EX-99.1 2 d453547dex991.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

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

 

Assets

   09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Current assets

     2,558,626         2,462,660   

Non-current assets

     10,885,582         10,089,518   
  

 

 

    

 

 

 

Total assets

     13,444,208         12,552,178   
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

   09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Current liabilities

     1,301,716         1,031,945   

Non-current liabilities

     5,214,860         4,490,083   

Non-parent participation

     76,366         90,543   

Net equity attributable to parent company

     6,851,266         6,939,607   
  

 

 

    

 

 

 

Total net equity and liabilities

     13,444,208         12,552,178   
  

 

 

    

 

 

 

As of September 30, 2012, total assets increased by 7.11% or U.S.$ 892 million compared to December 31, 2011. This increase is mainly attributable to an increase in the balance of Property, plant and equipment due to investments in Arauco Canada Panels ULC and in Arauco Panels USA LLC and increased contributions in our joint ventures in Uruguay.

Moreover, liabilities increased by U.S.$ 994 million, mainly attributable to an increase in Financial Liabilities as a result of bonds issued in January and April 2012 of ThU.S.$ 733 million, and the recognition of deferred tax due to change of rate, 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

   09-30-2012      12-31-2011  

Current ratio

     1.97         2.39   

Acid ratio

     1.15         1.34   

Debt indicators

   09-30-2012      12-31-2011  

Debt to equity ratio

     0.94         0.79   

Short-term debt to total debt

     0.20         0.19   

Long-term debt to total debt

     0.80         0.81   
     09-30-2012      09-30-2011  

Financial expenses covered

     2.49         4.64   

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 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

   09-30-2012      12-31-2011  

Inventory turnover

     2.79         2.71   

Inventory turnover (excluding biological assets)

     3.64         3.82   

Inventory permanence-days

     129.24         132.95   

Inventory permanence (excluding biological assets)

     98.90         94.23   

The liquidity ratio and the acid ratio for the current period has decreased this year compared to the period 2011. This is due to a lower 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 current financial liabilities, partially offset by a decrease in liabilities for income tax and dividend.

As of September 30, 2012, the short-term debt represented 20% of total liabilities compared to 19% as of December 2011.

The ratio of financial expenses covered decreased from 4.64 to 2.49. 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.$ 221 million for the six-month period compared to U.S.$ 551 million the same period of the previous year, a decrease of U.S.$ 330 million. The change is explained by the factors described in the following table:

 

Item

   Million
U.S.$
 

Gross margin

     (378

Other operating income

     48   

Other operating expenses

     (18

Difference of exchange

     (4

Other items

     22   
  

 

 

 

Net change in income before income tax

     (330
  

 

 

 

Gross Margin presents a profit of U.S.$ 841 million, a decrease of U.S.$ 378 million compared to the same period (U.S.$ 1,219 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

September 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

      

 

09-30-2012

ThU.S$

  

  

   

 

09-30-2011

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

       09-30-2012
ThU.S$
    09-30-2011
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

       09-30-2012     12-31-2011  

Profitability on equity

     1.12        8.95   

Profitability on assets

     0.60        4.95   

Return on operating assets

     2.01        5.21   

Profitability ratios

       09-30-2012     06-30-2011  

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

     0.49        3.82   

EBITDA (MThU.S.$)

     609,2        943.1   

Income after tax (ThU.S.$) (2)

     59        441   

Gross margin (ThU.S.$)

     841        1,219   

Financial costs (ThU.S.$)

     (148     (151

 

(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

September 30, 2012

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

 

 

3. MARKET SITUATION

Pulp Division

During the third quarter of 2012 the downward trend in prices that began in the previous quarter was confirmed. The main reason behind this drop was the lower demand for paper which triggered temporary closures of paper production. This situation causes two effects: (i) less paper production and therefore less demand for its raw material (pulp), and (ii) more pulp supply because of the stoppage of integrated paper producers that continue with its pulp production that is sold to the market. Both effects brought an oversupply to the market. Nonetheless, at the end of this third quarter there was an initial positive change in price and demand trends.

Despite the abovementioned reasons, we should consider the seasonality in paper demand in the Northern Hemisphere during the summer. During these months the demand for paper usually declines (and so does production). It is common to observe annual stoppages of production lines during vacations especially in July and August. In September demand usually returns to normal levels.

The demand in China also experienced the seasonality of low demand during summer and in addition, an oversupply of pulp coming from shipments to China that would have normally been sent to other importing countries. The Chinese economy continues to adjust, slowing the expansion of the paper market, especially in commodity paper for printing and writing. Other types of paper, such as tissue and special paper were less affected. The oversupply of long fiber caused by the exports of pulp from Europe to China continued, however, the growth rate of such exports has decreased because of rising freight costs from Europe to China.

Europe is the most depressed market and has had the biggest adjustments in paper production and oversupply especially in long fiber. Long Fiber produced in Nordic countries has become more competitive reaching regions such as South of Europe, where in the past have not been present due to lack of competitiveness or because of better alternatives. In general, the European economy did not show improvements and as a consequence the low demand for paper and the installed overcapacity of paper production continues being one of the main concerns for pulp importers.

The Middle East and Latin American markets had normal levels of demand but prices follow international trends, especially Middle East where producers from Europe, Brazil and North America may be competitive. For many producers it would normally be more difficult to be competitive in the Latin American market, however, some Nordic producers were able to ship long fiber to this market.

Sawn Timber Division

The real estate and construction sectors in the United Sates have shown a positive upward trend during the third quarter of 2012. The housing starts index reached in September 872,000 units per year, that is, a 34.8% increase compared to September, 2011. Current construction levels, however, continue to be low when compared to the average of the past ten years. During the third quarter of 2012 the sales price of moldings in the United States had a small improvement when compared to the second quarter of this year.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 30, 2012

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

 

 

During the third quarter of this year markets in general showed a small decline. Sales volumes were stable, but with pressure from a decline in prices. Also, in this third quarter the stock of logs in China was in line with demand, achieving stable prices for logs and wood.

Panels Division

Compared with the same quarter of 2011, sales were 8% lower. This decrease in sales can be explained by lower volume sales of 5% compared to the same period in 2011. The decrease in sales volume is mainly explained by the closure of our Curitiba mill in December 2011 and the Nueva Aldea plywood mill destroyed in a fire in January 2012.

Our Plywood’s sales volume to end-clients strongly declined compared to the same period in 2011, mainly caused by a market adjustment related to a lower supply in the market.

In the case of MDF panels sales volume increased in line with an active market in Latin America.

Particleboard panels sales volume had a slight increase compared to the same period of 2011, mainly explained by the Zarate mill in Argentina that resolved its operational issues it had in the previous quarter, and volume production after the start-up of our new Teno milll. Hardboard panels sales volume had a small increase when compared to the third quarter 2011, driven mainly by more sales of value added products to Mexico.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

September 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:

 

     09-30-2012
ThU.S.$
    09-30-2011
ThU.S.$
 

Positive (negative) Cash flow

    

Cash flow from operating activities

     314,052        597,606   

Cash flow from financing activities:

    

Loan and bond payments

     807,488        (327,577

Dividend payments

     (176,762     (200,672

Others

     (21     1,175   

Cash flow from investment activities:

    

Purchase and sales of permanent investments (net)

     (327,137     (121,660

Incorporation and sale of property, plant and equipment

     (423,904     (406,099

Incorporation and sale of biological assets

     (89,924     (103,355

Loan to related companies

     (51,000     (80,701

Other

     (1,199     (4,921
  

 

 

   

 

 

 

Net cash flow for the period

     51,593        (646,204
  

 

 

   

 

 

 

We had a positive operating cash flow of U.S.$ 314 million for the current period compared to U.S.$ 598 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 insurance payments.

Cash flow from financing activities had a positive balance of U.S.$ 631 million in the current period, compared to a negative balance of U.S.$ 527 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.$ 893 million (U.S.$ 717 million in 2011), mainly due to an increase in capital contributions, and higher payments for acquisition of property, plant and equipment in 2012.

5. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of September 30, 2012, a ratio of fixed rate debt to total consolidated debt of approximately 86.7%, 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

September 30, 2012

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

 

CONSOLIDATED BALANCE SHEET

 

     Note    09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Assets

        

Current Assets

        

Cash and cash equivalents

   4      370,278         315,901   

Other financial current assets

   23      879         0   

Other current non-financial assets

   25      249,805         207,196   

Trade and Other receivables -net

   23      776,541         740,416   

Related party receivables

   13      7,819         70,179   

Inventories

   3      844,294         795,104   

Biological assets, current

   20      221,460         281,418   

Tax receivables

        72,618         37,153   

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

        2,543,694         2,447,367   

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

   22      14,932         15,293   

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

        14,932         15,293   

Total Current Assets

        2,558,626         2,462,660   

Non-Current Assets

        

Other non-current financial assets

   23      65,647         25,812   

Other non-current and non-financial assets

   25      111,834         99,901   

Trade receivables, non current

   23      12,554         7,332   

Related party receivables, non current

   13      120,244         0   

Investment in associates accounted for using equity method

   15-16      1,007,681         886,706   

Intangible assets

   19      18,988         17,609   

Goodwill

        59,055         59,124   

Property, plant and equipment

   7      5,853,666         5,393,978   

Biological assets, non-current

   20      3,488,943         3,463,166   

Deferred tax assets

   6      146,970         135,890   

Total non-Current Assets

        10,885,582         10,089,518   

Total Assets

        13,444,208         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

September 30, 2012

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

 

CONSOLIDATED BALANCE SHEET (continued)

 

     Note      09-30-2012
ThU.S.$
    12-31-2011
ThU.S.$
 

Equity and liabilities

       

Liabilities

       

Current Liabilities

       

Other current financial liabilities

     23         710,556        248,992   

Trade and other payables

     23         474,949        397,073   

Related party payables

     13         11,819        9,785   

Other provisions, current

     18         9,608        8,607   

Tax liabilities

        1,985        144,989   

Current provision for employee benefits

     10         3,866        3,307   

Other current non financial liabilities

     25         88,933        219,192   

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

        1,301,716        1,031,945   

Total Current Liabilities

        1,301,716        1,031,945   

Non-Current Liabilities

       

Other non-current financial liabilities

     23         3,638,635        3,063,471   

Other non - current provisions

     18         11,470        9,688   

Deferred tax liabilities

     6         1,413,852        1,256,233   

Non-current provision for employee benefits

     10         42,479        36,102   

Other non - current non financial liabilities

     25         108,424        124,589   

Total non - current liabilities

        5,214,860        4,490,083   

Total liabilities

        6,516,576        5,522,028   

Net Equity

       

Issued capital stock

        353,176        353,176   

Accumulated earnings

        6,703,927        6,683,252   

Other reserves

        (205,837     (96,821

Net equity attributable to parent company

        6,851,266        6,939,607   

Non-controlling interest

        76,366        90,543   

Total net equity

        6,927,632        7,030,150   

Total net equity and liabilities

        13,444,208        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

September 30, 2012

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

 

CONSOLIDATED STATEMENTS OF INCOME

 

          January-September     July-September  
     Note    2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
MUS$
 

Income Statement

           

Revenue

   9      3,078,379        3,338,517        1,031,217        1,115,168   

Cost of sales

        (2,237,758     (2,120,023     (775,801     (750,557

Gross Income

        840,621        1,218,494        255,416        364,611   

Other operating income

   2      248,708        200,715        129,276        63,191   

Distribution costs

   2      (329,758     (375,099     (115,833     (143,973

Administrative expenses

   2      (336,280     (299,565     (114,764     (106,750

Other operating expenses

   2      (62,657     (44,909     (15,358     (14,003

Other income (Loss)

   14      16,248        18        (15     18   

Profitability (Loss Statement) from operating activities

        376,882        699,654        138,722        163,094   

Financial income

        12,862        21,119        3,962        9,713   

Financial costs

   2      (148,451     (151,372     (45,063     (47,277

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

   15      (4,666     (6,515     3,911        1,762   

Exchange rate differences

        (15,759     (11,982     (9,589     (29,638

Income before income tax

        220,868        550,904        91,943        97,654   

Income Tax

   6      (162,079     (110,020     (148,668     (16,369

Income from continuing operations

        58,789        440,884        (56,725 )      81,285   

Net Income

        58,789        440,884        (56,725 )      81,285   

Income attributable to equity holders

           

Income attributable to parent company

        55,318        432,294        (58,248     78,229   

Income attributable to non-parent company

        3,471        8,590        1,523        3,056   

Net Income

        58,789        440,884        (56,725 )      81,285   

Basic earnings per share

           

Earnings per share from continuing operations

        0.0004889        0.0038205        (0.0005148     0.0006914   
     

 

 

   

 

 

   

 

 

   

 

 

 
        0.0004889        0.0038205        (0.0005148 )      0.0006914   
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per diluted shares

           

Earnings per diluted share from continuing operations

        0.0004889        0.0038205        (0.0005148     0.0006914   
     

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per diluted share

        0.0004889        0.0038205        (0.0005148 )      0.0006914   
     

 

 

   

 

 

   

 

 

   

 

 

 

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

September 30, 2012

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

 

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

 

          January-September     July-September  
     Note    2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
MUS$
 

Net Income

        58,789        440,884        (56,725 )      81,285   

Other comprehensive income, net of tax

           

Exchange difference on conversion

           

Gain (loss) for exchange differences, before tax

   11      (96,268     (117,443     (4,631     (190,605

Cash flow hedges

           

Gain (loss) for cash flow hedges, before tax

   23      (19,870     (16,823     (13,568     (12,640

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

        120        (4,155     (80     (3,821

Other comprehensive income, net of tax

        (116,018 )      (138,421 )      (18,279 )      (207,066 ) 

Income tax related to Cash flow hedges on Other comprehensive income

   6-23      3,838        1,562        2,316        519   

Other comprehensive income

        (112,180 )      (136,859 )      (15,963 )      (206,547 ) 

Total comprehensive income

        (53,391 )      304,025        (72,688 )      (125,262 ) 

Comprehensive Income Statement attributable to

           

Comprehensive income statement attributable to parent company

        (53,698     300,492        (74,064     (119,913

Comprehensive income statement attributable to non-controlling interest

        307        3,533        1,376        (5,349

Total comprehensive income

        (53,391 )      304,025        (72,688 )      (125,262 ) 

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

September 30, 2012

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

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

09-30-2012

   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

                55,318        55,318        3,471        58,789   

Other comprehensive income, net of tax

        (93,104     (16,032     120        (109,016       (109,016     (3,164     (112,180

Comprehensive income

        (93,104 )      (16,032 )      120        (109,016 )      55,318        (53,698 )      307        (53,391 ) 

Dividends

                (34,643     (34,643     0        (34,643

Increase (decrease) for transfer and other changes

                  0        (14,484     (14,484

Total Changes in equity

     0         (93,104 )      (16,032 )      120        (109,016 )      20,675        (88,341 )      (14,177 )      (102,518 ) 

Closing balance at 09/30/2012

     353,176         (160,643 )      (41,946 )      (3,248 )      (205,837 )      6,703,927        6,851,266        76,366        6,927,632   

 

09-30-2011

   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

                432,294        432,294        8,590        440,884   

Other comprehensive income, net of tax

        (112,386     (15,261     (4,155     (131,802       (131,802     (5,057     (136,859

Comprehensive income

        (112,386 )      (15,261 )      (4,155 )      (131,802 )      432,294        300,492        3,533        304,025   

Dividends

              0        (175,994     (175,994     0        (175,994

Increase (decrease) for transfer and other changes

              0          0        (16,752     (16,752

Total Changes in equity

     0         (112,386 )      (15,261 )      (4,155 )      (131,802 )      256,300        124,498        (13,219 )      111,279   

Closing balance at 09/30/2011

     353,176         (39,687 )      (29,340 )      (4,021 )      (73,048 )      6,576,564        6,856,692        95,162        6,951,854   

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

September 30, 2012

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

 

CONSOLIDATED STATEMENTS OF CASH FLOWS-DIRECT METHOD

 

     09-30-2012
ThU.S.$
    09-30-2011
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

     3,418,195        3,647,060   

Receipts from premiums and claims, annuities and other policy benefits

     122,182        2,052   

Other cash receipts from operating activities

     217,800        199,675   

Classes of cash payments

    

Payments to suppliers for goods and services

     (2,839,665     (2,764,373

Payments to and behalf of employees

     (271,175     (231,111

Other cash payments from operating activities

     (18,928     (7,891

Dividends received

     3,980        1,720   

Interest paid

     (133,754     (157,380

Interest received

     10,252        13,112   

Income taxes refund (paid)

     (194,843     (104,621

Other (outflows) inflows of cash, net

     8        (637

Net Cash flows from Operating Activities

     314,052        597,606   

Cash flows (used in) investment activities

    

Cash flow used in obtaining control of subsidiaries or other businesses

     (190,897     0   

Cash flow used to contributions in associates

     (13,560     (981

Other cash receipts from sales of participations in joint ventures

     6,607        0   

Capital contributions to joint ventures

     (129,287     (120,679

Loans to related parties

     (60,500     (127,130

Proceeds from sale of property, plant and equipment

     7,119        9,684   

Purchase of property, plant and equipment

     (431,023     (415,783

Proceeds from sales of Intangible Assets

     3,250        0   

Purchase of intangible assets

     (4,464     (7,455

Proceeds from other long-term assets

     1,750        4,734   

Purchase of biological assets

     (91,674     (108,089

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

     9,500        46,429   

Other outflows of cash, net

     15        2,534   

Cash flows used in Investment Activities

     (893,164 )      (716,736 ) 

Cash flows from (used in) Financing Activities

    

Total loans obtained

     1,398,457        218,301   

Proceeds from short-term borrowings

     763,059        0   

Loans obtained in long term

     635,398        218,301   

Repayments of borrowings

     (590,969     (545,878

Dividends paid by subsidiaries or special purpose companies

     (176,762     (200,672

Other inflows of cash, net

     (21     1,175   

Cash flows from (used in) Financing Activities

     630,705        (527,074 ) 

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

     51,593        (646,204 ) 

Effect of exchange rate changes on cash and cash equivalents

     2,784        (20,165

Net increase (decrease) of Cash and Cash equivalents

     54,377        (666,369 ) 

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

     370,278        377,465   

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

September 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 September 30, 2012 are:

 

   

Consolidated Balance Sheet as of September 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).

Period covered by the Financial Statements

Period from January 1 to September 30, 2012.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 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 September 30, 2012, was approved by the Board of Directors of the Company (the “Board”) in Extraordinary Session N° 478 of November 21, 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

September 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 September 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

September 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 September 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

September 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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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 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

September 30, 2012

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

 

 

(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.

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

 

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2012

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

 

 

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

September 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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Unaudited Notes to the Consolidated Financial Statements

September 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

September 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

September 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 to 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

September 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

September 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

September 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

September 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

 

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

     January 01, 2013

IAS 27

    

Separate Financial Statements

 

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

     January 01, 2013

IFRS 9

    

Financial Instruments

 

Issued in December 2009, amending the classification and measurement of financial assets. Later this rule was amended in November 2010 to include treatment and classification of liabilities. Early adoption is permitted.

     January 01, 2015

IFRS 10

    

Consolidated Financial Statements

 

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

     January 01, 2013

IFRS 11

    

Joint Arrangements

 

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

     January 01, 2013

IFRS 12

    

Disclosure of shareholdings in other entities

 

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

    

January 01, 2013

IFRS 13

    

Fair Value Measurement

 

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

     January 01, 2013

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

September 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 September 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

     Offseting of financial assets and liabilities      January 01, 2014
     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.     

IFRS 7

    

Financial Instruments

Disclosures-Amendments to disclosures about netting of

Assets and liabilities.

     January 01, 2013

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

September 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.

 

     09/30/2012   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
     09/30/2012   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.$34,643 (ThU.S.$175,994 as of September 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.$176,762 as of September 30, 2012, (ThU.S.$200,672 as of September 30, 2011) of which ThU.S.$161,568 (ThU.S.$182,770 as of September 30, 2011) correspond to dividends paid to the Parent Company.

As of September 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

September 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

September 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 September 30, 2012 and 2011:

 

     January - September     July - September  
     2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Classes of Other Income by activity

        

Other Operating Income, Total

     248,708        200,715        129,276        63,191   

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

     171,498        172,538        94,068        57,569   

Net income from insurance compensation

     42,219        —          25,097        —     

Revenue from export promotion

     2,319        4,558        910        1,326   

Insurance compensation, net of earthquake related losses (*)

     —          1,120        —          (800

Leases received

     1,712        3,321        55        1,626   

Gain on sales of assets

     9,925        3,020        1,909        - 222   

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

     21,035        16,158        7,237        3,692   

Classes of Other Expenses by activity

        

Total of other expenses by activity

     (62,657     (44,909     (15,360     (14,003

Depreciations

     (452     (868     (142     (370

Contingent provision

     (2,520     (3,978     (300     (1,001

Plants stopped operating expenses

     (13,151     (6,232     (476     (2,428

Expenses projects

     (10,367     —          (1,539     —     

Loss of assets

     (487     —          (87     —     

Loss of forest due to fires

     (2,907     (4,214     (165     (469

Other Taxes

     (4,228     (4,438     (1,756     (2,064

Research and development expenses

     (1,563     (2,611     (519     (1,023

Compensation and eviction

     (5,504     (2,458     (1,924     (642

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

     (21,478     (20,110     (8,452     (6,006

Classes of financing income

        

Financing income, total

     12,862        21,119        3,962        9,713   

Financial income from mutual funds - deposits

     6,276        10,611        1,555        1,240   

Financial income resulting from swap - forward

     2,979        8,389        527        7,437   

Other financial income

     3,607        2,119        1,880        1,036   

Classes of financing costs

        

Financing costs, Total

     (148,451     (151,372     (45,063     (47,277

Interest expense, Loans banks

     (10,104     (6,977     (4,068     (2,664

Interest expense, Bonds

     (115,851     (128,301     (36,157     (40,886

Interest expense, financial instruments

     (10,660     (5,300     (2,838     1,040   

Other financial costs

     (11,836     (10,794     (2,000     (4,767

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

        

Total

     (4,666     (6,515     3,911        1,762   

Investments in associates

     16,194        (1,018     6,472        (78

Joint ventures

     (20,860     (5,497     (2,561     1,840   

 

(*) 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

September 30, 2012

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

 

 

Below is the Balance of Expenses by nature:

 

      January - September      July - September  

Cost of sales

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

Timber

     510,434        524,936         97,001        157,882   

Forestry labor costs

     439,371        440,216         151,563        169,955   

Depreciation

     164,661        159,956         57,061        52,524   

Maintenance costs

     143,099        160,063         46,185        52,678   

Chemical costs

     263,563        240,003         95,123        85,370   

Sawmill Services

     135,575        126,699         40,565        41,857   

Others Raw Materials

     220,930        140,211         133,870        40,370   

Indirect costs

     93,041        66,301         26,001        19,611   

Energy and fuel

     105,064        111,874         37,774        47,398   

Cost of electricity

     54,071        47,495         24,445        16,336   

Wage and salaries

     107,947        102,268         66,210        66,575   

Total

     2,237,758        2,120,023         775,801        750,557   
      January - September      July - September  

Distribution expenses

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

Sale costs

     20,529        49,196         7,023        31,528   

Commissions

     10,680        10,715         3,513        2,842   

Insurances

     3,538        2,887         1,536        1,239   

Doubtful assets

     (1,711     6,850         (1,157     6,234   

Other sales expenses

     8,022        28,744         3,131        21,213   

Shipping and freight costs

     309,229        325,903         108,810        112,445   

Port services

     18,187        21,856         4,282        7,987   

Freights

     254,911        288,368         75,206        100,041   

Other shipping and freight costs

     36,131        15,679         29,322        4,417   

Total

     329,758        375,099         115,833        143,973   
      January - September      July - September  

Administration expenses

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

Wage and salaries

     138,890        118,086         48,759        40,203   

Marketing, advertising, promotion and publications expenses

     7,059        5,477         3,970        2,657   

Insurances

     23,896        13,596         9,948        6,524   

Depreciations and amortization not paid

     8,523        7,832         2,001        3,093   

Computer services

     8,569        6,579         3,827        237   

Office, warehouse and machinery leases

     12,624        8,528         5,159        2,750   

External audits

     2,770        2,578         774        1,051   

Donations, contributions, grants

     7,938        9,341         1,737        3,893   

Fees (advices technical, Legal …)

     30,990        32,914         4,082        9,476   

Property taxes, patents and municipal rights

     12,527        13,942         4,910        4,932   

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

     82,494        80,692         29,596        31,934   

Total

     336,280        299,565         114,764        106,750   

 

          January-September      July-September  

Expenses for

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

Depreciations

   7      174,297         169,345         59,591         55,353   

Employee benefits

   10      298,257         249,235         120,482         91,097   

Amortization

   19      2,018         1,192         1,023         565   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2012

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

 

 

NOTE 3. INVENTORIES

 

     09-30-2012      12-31-2011  

Components of Inventory

   ThU.S.$      ThU.S.$  

Raw Materials

     100,607         90,587   

Production Supplies

     80,482         74,658   

Work in progress

     69,873         58,594   

Finished goods

     435,493         446,289   

Parts

     157,761         123,071   

Other Inventories

     78         1,905   

Total Inventories

     844,294         795,104   

As of September 30, 2012, a cost of sales of inventories amounted to ThU.S.$ 2,225,788 (ThU.S.$ 2,129,623 as of September 30, 2011).

In order to allow the registered inventories to net realizable value, at September 30, 2012, a net reduction of inventories has been recognized, related to lower allowance of obsolescence as of ThU.S.$2,403 (Increased provision of ThU.S.$ 2,957 as of December 31 , 2011) and a increase of provision associated to 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

September 30, 2012

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

 

 

Components of Cash and Cash Equivalents

   09-30-2012
ThU.S.$
     12-31-2011
MUS$
 

Cash on hand

     3,951         527   

Banks

     83,395         31,097   

Short term deposit

     115,396         128,526   

Mutual Funds

     167,536         155,751   

Total

     370,278         315,901   

The following tables detail the value of the cost of assets and liabilities acquired by Arauco Canada Panels ULC dated on September 24, 2012, 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 Canada Panels ULC

  

Cash paid for acquisitions and cash equivalents

     242,502   

Cash and cash equivalents held by acquired entities

     52,427   

Net cash paid to acquire entities

     294,929   
  

 

 

 

Net Assets less Cash and Cash equivalents of acquired entity

     190,075   
  

 

 

 
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   
  

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2012

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

 

 

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 September 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 September 30, 2012 do not show changes in accounting policies compared to the same period last year.

The financial statements as of December 31 2011 have been restated to reflect the effects of the following corrections:

 

  a) The registration of contracts that qualify as finance leases, which meant an increase of the items Property, plant and equipment and other non-current liabilities for ThU.S.$ 69,806 at December 31, 2011 (ThU.S.$ 38,874 as of January 1 of 2011).

 

  b) The presentation of derivative hedging contracts, which meant an increase of items other non-current financial assets and other non-current liabilities for ThU.S.$ 24,650 at December 31, 2011. At January 1, 2011 had no derivative contracts to reclassify any coverage.

The effects mentioned above, at level of total assets and liabilities at December 31, 2011 and January 1, 2011, were as follows:

 

      Previously reported
balances to
12-31-2011 ThU.S.$
     Reclassifications
filing
ThU.S.$
     Restated amount
to 12-31-2011
ThU.S.$
 

Total assets

     12,457,722         94,456         12,552,178   

Total liabilities

     5,427,572         94,456         5,522,028   
      Previously reported
balances to
01-01-2011 ThU.S.$
     Reclassifications
filing
ThU.S.$
     Restated amount
to 01-01-2011
ThU.S.$
 

Total assets

     12,506,332         38,874         12,545,206   

Total liabilities

     5,665,757         38,874         5,704,631   

These adjustments had no effect on the results of Arauco.

 

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Unaudited Notes to the Consolidated Financial Statements

September 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.

On September 27, 2012 Law N° 20,630 was published, and among other changes, it increased the rate of First Category Tax to a permanent 20%, effective from the financial year 2012, tax year 2013. The change effects in tax rates in 2012 period 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.

The effect on results at September 30, 2012 of this change in the tax rate is ThU.S.$ 128,981, which is generated mainly from temporary differences associated with property, plant, equipment and biological assets.

Deferred Tax Assets

The following table details deferred tax assets:

 

Deferred Tax Assets

   09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Deferred Tax Assets related to Provisions

     5,076         7,878   

Deferred Tax Assets related to accrued liabilities

     6,066         4,766   

Deferred Tax Assets related to Post-Employment obligations

     8,496         6,625   

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

     1,785         1,721   

Deferred Tax Assets related to Financial Instruments Restatements

     1,210         789   

Deferred Tax Assets related to tax losses

     79,944         71,870   

Valuation of biological assets

     3,921         5,244   

Valuation of inventory

     5,700         3,543   

Income provision

     3,662         4,064   

Trade debtors and receivables

     7,204         4,458   

Defferred tax Assets related to Others

     23,906         24,932   

Deferred Tax Assets Total

     146,970         135,890   

As of the date of the present financial statement, some of Arauco’s subsidiaries present tax losses of ThU.S.$ 332,052 (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

September 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:

 

Deferred Tax Liabilities

   09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Deferred Tax Liabilities related to Revaluated Property, Plant and equipment

     724,636         674,924   

Deferred Tax Liabilities related to Financial Instrument restatement

     16,390         3,723   

Valuation of biological asset

     538,266         498,776   

Valuation of inventory

     24,175         14,509   

Valuation of prepaid expenses

     23,216         0   

Differences in valuation of deferred expenditures

     54,251         41,487   

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

     32,918         22,814   
  

 

 

    

 

 

 

Deferred Tax Liabilities Total

     1,413,852         1,256,233   
  

 

 

    

 

 

 

The effect of deferred taxes related to financial hedging instruments corresponds to a payment of ThU.S.$ 3,838 as of September 30, 2012 (payment of ThU.S.$ 1,562 as of September 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.$ 22,996 and ThU.S.$ 171,454 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:

 

     09-30-2012     12-31-2011  

Detail of classes of Deferred Tax Temporary Differences

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

Deferred Tax Assets

     67,026          64,020     

Tax Loss

     79,944          71,870     

Deferred Tax Liabilities

       1,413,852          1,256,233   

Total

     146,970        1,413,852        135,890        1,256,233   
     January - September     July - September  

Detail of Temporary Difference Income and Loss Amounts

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

Deferred Tax Assets

     4,903        (7,084     8,127        5,221   

Tax Loss

     13,992        22,310        4,519        10,060   

Deferred Tax Liabilities

     (155,011     (1,900     (148,140     (356

Total

     (136,116     13,326        (135,494     14,925   

 

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Unaudited Notes to the Consolidated Financial Statements

September 30, 2012

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

 

 

Income Tax consists of the following:

 

     January - September     July - September  

Income Tax composition

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

Current income tax expense

     (27,952     (126,081     (13,664     (31,210

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

     1,266        (261     354        (314

Previous period current tax adjustments

     610        2,316        (11     0   

Other current tax expenses

     114        680        148        230   

Current Tax Expense, Net

     (25,962     (123,346     (13,173     (31,294

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

     (17,476     (17,337     (6,373     1,773   

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

     (128,981     7,878        (129,822     2,617   

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

     10,340        22,785        700        10,535   

Total deferred Tax Expense, Net

     (136,117     13,326        (135,495     14,925   

Income Tax Expense, Total

     (162,079     (110,020     (148,668     (16,369

 

(*) The effect of rate change in results is a loss of ThU.S.$ 128,981, which include ThU.S.$ 124,597 for deferred tax balances on startup and ThU.S.$ 4,384 for the effect of rate change for deferred tax of the period.

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

 

     January - September     July - September  
     2012
ThU.S.$
    2011
ThU.S.$
    2012
ThU.S.$
    2011
ThU.S.$
 

Foreign current tax

     (5,020     (36,916     (3,169     (8,502

National current tax

     (20,942     (86,430     (10,004     (22,792

Current tax, Total

     (25,962     (123,346     (13,173     (31,294

Foreign deferred tax

     18,719        20,114        6,530        11,112   

National deferred tax

     (154,836     (6,788     (142,025     3,813   

Deferred tax, Total

     (136,117     13,326        (135,495     14,925   

Income (expense) due to Income Tax, Total

     (162,079     (110,020     (148,668     (16,369

Income Tax Expense Reconciliation using the Effective Rate method

Income tax expenditure reconciliation is as follows:

 

     January - September     July - September  

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

     (44,174     (110,223     (20,323     (19,573

Tax effect of rates in other jurisdictions

     1,177        (9,141     1,129        (2,969

Tax effect of non taxable ordinary income

     13,005        2,431        3,331        (4,218

Tax effect of non tax deductible expenses

     (5,450     (10,793     2,358        (2,703

Tax effect of tax loses unrecognized for previous periods

     758        (93     79        221   

Tax effect of tax rates changes (opening balances)

     (124,597     7,878        (125,438     2,644   

Tax effect of excess tax for previous periods

     610        2,316        (11     0   

Other Increases (Decreases) Legal Taxes

     (3,408     7,605        (9,793     10,229   

Adjustment to Tax Expense using the Statutory Rate, Total

     (117,905     203        (128,345     3,204   

Tax Expenses Using the Effective Rate

     (162,079     (110,020     (148,668     (16,369

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2012

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

 

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

Properties, Plant and Equipment, Net

   09-30-2012
ThU.S.$
    12-31-2011
ThU.S.$
 

Construction in progress

     912,743        663,971   

Land

     804,704        805,804   

Buildings

     1,503,249        1,459,759   

Plant and equipment

     2,532,342        2,360,229   

Information technology equipment

     22,380        23,740   

Fixed facilities and accessories

     5,019        6,010   

Motorized vehicles

     8,883        10,152   

Others

     64,346        64,313   

Total Net

     5,853,666        5,393,978   

Properties, Plant and Equipment, Gross

    

Construction in progress

     912,743        663,971   

Land

     804,704        805,804   

Buildings

     2,767,468        2,616,914   

Plant and equipment

     4,940,763        4,391,652   

Information technology equipment

     55,903        55,772   

Fixed facilities and accessories

     23,862        23,942   

Motorized vehicles

     33,832        34,447   

Others

     91,780        87,983   

Total Gross

     9,631,055        8,680,485   

Accumulated depreciation and impairment

    

Buildings

     (1,264,219     (1,157,155

Plant and equipment

     (2,408,421     (2,031,423

Information technology equipment

     (33,523     (32,032

Fixed facilities and accessories

     (18,843     (17,932

Motorized vehicles

     (24,949     (24,295

Others

     (27,434     (23,670

Total

     (3,777,389 )      (3,286,507 ) 

 

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Unaudited Notes to the Consolidated Financial Statements

September 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.

 

     09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Collateral amount of property, plant and equipment

     26,788         56,279   

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

 

     09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Amount committed for the acquisition of property, plant and equipment

     209,668         114,212   
     09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Disbursements for property, plant and equipment under construction

     371,588         537,398   

 

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Unaudited Notes to the Consolidated Financial Statements

September 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 September 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

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

Opening Balance 01/01/2011

    562,309        821,288        1,417,684        2,227,197        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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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

September 30, 2012

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

 

 

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

 

     January-September      July-September  

Depreciation for the period

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

Cost of sale

     162,691         159,956         55,091         52,524   

Administration expenses

     8,475         6,571         4,075         2,489   

Other operation expenses

     3,131         2,818         425         340   

Total

     174,297         169,345         59,591         55,353   

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

September 30, 2012

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

 

 

NOTE 8. LEASES

Leases

 

     09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Property, Plant & Equipment Financial Leasing

     61,846         69,864   

Plant and equipment

     61,846         69,864   

Reconciliation of Financial Lease Minimum Payments:

 

     09-30-2012  

Minimum lease payments, lease payment obligations

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

Due within one year

     22,155         —           22,155   

Due within one and five years

     40,619         —           40,619   

Due beyond five years

     —           —           —     

Total

     62,774         —           62,774   
     12-31-2011  
      Gross
ThU.S.$
     Interest
ThU.S.$
     Present Value
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:

 

     09-30-2012  

Minimum Financial Lease Payments Receivable, Financial Lease

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

Due within one year

     2,190         150         2,040   

Due within one and five years

     1,865         126         1,739   

Due beyond five years

     —           —           —     

Total

     4,055         276         3,779   
     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

September 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 - September      July - September  

Types of Ordinary Revenue

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

Sale of goods

     2,972,622         3,252,229         996,469         1,096,445   

Service Contracts

     105,756         86,288         34,747         18,723   

Total

     3,078,379         3,338,517         1,031,217         1,115,168   

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

 

     January - September      July - September  
     2012
ThU.S.$
     2011
ThU.S.$
     2012
ThU.S.$
     2011
ThU.S.$
 

Personnel Expenses

     298,257         249,235         47,446         245,723   

Wages and salaries

     288,369         239,529         46,416         238,983   

Compensation for years of service

     9,888         9,706         744         6,740   

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

 

     09-30-2012
ThU.S.$
    12-31-2011
ThU.S.$
 

Current

     3,866        3,307   

Non-current

     42,479        36,102   

Total

     46,345        39,409   

Roll- forward

   09-30-2012
ThU.S.$
    12-31-2011
ThU.S.$
 

Opening balance

     39,409        39,276   

Current service cost

     3,740        1,668   

Interest cost

     1,261        2,553   

Actuarial gains

     5,597        6,274   

Benefits paid

     (7,254     (6,837

Increase (decrease) for currency exchange

     3,592        (3,525

Closing balance

     46,345        39,409   

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

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

 

     09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Total Current Assets

     2,558,626         2,462,660   

Cash and Cash Equivalents

     370,278         315,901   

U.S Dollar

     302,230         196,546   

Euro

     4,909         58,328   

Real

     44,438         35,238   

Argentine pesos

     10,946         4,960   

Other currencies

     3,497         7,212   

$ not adjustable

     4,258         13,617   

Other Financial Assets, Current

     879         —     

U.S Dollar

     879         —     

Other current financial assets

     249,805         207,196   

U.S Dollar

     135,698         138,815   

Euros

     150         14   

Real

     20,563         23,319   

Argentine pesos

     9,368         10,553   

Other currencies

     9,304         12,500   

$ not adjustable

     74,722         21,995   

Trade and Other receivables-net

     776,541         740,416   

U.S Dollar

     520,937         500,790   

Euro

     22,898         25,800   

Real

     67,168         70,564   

Argentine pesos

     33,295         26,827   

Other currencies

     25,351         30,480   

$ not adjustable

     104,815         82,754   

U.F.

     2,077         3,201   

Related party receivables, Current

     7,819         70,179   

U.S Dollar

     1,642         69,356   

Real

     1,468         822   

$ not adjustable

     4,709         1   

Inventories

     844,294         795,104   

U.S Dollar

     743,356         630,500   

Real

     79,665         99,304   

Other currencies

     1,954         46,837   

$ not adjustable

     19,319         18,463   

Biological assets, current

     221,460         281,418   

U.S Dollar

     218,239         238,812   

Real

     3,221         42,606   

Tax receivables

     72,618         37,153   

U.S Dollar

     3,916         6,358   

Real

     6,544         6,745   

Argentine pesos

     7,096         7   

Other currencies

     7,474         11,199   

$ not adjustable

     47,588         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

September 30, 2012

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

 

 

 

     09-30-2012
ThU.S.$
     12-31-2011
ThU.S.$
 

Total Non Current Assets

     10,885,582         10,089,518   

Other non-current financial assets

     65,647         25,812   

U.S Dollar

     64,583         24,650   

Pesos Argentinos

     1,064         1,162   

Other non-current and non-financial assets

     111,834         99,901   

U.S Dollar

     34,331         78,046   

Real

     15,980         19,971   

Argentine pesos

     1,790         525   

Other currencies

     126         383   

$ not adjustable

     59,607         976   

Trade receivables, non current

     12,554         7,332   

U.S Dollar

     5,349         641   

$ not adjustable

     3,351         2,538   

U.F.

     3,854         4,153   

Related party receivables, non current

     120,244         —     

Dólares

     120,244         —     

Investment in associates accounted for using equity method

     1,007,681         886,706   

U.S Dollar

     727,290         634,440   

Real

     256,734         252,266   

Pesos Argentinos

     39         —     

$ no reajustables

     23,618         —     

Intangible assets

     18,988         17,609   

U.S Dollar

     14,604         12,729   

Real

     4,252         4,751   

Other currencies

     35         26   

$ not adjustable

     97         103   

Goodwill

     59,055         59,124   

U.S Dollar

     7,037         2,857   

Real

     51,977         56,267   

Pesos Argentinos

     41         —