EX-99.1 2 d420885dex991.htm UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Unaudited consolidated financial statements
Table of Contents

Exhibit 99.1

ARAUCO AND CONSTITUTION PULP INC

TABLE OF CONTENTS

 

Item         Page  

1.

  

Ratio Analysis of the Consolidated Financial Statement

     1   

2.

  

Unaudited Consolidated Financial Statement

     7   

3.

  

Unaudited Consolidated Financial Income Statement

     9   

4.

  

Unaudited Consolidated Statement of Changes in Net Equity

     11   

5.

  

Unaudited Consolidated Statement of Cash Flow

     12   

6.

  

Unaudited Notes to the Consolidated Financial Statement

     13   

7.

  

Annex: Press Release

  


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

June 30, 2012

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 June 30, 2012 and December 31, 2011, are as follows:

 

Assets

   06-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Current assets

     2,582,675         2,462,660   

Non-current assets

     10,350,456         10,089,518   
  

 

 

    

 

 

 

Total assets

     12,933,131         12,552,178   
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

   06-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Current liabilities

     748,091         1,031,945   

Non-current liabilities

     5,186,162         4,490,083   

Non –parent participation

     79,459         90,543   

Net equity attributable to parent company

     6,919,419         6,939,607   
  

 

 

    

 

 

 

Total net equity and liabilities

     12,933,131         12,552,178   
  

 

 

    

 

 

 

As of June 30, 2012, total assets increased by 3.03% or U.S.$ 381 million compared to December 31, 2011. This increase is mainly attributable to an increase in the balance of Cash and cash equivalents, in Trade and other receivables, and Property, plant and equipment.

Moreover, liabilities increased by U.S.$ 412 million, mainly attributable to an increase in Financial Liabilities as a result of bonds issued in January and April 2012 of ThU.S.$ 733, offset by reductions in liabilities for payment of income tax and dividend payment in the month of May 2012.

The main financial and operating ratios are as follows:

 

Liquidity ratios

   06-30-2012      12-31-2011  

Current ratio

     3.45         2.39   

Acid ratio

     2.05         1.34   

Debt indicators

   06-30-2012      12-31-2011  

Debt to equity ratio

     0.85         0.79   

Short-term debt to total debt

     0.13         0.19   

Long-term debt to total debt

     0.87         0.81   
     06-30-2012      06-30-2011  

Financial expenses covered

     2.25         5.35   

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

June 30, 2012

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

 

 

ANALYSIS OF FINANCIAL POSITION, continued

 

a) Analysis of the Balance Sheet, continued

 

Operational ratios

   06-30-2012      12-31-2011  

Inventory turnover

     2.75         2.71   

Inventory turnover (excluding biological assets)

     3.65         3.82   

Inventory permanence-days

     130.92         132.95   

Inventory permanence (excluding biological assets)

     98.68         94.23   

The liquidity ratio and the acid ratio for the current period has increased this year compared to the period 2011. This is due to a major proportional increase in current assets compared to a proportional reduction in the variation of current liabilities, which in turn is explained by an increase in the Cash and cash equivalents in addition to a decrease of liabilities for income tax and dividend.

As of June 30, 2012, the short-term debt represented 13% of total liabilities compared to 19% as of December 2011.

The ratio of financial expenses covered decreased from 5.35 to 2.25 This drop is mainly attributable to a lower net income in 2012, compared to the same period of 2011.

 

b) Analysis of the Income Statement

Profit before Income Tax

Profit before Income Tax registered a profit of U.S.$ 129 million for the six-month period compared to U.S.$ 453 million the same period of the previous year, a decrease of U.S.$ 324 million. The change is explained by the factors described in the following table:

 

Item

   Million
U.S.$
 

Gross margin

     (269

Administrative expenses and Distribution costs

     (12

Other operating income

     (18

Other operating expenses

     (16

Other income

     16   

Difference of exchange

     (24

Others item

     (1
  

 

 

 

Net change in income before income tax

     (324
  

 

 

 

Gross Margin presents a profit of U.S.$ 585 million, a decrease of U.S.$ 269 million compared to the same period (U.S.$ 854 million) caused by a proportional increase in Cost of sales and a decrease in sales prices, despite the increase in sales volumes, mainly in the cellulose business.

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

June 30, 2012

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

   06-30-2012
ThU.S$
     06-30-2011
ThU.S$
 

Pulp

     982,283         1,133,045   

Sawn timber

     364,626         362,762   

Panels

     604,222         637,025   

Forestry

     79,690         78,381   

Other

     16,341         12,136   
  

 

 

    

 

 

 

Total revenues

     2,047,162         2,223,349   
  

 

 

    

 

 

 

 

Sales costs

   06-30-2012
ThU.S$
     06-30-2011
ThU.S$
 

Wood

     413,433         367,054   

Forestry work

     287,808         267,261   

Depreciation

     107,600         107,432   

Other costs

     653,116         624,719   
  

 

 

    

 

 

 

Total sales costs

     1,461,957         1,369,466   
  

 

 

    

 

 

 

 

Profitability index

   06-30-2012      12-31-2011  

Profitability on equity

     3.29         8.95   

Profitability on assets

     1.81         4.95   

Return on operating assets

     2.63         5.21   

 

Profitability ratios

   06-30-2012     06-30-2011  

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

     1.00        3.13   

EBITDA( MThU.S.$)

     420.3        692.7   

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

     115,514        359,599   

Gross margin (ThU.S.$)

     585,205        853,883   

Financial costs (ThU.S.$)

     (103,388     (104,095

 

(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.

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

June 30, 2012

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

 

 

3. MARKET SITUATION

Pulp Division

Pulp sales reached U.S.$ 507.6 million (including energy sales) for the second quarter of 2012, an increase of 7.0% compared to the previous quarter. This increase was mainly due to higher average prices and sales volume of 3.0% and 1.1% respectively.

When compared with the U.S.$ 612.7 million (including energy sales) reached in the same quarter of 2011, pulp sales decreased 17.1%. This decrease is mainly explained by lower average prices of 20.2%, partially offset by higher sales volume of 3.1%.

The moderate increase in prices of softwood and hardwood observed during the first quarter of 2012, changed during May and June. Excess of supply and less paper production in some regions pushed the market, downward, undermining the recovery experienced during the first quarter by the most representative markets. A difficult market with lower prices is generally expected during the Northen Hemisphere summer season. Paper production in general is lower during July and August, limiting the demand for pulp during the months of June and August. This seasonal effect occurred earlier than normal this year, and with a sharper decline when compared to the previous 3 years.

China was not the exception, aggressively pushing prices downward during May. Chinese paper producers faced less demand and were forced to decrease their production rates, stop production lines for certain periods of time and adjust “commodity” paper inventory levels. In specialty paper or tissue, the situation was better in terms of demand, however, pulp prices still decreased due to higher pulp supply. This higher pulp supply did not only occur because of less demand for commodity paper, but also because of an important pulp supply increase coming from Scandinavian countries that have not been able to sell its pulp production in Europe. This is the main reason why the most impacted grade was softwood. In long fiber, prices in China decreased nearly 10% and in short fiber 4%. This generally occurs in all Asian markets that follow China.

Europe has followed a similar trend, but there are additional factors that negatively impacted the European market, namely, an exchange rate favorable to Euro zone pulp producers and declining or stagnant demand in practically all paper grades, including tissue. Long fiber supply, main Scandinavian production, increased because integrated paper mills that stopped its paper production due to low demand and prices, continued its pulp production, offering these additional amounts in the market. For this reason long fiber pulp prices have been under pressure, leading to prices below those for short fiber, a situation not experienced in the last several years. Most part of short fiber is imported to the Euro zone, so there are no relevant short fiber producers with costs in Euros that leverage the Euro-US Dollar exchange rate as a sales tool.

In North America the printing and writing paper demand decreased, and production for specialty paper was replaced for imports, while tissue paper demand grows moderately. The market is stable but follows global price trends.

Latin America is the region with best prices and in the current situation the gap is above 10%, however, it is still a small market that may not shift much its volume.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

June 30, 2012

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

 

 

Normal production during the quarter. There was scheduled shutdowns for maintenance plant, plants Constitution and Licancel. In the case of plant constitution lasted a few days longer than scheduled and plant Valdivia had a small decline in June.

Sawn Timber Division

Compared to the U.S. $188.8 million sold during the first quarter of 2012, sawn timber sales decreased by 6.9% during the second quarter of the year, reaching sales of U.S. $175.8 million. This decrease was mainly due to lower average prices and volume sales of 5.1% and 1.9% respectively.

When compared with the same period of 2011, sawn timber and remanufactured wood products sales decreased by 5.3% or U.S.$ 9.9 million during the second quarter of 2012, mainly due to an decrease in average prices of 1.5% and lower sales volume of 3.8%.

The real estate and construction markets in the United Sates have shown a positive upward trend during the second quarter of 2012. In June, the housing starts index reached 760,000 units per year, that is, a 6.9% increase compared to May. Current construction levels, however, continue to be low when compared to the historical ten year average. During the second quarter of 2012 the sales price of moldings improved when compared to the first quarter of this year.

Panels Division

Panel’s sales (including energy sales and consolidation of Moncure) reached U.S.$ 299.7 million in the second quarter of this year, a decrease of 1.6% when compared to the U.S.$ 304.5 million obtained in the first quarter of 2012. Compared with the previous quarter, prices remained relatively stable with a decrease of 0.3%. Without considering volume sales of our new Moncure unit, sales volume decreased 5.5% mainly explained by lower sales of plywood as a result of the Nueva Aldea fire, and particleboard due to the Zarate mill stoppage in May.

Compared with the same quarter of 2011, sales were 12.9% lower. This decrease in sales can be explained by a 26.2% decrease in volume sales (without considering volume sales of Moncure) and a decrease of 1.5% on average prices. This is mainly explained by a decrease of 46.0% in plywood volume sales to end clients, respect to the same period of 2011, mainly caused by the Nueva Aldea fire in January.

On the other hand, our MDF moldings products had an increase of 14.3% in volume sales comparing with the first quarter of 2012, that is greatly explained by an increase in sales to the USA.

Particleboard panels sales volume had a decrease of 40.7% compared to the same period of 2011, mainly caused by operational issues at our Zarate mill in Argentina and the closure of our Curitiba mill in Brazil.

Hardboard panels sales volume stood at similar levels compared to the second quarter 2011. The strong demand for hardboard products was contrasted by a limited world supply, which is causing a price increase with respect to last year.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

June 30, 2012

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

 

 

4. ANALYSIS OF CASH FLOW

The main components of net cash flow in each period are as follows:

 

     06-30-2012
thU.S.$
    06-30-2011
thU.S.$
 

Positive (negative) Cash flow

    

Cash flow from operating activities

     193,994        347,069   

Cash flow from financing activities:

    

Loan and bond payments

     638,215        (18,678

Dividend payments

     (172,023     (196,354

Others

     109        819   

Cash flow from investment activities:

    

Purchase and sales of permanent investments (net)

     (90,808     (35,738

Incorporation and sale of property, plant and equipment

     (335,290     (261,756

Incorporation and sale of biological assets

     (47,623     (62,884

Loan to related companies

     (34,000     (91,630

Other

     2,084        (5,531
  

 

 

   

 

 

 

Net cash flow for the period

     154,658        (324,683
  

 

 

   

 

 

 

We had a positive operating cash flow of U.S.$ 194 million for the current period compared to U.S.$ 347 million for the same period last year. This decrease was mainly due to an increase in payments for income tax and an increase in payments to suppliers and employees, partially offset by the increase in collection from customers and in the collection of insurance payments.

Cash flow from financing activities had a positive balance of U.S.$ 466 million in the current period, compared to a negative balance of U.S.$ 214 million for the same period in 2011. This variation resulted from the issuance of bonds in the amount of U.S.$ 733 million during the current period.

The investment cash flow, at the end of the current period, decreased U.S.$ 506 million (U.S.$ 457 million in 2011), mainly due to an increase in capital contributions, and higher payments for acquisition of property, plant and equipment in 2012, partially offset by loan collections from related companies.

5. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of June 30, 2012, a ratio of fixed rate debt to total consolidated debt of approximately 89.5%, 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

June 30, 2012

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

 

CONSOLIDATED BALANCE SHEET

 

     Note    06-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Assets

        

Current Assets

        

Cash and cash equivalents

   4      470,835         315,901   

Other current non-financial assets

   25      227,990         207,196   

Trade and Other receivables -net

   23      762,057         740,416   

Related party receivables

   13      5,871         70,179   

Inventories

   3      807,810         795,104   

Biological assets, current

   20      242,326         281,418   

Tax receivables

        50,854         37,153   

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

        2,567,743         2,447,367   

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

   22      14,932         15,293   

Total Current Assets

        2,582,675         2,462,660   

Non-Current Assets

        

Other non-current financial assets

   23      42,828         25,812   

Other non-current and non-financial assets

   25      105,491         99,901   

Trade receivables, non current

   23      7,235         7,332   

Related party receivables, non current

   13      102,218         0   

Investment in associates accounted for using equity method

   15-16      959,149         886,706   

Intangible assets

   19      16,291         17,609   

Goodwill

        55,071         59,124   

Property, plant and equipment

   7      5,480,459         5,393,978   

Biological assets, non-current

   20      3,444,371         3,463,166   

Deferred tax assets

   6      137,343         135,890   

Total non-Current Assets

        10,350,456         10,089,518   

Total Assets

        12,933,131         12,552,178   

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

June 30, 2012

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

 

 

CONSOLIDATED BALANCE SHEET (continued)

 

     Note    06-30-2012
ThU.S.$
    12-31-2011
ThU.S.$
 

Equity and liabilities

       

Liabilities

       

Current Liabilities

       

Other current financial liabilities

   23      203,290        248,992   

Trade and other payables

   23      423,230        397,073   

Related party payables

   13      13,158        9,785   

Other provisions, current

   18      9,402        8,607   

Tax liabilities

        2,418        144,989   

Current provision for employee benefits

   10      3,542        3,307   

Other current non financial liabilities

   25      93,051        219,192   

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

        748,091        1,031,945   

Total Current Liabilities

        748,091        1,031,945   

Non-Current Liabilities

       

Other non-current financial liabilities

   23      3,763,739        3,063,471   

Other non - current provisions

   18      11,610        9,688   

Deferred tax liabilities

   6      1,262,621        1,256,233   

Non-current provision for employee benefits

   10      38,779        36,102   

Other non - current non financial liabilities

   25      109,413        124,589   

Total non - current liabilities

        5,186,162        4,490,083   

Total liabilities

        5,934,253        5,522,028   

Net Equity

       

Issued capital stock

        353,176        353,176   

Accumulated earnings

        6,756,264        6,683,252   

Other reserves

        (190,021     (96,821

Net equity attributable to parent company

        6,919,419        6,939,607   

Non-controlling interest

        79,459        90,543   

Total net equity

        6,998,878        7,030,150   

Total net equity and liabilities

        12,933,131        12,552,178   

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

June 30, 2012

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

 

 

 

CONSOLIDATED STATEMENTS OF INCOME

 

          January-June     April-June  
     Nota    2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Income Statement

           

Revenue

   9      2,047,162        2,223,349        1,036,733        1,181,628   

Cost of sales

        (1,461,957     (1,369,466     (737,371     (731,792

Gross Income

        585,205        853,883        299,362        449,836   

Other operating income

   2      119,432        137,524        58,444        72,949   

Distribution costs

   2      (213,925     (231,126     (108,628     (118,633

Administrative expenses

   2      (221,516     (192,815     (118,693     (107,778

Other operating expenses

   2      (47,299     (30,906     (13,162     (18,496

Other income (Loss)

   14      16,263        0        16,263        0   

Profitability (Loss Statement) from operating activities

        238,160        536,560        133,586        277,878   

Financial income

        8,900        11,406        4,366        4,120   

Financial costs

   2      (103,388     (104,095     (45,306     (52,520

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

   15      (8,577     (8,277     (8,148     (4,381

Exchange rate differences

        (6,170     17,656        (16,963     4,490   

Income before income tax

        128,925        453,250        67,535        229,587   

Income Tax

   6      (13,411     (93,651     (4,083     (46,491

Income from continuing operations

        115,514        359,599        63,452        183,096   

Net Income

        115,514        359,599        63,452        183,096   

Income attributable to equity holders

           

Income attributable to parent company

        113,566        354,065        62,141        181,578   

Income attributable to non-parent company

        1,948        5,534        1,311        1,518   

Net Income

        115,514        359,599        63,452        183,096   

Basic earnings per share

           

Earnings per share from continuing operations

        0.0010037        0.0031291        0.0005492        0.0016047   
     

 

 

   

 

 

   

 

 

   

 

 

 
        0.0027608        0.0062582        0.0005492        0.0016047   
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per diluted shares

           

Earnings per diluted share from continuing operations

        0.0010037        0.0031291        0.0005492        0.0016047   
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per diluted share

        0.0010037        0.0031291        0.0005492        0.0016047   
     

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

June 30, 2012

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

 

 

 

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

 

          January-June     April-June  
     Nota    2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Net Income

        115,514        359,599        63,452        183,096   

Other comprehensive income, net of tax

           

Exchange difference on conversion

           

Gain (loss) for exchange differences, before tax

   11      (91,637     73,162        (130,111     48,827   

Cash flow hedges

           

Gain (loss) for cash flow hedges, before tax

   23      (6,302     (4,183     (4,215     110   

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

        200        (334     (2,861     380   

Other comprehensive income, net of tax

        (97,739     68,645        (137,187     49,317   

Income tax related to Cash flow hedges on Other comprehensive income

   6-23      1,522        1,043        424        588   

Other comprehensive income

        (96,217     69,688        (136,763     49,905   

Total comprehensive income

        19,297        429,287        (73,311     233,001   

Comprehensive Income Statement attributable to

           

Comprehensive income statement attributable to parent company

        20,366        420,405        (70,331     229,274   

Comprehensive income statement attributable to non-controlling interest

        (1,069     8,882        (2,980     3,727   

Total comprehensive income

        19,297        429,287        (73,311     233,001   

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

June 30, 2012

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

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

06-30-2012

  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 01/01/2012

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

Comprehensive income statement

                 

Net income

              113,566        113,566        1,948        115,514   

Other comprehensive income, net of tax

      (88,620     (4,780     200        (93,200       (93,200     (3,017     (96,217

Comprehensive income

      (88,620     (4,780     200        (93,200     113,566        20,366        (1,069     19,297   

Dividends

              (40,554     (40,554     0        (40,554

Increase (decrease) for transfer and other changes

                0        (10,015     (10,015

Total Changes in equity

    0        (88,620     (4,780     200        (93,200     73,012        (20,188     (11,084     (31,272

Closing balance at 06/30/2012

    353,176        (156,159     (30,694     (3,168     (190,021     6,756,264        6,919,419        79,459        6,998,878   

06/30/2011

  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

              354,065        354,065        5,534        359,599   

Other comprehensive income, net of tax

      69,814        (3,140     (334     66,340          66,340        3,348        69,688   

Comprehensive income

      69,814        (3,140     (334     66,340        354,065        420,405        8,882        429,287   

Dividends

            0        (141,401     (141,401     0        (141,401

Increase (decrease) for transfer and other changes

            0          0        (12,351     (12,351

Total Changes in equity

    0        69,814        (3,140     (334     66,340        212,664        279,004        (3,469     275,535   

Closing balance at 06/30/2011

    353,176        142,513        (17,219     (200     125,094        6,532,928        7,011,198        104,912        7,116,110   

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS-DIRECT METHOD

 

     06-30-2012
ThU.S.$
    06-30-2011
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

     2,353,193        2,274,344   

Receipts from premiums and claims, annuities and other policy benefits

     52,182        2,048   

Other cash receipts from operating activities

     147,415        126,606   

Classes of cash payments

    

Payments to suppliers for goods and services

     (1,931,041     (1,743,628

Payments to and behalf of employees

     (170,426     (152,130

Other cash payments from operating activities

     (9,489     (3,878

Dividends received

     2,128        1,753   

Interest paid

     (78,302     (92,230

Interest received

     5,045        9,146   

Income taxes refund (paid)

     (176,435     (74,623

Other (outflows) inflows of cash, net

     (276     (339

Net Cash flows from Operating Activities

     193,994        347,069   

Cash Flows from (used in) Investment Activities

    

Cash flow used in obtaining control of subsidiaries or other businesses

     (822     0   

Cash flow used to contributions in associates

     (13,490     (779

Other cash receipts from sales of participations in joint ventures

     6,607        0   

Capital contributions to joint ventures

     (83,103     (34,959

Loans to related parties

     (43,500     (91,630

Proceeds from sale of property, plant and equipment

     5,566        7,326   

Purchase of property, plant and equipment

     (340,856     (269,082

Proceeds from sales of Intangible Assets

     3,250        0   

Purchase of intangible assets

     (1,176     (6,639

Proceeds from other long-term assets

     1,450        3,073   

Purchase of biological assets

     (49,073     (65,957

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

     9,500        0   

Other outflows of cash, net

     10        1,108   

Cash flows used in Investment Activities

     (505,637     (457,539

Cash flows from (used in) Financing Activities

    

Loans obtained in long term

     1,029,567        62,622   

Proceeds from short-term borrowings

     725,920        0   

Total Loans obtained

     303,647        62,622   

Payments of Financial Lease liabilities

     (391,352     (81,300

Dividends paid by subsidiaries or special purpose companies

     (172,023     (196,354

Other inflows of cash, net

     109        819   

Cash flows from (used in) Financing Activities

     466,301        (214,213

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

     154,658        (324,683

Effect of exchange rate changes on cash and cash equivalents

     276        2,067   

Net increase (decrease) of Cash and Cash equivalents

     154,934        (322,616

Cash and cash equivalents, at the beginning of the period

     315,901        1,043,834   

Cash and cash equivalents, at the end of the period

     470,835        721,218   

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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 Interim Financial Statements were prepared on a going concern basis.

Presentation of Financial Statements

The Financial Statements presented by Arauco as of June 30, 2012 are:

 

   

Consolidated Balance Sheet as of June 30, 2012 and December 31, 2011.

 

   

Consolidated Statements of Income for the period ended 2012 and 2011.

 

   

Consolidated Comprehensive Income Statements for the period ended 2012 and 2011.

 

   

Consolidated Statements of Changes in Net Equity for the period ended 2012 and 2011.

 

   

Consolidated Statements of Cash Flows – Direct Method for the period ended 2012 and 2011.

 

   

Disclosure of Explanatory Information (notes).

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

Date of Approval of Financial Statements

The issuance of these consolidated interim financial statements for the period from January 1 to June 30, 2012, was approved by the Board of Directors of the Company (the “Board”) in Extraordinary Session N° 474 of August 28, 2012.

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 interim 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

Summary of significant accounting policies

The accompanying consolidated interim financial statements as of June 30, 2012 were prepared in accordance with Arauco’s accounting policies, uniformly applied to all items in these consolidated interim financial statements.

 

a) Basis for Presentation of financial statements

The actual Consolidated interim 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 interim 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.

 

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 business acquisition, management prepares avaluation of the acquired fixed assets and their useful lives 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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 interim 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 interim financial statements for the periods from January 1 to June 30, 2012 and 2011, 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).

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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 qualifying 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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.

The fair value of forward contracts of rates is calculated referring to the differential rate between the agreed rate and the market rate at the closing date.

(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.

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 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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

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. This method, sets that the acquisition cost is the fair value of assets delivered, the equity instruments issued and liabilities incurred or committed at the date of exchange, plus all direct costs attributable to the acquisition. Identifiable acquired assets and liabilities as well as the contingencies committed to in business combinations are initially recognized at fair value at the date of acquisition, despite minority interest scope. Excess of acquisition cost over the Fair Value of the Company’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than Fair Value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

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 it generates income that would reverse the negative equity previously generated due to the losses. Otherwise, a liability is not recognized but the value of the investment is left at zero.

 

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.

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

(i) Computer Software

Computer software licenses are capitalized in terms of the costs incurred to acquire them and make them compatible with existing software. 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 Arauco do Brasil S.A. 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 costs associated with repairs and maintenance are charged to the income statement for the period in which the costs are incurred.

Arauco capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of adequate assets as part of the cost of those assets (see Note 12).

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.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

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.

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 is 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.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

r) Provisions

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

 

s) Revenue recognition

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

(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 interim financial statements.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

t) Minimum dividend

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

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

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 paid 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.

For the purposes of assessing impairment losses, assets are grouped at the level lowest for which there are identifiable cash flows separately for each unit generating cash. Non-financial assets, other than goodwill, which had suffered an impairment are reviewed at each balance sheet date if have occurred possible reversal of the loss.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

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

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

Financial Assets

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

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

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

 

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.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

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

The following accounting pronouncements were effective as of January 1, 2012:

 

Amendments and improvements

  

Contents

  

Obligatory application for
years beginning after

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
IFRS 7   

Disclosures of Financial Instruments

 

Issued in October 2010, increases the disclosure requirements for transactions involving transfers of financial assets.

   July 01, 2011
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

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

At the date of issuance of these consolidated financial statements, the following accounting pronouncements were issued by the IASB, but are not mandatory:

 

Standards and interpretations

  

Content

  

Obligatory application for
years beginning after

IAS 19 revised    Employee Benefit    January 01, 2013
   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.   
IAS 27    Separate Financial Statements    January 01, 2013
   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.   
IFRS 9    Financial Instruments    January 01, 2015
   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.   
IFRS 10    Consolidated Financial Statements    January 01, 2013
   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.   
IFRS 11    Joint Arrangements    January 01, 2013
   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.   
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    January 01, 2013
   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.   
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

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

Amendments and improvements

  

Contents

  

Obligatory application for
years beginning after

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
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
IAS 32   

Offsetting of financial assets and liabilities

 

This clarifies the requirements for offsetting financial assets and financial liabilities in order to eliminate inconsistencies in the implementation of the current offsetting criteria of IAS 32. The Standard is applicable as from January 1, 2014 and early adoption is permitted.

   January 01, 2014

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

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

NOTE 2. DISCLOSURE OF OTHER INFORMATION

 

a) Disclosure of Information on Capital Issued

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

100% of capital corresponds to ordinary shares.

 

    

06/30/2012

  

12/31/2011

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
    

06/30/2012

  

12/31/2011

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.$40,554 (ThU.S.$141,401 as of June 30, 2011) presented in Consolidated Statement of Changes in Net Equity corresponds to the provision of minimum dividend registered corresponding to the 2012 period.

In the Statements of cash flows, the line “Dividends paid by the parent company” reflects the amount of ThU.S.$172,023 as of June 30, 2012, (ThU.S.$196,354 as of June 30, 2011) Of which ThU.S.$161,568 (ThU.S.$182,770 as of June 30, 2011) correspond to dividends paid to the Parent Company.

As of June 30, 2012, there has been no payment of dividends.

The following are the dividends paid during the 2012 period and in the year 2011, 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

   05-09-2012

Amount of Dividend

   ThU.S.$ 161,568

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share, Ordinary Share

   U.S.$1,42788

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share, Ordinary Share

   U.S.$ 1.61525

 

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.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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, Financial Income, Financing Costs and Participation in income (loss) of associates and joint venture as of June 30, 2012 and 2011:

 

     January - June     April - June  
     2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Classes of Other Income by activity

        

Other Operating Income, Total

     119,432        137,524        58,444        72,949   

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

     77,430        114,969        33,540        57,785   

Net income from insurance compensation

     17,122        —          17,122        —     

Revenue from export promotion

     1,409        3,232        663        1,651   

Insurance compensation, net of earthquake related losses (*)

     —          1,920        —          1,512   

Leases received

     1,657        1,695        900        884   

Gain on sales of assets

     8,016        3,242        2,142        2,921   

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

     13,798        12,466        4,077        8,196   

Classes of Other Expenses by activity

        

Total of other expenses by activity

     (47,299     (30,906     (13,162     (18,496

Depreciations

     (310     (498     (154     (347

Contingent provision

     (2,220     (2,977     (1,275     (2,137

plants stopped operating expenses

     (12,675     (3,804     (1,620     (2,849

Expenses projects

     (8,828     —          (4,642     —     

Loss of assets

     (400     —          5,306        —     

Loss of forest due to fires

     (2,742     (3,745     (524     (189

Other Taxes

     (2,474     (2,374     (1,208     (1,278

Research and development expenses

     (1,044     (1,588     (130     (924

Compensation and eviction

     (3,580     (1,816     (2,510     (1,213

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

     (13,026     (14,104     (6,405     (9,559

Classes of financing income

        

Financing income, total

     8,900        11,406        4,366        4,120   

Financial income from mutual funds - deposits

     4,721        9,371        2,026        4,099   

Financial income resulting from swap - forward

     2,452        952        1,715        (661

Other financial income

     1,727        1,083        625        682   

Classes of financing costs

        

Financing costs, Total

     (103,388     (104,095     (45,306     (52,520

Interest expense, Loans banks

     (6,036     (4,313     (3,250     (2,225

Interest expense, Bonds

     (79,694     (87,415     (38,573     (45,212

Interest expense, financial instruments

     (7,822     (6,340     2,932        (2,155

Other financial costs

     (9,836     (6,027     (6,415     (2,928

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

        

Total

     (8,577     (8,277     (8,148     (4,381

Investments in associates

     9,722        (940     8,629        (1,109

Joint ventures

     (18,299     (7,337     (16,777     (3,272

 

(*) Corresponds to the income from indemnity insurance net costs of impairment write offs and operational costs of affected plants.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

Below is the Balance of Expenses by nature:

 

     January - June      April - June  

Cost of sales

   2012
ThU.S.$
    2011
ThU.S.$
     2012
ThU.S.$
    2011
ThU.S.$
 

Timber

     413,433        367,054         193,986        179,190   

Forestry labor costs

     287,808        270,261         146,291        143,957   

Depreciation

     107,600        107,432         54,169        55,439   

Maintenance costs

     96,914        107,385         53,041        55,854   

Chemical costs

     168,440        154,633         91,747        80,077   

Sawmill Services

     95,010        84,842         49,085        41,905   

Others Raw Materials

     87,060        99,841         52,004        73,266   

Indirect costs

     66,323        46,156         22,367        25,588   

Energy and fuel

     67,290        64,476         36,285        38,622   

Cost of electricity

     29,625        31,159         16,517        15,200   

Port Costs

     716        534         700        347   

Wage and salaries

     41,737        35,693         21,178        22,347   

Total

     1,461,957        1,369,466         737,371        731,792   
     January - June      April - June  

Distribution expenses

   2012
ThU.S.$
    2011
ThU.S.$
     2012
ThU.S.$
    2011
ThU.S.$
 

Sale costs

     13,506        17,668         5,695        7,062   

Commissions

     7,167        7,873         3,521        4,389   

Insurances

     2,002        1,648         979        888   

Doubtful assets

     (554     616         (559     (18

Other sales expenses

     4,891        7,531         1,754        1,803   

Shipping and freight costs

     200,419        213,458         102,933        111,571   

Port services

     13,905        13,869         6,930        7,069   

Freights

     179,705        188,327         93,595        98,591   

Other shipping and freight costs

     6,809        11,262         2,408        5,911   

Total

     213,925        231,126         108,628        118,633   
     January - June      April - June  

Administration expenses

   2012
ThU.S.$
    2011
ThU.S.$
     2012
ThU.S.$
    2011
ThU.S.$
 

Wage and salaries

     90,131        77,883         48,507        41,941   

Marketing, advertising, promotion and publications expenses

     3,089        2,820         1,349        1,318   

Insurances

     13,948        7,072         7,706        4,875   

Depreciations and amortizacion not paid

     6,522        4,739         3,838        2,407   

Computer services

     4,742        6,342         1,662        2,700   

Office, warehouse and machinery leases

     7,465        5,778         4,760        3,243   

External audits

     2,938        1,527         1,879        742   

Donations, contributions, grants

     6,201        5,448         4,137        3,625   

Fees (advices technical. Legal …)

     35,058        31,964         20,800        18,548   

Property taxes, patents and municipal rights

     7,617        9,010         4,987        5,678   

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

     43,805        40,232         19,068        22,701   

Total

     221,516        192,815         118,693        107,778   

 

          January-June      April-June  

Expenses for

   Note    2012
ThU.S.$
     2011
ThU.S.$
     2012
ThU.S.$
     2011
ThU.S.$
 

Depreciations

   7      114,706         113,992         57,511         57,279   

Employee benefits

   10      177,775         158,138         84,329         80,175   

Amortization

   19      995         627         624         291   

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

NOTE 3. INVENTORIES

 

Components of Inventory

   06/30/2012
ThU.S.$
     12/31/2011
ThU.S.$
 

Raw Materials

     84,919         90,587   

Production Supplies

     76,182         74,658   

Work in progress

     68,382         58,594   

Finished goods

     446,151         446,289   

Parts

     131,314         123,071   

Other Inventories

     862         1,905   

Total Inventories

     807,810         795,104   

As of June 30, 2012, a cost of sales of inventories amounted to ThU.S.$ 1,465,208 (ThU.S.$ 1,374,583 as of June 30, 2011).

In order to allow the registered inventories to net realizable value, at June 30, 2012, a reduction of inventories has been recognized, related to allowance of obsolescence as of ThU.S.$611 (ThU.S.$ 2,957 as of December 31, 2011) and impaired inventories of ThU.S.$20,244 (ThU.S.$ 315 as of December 31, 2011). This reduction of inventory is mainly a result of the fire on Panels division that occurred in January 2012 in the forestry and industrial complex Nueva Aldea.

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.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

     06/30/2012      12/31/2011  

Components of Cash and Cash Equivalents

   ThU.S.$      ThU.S.$  

Cash on hand

     3,868         527   

Banks

     39,783         31,097   

Short term deposit

     279,012         128,526   

Mutual Funds

     145,780         155,751   

Other cash and cash equivalents (*)

     2,392         —     

Total

     470,835         315,901   

 

(*) Corresponding to contracts of purchase with sellback agreements

The following tables detail the value of the cost of assets and liabilities acquired by Arauco Panels USA LLC. Dated on January 24, 2012 and the investments in Greenagro S.A. dated on December 20, 2011. (see Note 14).

 

2012

Purchase of assets

   ThU.S.$  

Adquisition on Arauco Panels USA LLC.

  

Cash paid for acquisitions and cash equivalents

     62,711   

Cash and cash equivalents held by acquired entities

     0   

Net cash paid to acquire entities

     62,711   
  

 

 

 

Net Assets less Cash and Cash equivalents of acquired entity

     78,974   
  

 

 

 

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   
  

 

 

 

 

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 June 30, 2012 and applied uniformly to all periods presented in these consolidated interim financial statements.

Changes in the Treatment of Accounting Policy

The financial statements as of June 30, 2012 do not show changes in accounting policies compared to the same period last year.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

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 No. 20,455 for national reconstruction financing was published in the Chilean Official Gazette (Diario Oficial de Chile). One of the most important changes was the increase in First Category Taxes for revenues received and /or accrued during commercial years 2011 and 2012, which increased rates of 20% and 18.5%, respectively.

For the fiscal year 2010, 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:

 

     06/30/2012      12/31/2011  

Deferred Tax Assets

   ThU.S.$      ThU.S.$  

Deferred Tax Assets related to Provisions

     3,953         7,878   

Deferred Tax Assets related to accrued liabilities

     4,778         4,766   

Deferred Tax Assets related to Post-Employment obligations

     7,117         6,625   

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

     1,999         1,721   

Deferred Tax Assets related to Financial Instruments Restatements

     1,340         789   

Deferred Tax Assets related to tax losses

     76,230         71,870   

Valuation of biological assets

     3,433         5,244   

Valuation of inventory

     3,826         3,543   

Income provisions

     4,343         4,064   

Trade debtors and receivables

     4,014         4,458   

Deferred tax Assets related to Others

     26,310         24,932   

Deferred Tax Assets Total

     137,343         135,890   

As of the date of the present financial statement, some of Arauco’s subsidiaries present tax losses of ThU.S.$ 345,087 (ThU.S.$ 343,311 as of December 31, 2011) 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.

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

Deferred Tax Liability

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

The following table details deferred tax liabilities:

 

     06/30/2012      12/31/2011  

Deferred Tax Liabilities

   ThU.S.$      ThU.S.$  

Deferred Tax Liabilities related to Revaluated Property, Plant and equipment

     729,826         747,450   

Deferred Tax Liabilities related to Financial Instrument restatement

     9,804         3,723   

Valuation of biological asset

     423,691         426,250   

Valuation of inventory

     14,789         14,509   

Valuation of prepaid expenses

     10,512         —     

Differences in valuation of deferred expenditures

     47,096         41,487   

Deferred Tax Liabilities related to Others (goodwill, investment affiliates, unemployment insurance)

     26,903         22,814   
  

 

 

    

 

 

 

Deferred Tax Liabilities Total

     1,262,621         1,256,233   
  

 

 

    

 

 

 

The effect of deferred taxes related to financial hedging instruments corresponds to a payment of ThU.S.$ 1,522 as of June 30, 2012 (payment of ThU.S.$ 1,043 as of June 30, 2011), 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.$ 17,071 and ThU.S.$ 108,344 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:

 

    06/30/2012     12/31/2011  
    Deductible     Taxable     Deductible     Taxable  

Detail of classes of Deferred Tax Temporary Differences

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

Deferred Tax Assets

    61,113          64,020     

Tax Loss

    76,230          71,870     

Deferred Tax Liabilities

      1,262,621          1,256,233   

Total

    137,343        1,262,621        135,890        1,256,233   
    January - June     April - June  

Detail of Temporary Difference Income and Loss Amounts

  2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Deferred Tax Assets

    (3,224     (12,305     (1,259     (2,964

Tax Loss

    9,473        12,250        1,704        519   

Deferred Tax Liabilities

    (6,871     (1,544     4,590        9,717   

Total

    (622     (1,599     5,035        7,272   

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

Income Tax consists of the following:

 

     January - June     April - June  

Income Tax composition

   2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Current income tax expense

     (14,288     (94,871     (4,200     (55,712

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

     912        53        (5,328     53   

Previous period current tax adjustments

     621        2,316        409        1,367   

Other current tax expenses

     (34     450        1        529   

Current Tax Expense, Net

     (12,789     (92,052     (9,118     (53,763

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

     (18,207     (19,110     (3,617     3,497   

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

     841        5,261        755        3,256   

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

     9,640        12,250        1,697        519   

Other current tax expenses

     7,104        —          6,200        —     

Total deferred Tax Expense, Net

     (622     (1,599     5,035        7,272   

Income Tax Expense, Total

     (13,411     (93,651     (4,083     (46,491

The following table details the income tax for foreign and national companies as of June 30, 2012 and 2011:

 

     January - June     April - June  
     2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Foreign current tax

     (1,851     (28,414     (295     (15,435

National current tax

     (10,938     (63,638     (8,823     (38,328

Current tax, Total

     (12,789     (92,052     (9,118     (53,763

Foreign deferred tax

     12,189        9,002        5,590        6,427   

National deferred tax

     (12,811     (10,601     (555     845   

Deferred tax, Total

     (622     (1,599     5,035        7,272   

Income (expense) due to Income Tax, Total

     (13,411     (93,651     (4,083     (46,491

Income Tax Expense Reconciliation using the Effective Rate method

Income tax expenditure reconciliation is as follows:

 

     January - June     April - June  

Reconciliation of Income tax from Statutory Rate to Effective Tax Rate

   2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Tax Expense Using Statutory Rate

     (23,851     (90,650     (12,411     (45,917

Tax effect of rates in other jurisdictions

     48        (6,172     (558     (695

Tax effect of non taxable ordinary income

     9,674        6,649        6,985        2,267   

Tax effect of non tax deductible expenses

     (7,808     (8,090     391        84   

Tax effect of tax loses unrecognized for previous periods

     679        (314     (1,075     (1,048

Tax effect of tax rates changes

     841        5,234        755        2,723   

Tax effect of excess tax for previous periods

     621        2,316        409        1,367   

Other Increases (Decreases) Legal Taxes

     6,385        (2,624     1,421        (5,272

Adjustment to Tax Expense using the Statutory Rate, Total

     10,440        (3,001     8,328        (574

Tax Expenses Using the Effective Rate

     (13,411     (93,651     (4,083     (46,491

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

     06/30/2012     12/31/2011  

Properties, Plant and Equipment, Net

   ThU.S.$     ThU.S.$  

Construction in progress

     829,942        663,971   

Land

     790,995        805,804   

Buildings

     1,445,496        1,459,759   

Plant and equipment

     2,312,208        2,360,229   

Information technology equipment

     25,610        23,740   

Fixed facilities and accessories

     5,651        6,010   

Motorized vehicles

     9,149        10,152   

Others

     61,408        64,313   

Total Net

     5,480,459        5,393,978   

Properties, Plant and Equipment, Gross

    

Construction in progress

     829,942        663,971   

Land

     790,995        805,804   

Buildings

     2,632,086        2,616,914   

Plant and equipment

     4,378,895        4,391,652   

Information technology equipment

     58,417        55,772   

Fixed facilities and accessories

     23,728        23,942   

Motorized vehicles

     34,116        34,447   

Others

     85,084        87,983   

Total Gross

     8,833,263        8,680,485   

Accumulated depreciation and impairment

    

Buildings

     (1,186,590     (1,157,155

Plant and equipment

     (2,066,687     (2,031,423

Information technology equipment

     (32,807     (32,032

Fixed facilities and accessories

     (18,077     (17,932

Motorized vehicles

     (24,967     (24,295

Others

     (23,676     (23,670

Total

     (3,352,804     (3,286,507

 

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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.

 

     06/30/2012      12/31/2011  
     ThU.S.$      ThU.S.$  

Collateral amount of property, plant and equipment

     35,960         56,279   

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

 

     06-30-2012      12-31-2011  
     ThU.S.$      ThU.S.$  

Amount committed for the acquisition of property, plant and equipment

     18,039         114,212   
     06-30-2012      12-31-2011  
     ThU.S.$      ThU.S.$  

Disbursements for property, plant and equipment under construction

     245,175         537,398   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

Movement on Property, Plant and Equipment

The following tables detail the movement of Property, Plant and Equipment as of June 30, 2012 and December 31, 2011:

 

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 01/01/2012

    663,971        805,804        1,459,759        2,360,229        23,740        6,010        10,152        64,313        5,393,978   

Changes

                 

Additions

    245,175        1,387        7,537        6,857        536        87        986        2,593        265,158   

Acquisitions of business

    —          98        18,404        64,338        —          —          —          —          82,840   

disposals

    (25     (324     (12     (6,517     (8     (10     (54     —          (6,950

Withdrawals

    (3     (19     (149     (297     (10     —          (12     (4,782     (5,272

Depreciation costs

    —          —          (38,332     (87,485     (1,371     (716     (1,542     (141     (129,587

Provision Impairment

    (6,942     —          (19,206     (42,674     (91     (74     (818     —          (69,805

Exchange rate increase (decrease) of foreign currency

    (9,803     (15,951     (2,990     (19,743     7        (326     112        (1,209     (49,903

Transfers work in progress closed

    (62,431     —          20,485        37,500        2,807        680        325        634        —     

Total changes

    165,971        (14,809     (14,263     (48,021     1,870        (359     (1,003     (2,905     86,481   

Closing balance 06/30/2012

    829,942        790,995        1,445,496        2,312,208        25,610        5,651        9,149        61,408        5,480,459   

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        2,227,197        16,963        3,657        10,057        68,464        5,127,619   

Changes

                 

Additions

    537,398        5,549        5,281        47,679        276        750        1,288        4,184        602,405   

Acquisitions of business

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

disposals

    (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 of earthquake assets

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

Provision Impairment

    —          —          (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 work in progress closed

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

Total changes

    101,662        (15,484     42,075        133,032        6,777        2,353        95        (4,151     266,359   

Closing balance 12/31/2011

    663,971        805,804        1,459,759        2,360,229        23,740        6,010        10,152        64,313        5,393,978   

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

The depreciation charged to income as of June 30, 2012 and 2011 is as follows:

 

     January-June      April-June  
     2012      2011      2012      2011  

Depreciation for the period

   ThU.S.$      ThU.S.$      ThU.S.$      ThU.S.$  

Cost of sale

     107,600         107,432         54,169         54,846   

Administration expenses

     4,400         4,082         2,089         2,086   

Other operation expenses

     2,706         2,478         1,253         347   

Total

     114,706         113,992         57,511         57,279   

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

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

NOTE 8. LEASES

Leases

 

     06-30-2012      12-31-2011  
     ThU.S.$      ThU.S.$  

Property, Plant & Equipment Financial Leasing

     65,941         69,864   

Plant and equipment

     65,941         69,864   

Reconciliation of Financial Lease Minimum Payments:

 

     06-30-2012  
     Gross      Interest      Present Value  

Minimum lease payments, lease payment obligations

   ThU.S.$      ThU.S.$      ThU.S.$  

Due within one year

     12         —           12   

Due within one and five years

     65,917         —           65,917   

Due beyond five years

     —           —           —     

Total

     65,929         —           65,929   
     12-31-2011  
     Gross      Interest      Present Value  
     ThU.S.$      ThU.S.$      ThU.S.$  

Due within one year

     47         1         46   

Due within one and five years

     69,806         —           69,806   

Due beyond five years

     —           —           —     

Total

     69,853         1         69,852   

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:

 

     06/30/2012  

Minimum Financial Lease Payments Receivable, Financial Lease

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

Due within one year

     2,617         170         2,447   

Due within one and five years

     1,896         134         1,762   

Due beyond five years

     —           —           —     

Total

     4,513         304         4,209   
     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   

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.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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 - June      April - June  

Types of Ordinary Revenue

   2012
ThU.S.$
     2011
ThU.S.$
     2012
ThU.S.$
     2011
ThU.S.$
 

Sale of goods

     1,976,153         2,155,784         996,736         1,143,886   

Service Contracts

     71,009         67,565         39,997         37,742   

Total

     2,047,162         2,223,349         1,036,733         1,181,628   

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

 

     January - June      April - June  
     2012
ThU.S.$
     2011
ThU.S.$
     2012
ThU.S.$
     2011
ThU.S.$
 

Personnel Expenses

     177,775         158,138         84,329         80,175   

Wages and salaries

     170,426         152,130         80,570         76,309   

Compensation for years of service

     7,349         6,008         3,759         3,866   

The main actuarial assumptions used by Arauco in the calculation of the prevision of compensation for year services as of June 30, 2012 and December 31, 2011 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 June 30, 2012 and December 31 2011:

 

     06/30/2012     12/31/2011  
     ThU.S.$     ThU.S.$  

Current

     3,542        3,307   

Non-current

     38,779        36,102   

Total

     42,321        39,409   

Roll- forward

   06/30/2012
ThU.S.$
    12/31/2011
ThU.S.$
 

Opening balance

     39,409        39,276   

Current service cost

     1,012        1,668   

Interest cost

     1,261        2,553   

Actuarial gains

     5,305        6,274   

Benefits paid

     (6,181     (6,837

Increase (decrease) for currency exchange

     1,515        (3,525

Closing balance

     42,321        39,409   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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 June 30, 2012 and December 31, 2011 are as follows:

 

     06-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Total Current Assets

     2,582,675         2,462,660   

Cash and Cash Equivalents

     470,835         315,901   

U.S Dollar

     365,889         196,546   

Euro

     21,194         58,328   

Real

     46,421         35,238   

Argentine pesos

     10,306         4,960   

Other currencies

     5,972         7,212   

$ not adjustable

     21,053         13,617   

Other current non-financial assets

     227,990         207,196   

U.S Dollar

     129,742         138,815   

Euro

     101         14   

Real

     20,464         23,319   

Argentine pesos

     11,564         10,553   

Other currencies

     8,667         12,500   

$ not adjustable

     55,987         21,995   

U.F.

     1,465         —     

Trade and Other receivables-net

     762,057         740,416   

U.S Dollar

     497,287         500,790   

Euro

     29,171         25,800   

Real

     66,216         70,564   

Argentine pesos

     30,850         26,827   

Other currencies

     24,349         30,480   

$ not adjustable

     111,777         82,754   

U.F.

     2,407         3,201   

Related party receivables, Current

     5,871         70,179   

U.S Dollar

     2,710         69,356   

Real

     2,137         822   

$ not adjustable

     1,024         1   

Inventories

     807,810         795,104   

U.S Dollar

     669,733         630,500   

Real

     80,701         99,304   

Other currencies

     39,540         46,837   

$ not adjustable

     17,836         18,463   

Biological assets, current

     242,326         281,418   

U.S Dollar

     228,745         238,812   

Real

     13,581         42,606   

Tax receivables

     50,854         37,153   

U.S Dollar

     6,633         6,358   

Real

     8,158         6,745   

Argentine pesos

     3,403         7   

Other currencies

     4,970         11,199   

$ not adjustable

     27,690         12,844   

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

     14,932         15,293   

U.S Dollar

     14,932         15,293   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

     06-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Total Non Current Assets

     10,350,456         10,089,518   

Other non-current financial assets

     42,828         25,812   

U.S Dollar

     41,723         24,650   

Argentine pesos

     1,105         1,162   

Other non-current and non-financial assets

     105,491         99,901   

U.S Dollar

     86,792         78,046   

Real

     15,443         19,971   

Argentine pesos

     1,683         525   

Other currencies

     91         383   

$ not adjustable

     1,482         976   

Trade receivables, non current

     7,235         7,332   

U.S Dollar

     400         641   

$ not adjustable

     3,636         2,538   

U.F.

     3,199         4,153   

Related party receivables, Non Current

     102,218         —     

U.S Dollar

     102,218         —     

Investment in associates accounted for using equity method

     959,149         886,706   

U.S Dollar

     705,923         634,440   

Real

     253,226         252,266   

Intangible assets

     16,291         17,609   

U.S Dollar

     11,745         12,729   

Real

     4,426         4,751   

Other currencies

     24         26   

$ not adjustable

     96         103   

Goodwill

     55,071         59,124   

U.S Dollar

     2,813         2,857   

Real

     52,217         56,267   

Argentine pesos

     41         —     

Property, plant and equipment

     5,480,459         5,393,978   

U.S Dollar

     4,750,877         4,668,914   

Euros

     36         37   

Real

     703,350         715,486   

Argentine pesos

     15,486         —     

Other currencies

     433         474   

$ not adjustable

     10,277         9,067   

Biological assets, non-current

     3,444,371         3,463,166   

U.S Dollar

     3,065,532         3,060,006   

Real

     374,589         403,160   

Argentine pesos

     4,250         —     

Deferred tax assets

     137,343         135,890   

U.S Dollar

     75,101         77,179   

Real

     48,516         46,478   

Argentine pesos

     12,111         11,688   

Other currencies

     1,089         150   

$ not adjustable

     526         395   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

June 30, 2012

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

 

 

     06-30-2012      12-31-2011  
     Up to 90 days
ThU.S.$
     From 91 days to
1 year

ThU.S.$
     Total
ThU.S.$
     Up to 90 days
ThU.S.$
     From 91 days to
1 year

ThU.S.$
     Total
ThU.S.$
 

Total Liabilities, current

     601,570         146,521         748,091         763,592         268,353         1,031,945   

Other financial liabilities, current

     113,593