EX-99.1 2 d556349dex991.htm EX-99.1 EX-99.1
Table of Contents

Exhibit 99.1

ARAUCO AND CONSTITUTION PULP INC

TABLE OF CONTENTS

 

         Page  

Item

    
1.  

Ratio Analysis of the Consolidated Financial Statement

     2   
2.  

Unaudited Consolidated Financial Statement

     8   
3.  

Unaudited Consolidated Financial Income Statement

     10   
4.  

Unaudited Consolidated Statement of Changes in Net Equity

     12   
5.  

Unaudited Consolidated Statement of Cash Flow

     13   
6.  

Unaudited Notes to the Consolidated Financial Statement

     14   
7.  

Annex: Press Release

  

 


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2013

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

 

1. ANALYSIS OF FINANCIAL POSITION

 

a) Statement of Financial position

The principal components of assets and liabilities are at year end, as follows:

 

Assets

   03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Current assets

     2,707,824         2,698,968   

Non-current assets

     10,922,911         10,852,218   
  

 

 

    

 

 

 

Total assets

     13,630,735         13,551,186   
  

 

 

    

 

 

 

 

Liabilities

   03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Current liabilities

     1,498,046         1,425,287   

Non-current liabilities

     5,090,642         5,160,140   

Non-parent participation

     73,029         74,437   

Net equity attributable to parent company

     6,969,018         6,891,322   
  

 

 

    

 

 

 

Total net equity and liabilities

     13,630,735         13,551,186   
  

 

 

    

 

 

 

As of March 31, 2013, total assets increased by 80% compared to December 31, 2012, equivalent to 0.59% of variation. This deviation is mainly attributable to an increase in the balance of Property, plant and equipment, biological assets and inventories, offset by a decrease in non-financial assets (in 2012 compensation was received for fire insurance in Nueva Aldea).

Moreover, liabilities increased US$ 3 million mainly attributable to an increase in Non-Financial Liabilities by increasing the provision of minimum dividend (interim dividend recognition for the period 2013 and definitive year 2012), offset by a net decrease in financial liabilities.

The main financial and operating indicators relating to balance are as follows:

 

Liquidity ratios

   03-31-2013      12-31-2012  

Current Liquidity (current assets / current liabilities)

     1.81         1.89   

Acid ratio (( current assets-inventories, biological assets) /
Current liabilities)

     1.07         1.14   

 

Debt indicators

   03-31-2013      12-31-2012  

Debt to equity ratio (total liabilities / equity)

     0.94         0.95   

Short-term debt to total debt (current liabilities / total liabilities)

     0.23         0.22   

Long-term debt to total debt (non-current liabilities / total liabilities)

     0.77         0.78   

 

     03-31-2013      03-31-2012  

Financial expenses coverage ratio (earnings before Taxes + interest expense / interest expense)

     2.95         2.06   

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2013

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

 

 

Activity ratio

   03-31-2013      12-31-2012  

Inventory turnover-times (cost of sales / inventories + current biological assets))

     3.11         2.94   

Inventory turnover-time (excluding biological assets) (Cost of sales /inventory)

     4.06         3.91   

Inventory permanence-days ( Inventories + biological assets)) /cost of sales)

     115.92         122.63   

Inventory permanence (excluding biological assets) (inventory / cost of sales)

     88.66         92.09   

The ratio current liquidity and of reason acidic are presented similarly in the period 2013 compared with exercise 2012.

As of March 31, 2013, the short-term debt represented 23% of total liabilities (22% as of December 31, 2012).

The ratio of financial expenses covered presents an increase of 2.06 to 2.95. This drop is mainly attributable to greater result of the period 2013, compared to the same period of 2012.

 

b) Statements of income

Profit before Income Tax

Profit before Income Tax registered a profit of US$ 109 million compared to a profit of US$ 61 million in the same period of the previous year, positive variation of US$ 48 million. The effect is explained by the factors described in the following table:

 

Item

   Million
U.S.$
 

Gross margin

     50   

Other operating income

     14   

Distribution and administrative expenses

     (29

Other operating expenses

     18   

Difference of exchange

     (13
  

 

 

 

Others item

     8   
  

 

 

 

Net change in income before income tax

     48   
  

 

 

 

Gross Margin presents a profit of U.S.$ 336 million, amount of U.S.$ 50 million higher compared to the same period (U.S.$ 286 million) caused by a proportional increase in Cost of sales and a decrease in sales prices.

 

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Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2013

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

   03-31-2013
ThU.S$
    03-31-2012
ThU.S$
 

Pulp

     500.797        474,645   

Sawn timber

     186,822        188,844   

Panels

     449,897        304,496   

Forestry

     37,642        33,975   

Other

     7,146        8.469   
  

 

 

   

 

 

 

Total revenues

     1,182,304        1,010,429   
  

 

 

   

 

 

 

Sales costs

   03-31-2013
ThU.S$
    03-31-2012
ThU.S$
 

Wood

     210,852        208,091   

Forestry work

     148,758        136,064   

Depreciation

     64,864        53,431   

Other costs

     421,887        327,000   
  

 

 

   

 

 

 

Total sales costs

     846,361        724,586   
  

 

 

   

 

 

 

Profitability index

   03-31-2013     12-31-2012  

Profitability on equity

     5.34        2.01   

Profitability on assets

     2.75        1.08   

Return on operating assets

     3.28        1.76   

Profitability ratios

   03-31-2013     03-31-2012  

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

     0.79        0.45   

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

     93,515        52,062   

Gross margin (ThU.S.$)

     335,943        285,843   

Financial costs (ThU.S.$)

     (55,957     (58,082

 

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

 

EBITDA

   03-31-2013
ThU.S$
    03-31-2012
ThU.S$
 

Gain (loss)

     93.5        52.1   

Finance cost

     56.0        58.1   

Financial Income

     (5.5     (4.5

Expenses for income tax

     15.6        9.3   

EBIT

     159.6        115.0   

Depreciation and amortization

     69.5        57.6   

EBITDA

     229.1        172.6   

Cost at fair value of the harvest

     72.8        73.0   

Gain from changes in fair value of biological assets

     (67.6     (43.9

Exchange difference

     2.0        (10.8

Adjusted EBITDA

     236.2        190.9   

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

March 31, 2013

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

 

 

3. MARKET SITUATION

Pulp Division

Pulp sales reached US$ 500.8 million (including energy sales) for the first quarter of 2013, a decrease of 3.8% compared to the previous quarter. This decrease was mainly due to lower sales volume of 6.1% and higher average prices of 2.7%.

When compared with the same period of 2012, pulp sales increased 5.5%, mainly due to higher average prices of 0.4%, higher sales volume of 0.9% and higher energy sales.

Since the beginning of this first quarter of the year, we have seen an increase in prices of long fiber and short fiber pulp in all markets. Such increases have been driven by Asian and American markets. Europe has followed the trend to a lesser extent and with some difficulty given the demand for end-products in the European market.

The inventory levels that had been stable and had experienced a decrease in December 2012, now increased. The most important increase was in short fiber, with inventory levels 5 days higher than December and first quarter 2012. It is important to mention that in general inventory levels decrease during December every year, so the increase during the first quarter is normal.

Europe continues with less consumption of pulp. In March of this year, pulp consumption dropped again with respect to March 2012 by 1.4%. Nonetheless, producers have anticipated such decrease in consumption and shipments decreased hence regulating inventory levels which dropped 3.4% in March respect to March 2012. With this situation prices also have slightly increased, approximately 3% in long fiber and 2% in short fiber. However, the situation in Europe in general continues difficult and the trend of integrated paper producers releasing pulp to the spot market continues and affects the pulp market, especially the long fiber market. At the same time, the higher supply of long fiber is competing with short fiber, replacing it if the technical and economic feasibility allows, and in the short term limiting as well the price of short fiber pulp.

With the new Chinese government there is more optimism with respect to incentives to increase internal consumption in China, but so far this has not meant strong demand in the first quarter. On the contrary, pulp imports decreased 13.2% in long fiber and 13.5% in short fiber during the first months of the year. As opposed to this trend, prices have increased more than in other geographies. In long fiber the price increase during the first quarter was 5% and in short fiber approximately 8%. These price increases were important if we take into consideration that the first quarter of the year is normally stable and not necessarily with strong demand moreover considering the Chinese New Year.

Other markets such as Middle East and Latin America continued with a stable but strong demand. Prices have also been increasing following global trends and especially Middle East where there was fewer pulp surplus supply, except for some long fiber European producers and some short fiber supply coming from Brazil at the beginning of the quarter.

The fluff market continued stable at low levels during all the quarter but with optimism towards the second quarter due to higher demand of this pulp grade in North America, a very important market and producer.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2013

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

 

 

Production during the first quarter of the year was in line with planned levels, meeting production and sales targets (closed deals), however, invoicing levels did not reach target levels due to the strike at ports that affected most of Chile and in particular ports from the Eighth Region, which are the main ports from where we ship our pulp. We expect to recover the sales level during the second quarter.

Sawn Timber Division

Our Sawn Timber division had total sales of US$ 186.8 million for the first quarter of 2013, representing a 10.3% decrease compared to the previous quarter. During this quarter our change in the product sales mix set our average sales price 11.3% lower than the previous quarter, however, volume sales increased 0.6%.

When compared with the same period of 2012, sawn timber and remanufactured wood products sales decreased 1.1%, mainly due to a product sales mix that resulted in a lower average price of 6.3%, partially offset by higher sales volume of 0.3% and by new energy sales (Viñales Co-generation Plant) that started at the end of the second quarter of 2012.

The real estate and construction markets in the United States continued with positive growth during the first quarter of 2013. The Housing Starts Index reached 1.036.000 units per year during March which is a 46.7% increase as compared to March 2012. Current construction levels continue to be low if compared to the historical 10-year average. On average, during the first quarter of 2013 the sales price of moldings in the United States increased when compared to the last quarter of 2012.

During the first quarter of this year the solid wood market has shown a recovery in volumes and prices. Sales orders have increased and there is an upward pressure in prices of wood in most of the markets we sell.

Panels Division

Panel sales reached US$ 449.9 million in the first quarter of this year, an increase of 6.1% when compared to the US$ 424.1 million obtained in the fourth quarter of the year. This increase is mainly explained by an increase in sales volume of 0.8%.

The Panels Division closed the first quarter of 2013 with an increase in accumulated sales of 78% respect to the same quarter of 2012. The increase is explained by the addition of sales coming from our new operations in USA and Canada. Regardless of this important growth, in the case of Argentina and Chile, sales volume during the quarter were stable.

In the case of MDF panel boards, sales volume increased 105% respect to the same quarter of 2012. This strong growth is explained by an increase of supply in the North American market after the Flakeboard and Moncure acquisitions, and also because of the start of the new MDF line in Jaguariaiva, Brazil.

Sales volume of PBO grew 170% with respect to the same quarter of 2012 due to the increase of supply in North America and the additional volume supplied by our new Teno mill in Chile.

In MDF moldings, sales volume grew 10% when compared to the same quarter of 2012, mainly explained by higher demand in North America driven by the housing starts recovery in that market. As of March 2013, prices have increased 19% respect to the March 2012.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Ratio Analysis of the Consolidated Financial Statement

March 31, 2013

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

 

 

Sales volume of our HB panels dropped 9% with respect to the first quarter of 2012. This is explained by a lower demand in South American markets.

4. ANALYSIS OF CASH FLOW

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

 

     03-31-2013
ThU.S.$
    03-31-2012
ThU.S.$
 

Positive (negative) Cash flow

    

Cash flow from operating activities

     169,575        112,787   

Cash flow from financing activities:

    

Loan and bond payments

     (52,087     409,506   

Dividend payments

     (6,224     —     

Others

     —          346   

Cash flow from investment activities:

    

Purchase and sales of permanent investments (net)

     (13,252     (100,066

Incorporation and sale of property, plant and equipment

     (68,653     (152,487

Incorporation and sale of biological assets

     (31,131     (30,117

Loan to related companies (net)

     (7,800     (25,500

Others

     (864     14   
  

 

 

   

 

 

 

Positive Net cash flow (negative)

     (274     217,733   
  

 

 

   

 

 

 

The operating cash flow has a negative balance of U.S.$ 58 million in the current year, with differences over the previous year (positive balance of U.S. $ 410 million) mainly due to bond issues in the year 2012.

In relation to the flow of investment, the current financial year decreased U.S.$ 111 million (U.S.$ 305 million in 2012), mainly due to lower capital investments and lower payments for acquisition of property, plant and equipment in the year 2012.

5. MARKET RISK ANALYSIS

In respect of the economic risks resulting from interest rate variations, the Company maintains, as of March 31, 2013, a ratio of fixed rate debt to total consolidated debt of approximately 87.9%, 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.

In the report to the Interim Consolidated Financial Statements March 31, 2013, Note 23, a detailed analysis of the risks associated with the business of Arauco is available.

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2013

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

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

     Note    03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Assets

        

Current Assets

        

Cash and cash equivalents

   4      394,480         395,716   

Other current financial assets

   23      1,694         1,012   

Other current non-financial assets

   25      224,887         207,889   

Trade and other current receivables

   23      747,439         825,869   

Accounts receivable from related companies

   13      142,105         130,423   

Current Inventories

   3      851,675         815,782   

Current biological assets

   20      259,979         252,744   

Current tax assets

        72,474         55,923   

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

        2,694,733         2,685,358   

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

   22      13,091         13,610   

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

        13,091         13,610   

Total Current Assets

        2,707,824         2,698,968   

Non-Current Assets

        

Other non-current financial assets

   23      73,337         61,350   

Other non-current non-financial assets

   25      129,783         125,254   

Trade and other non-current receivables

   23      6,538         11,877   

Investments accounted for using equity method

   15-16      1,060,579         1,048,463   

Intangible assets other than goodwill

   19      22,676         22,311   

Goodwill

   17      59,318         58,645   

Property, plant and equipment

   7      5,913,481         5,889,137   

Non-current biological assets

   20      3,496,167         3,473,442   

Deferred tax assets

   6      161,032         161,739   

Total non-Current Assets

        10,922,911         10,852,218   

Total Assets

        13,630,735         13,551,186   
     

 

 

    

 

 

 

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

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2013

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

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (continued)

 

 

     Note    03-31-2013
ThU.S.$
    12-31-2012
ThU.S.$
 

Equity and liabilities

       

Liabilities

       

Current Liabilities

       

Other current financial liabilities

   23      830,190        808,614   

Trade and other current payables

   23      494,507        490,191   

Accounts payable to related companies

   13      7,318        9,168   

Other current provisions

   18      8,521        8,875   

Current tax liabilities

        9,329        12,264   

Current provisions for employee benefits

   10      3,919        3,945   

Other current non-financial liabilities

   25      144,262        92,230   

Total Current Liabilities

        1,498,046        1,425,287   

Non-Current Liabilities

       

Other non-current financial liabilities

   23      3,525,928        3,606,310   

Other non-current provisions

   18      15,252        13,281   

Deferred tax liabilities

   6      1,408,899        1,395,654   

Non-current provisions for employee benefits

   10      43,088        43,491   

Other non-current non-financial liabilities

   25      97,475        101,404   

Total non - current liabilities

        5,090,642        5,160,140   

Total liabilities

        6,588,688        6,585,427   

Equity

       

Issued capital

        353,176        353,176   

Retained earnings

        6,814,741        6,754,725   

Other reserves

        (198,899     (216,579

Equity attributable to parent company

        6,969,018        6,891,322   

Non-controlling interests

        73,029        74,437   

Total equity

        7,042,047        6,965,759   

Total equity and liabilities

        13,630,735        13,551,186   
     

 

 

   

 

 

 

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

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2013

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

 

 

CONSOLIDATED STATEMENTS OF INCOME

 

          January - March  
     Note    2013
ThU.S.$
    2012
ThU.S.$
 

Income Statement

       

Revenue

   9      1,182,304        1,010,429   

Cost of sales

   2      (846,361     (724,586

Gross profit

        335,943        285,843   

Other income

   2      74,636        60,988   

Distribution costs

   2      (107,471     (105,297

Administrative expenses

   2      (129,577     (102,823

Other expense

   2      (16,217     (34,137

Other gains (losses)

   14      0        0   

Profit (loss) from operating activities

        157,314        104,574   

Finance income

   2      5,526        4,534   

Finance costs

   2      (55,957     (58,082

Share of profit (loss) of associates and joint ventures accounted for using equity method

   15      4,285        (429

Exchange rate differences

        (2,029     10,793   

Income before income tax

        109,139        61,390   

Income Tax

   6      (15,624     (9,328

Profit (loss) from continuing operations

        93,515        52,062   

Profit (loss) from discontinued operations

       

Net Income

        93,515        52,062   

Net income attributable to

       

Net income attributable to parent company

        89,222        51,425   

Income attributable to non-controlling interests

        4,293        637   

Profit (loss)

        93,515        52,062   

Basic earnings per share

       

Earnings per share from continuing operations

        0.0007885        0.0004545   

Basic earnings per share

        0.0007885        0.0004545   

Earnings per diluted shares

       

Earnings per diluted share from continuing operations

        0.0007885        0.0004545   

Basic earnings per diluted share

        0.0007885        0.0004545   

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

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2013

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

 

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

            January - March  
     Note      2013
ThU.S.$
    2012
ThU.S.$
 

Profit (loss)

        93,515        52,062   

Components of other comprehensive income, before tax:

       

Exchange differences on translation

       

Gains (losses) on exchange differences on translation, before tax

     11         16,489        38,474   

Cash flow hedges

       

Gains (losses) on cash flow hedges, before tax

     23         2,861        (2,087

Share of other comprehensive income of associates and joint ventures accounted for using equity method

        (535     3,061   

Other comprehensive income, net of tax

        18,815        39,448   

Income tax relating to cash flow hedges of other comprehensive income

     6-23         (572     1,098   

Other comprehensive income

        18,243        40,546   

Total comprehensive income

        111,758        92,608   
     

 

 

   

 

 

 

Comprehensive Income attributable to

       

Comprehensive income, attributable to owners of parent company

        106,902        90,697   

Comprehensive income, attributable to non-controlling interests

        4,856        1,911   

Total comprehensive income

        111,758        92,608   
     

 

 

   

 

 

 

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

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Consolidated Financial Statements

March 31, 2013

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

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

03-31-2013

  Issue
Capital
ThU.S.$
    Reserve of
exchange
differences on
translation
ThU.S.$
    Reserve
of cash
flow
hedges
ThU.S.$
    Participation in
other
Comprehensive
Income in
Associates and
Joint Venture
ThU.S.$
    Other
Reserves
ThU.S.$
    Retained
Earnings
ThU.S.$
    Equity
attributable
to owners
of parent
T.hU.S.$
    Non -
controlling
interests
ThU.S.$
    Total
Equity
ThU.S.$
 

Opening balance at 01/01/2013

    353,176        (169,377     (45,110     (2,092     (216,579     6,754,725        6,891,322        74,437        6,965,759   

Comprehensive income

                 

Net income

              89,222        89,222        4,293        93,515   

Other comprehensive income, net of tax

      15,926        2,289        (535     17,680          17,680        563        18,243   

Comprehensive income

      15,926        2,289        (535     17,680        89,222        106,902        4,856        111,758   

Dividends

              (29,206     (29,206     0        (29,206

Increase (decrease) for transfer and other changes

                0        (6,264     (6,264

Total Changes in equity

    0        15,926        2,289        (535     17,680        60,016        77,696        (1,408     76,288   

Closing balance at 03/31/2013

    353,176        (153,451     (42,821     (2,627     (198,899     6,814,741        6,969,018        73,029        7,042,047   

03-31-2012

  Issue
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.$
    Retained
Earnings
ThU.S.$
    Equity
attributable
to owners
of parent
T.hU.S.$
    Non -
controlling
interests
ThU.S.$
    Total
Equity
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

                 

Net income

              51,425        51,425        637        52,062   

Other comprehensive income, net of tax

      37,200        (989     3,061        39,272          39,272        1,274        40,546   

Comprehensive income

      37,200        (989     3,061        39,272        51,425        90,697        1,911        92,608   

Dividends

            0        (21,350     (21,350     0        (21,350

Increase (decrease) for transfer and other changes

            0          0        (47     (47

Total Changes in equity

    0        37,200        (989     3,061        39,272        30,075        69,347        1,864        71,211   

Closing balance at 03/31/2012

    353,176        (30,339     (26,903     (307     (57,549     6,713,327        7,008,954        92,407        7,101,361   

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

 

 

 

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     03-31-2013
ThU.S.$
    12-31-2012
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

     1,330,493        1,122,262   

Receipts from premiums and claims, annuities and other policy benefits

     29,819        545   

Other cash receipts from operating activities

     170,969        82,024   

Classes of cash payments

    

Payments to suppliers for goods and services

     (1,105,988     (930,447

Payments to and on behalf of employees

     (127,179     (89,856

Other cash payments from operating activities

     (47,493     (4,864

Interest paid

     (64,380     (49,359

Interest received

     2,918        2,389   

Income taxes refund (paid)

     (19,225     (19,768

Other (outflows) inflows of cash, net

     (359     (139

Net Cash flows from Operating Activities

     169,575        112,787   
  

 

 

   

 

 

 

Cash flows (used in) investing activities

    

Cash flow used in obtaining control of subsidiaries or other businesses

     —          (62,911

Cash flow used to contributions in associates

     —          (13,490

Capital contributions to joint ventures

     (13,252     (23,665

Loans to related parties

     (11,000     (25,500

Proceeds from sale of property, plant and equipment

     13,497        1,382   

Purchase of property, plant and equipment

     (82,150     (153,869

Proceeds from sales of intangible assets

     —          3,250   

Purchase of intangible assets

     (861     —     

Proceeds from sale of other long-term assets

     810        644   

Purchase of biological assets

     (31,941     (30,761

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

     3,200        0   

Other outflows of cash, net

     (3     14   

Cash flows used in Investing Activities

     (111,538     (304,906
  

 

 

   

 

 

 

Cash flows from (used in) Financing Activities

    

Total loans obtained

     269,606        523,952   

Proceeds from short-term borrowings

     —          491,350   

Loans obtained in long term

     269,606        32,602   

Repayments of borrowings

     (321,693     (114,446

Dividends paid

     (6,224     —     

Other inflows of cash, net

     —          346   

Cash flows from (used in) Financing Activities

     (58,311     409,852   
  

 

 

   

 

 

 

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

     (274     217,733   

Effect of exchange rate changes on cash and cash equivalents

     (962     4,336   
  

 

 

   

 

 

 

Net increase (decrease) of Cash and Cash equivalents

     (1,236     222,069   

Cash and cash equivalents, at the beginning of the period

     395,716        315,901   

Cash and cash equivalents, at the end of the period

     394,480        537,970   
  

 

 

   

 

 

 

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

 

 

 

 

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AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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 with its subsidiaries, “Arauco”), tax identification number 93,458,000-1, is a closely held corporation, that was registered in the Securities Registry (the “Registry”) of the Superintendency of Securities and Insurance (the “Superintendency”) under No. 042 on June 14, 1982. Forestal Cholguán S.A., subsidiary of Arauco, is also registered in the Registry under No. 030. Additionally, the Company is registered as a non-accelerated filer with the Securities and Exchange Commission of the United States.

The Company’s head office address is El Golf Avenue 150, floor 14th, 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.

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 the oversight of the Superintendency.

The ultimate shareholders of Arauco are Mrs. Maria Noseda Zambra de Angelini, Mr. Roberto Angelini Rossi and Mrs. Patricia Angelini Rossi through the entity Inversiones Angelini y Cia. Ltda., which owns 99.9780% of the shares of AntarChile S.A., the controlling shareholder of our parent company Empresas Copec S.A.

Arauco’s Interim Consolidated Financial Statements were prepared on a going concern basis.

Presentation of Financial Statements

The Financial Statements presented by Arauco as of March 31, 2013 are:

 

   

Consolidated Balance Sheet as of March 31, 2013 and December 31, 2012.

 

   

Consolidated Statements of Income for the period ended 2013 and 2012.

 

   

Consolidated Comprehensive Income Statements for the period ended 2013 and 2012.

 

   

Consolidated Statements of Changes in Net Equity for the period ended 2013 and 2012.

 

   

Consolidated Statements of Cash Flows – Direct Method for the period ended 2013 and 2012.

 

   

Notes to the consolidated financial statements.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Period covered by the Financial Statements

Period ended at March 31, 2013

Date of Approval of Financial Statements

These Interim consolidated financial statements were authorized and approved for issue by the Board of Directors of the Company (the “Board”) at the Extraordinary Session N° 486 held on May 14, 2013, for the period from 1 January to 31 March 2013.

Functional and Presentation Currency

Arauco and most of its subsidiaries has determined the U.S. Dollar as its functional currency since majority of its revenues from sales of its products are from exports, while its costs of sales are to a large extent related or index to the U.S. Dollar.

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

For the sawmill, panel and forestry operating segments, although total sales include a mix of domestic and exports sales, 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.

In relation to cost of sales, 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, which are driven mainly by global markets and therefore, influenced mostly by the U.S. Dollar.

The presentation currency of the consolidated financial statements is the U.S. dollar.

Figures on these consolidated financial statements are presented in thousands of U.S. dollar (ThUS$).

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. meet the requirements for classification as Special Purpose Entities. These entities are in substance controlled by Arauco, which is indicated, by the existence of exclusive contracts with Arauco for wood supply, future purchases of land and forest administration. Consequently, the financial statements of these companies are included in the consolidated financial statements of Arauco.

Compliance and adoption of IFRS

The accompanying consolidated financial statements of Arauco presents in all material respects its financial position, its results of operations and its 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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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Summary of significant accounting policies

The accompanying Interim consolidated financial statements as of March 31, 2013 were prepared in accordance with Arauco’s accounting policies, which have been consistently applied to all periods presented in these Interim consolidated financial statements.

 

a) Basis for Presentation of financial statements

The accompanying Interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and they represent the integral, explicit and unreserved adoption of IFRS.

The Interim consolidated financial statements have been prepared on the historical cost basis except for biological assets, and certain financial assets and financial liabilities (including derivative instruments) that are measured at fair value.

 

b) Critical accounting estimates and judgments

The preparation of consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the carrying amounts reported. The estimates are based on historical experience and various other assumptions that are considered to be reasonable. Actual results may differ from these estimates. Management believes that the accounting policies below are the critical judgments that have the most significant effect on the amounts recognized in the consolidated financial statements.

- Property, Plant and Equipment

In a business acquisition, management values the acquired property, plant and equipment and their useful lives in consultation with a third party expert.

The carrying amounts of property, plant and equipment 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 the higher of fair value less costs to sell and its value in use, with an impairment loss 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.

A sensitivity analysis related to the estimated useful lives is disclosed in Note 7.

- 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 reporting date.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Detailed financial information about the 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 measure forest plantations are presented in Note 20, including a sensitivity analysis.

- Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and suitable discount rate in order to calculate present value.

- Employee benefits

The cost of defined employee benefits for termination of employment, as well as the present value of the obligation is determined using actuarial valuations. The actuarial valuations involve making assumptions about discount rates, staff turnover, future salary increases and mortality rates.

- Litigation and Contingencies

Arauco and its subsidiaries are subject to certain litigation. Future effects on Arauco’s financial condition resulting from such litigation are estimated by management, in collaboration with its legal advisors. Arauco recognizes provisions on each statement of financial position date and/or upon each substantial modification to an underlying claim of any such litigations. For description of current litigations see Note 18.

 

c) Consolidation

The Interim consolidated financial statements include all entities over which Arauco has the power to govern the financial and operating policies, which is presumed to exist when Arauco holds more than one half of the voting rights of an entity so as to obtain benefits from its activities. Subsidiaries (including special purpose entities) are consolidated from the date on which control is transferred to the group and up to the date that control ceases.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

A special purpose entity (“SPE”) is an organization that is established for a specific purpose or limited duration. Often these SPE serve as intermediary organizations. In substance, the activities of the SPE are being conducted on behalf of Arauco according to its specific business needs so that it obtains benefits from the SPE’s operation. An SPE shall be consolidated when the substance of the relationship between the consolidated entity and the SPE indicates that it is controlled by that entity.

All intercompany transactions and unrealized gains and losses from subsidiaries and special purpose entities have been fully eliminated from consolidation and non-controlling interests is presented in the Interim consolidated statement of financial position within equity, separately from the equity of the owners of the parent.

The Interim consolidated financial statements corresponding to the periods between January 1 and March 31, 2013 and 2012 include the assets, liabilities, income and expenses of the subsidiaries shown in Note 13 and those of the Fondo de Inversión Bío Bío, and its subsidiary Forestal Río Grande S.A., both of which are special purpose entities.

Certain consolidated subsidiaries have Brazilian Real and Chilean Pesos as, their functional currencies. For consolidation purposes, the financial statements of those subsidiaries have been prepared in accordance with IFRS and translated into the presentation currency as indicated in Note 1 e) (ii).

Accounting policies for subsidiaries are adjusted if necessary to ensure consistency with the accounting policies applied by Arauco.

 

d) Segments

Arauco has defined its operating segments according to its business areas, based on the products and services sold to its customers. This definition 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 Operating Decision Maker (CODM) is the Chief Executive Officer who is responsible for making these decisions and it is supported by the Corporate Managing Directors of each segment.

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

 

   

Pulp

 

   

Panels

 

   

Sawn Timber

 

   

Forestry

Refer to Note 24 for detailed financial information by operating segment.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

e) Functional currency

(i) Functional currency

All items in the financial statements of Arauco and each of its subsidiaries, associates and jointly controlled entities are measured using the currency of the primary economic environment in which each entity operates (the functional currency). The Interim consolidated financial statements are presented in U.S. dollars, which is Arauco’s functional and presentation currency.

(ii) Translation to the presentation currency of Arauco

For the purposes of presenting consolidated financial statements, the assets and liabilities of Arauco’s foreign operations are translated into U.S. dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.

On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the parent are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in Arauco losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss. For partial disposals of associates or jointly controlled entities that do not result in Arauco losing significant influence or joint control, the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the end of each reporting period. Exchange difference arising are recognized in other comprehensive income and accumulated in equity.

(iii) Foreign Currency Transactions

Transactions in foreign currencies are recognized at the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognized in profit or loss in the periods in which they arise except for exchange differences on transactions entered into in order to hedge certain foreign currency risks.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

f) Cash and cash equivalents

Cash and cash equivalents include cash-in-hand, deposits held on demand at banks and other short term highly liquid investments with an original maturity of less than three months and which are subject to an insignificant risk of changes in value.

 

g) Financial Instruments

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

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

Derivatives are also classified as held for trading unless they are designated and effective as hedging instruments. Assets in this category are classified as current assets and the obligation for these instruments is presented under other financial liabilities within the statement of financial position.

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

The financial assets and liabilities measured at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statement of income. They are subsequently measured at fair value with any gains or losses from changes in fair value recognized in profit or loss.

Interest Rate and Currency Swaps: Swaps are measured using the discounted cash flow method at a discount rate consistent with the risk of the operation.

Foreign Exchange Forwards: These instruments are initially recognized at fair value at the date on which the contract is entered into and are subsequently remeasured at fair value. Forwards are recognized as assets when fair value is positive and, as liabilities when fair value is negative.

The fair value of foreign exchange forward contracts is calculated by reference to current forward exchange rates for contracts with similar maturities.

The fair value of interest rate forward contracts is calculated by reference to the difference of the existing interest rates between the interest rate contractually agreed and the market interest rate at the end of each reporting period.

Mutual Funds: They are highly liquid instruments that are sold in the short term and are carried at their net asset value at the end of each period.

(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. Loans and receivables are classified as current assets, except for those with maturities more than 12 months after the reporting period, which are classified as non-current assets. Loans and receivables include trade and other receivables.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Loans and receivables are initially recognized at fair value and subsequently are measured at amortized cost using the effective interest rate method, less any impairment.

Repurchase Agreements: These are recognized at their initial investment cost plus accrued interest at the end of each reporting period. These contracts have maturities of less than 30 days.

(iii) Financial liabilities measured at amortized cost

Bank borrowings, debt issued (bonds) and financial liabilities of a similar nature are initially recognized at fair value. Transactions costs are included in the carrying amount of the liabilities and are amortized over the lives of the liabilities using the effective interest rate method).

In subsequent periods, they are measured at amortized cost and any difference between the proceeds (net of transaction costs) received, and the redemption value is recognized in profit or loss statement over the life of the debt using the effective interest rate method.

Financial liabilities are classified as current liabilities unless the Company has an unconditional right to defer settlement for at least twelve months after the reporting period.

The fair value of bank borrowings is determined using discounted cash flow techniques using rates consistent with the risk associated with bank borrowings of similar nature, while bonds are measured at their quoted market price.

(iv) Trade and other payables

These instruments are initially recognized at fair value and subsequently are measured 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 hedging instruments in cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of income within other income or other expenses, respectively.

When a hedging instrument expires or is settled, or when it ceases to qualify for hedge accounting, any cumulative gain or loss recognized in equity remains in equity until the forecasted transaction occurs, when the transaction occurs it is reclassified to profit or loss. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss recognized in equity is immediately reclassified to profit or loss.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

The fair value of hedging instruments are measured using internal model including discounted cash flow techniques that use a discount rate consistent with the operational risk using internal valuation methodology and market information from providers of recognized reputation.

 

h) Inventories

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

The cost of finished goods and products in process includes the cost of raw materials, direct labor, other direct costs and general overhead 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 production costs of a product exceeding its net realizable value, the inventories are write-down to its net realizable value. This write-down also includes obsolescence amounts resulting from slow moving inventories and technical obsolescence.

Spare parts that will be consumed in a period of less than twelve months, are presented in inventories and recognized as an expense when they are consumed.

 

i) Non-current assets held for sale

Non-current assets held for sale are measured at the lower of their previous carrying value and fair value less costs to sell. Assets are classified as held for sale when their carrying value will be recovered principally through a sale transaction that is highly probable and the non-current asset is available for immediate sale in its present condition. Management must be committed to a plan to sell the asset, and an active program to locate a buyer and complete the plan must have been initiated. In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification, except for the existence of events or circumstances (beyond the entity’s control) that may extend the period to complete the sale beyond one year.

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

 

j) Business Combinations

Arauco applies the acquisition method to account for a business combination. This method, requires to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any non-controlling

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

interest in the acquiree; and recognize and measure goodwill or a gain from a bargain purchase. Identifiable assets acquired and liabilities assumed and any contingent liabilities in a business combination are initially measured at fair value at the acquisition date.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income statement.

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 irrespective of whether other assets or liabilities of the acquire are allocated to those units or groups of units.

Acquisition-related costs are accounted for as expenses when they are incurred, except for costs to issue debt or equity securities which are recognized in accordance with IAS 32 and IAS 39.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the present ownership instruments’ proportionate share in the recognized amounts of the acquire’s identifiable net assets. The choice is made on a transaction-by-transaction basis.

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.

If the initial accounting for a business combination is not completed by the end of the reporting period in which the combination occurs, Arauco reports provisional amounts for the items for which the accounting is incomplete. During the measurement period (no more than one year), these provisional amounts are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information about facts and circumstances that existed at the acquisition date, if known, would have affected the amounts recognized at that date.

 

k) Investments in associates and joint ventures

Associates are entities over which Arauco exercises significant influence, generally when it holds between 20% and 50% of the voting rights, but not control.

Joint venture is defined as an entity over which there is joint control, which exists only when the decisions about strategic of activities, both financial and operational, require the unanimous consent of the parties sharing control.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Investments in associates and joint ventures are accounted for using the equity method and are initially recognized at cost. Their carrying amount is increased or decreased to recognize Arauco’s share of the profit or loss and other comprehensive income (exchange differences on translation to the reporting currency) of the associate or joint venture. Dividends received are recognized by deducting the carrying amount of the investment. Arauco’s investment in associates includes goodwill (net of any accumulated impairment loss).

If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income statement.

These investments are presented in the consolidated statement of financial position in the line item “Investments accounted for using equity method”.

If Arauco’s share of losses of an associate or joint venture equals or exceeds its interest in the associate or joint venture, Arauco discontinues recognizing its share of further losses. After Arauco’s carrying value in the investee is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that Arauco has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits, Arauco resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized.

 

l) Intangible assets

After initial recognition, intangible assets are with finite useful lives carried at cost less any accumulated amortization and impairment losses.

Amortization of an intangible asset with a finite useful life is allocated on a systematic basis over the asset’s useful life. Amortization begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management

 

(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) Water Rights, Easements and Other Rights

This item includes water-rights, easements and other acquired rights recognized at historical cost which have indefinite useful lives as there is no foreseeable limit to the period over which these assets are expected to generate net cash inflows. These rights are not amortized, but are tested for impairment at least annually, or when there is any indication that the assets might be impaired.

 

m) Goodwill

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Goodwill is not amortized but is tested for impairment on annual basis.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Goodwill recognized for the acquisition of the subsidiary Arauco do Brasil S.A. whose functional currency is the Brazilian real, is translated into U.S. dollars at the closing exchange rate. At the date of these financial statements, the only change in the carrying amount of goodwill is related to the net exchange rate differences on translation.

 

n) Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost includes expenditures that are directly attributable to the acquisition of the assets.

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 Arauco and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized from property, plant and equipment. All other repairs and maintenance costs are expensed in the period in which they are incurred.

Arauco capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets as part of the cost of those assets, until the assets are ready for their intended use (see Note 12).

Depreciation is calculated by components using the straight-line method.

The useful lives of the items of property, plant and equipment is estimated according to the expected use of the assets.

The residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

 

o) Leases

Leases of assets in which Arauco substantially holds all the risks and rewards of ownership are classified as finance leases. Finance leases are initially recognized at the lower of the fair value at the inception of the lease of the leased property and the present value of the minimum lease payments.

When assets are leased under a finance lease, the present value of lease payments are recognized as financial account receivables. Finance income, which is the difference between the gross receivable and the present value of such amount, is recognized as the interest rate of return.

Leases in which substantially all 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 recognized as an expense on a straight-line basis over the lease term.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

p) Biological Assets

IAS 41 requires that biological assets, such as standing trees, are measured at fair value in the statement of financial position. Plantations forestry are accounted for at fair value less costs to sell, based on the presumption that fair values of these assets can be measured reliably.

The measurement of plantations forestry is based on discounted cash flow models whereby the fair value of the biological assets is determined using estimated future cash flows from continuing operations calculated using our sustainable forest management plans and including the estimated growth of the forests. This valuation is performed on the basis of each identifiable farm block and for each type of tree.

The measurement of new plantations forestry made during the current year, is made at cost, which corresponds to the fair value at that date. After twelve months, the valuation methodology used is that explained in the preceding paragraph.

Biological assets shown as current assets correspond to those plantations forestry that will be harvested in the short term.

Biological growth and changes in fair value of plantations forestry are recognized in line item other income included in profit from operating activities in the statement of income.

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

 

q) Income taxes and Deferred taxes

The tax liabilities are recognized in the financial statements based on the determination of taxable income for the year and calculated using the tax rates in force in the countries where Arauco operates.

Deferred income tax is recognized using the balance sheet 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 or substantively enacted by the end of the reporting period and that are expected to apply when the related deferred tax asset is realized or the deferred income tax liability is settled.

The goodwill arising on business combinations not give rise to deferred tax.

The deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which those deductible temporary differences can be utilized.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

r) Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period.

 

s) Revenue recognition

Revenues are recognized when Arauco has transferred the risks and rewards of ownership to the buyer and Arauco retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. This means that generally revenues are recorded upon delivery of goods to customers in accordance with the agreed terms of delivery.

 

  (i) Revenue recognition from the Sale of Goods

Revenue from the sale of goods is recognized when Arauco has transferred to the buyer the significant risks and rewards of ownership of the goods, when the amount of revenue can be reliably measured, when Arauco does not retain any managerial involvement over the goods sold and when it is probable that the economic benefits associated with the transaction will flow to Arauco and the costs incurred in respect of the transaction can be measured reliably.

Sales are recognized in terms of the price agreed to in the sales contract, less any volume discounts and estimated product returns 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 from sales are collected within a short period, which is in line with market practices.

 

  (ii) Revenue recognition from Rendering of Services

When the outcome of a transaction involving the rendering of services can be estimated reliably revenue associated with the transaction is recognized by reference to the stage of completion of the transaction at the date of the reporting period, and when it is probable that the economic benefits associated with the transaction will flow to the Arauco.

Arauco mainly provides power supply which are traded in the spot market of the Sistema Interconectado Central (Interconnected Central System). According to current regulations, the prices on that market called “Marginal Costs” are calculated by the Centro de Despacho Económico de Carga del Sistema Interconectado Central (CDEC – SIC) (Load Economical Dispatch Center of the Interconnected Central System) and are generally recognized in the period in which the services are rendered.

Electrical power is generated as a by-product of the pulp process and is a complementary business to it, which is firstly supplied to the group’s subsidiaries and any surplus is sold to the interconnected central system.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Arauco provides other non-core services such as port services and pest control whose revenues are derived from fixed price service contracts, generally recognized during the period of the service contract on a straight-line basis over the term of the contract.

Revenues from operating segments mentioned in Note 24 are measured in accordance with the policies indicated in the preceding paragraphs.

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

 

t) Minimum dividend

Article No. 79 of the Chilean Corporations Law states that, unless otherwise unanimously agreed by the shareholders, corporations must distribute annually at least 30% of net income for the current year as cash dividend to shareholders determined in proportion to their shares or in the proportion established in the by-laws for preferred shares, if any, except where necessary to absorb accumulated losses from prior years.

The General Shareholders’ Meeting of Arauco agreed to distribute annual dividends at 40% of net distributable income, including an interim dividend to be distributed at year end. Dividends payable are recognized as a liability in the financial statements in the period when they are declared and approved by the Arauco’s shareholders or when arises the corresponding present obligation based on existing legislation or distribution policies established by the Shareholders’ Meeting.

The interim and final dividends are recorded in equity upon their approval by the Company’s Board of Directors and the shareholders.

Dividends payable are presented in the line item “other current non financial liabilities”.

Dividends paid are not deductible for income tax purposes.

 

u) Impairment

Non-financial Assets

The recoverable amount of property, plant and equipment and other assets with finite useful lives are measured whenever there is any indication that the assets have suffered an impairment loss. Among the indications to consider as evidence of impairment are significant declines in the assets’ market value, significant adverse changes in the technological environment, obsolescence or physical damages of assets and changes in the manner in which the asset is used or expected to be used). Arauco evaluates at the end of each reporting period whether there is any evidence of the indications above mentioned.

For this evaluation, assets are grouped at the lowest level of group of assets that generates cash flows independently.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Goodwill and intangible assets with indefinite useful life are tested annually for impairment or whenever circumstances indicate it. The recoverable amount of an intangible asset is the higher of its fair value less costs of disposal and its value in use. An impairment loss is recognized whenever the carrying amount exceeds the recoverable amount.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

A previously recognized impairment loss is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. Impairment losses are reversed so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. An impairment loss recognized for goodwill is not reversed in subsequent periods.

For the purposes of assessing impairment losses, assets are grouped at the lowest level for which there is identifiable cash flows separately for each cash-generating unit. Non-financial assets, other than goodwill, which had suffered an impairment loss, are reviewed at the end of each reporting period whether there is any indication that an impairment loss previously recognized may no longer exists or have decreased.

“Cash-generating units” are the smallest identifiable groups of those cash inflows that are largely independent of the cash inflow from other assets or groups of assets.

Goodwill is allocated to cash-generating units for impairment testing purposes. The allocation is made between cash-generating units or groups of cash generating units expected to benefit from the synergies of the combination.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Financial Assets

At the end of each reporting period, an evaluation is performed in order to identify whether there is any objective evidence that a financial asset or a group of financial assets may have been impaired. Financial assets are impaired only when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of a financial asset, the estimated future cash flows of the financial asset have been affected. Impairment losses are recognized in the consolidated statement of income.

The allowance for doubtful accounts is established when there is objective evidence that Arauco will not receive payments under the original sale terms. Allowance is made when the customer 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 the receivable in a reasonable time.

The allowance for doubtful accounts is measured as the difference between the carrying amount of receivables and the present value of estimated future cash flows. The carrying amount of the receivable is reduced through the use of the allowance. If the impairment loss decreases in later periods, it is reversed either directly or by adjusting the provision for doubtful accounts, with effect in profit or loss.

 

v) Employee Benefits

Arauco has severance payment obligations arising from voluntary termination of employment. These are paid to certain employees that have been employed by the company for more than five years in accordance with conditions established within collective or individual employment 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. These obligations are considered a defined benefit plan.

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

Actuarial gains and losses are recognized in profit or loss in the year they are incurred.

These obligations are treated as post-employment benefits.

 

w) Employee Vacations

Arauco recognizes the expense for employee vacation according to labor legislation in each country on an accrual basis.

This obligation is presented in the line item “Trade and Other payables” in the consolidated statement of financial position.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

x) Recent accounting pronouncements

The following accounting pronouncements were effective as of January 1, 2013:

 

New Standards and
interpretations

  

Content

  

Mandatory application
for annual periods
beginning on or after

IAS 19 revised   

Employee Benefits

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 disclosures of all employee benefits.

   January 1, 2013
IAS 27 revised   

Separate Financial Statements

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

   January 1, 2013
IFRS 10   

Consolidated Financial Statements

Issued in May 2011, replaces 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 1, 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 option of proportional consolidation of joint control entities. Early adoption is permitted in conjunction with IFRS 10, 12 and IFRS amendments to IAS 27 and 28.

   January 1, 2013
IFRS 12   

Disclosure of interests in other entities

Issued in May 2011, applies to those entities that have interest in subsidiaries, joint arrangements, associates or unconsolidated structured entities. Early adoption is permitted in conjunction with IFRS 10, 11 and IFRS amendments to IAS 27 and 28.

   January 1, 2013
IFRS 13   

Fair Value Measurement

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

   January 1, 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, this interpretation requires mining entities presenting IFRS financial statements to write down the existing assets recognized as “Stripping Costs” against retained earnings when they cannot be attributed to an identifiable component of a mine.    January 1, 2013

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Amendments and

improvements

  

Contents

  

Mandatory application
for annual periods
beginning on or

IAS 28    Investments in associates and joint ventures    January 1, 2013
   Issued in May 2011, sets out 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.   
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 profit or loss in subsequent periods. Early adoption is permitted.

   July 1, 2012
IFRS 7   

Financial Instruments

 

Disclosures and amendments to disclosures about netting of assets and liabilities.

   January 1, 2013

Guidelines for transition

Amendments to IFRS 10, IFRS 11 and IFRS 12

   Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities.    January 1, 2013

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

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

 

Amendments and

improvements

  

Contents

  

Mandatory application
for annual periods
beginning on or

IFRS 9    Financial Instruments
Issued in December 2009, amending the classification and measurement of financial assets.
In November 2010 it was also amended to include treatment and classification of liabilities. Early adoption is permitted.
   January 1, 2015
IAS 32   

Offsetting of financial assets and liabilities

 

The amendments clarify the requirements for offsetting financial assets and financial liabilities in order to eliminate inconsistencies in the implementation of the current offsetting criteria in IAS 32. The Standard is applicable for annual periods beginning on or after January 1, 2014 and early adoption is permitted.

   January 1, 2014
Amendments to IFRS 12, IFRS 10, IAS 27    Investment Entities Consolidated Financial Statements, Disclosure of Interests in Other Entities and Separate Financial Statements.    January 1, 2014

Arauco believes that the adoption of the standards, amendments and interpretations described above will have no significant impact on its consolidated financial statements of that Company in the period of initial application. We are in the process of assessing the impact on the valuation and disclosures associated with these modifications.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

NOTE 2. DISCLOSURE OF OTHER INFORMATION

 

a) Disclosure of Information on Issued Capital

The issued capital authorized, subscribed and fully paid of Arauco for the period ended March 31, 2013 and December 31, 2012 is ThU.S.$353,176 which is composed of 113,152,446 ordinary shares of a single series.

 

     03-31-2013    12-31-2012

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
     03-31-2013    12-31-2012

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

   113,152,446

 

b) Dividends paid

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 equity.

The final dividend paid each year corresponds to the difference between the 40% of prior year net income distributable and the amount of interim dividend paid at the end of the immediately preceding fiscal year.

The provision of minimum dividend corresponding to the year 2013 of ThU.S.$29,206 (ThU.S.$21,350 as of March 31, 2012) is presented in the consolidated statement of changes in equity.

The line item “Dividends paid” in the statement of cash flows for ThU.S.$6,224 as of March 31, 2013, correspond to payments of special purpose companies. At March 31, 2012 there were no dividend payments.

The following are the dividends paid during 2012 and the corresponding amount per share:

 

Detail of Dividend Paid, Ordinary Shares

  

Dividend Paid

   Interim Dividend

Type of Shares for which there is a Dividend Paid

   Ordinary Shares

Date of Dividend Paid

   12-12-2012

Amount of Dividend

   ThU.S.$ 17,321

Number of Shares for which Dividends are Paid

   113,152,446

Dividend per Share

   U.S.$0,15308

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

   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

   U.S.$ 1.42788

 

c) Disclosure of Information on Reserves

Other Reserves

Other reserves consist of reserves of exchange differences on translation, reserves of cash flow hedges and other reserves.

Arauco does not have any restrictions associated with these reserves.

Reserves of exchange differences on translation

Corresponds to exchange differences relating to the translation of the results and net assets of Arauco’s subsidiaries whose functional currency is other than Arauco’s presentation currency.

Reserves of cash flow hedges

Corresponds to the portion of gains or net losses of outstanding hedging swaps in Arauco at each period.

Other reserves

This mainly corresponds to the share of other comprehensive income of investment in associates and joint ventures.

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

d) Disclosures of other Information

The table below sets forth other income, other expenses, finance income, finance costs and share of profit (loss) of associates and joint venture as of March 31, 2013 and 2012:

 

     January - March  
     2013     2012  
     ThU.S.$     ThU.S.$  

Classes of Other Income by activity

    

Other Operating Income, Total

     74,636        60,988   

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

     67,609        43,890   

Net income from insurance compensation

     1,486        —     

Revenue from export promotion

     1,110        746   

Leases received

     141        757   

Gain on sales of assets

     778        5,874   

Other operating results (sale materials and waste, rent of easements, income tax recovery)

     3,512        9,721   

Classes of Other Expenses by activity

    

Total of other expenses by activity

     (16,217     (34,137

Depreciations

     (153     (156

Contingent provision

     (1,163     (945

Impairment provision properties, plants and equipment and others

     (2,212     —     

Plants stopped operating expenses

     (3,056     (11,055

Expenses projects

     —          (4,186

Loss and repairs of assets

     (1,975     (5,706

Loss of forest due to fires

     (72     (2,218

Other Taxes

     (1,133     (1,266

Research and development expenses

     (565     (1,457

Compensation and eviction

     (518     (1,070

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

     (5,370     (6,078

Classes of financing income

    

Financing income, total

     5,526        4,534   

Financial income from mutual funds - deposits

     1,704        2,695   

Financial income resulting from swap - forward

     1,198        —     

Other financial income

     2,624        1,839   

Classes of financing costs

    

Financing costs, Total

     (55,957     (58,082

Interest expense, Loans banks

     (5,157     (2,786

Interest expense, Bonds

     (44,034     (41,121

Interest expense, financial instruments

     (2,602     (10,754

Other financial costs

     (4,164     (3,421

Classes of Participation in Income (Loss) of associates and joint ventures accounted for using the Equity Method

    

Total

     4,285        (429

Investments in associates

     1,394        1,093   

Joint ventures

     2,891        (1,522

 

 

 

 

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Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Below is the Balance of Expenses by nature:

 

     January - March  

Cost of sales

   2013
ThU.S.$
    2012
ThU.S.$
 

Timber

     210,852        208,091   

Forestry labor costs

     148,758        136,064   

Depreciation

     64,864        53,431   

Maintenance costs

     52,553        48,569   

Chemical costs

     121,116        81,646   

Sawmill Services

     44,237        45,925   

Others Raw Materials

     24,829        8,057   

Indirect costs

     53,741        59,019   

Energy and fuel

     45,561        29,806   

Cost of electricity

     21,597        16,059   

Wage and salaries

     58,253        37,919   

Total

     846,361        724,586   
  

 

 

   

 

 

 
     January - March  

Distribution cost

   2013
ThU.S.$
    2012
ThU.S.$
 

Selling costs

     8,769        7,811   

Commissions

     3,865        3,646   

Insurance

     1,527        1,023   

Provision for doubtful accounts receivable

     (18     5   

Other selling costs

     3,395        3,137   

Shipping and freight costs

     98,702        97,486   

Port services

     6,028        6,975   

Freights

     81,836        86,110   

Other shipping and freight costs

     10,838        4,401   

Total

     107,471        105,297   
  

 

 

   

 

 

 
     January - March  

Administrative expenses

   2013
ThU.S.$
    2012
ThU.S.$
 

Wage and salaries

     58,405        41,624   

Marketing, advertising, promotion and publications expenses

     2,026        1,740   

Insurance

     10,445        6,242   

Depreciation and amortization

     3,558        2,684   

Computer services

     3,655        3,080   

Lease rentals (offices, warehouses and machinery)

     4,088        2,705   

Auditor’s fees

     1,190        1,059   

Donations, contributions, scholarships

     2,146        2,064   

Fees (legal and technical advisories)

     11,494        14,258   

Property taxes, patents and municipality rights

     3,851        2,630   

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

     28,719        24,737   

Total

     129,577        102,823   
  

 

 

   

 

 

 

 

     Note    January-March  
          2013      2012  

Expenses for

        ThU.S.$      ThU.S.$  

Depreciations

   7      68,634         57,195   

Employee benefits

   10      125,042         93,446   

Amortization

   19      832         371   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

NOTE 3. INVENTORIES

 

     03-31-2013      12-31-2012  

Components of Inventory

   ThU.S.$      ThU.S.$  

Raw materials

     94,919         90,466   

Production supplies

     86,621         82,248   

Products in progress

     70,446         78,981   

Finished goods

     466,429         435,546   

Spare Parts

     133,260         128,541   

Total Inventories

     851,675         815,782   
  

 

 

    

 

 

 

Inventories recognized as cost of sales at March 31, 2013 were ThU.S.$843,543 (ThU.S.$725,196 at March 31, 2012).

In order to recognize inventories at net realizable value, at March 31, 2013, a net reduction is recognized of inventories associated with greater provision for obsolence of ThU.S.$ 224 (ThU.S.$ 457 as of March 31, 2012).

As of March 31, 2013 there are no penalties inventory report, at March 31, 2012 there were penalties inventory of ThU.S.$20,235, respectively as result of the fire occurred in January 2012 affecting a panels plant in Complejo Forestal e Industrial Nueva Aldea.

The allowance of obsolescence is calculated based on the conditions of sale of products and age of inventory (inventory turnover).

No inventories have been pledged as security for liabilities at the end of each reporting period.

Agricultural Products

Agricultural Products are mainly forestry products that are intended for sale in the normal course of our operations and are measured at fair value less costs to sell at the point of harvest at the end of each reporting period Agricultural products are classified as raw materials within the line item inventories.

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

NOTE 4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, bank checking account balances, time deposits, repurchase agreements and mutual funds. They are short-term highly liquid investments that are readily convertible to known amounts of cash, and are subject to an insignificant risk of changes in value.

The investment objective of time deposits and repurchase agreements is to maximize in the short-term the amounts of cash surpluses. These instruments are permitted under Arauco’s Investment Policy, which allows investing in fixed income securities. These instruments have a maturity of less than three months from the date of acquisition.

Arauco invests in local and international mutual funds in order to maximize the returns of cash surpluses denominated in Chilean Pesos or in foreign currencies such as U.S. Dollars or Euros. These instruments are permitted under Arauco’s Investment Policy.

As of the date of these consolidated financial statements, there are no amounts of cash and cash equivalents with restrictions on use.

 

     03-31-2013      12-31-2012  

Components of Cash and Cash Equivalents

   ThU.S.$      MUS$  

Cash on hand

     432         543   

Bank checking account balances

     97,032         62,816   

Time deposits

     182,395         151,799   

Mutual funds

     114,621         180,558   

Total

     394,480         395,716   
  

 

 

    

 

 

 

NOTE 5. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES

Changes in Accounting Policies

The accounting policies have been developed in accordance with the effective IFRS as of March 31, 2013 and have been consistently applied to all periods presented in these interim consolidated financial statements.

Changes in Estimates and Accounting Policies

The financial statements as of March 31, 2013 do not show changes in accounting policies compared to the last year.

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

NOTE 6. TAXES

The tax rates applicable in the countries in which Arauco operates are 20% in Chile, 35% in Argentina, 34% in Brazil and 34% in United States (federal tax).

On September 27, 2012, Law N° 20,630 was enacted in Chile, and among other changes, it increases the tax rate to a permanent 20%, effective beginning on tax year 2012. The change in the tax rate in 2012 affected the measurement of the tax consequences of temporary differences that are expected to reverse in the corresponding tax years.

The effect on the results of operations for the year ended December 31, 2012 due to the change in tax rate was an expense of ThU.S.$128,981, which was generated mainly the result of the expected reversal of temporary differences associated with property, plant, equipment and biological assets.

Deferred Tax Assets

The following table sets forth the deferred tax assets as of March 31, 2013 and at December 31, 2012:

 

     03-31-2013      12-31-2012  

Deferred Tax Assets

   ThU.S.$      ThU.S.$  

Deferred tax Assets relating to Provisions

     4,650         4,752   

Deferred tax Assets relating to accrued liabilities

     6,476         6,385   

Deferred tax Assets relating to Post-Employment benefits

     9,242         9,341   

Deferred tax Assets relating to Property, Plant and equipment

     10,043         10,822   

Deferred tax Assets relating to Financial Instruments

     173         297   

Deferred tax Assets relating to tax losses carryforwards

     90,195         90,327   

Deferred tax assets relating to biological assets

     4,721         2,636   

Deferred tax assets relating to inventories

     9,474         9,142   

Deferred tax assets relating to provisions for income

     3,248         4,477   

Deferred tax assets relating to provision for doubtful accounts

     3,671         3,602   

Defferred tax assets relating to other deductible temporary differences

     19,139         19,958   

Total deferred tax assets

     161,032         161,739   
  

 

 

    

 

 

 

As of December 31, 2012, certain of Arauco’s subsidiaries have carryforwards tax losses of ThU.S.$ 453,300 (ThU.S.$ 342,044 as of December 31, 2012) which are mainly generated due to operational and financial losses. Arauco believes that it is probable that future taxable profits will be available in the subsidiaries against which the unused tax losses will be utilized.

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Deferred Tax Liabilities

The following table sets for the deferred tax liabilities as of March 31, 2013 and at December 31, 2012:

 

Deferred Tax Liabilities

   03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Deferred tax liabilities relating to property, Plant and equipment

     737,990         736,530   

Deferred tax liabilities relating to financial instruments

     17,406         14,218   

Deferred tax liabilities relating to biological assets

     534,736         531,801   

Deferred tax liabilities relating to inventory

     16,752         16,517   

Deferred tax liabilities due to prepaid expenses

     59,841         55,294   

Deferred tax liabilities relating to other taxable temporary differences

     42,174         41,294   

Total deferred tax liabilities

     1,408,899         1,395,654   
  

 

 

    

 

 

 

The effect of changes in deferred tax liabilities related to cash flow hedges corresponds to a charge of ThU.S.$572 as of March 31, 2013 (credit of ThU.S.$1,098 as of March 31, 2012), which is presented deducting the reserve of cash flow hedges in the statement of changes in equity.

The deferred tax assets and liabilities expected to be recovered and settled in less than twelve months amounts to ThU.S.$22,963 and ThU.S.$145,881 respectively, will be used over a period of 12 months.

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

Temporary Differences

The following tables summarize the deductible and taxable temporary differences:

 

     03-31-2013      12-31-2012  

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

     70,837            71,412      

Deferred Tax Assets - Tax losses

     90,195            90,327      

Deferred Tax Liabilities

        1,408,899            1,395,654   

Total

     161,032         1,408,899         161,739         1,395,654   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     January - March  

Detail of Temporary Difference Income and Loss Amounts

   2013
ThU.S.$
    2012
ThU.S.$
 

Deferred Tax Assets

     (2,388     (1,965

Deferred Tax Assets - Tax losses

     1,749        7,769   

Deferred Tax Liabilities

     (6,968     (11,461

Total

     (7,607     (5,657
  

 

 

   

 

 

 

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Income Tax consists of the following:

 

     January - March  

Income Tax composition

   2013
ThU.S.$
    2012
ThU.S.$
 

Current income tax expense

     (9,136     (10,088

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

     924        6,240   

Previous period current tax adjustments

     (78     212   

Other current tax expenses

     273        (35

Current Tax Expense, Net

     (8,017     (3,671

Deferred tax income (expense) relating to origination and reversal of temporary differences

     (9,356     (14,590

Deferred tax income (expense) relating to changes in tax rates or new tax rates

     —          86   

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

     1,749        7,943   

Other current tax expenses

     —          904   

Total deferred Tax Expense, Net

     (7,607     (5,657

Income Tax Expense, Total

     (15,624     (9,328
  

 

 

   

 

 

 

The following table sets for the current income tax expense detailed by foreign and domestic companies as of March 31, 2013 and 2012:

 

     January - March  
     2013
ThU.S.$
    2012
ThU.S.$
 

Foreign current income tax expense

     (4,637     (1,556

Domestic current income tax expense

     (3,380     (2,115

Total current income tax expense

     (8,017     (3,671

Foreign deferred tax expense

     (1,002     6,599   

Domestic deferred tax expense

     (6,605     (12,256

Total deferred tax expense

     (7,607     (5,657

Total tax income (expense)

     (15,624     (9,328
  

 

 

   

 

 

 

Reconciliation of income tax expense from statutory tax rate to the effective tax rate.

The reconciliation of income tax expense is as follows:

 

     January - March  

Reconciliation of Income tax from Statutory Rate to Effective Tax Rate

   2013
ThU.S.$
    2012
ThU.S.$
 

Tax Expense at applicable tax rate

     (21,828     (11,440

Tax effect of foreign tax rates

     (4,245     606   

Tax effect of revenues exempt from taxation

     7,413        2,689   

Tax effect of expense mot deductible in determining taxable profit (tax loss)

     2,012        (8,199

Tax rate effect of tax losses

     (19     1,754   

Tax rate effect from change in tax rate (opening balances)

     —          86   

Tax rate effect of adjustments for current tax of prior periods

     (78     212   

Other tax rate effects

     1,121        4,964   

Total adjustments to tax expense at applicable tax rate

     6,204        2,112   

Tax expense at effective tax rate

     (15,624     (9,328
  

 

 

   

 

 

 

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

 

      03-31-2013
ThU.S.$
    12-31-2012
ThU.S.$
 

Properties, Plant and Equipment, Net

    

Construction in progress

     391,155        487,406   

Land

     810,267        806,840   

Buildings

     1,683,664        1,649,582   

Plant and equipment

     2,885,211        2,804,865   

Information technology equipment

     25,803        26,294   

Fixtures and fittings

     5,793        5,790   

Motor vehicles

     8,276        8,124   

Other property, plant and equipment

     103,312        100,236   

Total Net

     5,913,481        5,889,137   
  

 

 

   

 

 

 

Properties, Plant and Equipment, Gross

    

Construction in progress

     391,155        487,406   

Land

     810,267        806,840   

Buildings

     2,978,505        2,923,631   

Plant and equipment

     5,319,687        5,201,709   

Information technology equipment

     61,789        61,252   

Fixtures and fittings

     28,507        24,845   

Motor vehicles

     33,218        32,766   

Other property, plant and equipment

     148,989        145,420   

Total Gross

     9,772,117        9,683,869   
  

 

 

   

 

 

 

Accumulated depreciation and impairment

    

Buildings

     (1,294,841     (1,274,049

Plant and equipment

     (2,434,476     (2,396,844

Information technology equipment

     (35,986     (34,958

Fixtures and fittings

     (22,714     (19,055

Motor vehicles

     (24,942     (24,642

Other property, plant and equipment

     (45,677     (45,184

Total

     (3,858,636     (3,794,732
  

 

 

   

 

 

 

Description of Property, Plant and Equipment Pledged as Security for Liabilities

In October 2006, Forestal Río Grande S.A, a subsidiary of Fondo de Inversión Bío Bío (Arauco’s special purpose entity), executed in favor of JPMorgan Chase Bank N.A. and Arauco, respectively, first and second degree mortgages, which prohibited the sale of any property owned by Fondo de Inversión Bío Bío in order to secure its obligations.

In September 2007, Forestal Río Grande S.A acquired a real estate in Yungay, located in Chile’s Eighth Region, for which the company executed a first and second degree mortgage in favor of JPMorgan and Arauco, respectively, which prohibited the sale and encumber such property.

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

     03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Total property, plant and equipment pledged as security

     6,601         16,413   

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

 

     03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Amount committed for the acquisition of property, plant and equipment

     215,033         281,893   
     03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Disbursements for property, plant and equipment under construction

     89,846         424,474   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Movement on Property, Plant and Equipment

The following tables set forth the reconciliation of the carrying amount of property, plant and equipment as of March 31, 2013 and at December 31, 2012:

 

Movement of Property, Plant and
Equipment

   Construction
in progress

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

ThU.S.$
    IT
Equipment

ThU.S.$
    Fixtures
and
fittings

ThU.S.$
    Motor
vehicles

ThU.S.$
    Other
Property,
Plant and
Equipment

ThU.S.$
    TOTAL
ThU.S.$
 

Opening Balance 01-01-2013

     487,406        806,840        1,649,582        2,804,865        26,294        5,790        8,124        100,236        5,889,137   

Changes

                  

Additions

     89,846        669        5,401        (1,756     115        318        574        5,148        100,315   

Disposals

     —          —          (582     (2,483     —          (5     (58     (153     (3,281

Retirements

     (1,633     (42     88        (431     —          3        86        (855     (2,784

Depreciation

     —          —          (21,117     (56,118     (981     (799     (560     (1,213     (80,788

Impairment loss recognized in profit or loss

     —          —          20        (150     —          —          —          —          (130

Increase (decrease) through net exchange differences

     1,060        2,800        676        4,395        12        413        97        149        9,602   

Reclassification Assets or disposal groups classified as held for sale

     —          —          68        1,342        —          —          —          —          1,410   

Increase (decrease) through transfers from construction in progress

     (185,524     —          49,528        135,547        363        73        13        —          —     

Total changes

     (96,251     3,427        34,082        80,346        (491     3        152        3,076        24,344   

Closing balance 03-31-2013

     391,155        810,267        1,683,664        2,885,211        25,803        5,793        8,276        103,312        5,913,481   

Movement of Property, Plant and
Equipment

   Construction
in progress

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

ThU.S.$
    IT
Equipment

ThU.S.$
    Fixtures
and
fittings

ThU.S.$
    Motor
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

     424,474        5,569        3,850        30,723        593        61        1,693        39,005        505,968   

Acquisitions through business combinations

     2,730        14,648        70,996        314,283        1,477        —          —          2,373        406,507   

Disposals

     (516     (668     5,707        (16,196     (8     (113     (435     (3,535     (15,764

Retirements

     (12,062     (189     (19,979     (49,019     (103     (114     (1,175     (851     (83,492

Depreciation

     —          —          (82,069     (200,022     (3,468     (1,749     (3,020     (528     (290,856

Impairment loss recognized in profit or loss

     —          —          16,963        18,060        (4     (13     —          799        35,805   

Increase (decrease) through net exchange differences

     (16,042     (18,420     (8,953     (17,029     (220     (586     220        (1,979     (63,009

Increase (decrease) through transfers from construction in progress

     (575,149     96        203,308        363,836        4,287        2,294        689        639        —     

Total changes

     (176,565     1,036        189,823        444,636        2,554        (220     (2,028     35,923        495,159   

Closing balance 12-31-2012

     487,406        806,840        1,649,582        2,804,865        26,294        5,790        8,124        100,236        5,889,137   

 

 

 

 

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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

The depreciation expense as of March 31, 2013 and 2012 is as follows:

 

     January-March  

Depreciation for the year

   2013
ThU.S.$
     2012
ThU.S.$
 

Cost of sales

     63,998         53,431   

Administrative expenses

     3,557         2,311   

Other expenses

     1,079         1,453   

Total

     68,634         57,195   
  

 

 

    

 

 

 

The useful lives of property, plant and equipment estimated based on the 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   

Fixtures and fittings

   Useful Life in Years      6         12         10   

Motor vehicles

   Useful Life in Years      6         26         13   

Other property, plant and equipment

   Useful Life in Years      5         27         16   

A significant portion of items of property, plant and equipment do not have significant differences between the fair value and the cost of these assets.

The following table sets forth a sensitivity analysis for depreciation based on changes of 5% in useful lives:

 

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

March 31, 2013

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

 

 

NOTE 8. LEASES

Arauco acting as lessee

 

      03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Property, Plant and Equipment under finance leases

     51,196         55,879   

Plant and equipment

     51,196         55,879   

The following tables set for reconciliation between the total of future minimum lease payments as of March 31, 2013 and at December 31, 2012, and their present value:

 

     03-31-2013  

Periods

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

Not later than one year

     19,411         —           19,411   

Later than one year and not later than five years

     31,928         —           31,928   

Later than five years

     —           —           —     

Total

     51,339         —           51,339   
  

 

 

    

 

 

    

 

 

 
     12-31-2012  

Periods

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

Not later than one year

     20,489         —           20,489   

Later than one year and not later than five years

     35,563         —           35,563   

Later than five years

     —           —           —     

Total

     56,052         —           56,052   
  

 

 

    

 

 

    

 

 

 

Lease obligations are presented in the consolidated statement of financial position in line items “other current financial liabilities” and “Other non-current financial liabilities” depending on their maturities as stated above.

Arauco acting as lessor

The following tables set forth reconciliation between the gross investment in the lease, and the present value of minimum lease payments receivable as of March 31, 2013 and at December 31, 2012.

 

     03-31-2013  

Periods

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

Not later than one year

     1,343         91         1,252   

Later than one year and not later than five years

     1,091         76         1,015   

Later than five years

     —           —           —     

Total

     2,434         167         2,267   
  

 

 

    

 

 

    

 

 

 
     12-31-2012  

Periods

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

Not later than one year

     1,642         115         1,527   

Later than one year and not later than five years

     1,437         93         1,344   

Later than five years

     —           —           —     

Total

     3,079         208         2,871   
  

 

 

    

 

 

    

 

 

 

Finance lease receivables are presented in the consolidated statement of financial position in line items “Trade and other current receivable” and “Trade and other non-current receivable” depending on their maturities stated above.

 

 

 

 

 

47


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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

Arauco accounts for its lease contracts as finance leases. These lease contracts are for a term of less than five-year at a market interest rates and leased assets are forestry machinery and equipment. They also include an early termination option, under general and special conditions stipulated in each contract.

There are no contingent rents payable or restrictions imposed by lease arrangements.

NOTE 9. REVENUE

 

     January - March  

Classes of revenue

   2013
ThU.S.$
     2012
ThU.S.$
 

Revenue from sales of goods

     1,145,153         979,417   

Revenue from rendering of services

     37,151         31,012   

Total

     1,182,304         1,010,429   
  

 

 

    

 

 

 

NOTE 10. EMPLOYEE BENEFITS

Classes of Benefits and Expenses by Employee

 

     January - March  
     2013
ThU.S.$
     2012
ThU.S.$
 

Employee expenses

     125,042         93,446   

Wages and salaries

     122,650         89,856   

Severance indemnities

     2,392         3,590   

The main actuarial assumptions used by Arauco in the calculation of the severance indemnities obligation as of March 31, 2013 and 2012 are:

 

Discount rate

     3.50

Inflation

     3.00

Mortality rate

     RV-2009   

The following tables set forth the balances and the reconciliation of the present value of severance indemnities obligation as of March 31, 2013 and at December 31, 2012:

 

     03/31/2013
ThU.S.$
    12/31/2012
ThU.S.$
 

Current

     3,919        3,945   

Non-current

     43,088        43,491   

Total

     47,007        47,436   
  

 

 

   

 

 

 

Reconciliation of the present value of severance indemnities obligation

   03/31/2013
ThU.S.$
    12/31/2012
ThU.S.$
 

Opening balance

     47,436        39,409   

Current service cost

     (370     3,916   

Interest cost

     1,510        1,401   

Actuarial gains

     2,589        8,235   

Benefits paid

     (5,450     (8,726

Increase (decrease) for foreign currency exchange rates changes

     1,292        3,201   

Closing balance

     47,007        47,436   
  

 

 

   

 

 

 

 

 

 

 

48


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

NOTE 11. EFFECT OF FOREIGN CURRENCY EXCHANGE RATE VARIATIONS

Local and foreign currency

Assets and liabilities by class of currency as of March 31, 2013 and at December 31, 2012 are as follows:

 

     03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Total Current Assets

     2,707,824         2,698,968   

Cash and Cash Equivalents

     394,480         395,716   

U.S Dollar

     270,562         325,340   

Euro

     24,295         1,867   

Brazilian Real

     91,754         38,477   

Argentine pesos

     3,399         4,877   

Other currencies

     3,297         2,726   

Chilean Pesos

     1,173         22,429   

Other current financial assets

     1,694         1,012   

U.S Dollar

     1,432         1,012   

Otras monedas

     262         —     

Other current non-financial assets

     224,887         207,889   

U.S Dollar

     97,412         96,257   

Euros

     106         103   

Brazilian Real

     15,580         15,041   

Argentine pesos

     14,388         13,647   

Other currencies

     10,416         1,846   

Chilean Pesos

     86,985         80,995   

Trade and other current receivables

     747,439         825,869   

U.S Dollar

     475,320         520,803   

Euro

     28,464         26,711   

Brazilian Real

     63,137         53,057   

Argentine pesos

     35,122         38,256   

Other currencies

     26,519         22,543   

Chilean Pesos

     117,570         163,084   

U.F.

     1,307         1,415   

Accounts receivable from related companies

     142,105         130,423   

U.S Dollar

     131,537         122,315   

Brazilian Real

     2,477         1,268   

Chilean Pesos

     8,091         6,840   

Current Inventories

     851,675         815,782   

U.S Dollar

     748,050         718,348   

Brazilian Real

     84,388         77,340   

Chilean Pesos

     19,237         20,094   

Current biological assets

     259,979         252,744   

U.S Dollar

     259,979         252,744   

Current tax assets

     72,474         55,923   

U.S Dollar

     514         304   

Brazilian Real

     3,838         6,655   

Argentine pesos

     5,649         6,931   

Other currencies

     1,515         1,188   

Chilean Pesos

     60,958         40,845   

Non-current assets or disposal groups classified as held for sale or as held for distribution to owners

     13,091         13,610   

U.S Dollar

     13,091         13,610   

 

 

 

 

49


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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

     03-31-2013
ThU.S.$
     12-31-2012
ThU.S.$
 

Total Non Current Assets

     10,922,911         10,852,218   

Other non-current financial assets

     73,337         61,350   

U.S Dollar

     72,361         60,333   

Argentine pesos

     976         1,017   

Other non-current non-financial assets

     129,783         125,254   

U.S Dollar

     109,136         105,414   

Brazilian Real

     16,443         17,042   

Argentine pesos

     2,796         1,540   

Other currencies

     736         681   

Chilean Pesos

     672         577   

Trade and other non-current receivables

     6,538         11,877   

U.S Dollar

     254         5,204   

Chilean Pesos

     3,382         3,374   

U.F.

     2,902         3,299   

Investments accounted for using equity method

     1,060,579         1,048,463   

U.S Dollar

     806,576         790,116   

Brazilian Real

     254,003         258,347   

Intangible assets other than goodwill

     22,676         22,311   

U.S Dollar

     18,611         18,150   

Brazilian Real

     3,978         4,070   

Chilean Pesos

     87         91   

Goodwill

     59,318         58,645   

U.S Dollar

     6,907         6,996   

Brazilian Real

     52,411         51,649   

Property, plant and equipment

     5,913,481         5,889,137   

U.S Dollar

     5,121,739         5,121,851   

Brazilian Real

     781,169         756,507   

Chilean Pesos

     10,573         10,779   

Non-current biological assets

     3,496,167         3,473,442   

U.S Dollar

     3,103,067         3,093,440   

Brazilian Real

     393,100         380,002   

Deferred tax assets

     161,032         161,739   

U.S Dollar

     112,992         114,108   

Brazilian Real

     47,026         46,464   

Other currencies

     363         361   

Chilean Pesos

     651         806   

 

 

 

 

50


Table of Contents

CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

     03-31-2013      12-31-2012  
     Up to 90
days

ThU.S.$
     From 91
days to 1
year

ThU.S.$
     Total
ThU.S.$
     Up to 90
days

ThU.S.$
     From 91
days to 1
year

ThU.S.$
     Total
ThU.S.$
 

Total Liabilities, current

     986,538         511,508         1,498,046         1,015,183         410,104         1,425,287   

Other current financial liabilities

     319,817         510,373         830,190         401,493         407,121         808,614   

U.S Dollar

     246,292         384,657         630,949         360,732         355,651         716,383   

Brazilian Real

     11,561         5,019         16,580         8,494         3,432         11,926   

Argentine pesos

     39,938         —           39,938         25,091         12,200         37,291   

Chilean Pesos

     110         329         439         111         330         441   

U.F.

     21,916         120,368         142,284         7,065         35,508         42,573   

Bank Loans

     282,593         70,182         352,775         347,256         66,015         413,271   

U.S Dollar

     231,094         65,163         296,257         313,671         50,383         364,054   

Brazilian Real

     11,561         5,019         16,580         8,494         3,432         11,926   

Argentine pesos

     39,938         —           39,938         25,091         12,200         37,291   

Financial Leases

     3,963         15,448         19,411         3,909         16,580         20,489   

U.S Dollar

     —           127         127         —           127         127   

Chilean Pesos

     110         329         439         111         330         441   

U.F.

     3,853         14,992         18,845         3,798         16,123         19,921   

Other Loans

     33,261         424,743         458,004         50,328         324,526         374,854   

U.S Dollar

     15,198         319,367         334,565         47,061         305,141         352,202   

U.F.

     18,063         105,376         123,439         3,267         19,385         22,652   

Trade and other current payables

     494,507         —           494,507         490,191         —           490,191   

U.S Dollar

     126,863         —           126,863         117,458         —           117,458   

Euros

     14,923         —           14,923         9,114         —           9,114   

Brazilian Real

     38,861         —           38,861         30,730         —           30,730   

Argentine pesos

     34,948         —           34,948         37,515         —           37,515   

Other currencies

     1,586         —           1,586         1,622         —           1,622   

Chilean Pesos

     274,570         —           274,570         291,190         —           291,190   

U.F.

     2,756         —           2,756         2,562         —           2,562   

Accounts payable to related companies

     7,318         —           7,318         9,168         —           9,168   

U.S Dollar

     1,148         —           1,148         1,474         —           1,474   

Chilean Pesos

     6,170         —           6,170         7,694         —           7,694   

Other current provisions

     8,521         —           8,521         8,875         —           8,875   

Argentine pesos

     8,521         —           8,521         8,875         —           8,875   

Current tax liabilities

     8,588         741         9,329         12,264         —           12,264   

Euros

     134         —           134         132         —           132   

Brazilian Real

     1,130         —           1,130         —           —           —     

Argentine pesos

     75         —           75         —           —           —     

Other currencies

     356         —           356         711         —           711   

Chilean Pesos

     6,893         741         7,634         11,421         —           11,421   

Current provisions for employee benefits

     3,525         394         3,919         962         2,983         3,945   

Chilean Pesos

     3,525         394         3,919         962         2,983         3,945   

Other current non-financial liabilities

     144,262         —           144,262         92,230         —           92,230   

U.S Dollar

     72,730         —           72,730         49,453         —           49,453   

Brazilian Real

     29,788         —           29,788         23,767         —           23,767   

Argentine pesos

     6,292         —           6,292         4,067         —           4,067   

Other currencies

     12,955         —           12,955         2,221         —           2,221   

Chilean Pesos

     20,360         —           20,360         10,620         —           10,620   

U.F.

     2,137         —           2,137         2,102         —           2,102   

 

 

 

 

51


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CELULOSA ARAUCO Y CONSTITUCION S.A.

AND SUBSIDIARIES

Unaudited Notes to the Consolidated Financial Statements

March 31, 2013

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

 

 

     03-31-2013      12-31-2012  
     From 13
months to 5
years
     More than
5 years
     Total      From 13
months to 5
years
     More than
5 years
     Total  
     ThU.S.$