deferred tax assets and deferred tax liabilities listed in the above tables, approximately ThU.S.$17,635 and ThU.S.$74,689 respectively, will be used in a period of 12 months.

Arauco does not offset deferred tax assets and deferred tax liabilities since there is no legal right to offset amounts recognized in these items that correspond to different fiscal jurisdictions.

Temporary Differences

The following tables summarize current asset and liability temporary differences:

 

     12/31/2011      12/31/2010  

Detail of classes of Deferred Tax Temporary Differences

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

Deferred Tax Assets

     64,020            68,599      

Tax Loss

     71,870            56,724      

Deferred Tax Liabilities

        1,256,233            1,369,489   

Total

     135,890         1,256,233         125,323         1,369,489   

 

Detail of Temporary Difference Income and Loss Amounts

   2011
ThU.S.$
    2010
ThU.S.$
 

Deferred Tax Assets

     (3,455     7,028   

Tax Loss

     29,389        1,846   

Deferred Tax Liabilities

     60,050        (100,189

Total

     85,984        (91,315

 

37


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Income Tax Expense (Income)

Income Tax consists of the following:

 

Income Tax composition

   2011
ThU.S.$
    2010
ThU.S.$
 

Current income tax expense

     (242,918     (112,840

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

     1,635        8,402   

Previous period current tax adjustments

     2,316        (581

Other current tax expenses

     484        (1,684

Current Tax Expense, Net

     (238,483     (106,703

Deferred expense from taxes relative to the creation and reversión of temporary differences

     45,617        (68,814

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

     10,632        (23,904

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

     29,735        1,403   

Total deferred Tax Expense, Net

     85,984        (91,315

Income Tax Expense, Total

     (152,499     (198,018

The following table details the income tax for foreign and national companies as of December 31, 2011, 2010 and 2009 respectively:

 

     2011
ThU.S.$
    2010
ThU.S.$
 

Foreign current tax

     (38,103     (52,567

National current tax

     (200,380     (54,136

Current tax, Total

     (238,483     (106,703

Foreign deferred tax

     27,085        17,718   

National deferred tax

     58,899        (109,033

Deferred tax, Total

     85,984        (91,315

Income (expense) due to Income Tax, Total

     (152,499     (198,018

Income Tax Expense Reconciliation using the Effective Rate method

Income tax expenditure reconciliation is as follows:

 

Reconciliation of Income tax from Statutory Rate to Effective Tax Rate

   2011
ThU.S.$
    2010
ThU.S.$
 

Tax Expense Using Statutory Rate

     (154,665     (152,790

Tax effect of rates in other jurisdictions

     (7,599     (24,714

Tax effect of non taxable ordinary income

     11,172        18,493   

Tax effect of non tax deductible expenses

     (19,976     (22,486

Tax effect of tax loses unrecognized for previous periods

     41        0   

Tax effect of tax rates changes

     10,632        (23,904

Tax effect of excess tax for previous periods

     2,316        (581

Other Increases (Decreases) Legal Taxes

     5,580        7,964   

Adjustment to Tax Expense using the Statutory Rate, Total

     2,166        (45,228

Tax Expenses Using the Effective Rate

     (152,499     (198,018

 

38


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

Properties, Plant and Equipment, Net

   12-31-2011
ThU.S.$
    12-31-2010
ThU.S.$
 

Construction in progress

     663,971        562,309   

Land

     805,804        821,288   

Buildings

     1,459,759        1,417,684   

Plant and equipment

     2,290,423        2,188,323   

Information technology equipment

     23,740        16,963   

Fixed facilities and accessories

     6,010        3,657   

Motorized vehicles

     10,152        10,057   

Others

     64,313        68,464   

Total Net

     5,324,172        5,088,745   

Properties, Plant and Equipment, Gross

    

Construction in progress

     663,971        562,309   

Land

     805,804        821,288   

Buildings

     2,616,914        2,523,397   

Plant and equipment

     4,321,846        4,180,142   

Information technology equipment

     55,772        43,614   

Fixed facilities and accessories

     23,942        17,339   

Motorized vehicles

     34,447        32,328   

Others

     87,983        110,076   

Total Gross

     8,610,679        8,290,493   

Accumulated depreciation and impairment

    

Buildings

     (1,157,155     (1,105,713

Plant and equipment

     (2,031,423     (1,991,819

Information technology equipment

     (32,032     (26,651

Fixed facilities and accessories

     (17,932     (13,682

Motorized vehicles

     (24,295     (22,271

Others

     (23,670     (41,612

Total

     (3,286,507     (3,201,748

 

39


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

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.

 

     12-31-2011
ThU.S.$
     12-31-2010
ThU.S.$
 

Collateral amount of property, plant and equipament

     56,279         56,272   

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

 

     12-31-2011
MUS$
     12-31-2010
MUS$
 

Amount committed for the acquisition of property, plant and equipment

     114,212         268,391   
     12-31-2011
MUS$
     12-31-2010
MUS$
 

Disbursements for property, plant and equipment under construction

     537,398         361,598   

 

40


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Movement on Property, Plant and Equipment

The following tables detail the movement of Property, Plant and Equipment as of December 31, 2011 and 2010:

 

Movement of Fixed Assets

  Construction
in progress
ThU.S.$
    Land
ThU.S.$
    Buildings
ThU.S.$
    Plant and
equipments
ThU.S.$
    IT
Equipment
ThU.S.$
    Fixed
Facilities
and
accesories
ThU.S.$
    Motorized
Vehicles
ThU.S.$
    Other
Property,
Plant and
Equipment
ThU.S.$
    TOTAL
ThU.S.$
 

Opening Balance 01/01/2011

    562,309        821,288        1,417,684        2,188,323        16,963        3,657        10,057        68,464        5,088,745   

Changes

                 

Additions

    537,398        5,549        5,281        16,747        276        750        1,288        4,184        571,473   

Acquiitions of business

    —          7,293        499        86        —          —          51        1        7,930   

Dispositions

    (1,213     (1,113     (203     (632     —          —          (39     (768     (3,968

Withdrawals

    (10,587     (871     (85     (2,789     (3     (2     (7     (5,352     (19,696

Depreciation costs

    —          —          (74,478     (171,646     (2,781     (1,463     (2,615     (1,458     (254,441

Net movement to replacement of assets damaged by the earthquake

    (61,209     —          7,232        76,432        63        (2     (242     7,497        29,771   

Impairment loss recognized in the Income Statement (note 17)

    —          —          (34     (4,064     —          —          —          (2,803     (6,901

Exchange rate increase (decrease) of foreign currency

    (15,227     (28,022     (10,686     (31,448     (88     (174     (53     (2,045     (87,743

Reclassification of assets held for sale

    —          (8     137        (1,127     —          —          —          —          (998

Transfers

    (347,500     1,688        114,412        220,541        9,310        3,244        1,712        (3,407     —     

Total changes

    101,662        (15,484     42,075        102,100        6,777        2,353        95        (4,151     235,427   

Closing balance 12/31/2011

    663,971        805,804        1,459,759        2,290,423        23,740        6,010        10,152        64,313        5,324,172   

 

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
accesories
ThU.S.$
    Motorized
Vehicles
ThU.S.$
    Other
Property,
Plant and
Equipment
ThU.S.$
    TOTAL
ThU.S.$
 

Opening Balance 01/01/2010

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

Changes

                 

Additions

    361,598        81,610        18,463        14,086        186        234        2,265        4,758        483,200   

Acquisitions of business

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

Disposals

    (142     (14,107     (3,499     (3,132     (3     (1     (215     (4,375     (25,474

Withdrawals

    (1,024     (6     (1,020     (4,315     (11     (39     (2     (408     (6,825

Depreciation costs

    —          —          (68,237     (160,894     (1,966     (810     (1,892     (1,708     (235,507

Impairment loss recognized in the Income Statement (note 17)

    —          —          (24,198     (110,408     (63     —          (102     (9,341     (144,112

Exchange rate increase (decrease) of foreign currency

    1,394        9,350        3,902        19,986        2        (1,395     64        824        34,127   

Reclassification of assets held for sale

    —          (5,003     (5,877     (3,228     —          —          —          —          (14,108

Transfers

    (233,002     4,834        140,445        86,351        640        461        134        137        —     

Total changes

    129,040        77,338        64,223        (140,134     (1,215     (1,550     266        (8,976     118,992   

Closing balance 12/31/2010

    562,309        821,288        1,417,684        2,188,323        16,963        3,657        10,057        68,464        5,088,745   

 

41


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

The depreciation charged to income as of December 31, 2011 and 2010 is as follows:

 

     January-December  

Depreciation for the year

   2011
ThU.S.$
     2010
ThU.S.$
 

Cost of sale

     216,967         187,208   

Administration expenses

     8,716         10,863   

Other operation expenses(*)

     3,156         33,952   

Total

     228,839         232,023   

 

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

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

 

          Minimum      Maximum      Average  

Buildings

   Useful Life in Years      16         89         39   

Plant and equipment

   Useful Life in Years      8         67         29   

Information technology equipment

   Useful Life in Years      6         18         5   

Fixed facilities and accesories

   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   

The following table is a sensitivity analysis for depreciation based on changes in useful life:

 

Useful life variance

   %  

5% +

     4.76

5% -

     -5.26

 

42


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

NOTE 8. LEASES

Leases

 

     12-31-2011
ThU.S.$
     12-31-2010
ThU.S.$
 

Property, Plant & Equipment Financial Leasing

     58         440   

Plant and equipament

     58         440   

Reconciliation of Financial Lease Minimum Payments:

 

     12-31-2011  

Minimum lease payments, lease payment oblogations

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

Due within one year

     47         1         46   

Due within one and five years

     —           —           —     

Due beyond five years

     —           —           —     

Total

     47         1         46   
     12-31-2010  
     Gross
ThU.S.$
     Interest
ThU.S.$
     Present
Value
ThU.S.$
 

Due within one year

     354         10         344   

Due within one and five years

     50         1         49   

Due beyond five years

     —           —           —     

Total

     404         11         393   

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

Lessor

Reconciliation of Financial Lease Minimum Payments:

 

     12-31-2011  

Minimum Financial Lease Payments Receivable, Financial Lease

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

Due within one year

     3,510         249         3,261   

Due within one and five years

     2,766         186         2,580   

Due beyond five years

     —           —           —     

Total

     6,276         435         5,841   
     12-31-2010  

Minimum Financial Lease Payments Receivable, Financial Lease

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

Due within one year

     4,767         450         4,317   

Due within one and five years

     5,957         358         5,599   

Due beyond five years

     —           —           —     

Total

     10,724         808         9,916   

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.

Arauco reports the value of its lease contracts under financial leasing. These contracts include leases of forestry machinery and equipment, for periods not exceeding five years and market interest rates. They also include an early termination option, according to general and special conditions established in each contract.

 

43


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

Arauco holds financial leases as a lessor and lessee detailed within the previous tables. There are no contingent payments or restrictions to note.

NOTE 9. ORDINARY REVENUE

 

     January - december  

Types of Ordinary Revenue

   2011
ThU.S.$
     2010
ThU.S.$
 

Sale of goods

     4,267,914         3,671,251   

Service Contracts

     106,581         96,133   

Total

     4,374,495         3,767,384   

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

 

     2011
ThU.S.$
     2010
ThU.S.$
 

Personnel Expenses

     341,260         295,399   

Wages and salaries

     329,158         280,158   

Compensation for years of service

     12,102         15,241   

The main actuarial assumptions used by Arauco in the calculation of the prevision of compensation for year services at December 31, 2011 and 2010 are:

 

Discount rate

   3.50%

Inflation

   3.00%

Mortality rate

   RV-2009

The following tables detail the balances and the movement of payments for years of service provisioned as of December 31, 2011 and 2010:

 

     12-31-2011
ThU.S.$
    12-31-2010
ThU.S.$
 

Current

     3,307        3,312   

Non-current

     36,102        35,964   

Total

     39,409        39,276   

Roll- forward

   12-31-2011
ThU.S.$
    12-31-2010
ThU.S.$
 

Opening balance

     39,276        27,667   

Current service cost

     1,668        1,851   

Interest cost

     2,553        1,798   

Actuarial gains

     6,274        11,256   

Benefits paid

     (6,837     (5,537

Increase (decrease) for currency exchange

     (3,525     2,241   

Closing balance

     39,409        39,276   

 

44


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

NOTE 11. EFFECT OF FOREIGN CURRENCY RATE VARIATIONS

Local and foreign currency

Currency assets and liabilities as of December 31, 2011 and 2010 are as follows:

 

     12-31-2011
ThU.S.$
     12-31-2010
ThU.S.$
 

Total Current Assets

     2,462,660         3,152,116   

Cash and Cash Equivalents

     315,901         1,043,834   

U.S Dollar

     196,546         513,303   

Euro

     58,328         73,573   

Real

     35,238         41,598   

Argentine pesos

     4,960         —     

Other currencies

     7,212         6,902   

$ not adjustable

     13,617         408,458   

Other Financial Assets, Current

     —           2,909   

U.S Dollar

     —           2,909   

Other current financial assets

     207,196         177,140   

U.S Dollar

     138,815         119,184   

Euro

     14         —     

Real

     23,319         9,104   

Argentine pesos

     10,553         11,426   

Other currencies

     12,500         15,023   

$ not adjustable

     21,995         22,403   

Trade and Other receivables-net

     740,416         774,289   

U.S Dollar

     500,790         528,657   

Euro

     25,800         31,651   

Real

     70,564         26,748   

Argentine pesos

     26,827         14,027   

Other currencies

     30,480         52,300   

$ not adjustable

     82,754         115,338   

U.F.

     3,201         5,568   

Related party receivables, Current

     70,179         18,074   

U.S Dollar

     69,356         12,657   

Real

     822         854   

$ not adjustable

     1         4,563   

Inventories

     795,104         727,535   

U.S Dollar

     677,337         614,509   

Real

     99,304         87,869   

$ not adjustable

     18,463         25,157   

Biological assets, current

     281,418         344,096   

U.S Dollar

     238,812         254,524   

Real

     42,606         89,572   

Tax receivables

     37,153         50,131   

U.S Dollar

     10,763         13,449   

Real

     6,745         9,156   

Argentine pesos

     7         —     

Other currencies

     11,199         10,113   

$ not adjustable

     1,811         7,668   

U.F.

     6,628         9,745   

Non-Current Assets or disposal groups classified as held for sale

     15,293         14,108   

U.S Dollar

     15,293         14,108   

 

45


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

     12-31-2011
MUS$
     12-31-2010
MUS$
 

Total Non Current Assets

     9,995,062         9,354,216   

Other non-current financial assets

     1,162         53,407   

U.S Dollar

     —           53,407   

Pesos Argentinos

     1,162         —     

Other non-current and non-financial assets

     99,901         52,352   

U.S Dollar

     78,046         43,873   

Real

     19,971         6,701   

Argentine pesos

     525         301   

Other currencies

     383         434   

$ not adjustable

     976         1,043   

Trade receivables, non current

     7,332         11,965   

U.S Dollar

     641         4,389   

Other currencies

     —           205   

$ not adjustable

     2,538         4,589   

U.F.

     4,153         2,782   

Investment in associates accounted for using equity method

     886,706         498,204   

U.S Dollar

     634,440         428,033   

Euro

     —           1,336   

Real

     252,266         68,835   

Intangible assets

     17,609         11,127   

U.S Dollar

     12,729         10,699   

Real

     4,751         269   

Other currencies

     26         28   

$ not adjustable

     103         131   

Goodwill

     59,124         66,231   

U.S Dollar

     2,857         2,857   

Real

     56,267         63,374   

Property, plant and equipment

     5,324,172         5,088,745   

U.S Dollar

     4,599,582         4,354,417   

Euro

     37         —     

Real

     715,486         728,492   

$ not adjustable

     9,067         5,836   

Biological assets, non-current

     3,463,166         3,446,862   

U.S Dollar

     3,060,006         3,038,042   

Real

     403,160         408,820   

Deferred tax assets

     135,890         125,323   

U.S Dollar

     77,179         72,512   

Real

     46,478         40,370   

Argentine pesos

     11,688         9,789   

Other currencies

     150         1,898   

$ not adjustable

     395         754   

 

46


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

     Up tp 90 days
ThU.S.$
     12-31-2011
Fron 91 days to
1 year

ThU.S.$
     Total
ThU.S.$
     Up tp 90 days
ThU.S.$
     12-31-2010
Fron 91 days to
1 year

ThU.S.$
     Total
ThU.S.$
 

Total Liabilities, current

     924,097         107,848         1,031,945         722,165         486,896         1,209,061   

Other financial liabilities, current

     157,944         91,048         248,992         109,051         445,622         554,673   

U.S Dollar

     143,129         74,523         217,652         95,871         440,318         536,189   

Real

     11,849         20         11,869         9,980         2,501         12,481   

U.F.

     2,966         16,505         19,471         3,200         2,803         6,003   

Bank Loans

     120,847         64,971         185,818         50,602         52,214         102,816   

U.S Dollar

     108,998         64,951         173,949         40,622         49,713         90,335   

Real

     11,849         20         11,869         9,980         2,501         12,481   

Financial Leases

     18         28         46         94         250         344   

U.F.

     18         28         46         94         250         344   

Other Loans

     37,079         26,049         63,128         58,355         393,158         451,513   

U.S Dollar

     34,131         9,572         43,703         55,249         390,605         445,854   

U.F.

     2,948         16,477         19,425         3,106         2,553         5,659   

Trade and Other payables

     389,902         7,171         397,073         342,805         19,377         362,182   

U.S Dollar

     73,583         412         73,995         71,273         2,335         73,608   

Euro

     43,392         —           43,392         5,648         —           5,648   

Real

     9,117         —           9,117         39,308         —           39,308   

Argentine pesos

     32,235         —           32,235         39,085         —           39,085   

Other currencies

     2,119         —           2,119         1,530         3,020         4,550   

$ not adjustable

     229,245         3,648         232,893         185,896         11,876         197,772   

U.F.

     211         3,111         3,322         65         2,146         2,211   

Related party payables

     9,785         —           9,785         9,209         —           9,209   

U.S Dollar

     9,751         —           9,751         —           —           —     

$ not adjustable

     34         —           34         9,209         —           9,209   

Other provisions, current

     8,607         —           8,607         —           5,842         5,842   

U.S Dollar

     8,565         —           8,565         —           —           —     

Argentine pesos

     42         —           42         —           5,842         5,842   

Tax liabilities

     143,008         1,981         144,989         62,223         664         62,887   

U.S Dollar

     139,838         1,571         141,409         20,139         —           20,139   

Euros

     78         —           78         —           —           —     

Real

     14         —           14         2,572         —           2,572   

Argentine pesos

     2,219         —           2,219         36,827         —           36,827   

Other currencies

     30         284         314         706         664         1,370   

$ not adjustable

     829         126         955         1,979         —           1,979   

Current provision for employee benefits

     2,976         331         3,307         2,643         669         3,312   

U.S Dollar

     —           —           —           —           206         206   

Other currencies

     —           —           —           —           34         34   

$ not adjustable

     2,976         123         3,099         2,643         429         3,072   

Other current non-financial liabilities

     211,875         7,317         219,192         196,234         14,722         210,956   

U.S Dollar

     160,505         5,652         166,157         176,395         2,407         178,802   

Real

     28,094         —           28,094         16,267         —           16,267   

Argentine pesos

     5,230         —           5,230         26         —           26   

Other currencies

     11,626         —           11,626         520         10,708         11,228   

$ not adjustable

     6,419         865         7,284         3,025         893         3,918   

U.F.

     1         800         801         1         714         715   

 

47


CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

December 31, 2011

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

 

 

     Up tp 90 days
ThU.S.$
     12-31-2011
Fron 91  days to
1 year

ThU.S.$
     Total
ThU.S.$
     Up tp 90 days
ThU.S.$
     12-31-2010
Fron 91  days to
1 year

ThU.S.$
     Total
ThU.S.$
 

Total non-current liabilities

     2,097,788         2,297,839         4,395,627         2,232,876         2,223,820         4,456,696   

Other non-current financial liabilities

     1,187,737         1,781,278         2,969,015         1,092,922         1,816,507         2,909,429   

U.S Dollar

     1,067,739         1,278,879         2,346,618         950,795         1,277,116         2,227,911   

Real

     6,462         690         7,152         6,188         3,578         9,766   

U.F.

     113,536         501,709         615,245         135,939         535,813         671,752   

Bank Loans

     406,754         769         407,523         290,815         3,925         294,740   

U.S Dollar

     400,292         79         400,371         284,627         347         284,974   

Real

     6,462         690         7,152         6,188         3,578         9,766   

Financial Leases

     —           —           —           49         —           49   

U.F.

     —           —           —           49         —           49   

Other Loans

     780,983         1,780,509         2,561,492         802,058         1,812,582         2,614,640   

U.S Dollar

     667,447         1,278,800         1,946,247         666,168         1,276,769         1,942,937   

U.F.

     113,536         501,709         615,245         135,890         535,813         671,703   

Other non-current provisions

     7,799         1,889         9,688