EX-99.1 2 ex99-1_072804.txt EXHIBIT 99.1, PRESS RELEASE, DATED JULY 29, 2004 Exhibit 99.1 Contact: Susie Ter-Jung [GRAPHIC OMITTED] Bunge 1-914-684-3398 Susie.Ter-Jung@Bunge.com Bunge Reports Second Quarter 2004 Net Income of $112 Million White Plains, NY - July 29, 2004 - Bunge Limited (NYSE:BG). > Financial Highlights (In millions, except per share data and percentages)
--------------------------------------------------------------------------------------------- Quarter Ended Six Months Ended ------------- ---------------- Percent Percent 6/30/04 6/30/03 Change 6/30/04 6/30/03 Change --------------------------------------------------------------------------------------------- Volumes (metric tons) 29.8 28.0 6% 53.6 50.8 6% Net sales $6,657 $5,181 28% $12,396 $10,023 24% Total segment operating profit(1) $218 $136 60% $354 $247 43% Gain on sale of soy ingredients business - $111 - - $111 - Net income $112 $182 (38)% $182 $222 (18)% Earnings per share(2) $1.00 $1.80 (44)% $1.65 $2.20 (25)% ----------------------------------------------------------------------------------------------
Net income for the second quarter of 2004 was $112 million, a $41 million, or 58%, increase over the same period last year (excluding the $111 million gain on sale of Bunge's soy ingredients business in the second quarter of 2003). Bunge's results for the quarter ended June 30, 2003 and for the six months ended June 30, 2004 and 2003 include certain gains and charges that may be of interest to investors. For the six months ended June 30, 2004, these items totaled $3 million, or $0.03 per share. For the quarter and six months ended June 30, 2003, these items totaled $117 million, or $1.16 per share, and $116 million, or $1.15 per share, respectively. These gains and charges are detailed in the attached schedule titled "Additional Financial Information." --------------------------- (1) Total segment operating profit is the consolidated segment operating profit of Bunge's segments. Total segment operating profit is a non-GAAP measure and is not intended to replace income from continuing operations before income tax and minority interest, the most directly comparable GAAP measure. The information required by Regulation G under the Securities Exchange Act of 1934, including reconciliation to income from continuing operations before income tax and minority interest, is included in the tables attached to this press release. (2) Earnings per share numbers are reported on a fully diluted basis, which includes approximately 7.78 million common shares issuable upon conversion of Bunge's 3.75% convertible notes due 2022 for the quarter and six months ended June 30, 2004. See Note 3 to the consolidated statements of income attached to this press release for more information. > Overview Alberto Weisser, Bunge's Chairman and Chief Executive Officer, stated, "We are pleased with our strong performance in the second quarter of 2004. All three of our divisions performed well, generating solid bottom line results. Quarterly cash flow from operations of $404 million reflected our good operating results and lower agricultural commodity prices, which reduced operating working capital. "Bunge's results for the first half of the year were above expectations, despite unprecedented volatility in agribusiness markets and a disruption in soybean trade with China. Disciplined risk and logistics management and our balanced global footprint made the difference, giving us good momentum as we enter the second half of the year." > Second Quarter Results Agribusiness Agribusiness benefited from increases in sales volumes and improvements in operating profit in most of our business lines and geographies. Effective freight and risk management, strong softseed profitability and efficiency improvements in logistics contributed to the results for the quarter. Fertilizer The fertilizer segment benefited from higher average selling prices for fertilizers and increases in sales volumes, which resulted in improved segment operating profit. Volumes in the second quarter of 2004 benefited from planned increases in planted acreage. Higher international prices for fertilizer raw materials boosted local selling prices and increased margins on local production, as products are priced to import parity. Edible Oil Products For comparative purposes, the results of the edible oil segment are presented below to exclude Lesieur, which was sold to our Saipol joint venture in July 2003.
------------------------------------------------------------------------------ Quarter Ended ---------------------------------------- As Excluding Reported Lesieur Lesieur (In millions, except volumes) 6/30/04 6/30/03 6/30/03 6/30/03 ------------------------------------------------------------------------------ Volumes (in thousands of metric tons) 1,243 1,182 98 1,084 Net sales $1,025 $746 $119 $627 Segment operating profit $25 $28 $5 $23 ------------------------------------------------------------------------------
Edible oil results benefited from higher sales volumes in North and South America and margin expansion in Eastern Europe due to higher edible oil prices. 2 Milling Products Milling products results benefited from higher sales volumes in both corn milling in the United States and wheat milling in Brazil, improved production yields from good corn quality and a favorable product mix in wheat milling as a result of the asset exchange with J. Macedo in March 2004. Selling, General and Administrative Costs (SG&A) SG&A increased in the second quarter of 2004 due to increased bonus, legal and tax provisions and increased headcount in Bunge's international marketing business. The second quarter of 2003 benefited from an $11 million curtailment gain related to certain pension and post-retirement benefit plans. Financial Costs Interest expense increased primarily due to higher average borrowings for the second quarter of 2004, compared to the same period in 2003, offset by lower average interest rates on long-term borrowings. Foreign exchange losses, incurred primarily on the net U.S. dollar-denominated monetary liability position of Bunge's Brazilian subsidiaries, were $64 million in the second quarter of 2004 compared to foreign exchange gains of $70 million in the same period last year. Foreign exchange gains on commodity inventories, included in segment operating profit, substantially offset these losses. The Brazilian real devalued 6% against the U.S. dollar in the second quarter of 2004 as compared to a 17% appreciation in the same period last year. Other Other income (expense) - net decreased in the second quarter of 2004 primarily due to decreases in Bunge's share of earnings from its joint ventures in Argentina. Results for the second quarter of 2003 include a $111 million gain on sale of the Brazilian soy ingredients business to The Solae Company (Solae). Solae is a joint venture between Bunge and DuPont. Income Tax Expense Bunge's effective tax rate for the second quarter of 2004 was 29%. Excluding the tax-free gain on the sale of the soy ingredients business, the effective tax rate for the second quarter of 2003 was 33%. The primary cause for the decrease in the effective tax rate in 2004 was the effect of a weaker Brazilian real. 3 Net Financial Debt(3) and Cash Flow Net financial debt increased from December 31, 2003 primarily due to seasonally higher levels of inventory resulting from the purchase of agricultural commodity inventories in South America and increased levels of operating working capital resulting from higher agricultural commodity prices and increases in sales volumes. Cash flow provided by operations in the second quarter of 2004 was positive $404 million, an increase of $181 million over the same period last year. Cash flow was favorably affected by strong operating results and reduced levels of operating working capital compared to the first quarter of 2004, due to lower agricultural commodity prices. Prices are beginning to reflect current market expectations of good crops for the coming North American harvest. As prices return to normal historical levels, there is a corresponding favorable effect on cash flow provided by operations. Equity Offering Bunge successfully completed an offering of 9,775,000 common shares this quarter, raising net proceeds of approximately $330 million. Substantially all of these funds will be used to buy back the outstanding minority interests in Bunge Brasil S.A., Bunge's publicly traded Brazilian subsidiary. The buyback is proceeding as planned, and is expected to close this fall. > Outlook Bill Wells, Chief Financial Officer, stated, "We are pleased with the strong first half of the year and expect continued solid performance in 2004. South America delivered large harvests and current U.S. growing prospects are good. Fertilizer demand and prices are strong and should remain so. We expect continued good performance in our food products division. "Our 2004 guidance is as follows: o Depreciation: $200 million to $220 million o Capital Expenditures: $350 million to $400 million o $115 million to $130 million maintenance capital expenditures o Effective Tax Rate: 33% to 38% o Joint Venture Earnings: $18 million to $20 million --------------------------- (3) Net financial debt is a non-GAAP financial measure and is not intended to replace total debt. A definition of net financial debt and the information required by Regulation G under the Securities Exchange Act of 1934, including reconciliation of net financial debt to total debt, the most directly comparable GAAP measure, is included in the tables attached to this press release. 4 "Considering our continued positive outlook, and assuming stable currencies in South America and a normal 2004/2005 North American crop, we are raising our net income guidance for fiscal 2004 to between $355 million to $375 million, representing $3.12 to $3.29 per share. This fully diluted per share guidance is based on a weighted average of 115,443,425 shares outstanding and assumes that all holders of Bunge's 3.75% convertible notes due 2022 convert to common shares. Our net income and per share guidance includes the effects of our June 2004 sale of common shares and the proposed buyout of minority interests in Brazil." Conference Call and Webcast Information Bunge Limited's management will host a conference call at 10:00 a.m. EDT on July 29, 2004, to discuss the company's second quarter results. To listen to the conference call, please dial (800) 753-0420, or, if located outside of the United States, dial (913) 981-5501. Please dial in five to 10 minutes before the scheduled start time. When prompted, enter passcode number 597955. The conference call will also be available live on the company's Web site at www.bunge.com. To access the webcast, go to the Bunge Web site and select "Upcoming Events" from the left navigation menu. Click the "Webcast" link for the "Q2 2004 Bunge Limited Conference Call," and follow the prompts to access the event. Please go to the Web site at least 15 minutes prior to the call to register and to download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay of the call will be available beginning at 2:00 p.m. EDT on July 29, 2004 and continuing through August 29, 2004. To listen to the replay, please dial (888) 203-1112, or, if located outside of the United States, dial (719) 457-0820. When prompted, enter passcode number 597955. A rebroadcast of the conference call will also be available on the company's Web site beginning at 2:00 p.m. EDT on July 29, 2004 and continuing through 12:00 p.m. EDT on August 29, 2004. To locate the rebroadcast on the Web site, select "News & Information" from the left navigation menu. Open the "Audio Archive" subcategory and select the "Webcast" link for the "Q2 2004 Bunge Limited Conference Call." Follow the prompts to access the replay. About Bunge Bunge Limited (www.bunge.com) is an integrated, global agribusiness and food company operating in the farm-to-consumer food chain. Founded in 1818 and headquartered in White Plains, New York, Bunge has 24,000 employees and locations in 30 countries. Bunge is the world's leading oilseed processing company, the largest producer and supplier of fertilizers to farmers in South America and the world's leading seller of bottled vegetable oils to consumers. 5 Cautionary Statement Concerning Forward-Looking Statements This press release contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "will," "expect," "anticipate," "believe," "intend," "estimate," "continue" and similar expressions. These forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these forward-looking statements. The following important factors, among others, could affect our business and financial performance: our ability to complete, integrate and benefit from acquisitions, divestitures, joint ventures and strategic alliances; estimated demand for the commodities and other products that we sell and use in our business; industry conditions, including the cyclicality of the agribusiness industry and unpredictability of the weather; agricultural, economic and political conditions in the primary markets where we operate; and other economic, business, competitive and/or regulatory factors affecting our business generally. The forward-looking statements included in this release are made only as of the date of this release, and except as otherwise required by federal securities law, we do not have any obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances. 6 Additional Financial Information The following table provides a summary of certain gains and charges that may be of interest to investors. The table includes a description of these items and their effect on total segment operating profit, income from continuing operations before income taxes and minority interest, net income and earnings per share for the quarter and six months ended June 30, 2004 and 2003.
---------------------------------------------------------------------------------------------------------------------------- Income From Continuing Operations Before Total Segment Income Taxes and Earnings Per Share (In millions, except per share data) Operating Profit Minority Interest Net Income Diluted ---------------- ----------------- ---------- ------- 2004 2003 2004 2003 2004 2003 2004 2003 ---- ---- ---- ---- ---- ---- ---- ---- Quarter Ended June 30: Post retirement curtailment gains $- $11 $- $11 $- $7 $- $0.07 Gain on sale of soy ingredients business - - - 111 - 111 - 1.10 Discontinued operations, net of tax - - - - - (1) - (0.01) -------------------------------------------------------------------------------------- Total $- $11 $ $122 $- $117 $- $1.16 ====================================================================================== ----------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------- Income From Continuing Operations Before Total Segment Income Taxes and Earnings Per Share (In millions, except per share data) Operating Profit Minority Interest Net Income Diluted ---------------- ----------------- ---------- ------- 2004 2003 2004 2003 2004 2003 2004 2003 ---- ---- ---- ---- ---- ---- ---- ---- Six Months Ended June 30: Post retirement curtailment gains $- $11 $- $11 $- $7 $- $0.07 Gain on sale of soy ingredients business - - - 111 - 111 - 1.10 Gain on exchange of retail flour business - - 5 - 3 - 0.03 - Discontinued operations, net of tax - - - - - (2) - (0.02) -------------------------------------------------------------------------------------- Total $- $11 $5 $122 $3 $116 $0.03 $1.15 ====================================================================================== ----------------------------------------------------------------------------------------------------------------------------
7 CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data and percentages) (Unaudited) (Note 4)
Quarter Ended Six Months Ended June 30, June 30, ---------------------------- Percent ---------------------------- Percent 2004 2003 Change 2004 2003 Change ------------------------------------------------------------------------------- Net sales $6,657 $5,181 28% $12,396 $10,023 24% Cost of goods sold (6,161) (4,912) 25% (11,535) (9,481) 22% ------------- ------------- ------------- ------------- Gross profit 496 269 84% 861 542 59% Gain on sale of soy ingredients business (Note 1) - 111 - - 111 - Selling, general and administrative expenses (192) (164) 17% (370) (313) 18% Interest income 24 24 - 40 44 (9)% Interest expense (43) (49) (12)% (83) (96) (14)% Interest expense on readily marketable inventories (19) (8) 138% (31) (15) 107% Foreign exchange gains (losses) (64) 70 (80) 77 Other income (expense)-net (1) 3 10 4 ------------- ------------- ------------- ------------- Income from continuing operations before income tax and minority interest 201 256 (21)% 347 354 (2)% Income tax expense (58) (48) 21% (116) (85) 36% ------------- ------------- ------------- ------------- Income from continuing operations before minority interest 143 208 (31)% 231 269 (14%) Minority interest (31) (25) 24% (49) (45) 9% ------------- ------------- ------------- ------------- Income from continuing operations 112 183 (39)% 182 224 (19)% Discontinued operations, net of tax (Note 2) - (1) - (2) ------------- ------------- ------------- ------------- Net income $ 112 $ 182 (38)% $ 182 $ 222 (18)% ============= ============= ============= ============= Earnings per common share - basic (Note 3): Income from continuing operations $ 1.08 $ 1.84 (41)% $ 1.79 $ 2.25 (20)% Discontinued operations - (0.01) - (0.02) ------------- ------------- ------------- ------------- Net income per share - basic $ 1.08 $ 1.83 (41)% $ 1.79 $ 2.23 (20)% ============= ============= ============= ============= Earnings per common share - diluted (Note 3): Income from continuing operations $ 1.00 $ 1.81 (45)% $ 1.65 $ 2.22 (26)% Discontinued operations - (0.01) - (0.02) ------------- ------------- ------------- ------------- Net income per share - diluted $ 1.00 $ 1.80 (44%) $ 1.65 $ 2.20 (25)% ============= =============------------============= =============-----------
8 NOTES TO CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Note 1: In May 2003, Bunge sold its Brazilian soy ingredients business to The Solae Company (Solae) for $251 million in cash, net of expenses of approximately $5 million. Consequently, Bunge recognized a gain on sale of $111 million in the second quarter of 2003. Solae is a joint venture between Bunge and E.I. DuPont de Nemours and Company. Note 2: In December 2003, Bunge sold its North American bakery business to a third party. Accordingly, the operating results for the disposed division have been reported as discontinued operations for the quarter and six months ended June 30, 2003. Note 3: Earnings per share are calculated on the basis of the following number of common shares outstanding:
Quarter Ended Six Months Ended June 30, June 30, --------------------------------- --------------------------------- 2004 2003 2004 2003 --------------- ---------------- --------------- ---------------- (In millions, except share data) Income from continuing operations - basic $112 $183 $182 $224 Interest on convertible notes, net of 1 - 2 - tax --------------- ---------------- --------------- ---------------- Income from continuing operations - diluted $113 $183 $184 $224 =============== ================ =============== ================ Weighted average number of common shares outstanding: Basic 103,434,409 99,696,727 101,725,621 99,641,565 Effect of dilutive shares: -Stock options and awards 1,678,953 1,226,735 1,743,109 1,062,955 -Convertible notes 7,778,425 - 7,778,425 - --------------- ---------------- --------------- ---------------- Diluted 112,891,787 100,923,462 111,247,155 100,704,520 =============== ================ =============== ================ Income from continuing operations - per share: -Basic $1.08 $1.84 $1.79 $2.25 =============== ================ =============== ================ -Diluted $1.00 $1.81 $1.65 $2.22 =============== ================ =============== ================
The calculation of diluted earnings per common share for the quarter and six months ended June 30, 2004 includes the 7,778,425 common shares that would be issuable on conversion of our 3.75% convertible notes due 2022. The convertible notes are convertible at the option of the holder into our common shares, among other circumstances, during any calendar quarter in which the closing price of our common shares for at least 20 of the last 30 trading days of the immediately preceding calendar quarter is more than 120% of the conversion price of $32.1402, or approximately $38.57 per share. The closing price condition was satisfied as of March 31, 2004 and the convertible notes were convertible at the option of the holder throughout the quarter ended June 30, 2004. The convertible notes are not convertible during the quarter ending September 30, 2004 as the closing price condition was not satisfied as of June 30, 2004. However, if the closing sale price condition is satisfied as of September 30, 2004, the 7,778,425 common shares issuable on conversion will be included in Bunge's fully diluted earnings per share for the third quarter and nine months ended September 30, 2004. Bunge's diluted weighted average common shares outstanding for the quarter and six months ended June 30, 2003 does not include the common shares that would be issuable on conversion of the convertible notes, because in accordance with their terms, the convertible notes had not yet become convertible. Note 4: Certain reclassifications were made to the prior period's consolidated financial statements to conform to the 2004 presentation. 9 CONSOLIDATED SEGMENT INFORMATION (In millions, except volumes and percentages) (Unaudited) (Note 1) Set forth below is a summary of certain items in our consolidated statements of income and volumes by reportable segment.
Quarter Ended Six Months Ended June 30, June 30, ------------------------ ------------------------- Percent Percent 2004 2003 Change 2004 2003 Change ------------ ------------ ---------- ------------ ------------- ---------- Volumes (in thousands of metric tons): Agribusiness 24,880 23,548 6% 44,817 42,330 6% Fertilizer 2,634 2,417 9% 4,394 4,278 3% Edible oil products 1,243 1,182 5% 2,413 2,360 2% Milling products 1,034 836 24% 2,000 1,661 20% Other (soy ingredients) - 8 (100)% - 140 (100)% ------------ ------------ ------------ ------------- ---------- Food products total 2,277 2,026 12% 4,413 4,161 6% ------------ ------------ ------------ ------------- ---------- Total 29,791 27,991 6% 53,624 50,769 6% ============ ============ ============ ============= ========== Net sales: Agribusiness $4,912 $3,832 28% $9,153 $7,455 23% Fertilizer 524 415 26% 890 701 27% Edible oil products 1,025 746 37% 1,957 1,461 34% Milling products 196 182 8% 396 354 12% Other (soy ingredients) - 6 (100)% - 52 (100)% ------------ ------------ ------------ ------------- ---------- Food products total 1,221 934 31% 2,353 1,867 26% ------------ ------------ ------------ ------------- ---------- Total $6,657 $5,181 28% $12,396 $10,023 24% ============ ============ ============ ============= Cost of goods sold: Agribusiness $(4,625) $(3,750) 23% $(8,666) $(7,262) 19% Fertilizer (408) (327) 25% (689) (553) 25% Edible oil products (955) (668) 43% (1,825) (1,313) 39% Milling products (173) (162) 7% (355) (319) 11% Other (soy ingredients) - (5) (100)% - (34) (100)% ------------ ------------ ------------ ------------- ---------- Food products total (1,128) (835) 35% (2,180) (1,666) 31% ------------ ------------ ------------ ------------- ---------- Total $(6,161) $(4,912) 25% $(11,535) $(9,481) 22% ============ ============ ============ ============= Gross profit: Agribusiness $287 $82 250% $487 $193 152% Fertilizer 116 88 32% 201 148 36% Edible oil products 70 78 (10)% 132 148 (11)% Milling products 23 20 15% 41 35 17% Other (soy ingredients) - 1 (100)% - 18 (100)% ------------ ------------ ------------ ------------- ---------- Food products total 93 99 (6)% 173 201 (14)% ------------ ------------ ------------ ------------- ---------- Total $496 $269 84% $861 $542 59% ============ ============ ============ ============= Selling, general and administrative expenses: Agribusiness $(102) $(81) 26% $(202) $(150) 35% Fertilizer (38) (25) 52% (69) (44) 57% Edible oil products (41) (47) (13)% (77) (90) (14)% Milling products (11) (11) - (22) (22) - Other (soy ingredients) - - - - (7) (100)% ------------ ------------ ------------ ------------- ---------- Food products total (52) (58) (10)% (99) (119) (17)% ------------ ------------ ------------ ------------- ---------- Total $(192) $(164) 17% $(370) $(313) 18% ============ ============ ============ ============= Foreign exchange gain (loss): Agribusiness $(45) $67 $(50) $78 Fertilizer (13) (11) (24) (13) Edible oil products - - - - Milling products - - - - Other (soy ingredients) - (2) - (1) ------------ ------------ ------------ ------------- Food products total - (2) - (1) ------------ ------------ ------------ ------------- Total $(58) $54 $(74) $64 ============ ============ ============ ============= 10 Quarter Ended Six Months Ended June 30, June 30, ------------------------ ------------------------- Percent Percent 2004 2003 Change 2004 2003 Change ------------ ------------ ---------- ------------ ------------- ---------- Interest income: Agribusiness $3 $4 (25)% $5 $7 (29)% Fertilizer 11 13 (15)% 20 24 (17)% Edible oil products 3 2 50% 6 3 100% Milling products 1 - 100% 3 - 100% Other (soy ingredients) - - - - - - ------------ ------------ ------------ ------------- Food products total 4 2 100% 9 3 200% ------------ ------------ ------------ ------------- Total $18 $19 (5)% $34 $34 - ============ ============ ============ ============= Interest expense: Agribusiness $(30) $(27) 11% $(60) $(40) 50% Fertilizer (9) (7) 29% (20) (19) 5% Edible oil products (7) (5) 40% (14) (14) - Milling products - (3) (100)% (3) (5) (40)% Other (soy ingredients) - - - - (2) (100)% ------------ ------------ ------------ ------------- Food products total (7) (8) (13)% (17) (21) (19)% ------------ ------------ ------------ ------------- Total $(46) $(42) (10)% $(97) $(80) 21% ============ ============ ============ ============= -------------------------------------------------------------------------------------------------------------------------------- Segment operating profit: Agribusiness $113 $45 151% $180 $88 105% Fertilizer 67 58 16% 108 96 13% Edible oil products 25 28 (11)% 47 47 - Milling products 13 6 117% 19 8 138% Other (soy ingredients) - (1) (100)% - 8 (100)% ------------ ------------ ------------ ------------- Food products total 38 33 15% 66 63 5% ------------ ------------ ------------ ------------- Total (Note 2) $218 $136 60% $354 $247 43% ============ ============ ============ ============= -------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income tax and minority interest: Segment operating profit $218 $136 $354 $247 Gain on sale of soy ingredients business - 111 - 111 Unallocated (Note 3) (17) 9 (7) (4) ------------ ------------ ------------ ------------- Income from continuing operations before income tax and minority interest $201 $256 $347 $354 ============ ============ ============ ============= Depreciation, depletion and amortization: Agribusiness $20 $15 33% $41 $41 - Fertilizer 17 14 21% 34 26 31% Edible oil products 10 8 25% 20 15 33% Milling products 3 2 50% 6 6 - Other (soy ingredients) - - - - - - ------------ ------------ ------------ ------------- Food products total 13 10 30% 26 21 24% ------------ ------------ ------------ ------------- Total $50 $39 28% $101 $88 15% ============ ============ ============ =============
11 NOTES TO CONSOLIDATED SEGMENT INFORMATION (Unaudited) Note 1: In the second quarter of 2004, Bunge reclassified certain consumer product lines from the agribusiness segment to the edible oil segment. As a result, amounts for the quarter and six months ended June 30, 2003 have been reclassified to conform to the quarter and six months ended June 30, 2004 presentation. Note 2: Total segment operating profit is the consolidated segment operating profit of all of Bunge's segments. Total segment operating profit is a non-GAAP measure and is not intended to replace income from continuing operations before income tax and minority interest. The information required by Regulation G under the Securities Exchange Act of 1934, including a reconciliation to income from continuing operations before income tax and minority interest, is included under the caption "Reconciliation of Non-GAAP Measures". Note 3: Includes interest income, interest expense and foreign exchange gains and losses and other income and expenses not directly attributable to Bunge's operating segments. In 2004, foreign exchange losses were recorded on Bunge's U.S. dollar short position due to the devaluation of the Brazilian real. In 2003, foreign exchange gains were recorded on Bunge's U.S. dollar short position due to the appreciation of the Brazilian real. 12 CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited)
June 30, December 31, June 30, 2004 2003 2003 ----------------- ------------------ ------------------ ASSETS Cash and cash equivalents $ 524 $ 489 $ 441 Trade accounts receivable 1,889 1,495 1,356 Inventories 3,583 2,867 2,740 Other current assets 1,450 1,567 1,460 ----------------- ------------------ ------------------ Total current assets 7,446 6,418 5,997 Property, plant and equipment, net 2,010 2,090 1,836 Goodwill 138 148 138 Investments in affiliates 554 537 603 Other non-current assets 696 691 493 ----------------- ------------------ ------------------ Total assets $10,844 $9,884 $9,067 ================= ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY Short-term debt $ 649 $ 889 $956 Current portion of long-term debt 143 128 229 Trade accounts payable 2,100 1,678 1,572 Other current liabilities 1,249 1,242 1,248 ----------------- ------------------ ------------------ Total current liabilities 4,141 3,937 4,005 Long-term debt 2,826 2,377 1,910 Other non-current liabilities 590 639 508 Minority interest in subsidiaries 505 554 539 Shareholders' equity 2,782 2,377 2,105 ----------------- ------------------ ------------------ Total liabilities and shareholders' equity $10,844 $9,884 $9,067 ================= ================== ==================
13 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited)
Six Months Ended June 30, ---------------------------- 2004 2003 ------------- ------------- OPERATING ACTIVITIES Net income $ 182 $ 222 Adjustments to reconcile net income to cash provided by (used for) operating activities: Gain on sale of soy ingredients business - (111) Foreign exchange loss (gain) on debt 88 (121) Minority interest 49 45 Depreciation, depletion and amortization 101 88 Other - net 8 (63) Changes in operating assets and liabilities, excluding the effects of acquisitions (744) 217 Arbitration settlement - (57) ------------- ------------- Cash (used for) provided by operating activities (316) 220 INVESTING ACTIVITIES Payments made for capital expenditures (120) (119) Business acquisitions and investments in affiliates (55) (75) Proceeds from sale of soy ingredients business - 251 Proceeds from disposal of property, plant and equipment 10 20 ------------- ------------- Cash (used for) provided by investing activities (165) 77 FINANCING ACTIVITIES Net change in short-term debt (226) (303) Proceeds from long-term debt 850 321 Repayments of long-term debt (387) (393) Proceeds from receivable from former shareholder - 55 Proceeds from sale of common shares 336 5 Dividends paid to shareholders (22) (20) Dividends paid to minority interest (18) (44) ------------- ------------- Cash provided by (used for) financing activities 533 (379) Effect of exchange rate changes on cash and cash equivalents (17) 53 ------------- ------------- Net increase (decrease) in cash and cash equivalents 35 (29) Cash and cash equivalents, beginning of period 489 470 ------------- ------------- Cash and cash equivalents, end of period $524 $441 ============= =============
14 Reconciliation of Non-GAAP Measures This earnings release contains total segment operating profit, net financial debt and, net financial debt less readily marketable inventories, which are "non-GAAP financial measures", as this term is defined in Regulation G of the Securities Act of 1934. In accordance with Regulation G, Bunge has reconciled these non-GAAP financial measures to the most directly comparable U.S. GAAP measures. Total Segment Operating Profit Total segment operating profit, which is the consolidated segment operating profit of all of Bunge's segments, is Bunge's consolidated income from continuing operations before income tax and minority interest that includes an allocated portion of the foreign exchange gains and losses relating to debt financing operating working capital, including readily marketable inventories. Also included in total segment operating profit is interest income and interest expense attributable to the financing of operating working capital. Total segment operating profit is a non-GAAP financial measure and is not intended to replace income from continuing operations before income tax and minority interest, the most directly comparable GAAP financial measure. Total segment operating profit is a key performance measurement used by our management to evaluate whether our operating activities cover the financing costs of our business. We believe total segment operating profit is a more complete measure of our operating profitability, since it allocates foreign exchange gains and losses and the cost of debt financing working capital to the appropriate operating segments. Additionally, we believe total segment operating profit assists investors by allowing them to evaluate changes in the operating results of our portfolio of businesses before non-operating factors that affect net income. Total segment operating profit is not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to income from continuing operations before income taxes and minority interest or any other measure of consolidated operating results under U.S. GAAP. Below is a reconciliation of income from continuing operations before income tax and minority interest to total segment operating profit:
Quarter Ended Six Months June 30, Ended June 30, -------------------------------- -------------------------------- (In millions) 2004 2003 2004 2003 -------------- -------------- --------------- ------------- Income from continuing operations before income tax and minority interest $201 $256 $347 $354 Gain on sale of soy ingredients business - (111) - (111) Plus (minus): Unallocated expenses (1) 17 (9) 7 4 -------------- -------------- --------------- ------------- Total segment operating profit $218 $136 $354 $247 ============== ============== =============== =============
---------------------------------- (1) Includes interest income, interest expense and foreign exchange gains and losses and other income and expenses not directly attributable to Bunge's operating segments. Net Financial Debt Net financial debt is the sum of short-term debt, current maturities of long-term debt and long-term debt, less cash and cash equivalents and marketable securities. Net financial debt is presented because management believes it represents a meaningful measure of Bunge's leverage capacity and solvency. Net financial debt is not a measure of solvency under U.S. GAAP and should not be considered as an alternative to total debt as a measure of solvency. Net financial debt less readily marketable inventories (RMI), or net financial debt less RMI, is the sum of short-term debt, current maturities of long-term debt and long-term debt, less cash and cash equivalents, marketable securities and readily marketable inventories. Net financial debt less RMI is presented because management believes it represents a more complete picture of Bunge's leverage capacity and solvency since it adjusts for readily marketable inventories. Readily marketable inventories are agricultural inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. Net financial debt less RMI is not a measure of leverage capacity and solvency under U.S. GAAP and should not be considered as an alternative to total debt as a measure of solvency. 15 Below is a reconciliation of total long-term and short-term debt to net financial debt and to net financial debt less readily marketable inventories:
June 30, December 31, June 30, (In millions) 2004 2003 2003 ------------- ---------------- -------------- Short-term debt $649 $ 889 $956 Long-term debt, including current portion 2,969 2,505 2,139 ------------- ---------------- -------------- Total debt 3,618 3,394 3,095 Less: Cash and cash equivalents 524 489 441 Marketable securities 29 13 13 ------------- ---------------- -------------- Net financial debt 3,065 2,892 2,641 Less: Readily marketable inventories 2,434 1,868 1,949 ------------- ---------------- -------------- Net financial debt less readily marketable inventories $631 $1,024 $692 ============= ================ ==============
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