-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WRabe/zo6oAStBAPQ06A9f578iIJMNMzXMBa/nEs/fYoy02RhXQjLMsSEAHhyjcC vS0VJfjlmRHTVF+L2kZ3nA== 0000911420-04-000261.txt : 20040714 0000911420-04-000261.hdr.sgml : 20040714 20040714110015 ACCESSION NUMBER: 0000911420-04-000261 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040715 FILED AS OF DATE: 20040714 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARACRUZ CELLULOSE S A CENTRAL INDEX KEY: 0000883952 STANDARD INDUSTRIAL CLASSIFICATION: PULP MILLS [2611] IRS NUMBER: 000000000 STATE OF INCORPORATION: D5 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11005 FILM NUMBER: 04913189 BUSINESS ADDRESS: STREET 1: RUA LAURO MULLER 116 40TH FLOOR STREET 2: RIO DE JANEIRO 222-90 CITY: BRAZIL STATE: D5 ZIP: 00000 BUSINESS PHONE: 552138208111 MAIL ADDRESS: STREET 1: RUS LAURO MULLER, 116--40TH FLOOR CITY: RIO DE JANEIRO STATE: D5 ZIP: 22290 6-K 1 d978014.txt MAIN DOCUMENT ================================================================================ FORM 6-K U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934 Dated July 14, 2004 Commission File Number 001-11005 ARACRUZ CELULOSE S.A. (Exact Name as Specified in its Charter) ARACRUZ CELLULOSE S.A. ---------------------- (Translation of Registrant's Name) Rua Lauro Muller, 116--40th floor, Botafogo Rio de Janeiro, RJ, 22299-900, Brazil ------------------------------------- (Address of principal executive offices) (Zip code) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F --- --- Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): --------- Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): --------- Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X --- --- If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable. ================================================================================ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: July 14, 2004 ARACRUZ CELULOSE S.A. By: /s/ Carlos Augusto Lira Aguiar --------------------------------- Name: Carlos Augusto Lira Aguiar Title: Chief Executive Officer EXHIBIT INDEX Exhibit Description of Exhibit - ------- ---------------------- 99.1. Condensed Consolidated Financial Information as of June 30, 2004 and 2003 and Report of Independent Registered Public Accounting Firm EX-99.I 2 e977497.txt EXHIBITS Exhibit 99.1 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED FINANCIAL INFORMATION AS OF JUNE 30, 2004 AND 2003 AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Exhibit 99.1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Directors and Stockholders Aracruz Celulose S.A. 1. We have reviewed the accompanying condensed consolidated balance sheet of Aracruz Celulose S.A. and subsidiaries ("the Company") as of June 30, 2004 and the related condensed consolidated statements of income for the three-month and six-month periods ended June 30, 2004, and of changes in stockholders' equity and cash flows for the six-month period ended June 30, 2004, all expressed in United States dollars. These interim financial statements are the responsibility of the Company's management. 2. We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. 3. Based on our review, we are not aware of any material modifications that should be made to such condensed interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. 4. Other accountants have reported on the accompanying condensed financial information as of December 31, 2003, and for the three-month and six-month periods ended June 30, 2003, and in their reports dated January 12, 2004 and July 8, 2003 respectively, they stated that the condensed balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived, and that they were not aware of any material modification that should be made to the condensed interim financial statements for the three-month and six-month periods ended June 30, 2003 in order for them to be in conformity with accounting principles generally accepted in the United States of America. Their above-mentioned report for the period ended December 31, 2003 contained an explanatory paragraph with an emphasis of a matter regarding the utilization of a fiscal benefit granted by the Northeast Development Agency (Agencia de Desenvolvimento do Nordeste "ADENE"), consisting of reduced income taxes rates. Vitoria, Brazil, July 9, 2004 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED BALANCE SHEETS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) - --------------------------------------------------------------------------------
JUNE 30, DECEMBER 31, ASSETS 2004 2003 ------------------ ------------------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents 67,126 66,284 Time deposits 308,176 285,991 Accounts receivable Related parties 3,174 Other 175,074 219,874 Inventories, net 150,529 131,486 Deferred income tax, net 16,888 13,181 Recoverable income and other taxes 21,740 20,464 Other current assets 3,935 2,280 ------------------ ------------------- 743,468 742,734 ------------------ ------------------- PROPERTY, PLANT AND EQUIPMENT, NET 2,208,063 2,270,369 INVESTMENT IN AFFILIATED COMPANY 219,323 174,257 GOODWILL 208,061 208,061 OTHER ASSETS Advances to suppliers 42,855 38,197 Deposits for tax assessments 14,073 14,319 Recoverable income and other taxes 4,360 1,548 Other 5,141 4,948 ------------------ ------------------- 66,429 59,012 ------------------ ------------------- TOTAL ASSETS 3,445,344 3,454,433 ================== ===================
2 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED BALANCE SHEETS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (continued) - --------------------------------------------------------------------------------
JUNE 30, DECEMBER 31, LIABILITIES AND STOCKHOLDERS' EQUITY 2004 2003 -------------------- ------------------ (UNAUDITED) CURRENT LIABILITIES Suppliers 49,221 79,673 Payroll and related charges 10,580 16,245 Income and other taxes 15,052 24,120 Current portion of long-term debt Related party 44,539 55,190 Other 115,418 212,472 Short-term debt - export financing and other 118,306 Accrued finance charges 7,121 6,120 Other accruals 7,051 1,553 ------------------- ------------------ 248,982 513,679 ------------------- ------------------ LONG-TERM LIABILITIES Suppliers 12,757 15,222 Long-term debt Related party 176,670 208,076 Other 1,051,434 771,359 Deferred income tax, net 29,294 26,467 Tax assessments and litigation contingencies (Note 11) 92,829 94,500 Other 19,333 23,877 ------------------ ----------------- 1,382,317 1,139,501 ------------------ ----------------- MINORITY INTEREST 323 292 ------------------ ----------------- STOCKHOLDERS' EQUITY Share capital - no-par-value shares authorized and issued Preferred stock Class A - 2004 - 38,024,028 shares; 2003 - 38,137,170 shares 31,106 31,199 Class B - 2004 - 539,139,393 shares; 2003 - 539,026,251 shares 583,390 583,297 Common stock - 455,390,699 shares 297,265 297,265 Treasury stock Class B preferred stock - 1,378,000 shares and Common stock - 483,114 shares (2,288) (2,288) ------------------- ----------------- Total share capital 909,473 909,473 Appropriated retained earnings 314,201 334,246 Unappropriated retained earnings 590,048 557,242 ------------------ ----------------- 1,813,722 1,800,961 ------------------ ----------------- TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY 3,445,344 3,454,433 ================== =================
The accompanying notes are an integral part of these financial statements. 3 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
THREE-MONTH PERIOD SIX-MONTH PERIOD ENDED JUNE 30, ENDED JUNE 30, ------------------------------ ------------------------------ 2004 2003 2004 2003 -------------- -------------- -------------- -------------- OPERATING REVENUES Sales of eucalyptus pulp Domestic 15,392 3,918 27,789 8,941 Export 314,632 216,858 584,817 446,286 -------------- -------------- -------------- -------------- 330,024 220,776 612,606 455,227 Sales taxes and other deductions 38,786 22,101 66,155 38,999 -------------- -------------- -------------- -------------- Net operating revenues 291,238 198,675 546,451 416,228 -------------- -------------- -------------- -------------- OPERATING COSTS AND EXPENSES Cost of sales 168,625 107,135 325,460 232,077 Selling 12,721 8,438 24,424 15,915 Administrative 8,364 4,049 15,631 8,522 Other, net 6,970 9,521 10,178 13,482 -------------- -------------- -------------- -------------- 196,680 129,143 375,693 269,996 -------------- -------------- -------------- -------------- OPERATING INCOME 94,558 69,532 170,758 146,232 -------------- -------------- -------------- -------------- NON-OPERATING (INCOME) EXPENSES Equity in results of affiliated company (1,995) 4,990 (77) 7,003 Financial income (7,007) 2,640 (17,678) (18,934) Financial expenses 29,045 34,586 57,343 51,690 Gain on currency remeasurement, net (8,216) (30,010) (8,480) (40,635) Other, net (25) (20) (10) (15) -------------- -------------- -------------- -------------- 11,802 12,186 31,098 (891) -------------- -------------- -------------- -------------- INCOME BEFORE INCOME TAXES 82,756 57,346 139,660 147,123 INCOME TAX EXPENSE (BENEFIT) Current (2,536) 54,987 5,061 80,619 Deferred (3,005) 159 (882) 5,788 -------------- -------------- -------------- -------------- (5,541) 55,146 4,179 86,407 -------------- -------------- -------------- --------------
The accompanying notes are an integral part of these financial statements. 4 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
NET INCOME 88,297 2,200 135,481 60,716 ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements. 5 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
THREE-MONTH PERIOD SIX-MONTH PERIOD ENDED JUNE 30, ENDED JUNE 30, ------------------------------ ----------------------------- 2004 2003 2004 2003 -------------- -------------- -------------- -------------- BASIC AND DILUTED EARNINGS PER SHARE Class A preferred stock 0.089 0.009 0.137 0.061 Class B preferred stock 0.089 0.002 0.137 0.061 Common stock 0.081 0.002 0.126 0.056 WEIGHTED-AVERAGE NUMBER OF SHARES outstanding (thousands) Class A preferred stock 38,069 40,324 38,103 40,325 Class B preferred stock 537,716 535,465 537,682 535,464 Common stock 454,908 454,908 454,908 454,908
The accompanying notes are an integral part of these financial statements. 6 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
SIX-MONTH PERIOD ENDED JUNE 30, ---------------------------------- 2004 2003 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income 135,481 60,716 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash items Depreciation and depletion 102,173 90,240 Equity results of affiliated company (77) 7,003 Deferred income tax (882) 5,788 Gain on currency remeasurement (8,480) (40,635) Loss on sale of equipment 232 356 Decrease (increase) in operating assets Accounts receivable, net 43,040 12,524 Inventories, net (19,043) (35,337) Interest on time deposits (13,195) 9,431 Recoverable income taxes (5,315) 29,297 Other (2,661) (1,733) Increase (decrease) in operating liabilities Suppliers (37,470) (1,253) Payroll and related charges (5,435) 298 Income and other taxes and litigation contingencies (4,388) 51,238 Accrued finance charges 1,003 2,115 Other 3,871 5,942 ------------- -------------- Net cash provided by operating activities 188,854 195,990 ------------- -------------- CASH FLOWS USED IN INVESTING ACTIVITIES Time deposits (29,776) 116,508 Proceeds from sale of equipment 585 378 Investments in affiliate (45,000) (233,975) Additions to property, plant and equipment (38,348) (56,095) -------------- ------------- Net cash used in investing activities (112,539) (173,184) -------------- --------------
The accompanying notes are an integral part of these financial statements. 7 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
SIX-MONTH PERIOD ENDED JUNE 30, ---------------------------------- 2004 2003 --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES Short-term debt, net (114,934 ) 489,283 Long-term debt Issuances Other 307,488 60,000 Repayments Related parties (31,428 ) (15,978 ) Other (124,467 ) (79,888 ) Treasury stock acquired (3 ) Dividends paid (115,892 ) (109,310 ) --------------- --------------- Net cash provided by (used in) financing activities (79,233 ) 344,104 --------------- --------------- Effect of exchange rate changes on cash and cash equivalents 3,760 (1,499 ) --------------- --------------- INCREASE IN CASH AND CASH EQUIVALENTS 842 365,411 CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 66,284 25,474 --------------- --------------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD 67,126 390,885 =============== ===============
The accompanying notes are an integral part of these financial statements. 8 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
SIX-MONTH PERIOD ENDED JUNE 30, 2004 ---------------------------------------- SHARES US$ ------------------- ----------------- SHARE CAPITAL Preferred stock - Class A Balance, January 1 38,137,170 31,199 Conversion to Class B stock (113,142 ) (93 ) ------------------- ----------------- Balance, June 30 38,024,028 31,106 ------------------- ----------------- Preferred stock - Class B Balance, January 1 539,026,251 583,297 Conversion from Class A stock 113,142 93 ------------------- ----------------- Balance, June 30 539,139,393 583,390 ------------------- ----------------- Common stock Balance, January 1 and June 30 455,390,699 297,265 ------------------- ----------------- Treasury stock Balance, June 30 (1,861,114 ) (2,288 ) ------------------- ----------------- Balance carried forward 1,030,693,006 909,473 ------------------- -----------------
The accompanying notes are an integral part of these financial statements. 9 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
SIX-MONTH PERIOD ENDED JUNE 30, 2004 -------------------------------------------- SHARES US$ -------------------- ------------------ BALANCE BROUGHT FORWARD 1,030,693,006 909,473 -------------------- ------------------ APPROPRIATED RETAINED EARNINGS Investments reserve Balance, January 1 240,509 Transfer to unappropriated retained earnings (16,896 ) ------------------ Balance, June 30 223,613 ------------------ Fiscal-incentive reserve Balance, January 1 34,934 Transfer from unappropriated retained earnings 982 ------------------ Balance, June 30 35,916 ------------------ Legal reserve Balance, January 1 58,803 Transfer from unappropriated retained earnings (4,131 ) ------------------ Balance, June 30 54,672 ------------------ Total balance, June 30 314,201 ------------------ UNAPPROPRIATED RETAINED EARNINGS Balance, January 1 557,242 Net income 135,481 Dividends distribution (122,720 ) Transfer to appropriated retained earnings 20,045 ------------------ Balance, June 30 590,048 ------------------ TOTAL STOCKHOLDERS' EQUITY 1,030,693,006 1,813,722 ==================== ==================
The accompanying notes are an integral part of these financial statements. 10 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- 1 FINANCIAL INFORMATION PRESENTATION a) The unaudited condensed consolidated financial statements of Aracruz Celulose S.A. (the "Company") for the three-months and six-month periods ended June 30, 2004 and 2003 are based upon accounting policies and methods consistent with those used and described in the Company's annual report. In the opinion of management, the said financial statements include all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods presented. The results for the first six months of the year may not necessarily be indicative of the results to be expected for the entire year. The condensed consolidated interim financial statements do not include all the disclosures required by USGAAP and therefore should be read in conjunction with the most recent annual financial statements. As mentioned in Note 9, on June 30, 2003, the Company acquired a controlling interest in and, on July 2, 2003, became the sole stockholder of Riocell S.A.. On January 07, 2004 Riocell was merged into Aracruz Celulose S.A. In preparing the condensed consolidated financial statements, the use of estimates is required to account for certain assets, liabilities and other transactions. The Company's condensed consolidated financial statements therefore include various estimates concerning the selection of useful lives of property, plant and equipment, carrying values of goodwill, provisions necessary for losses on accounts receivable and for contingent liabilities, employee post-retirement benefits and other similar evaluations. Actual results may vary from estimates. b) The financial information has been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"), which differ in certain respects from the statutory financial statements prepared in accordance with accounting practices adopted in Brazil. The Board of Directors and management consider the US dollar as the Company's functional currency as this is the currency in which it principally operates as well as being the Company's primary unit of economic measure. Accordingly, the US dollar amounts have been remeasured from Brazilian Reais (R$) in accordance with the criteria set forth in Statement of Financial Accounting Standards ("SFAS") 52 - "Foreign Currency Translation". Gains and losses resulting from the remeasurement of the financial information, as well as those resulting from foreign currency transactions have been recorded in the statement of income for all periods presented. 11 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- 2 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 2003, FIN 46 was substantially revised and a new interpretation, FIN 46 (revised), or FIN 46R, was issued. FIN 46R(i) clarified some FIN 46 requirements, (ii) eased some implementation problems, and (iii) added new scope exceptions. In addition, FIN 46R deferred the effective date of the Interpretation for public companies to the end of the first reporting period ending after March 15, 2004, except that all public companies must at a minimum apply the provisions of the Interpretation to entities created after February 1, 2003 that are considered special-purpose entities, or SPEs, under FASB literature prior to the issuance of FIN 46R by the end of the first reporting period ending after December 15, 2003. For foreign private issuers who only report on an annual basis, the effective date of FIN 46R is the beginning of the first annual period after December 15, 2003. For SPEs created by foreign private issuers after February 1, 2003, however, the effective date is no later than the end of the first reporting period ending after December 15, 2003. Adoption of FIN 46R by the Company in 2004 did not have any impact on its operations. At its March 31, 2004 meeting, the Emerging Issues Task Force (EITF) reached final consensuses on EITF Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share. Typically, a participating security is entitled to share in a company's earnings, often via a formula tied to dividends on the company's common stock. The issue clarifies what is meant by the term participating security, as used in Statement 128. When an instrument is deemed to be a participating security, it has the potential to significantly reduce basic earnings per common share because the two-class method must be used to compute the instrument's effect on earnings per share. The consensus also covers other instruments whose terms include a participation feature. The consensus also addresses the allocation of losses. If undistributed earnings must be allocated to participating securities under the two-class method, losses should also be allocated. However, EITF 03-6 limits this allocation only to situations when the security has (1) the right to participate in the earnings of the company, and (2) an objectively determinable contractual obligation to share in net losses of the company. The consensuses reached in EITF 03-6 are effective for fiscal periods beginning after March 31, 2004 (effectively the second fiscal quarter for calendar year-end companies). EPS in prior periods must be retroactively adjusted in order to comply with the consensus decisions reached in EITF 03-6. The Company does not expect that this consensus will have any impact on its calculation of Basic and Diluted EPS. 12 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- 3 INCOME TAXES Income taxes in Brazil comprise federal income tax and social contribution (which is an additional federal income tax). The deferred tax balances at each period are computed at the rates to be in force in the subsequent years and the current tax balances at each period include taxes to be paid currently. The statutory enacted rates applicable for federal income tax and social contribution were 25% and 9%, respectively, which represented an aggregate rate of 34%, for both 2004 and 2003. The amounts reported as income taxes expense in the condensed consolidated statements of income are reconciled to the statutory rates as follows:
THREE-MONTH PERIOD SIX-MONTH PERIOD ENDED JUNE 30, ENDED JUNE 30, 2004 2003 2004 2003 ------------ ------------- ------------- ----------- Income before income taxes 82,756 57,346 139,660 147,123 ------------ ------------- ------------- ----------- Federal income tax and social contribution expense at statutory enacted rates 28,137 19,498 47,484 50,022 Adjustments to derive effective tax rate: Effects of differences in remeasurement from Reais to US dollars, using historical exchange rates and indexing for tax purposes: Translation effect for the period (25,770 ) 26,999 (27,094 ) 36,255 Depreciation of difference in asset base 9,841 4,196 12,920 10,905 Fiscal incentive - income tax (a) 1,168 (12,492 (981 ) (23,181 ) Results in subsidiaries with different tax rates (19,925 ) 15,425 (29,444 ) 18,888 Reversal of income tax and social contribution (9,106 ) related to " Plano Verao" (Note 11) Others 1,008 1,520 1,294 2,624 ------------ ------------- ------------- ----------- Income tax expense per condensed consolidated statements of income (5,541 ) 55,146 4,179 86,407 ============ ============= ============= ===========
(a) The Company is located within the geographic area of ADENE (Agency for the Development of the Northeast). Decree No. 4213, of April 16, 2002, recognizes the pulp and paper sector as a priority in the development of the region, thus entitling Aracruz to benefit from reductions in corporate income tax. In October 2002, the Company signed the respective agreement with ADENE, which was formally approved by Internal Revenue Service on December 13, 2002, awarding the Company the right to reduced income tax rates on its operating profits, as follows: 13 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- (i) Profits corresponding to the volumes of Plant C, limited to 780 thousand tons/year, for 10 years: 75% reduction of the statutory tax rate, as from 2003 through 2012; (ii) Profits corresponding to the volumes of Plants A and B, limited to 1,300 thousand tons/year, for 10 years: 37.5% reduction of the statutory rate through 2003, 25% reduction from 2004 through 2008 and 12.5% reduction from 2009 through 2013. For the six-month period ended June 30, 2004, the reduction in taxes amounted to US$ 981, resulting in a cumulative total tax reduction of US$ 35,915 since the introduction of this incentive. The amounts of the tax reduction are transferred from retained earnings to the Fiscal Incentive Reserve in the Stockholders' Equity and may only be used to increase capital, according to the ADENE rules. On January 9, 2004, the Company was notified by ADENE of its decision to cancel the fiscal benefits to which the Company had been entitled. Such decision resulted from a revaluation by the legal department of the Regional Integration Ministry, which has concluded that the Company's location is outside the geographical area covered by the fiscal incentive and, therefore, the Company would no longer be entitled to such fiscal incentive. Based on the advice of external legal counsels, Company's management believes that such decision is incorrect, as the most appropriate interpretation of the legislation would lead necessarily to the conclusion that the Company does operate within the geographical area of ADENE and, therefore, is entitled to the fiscal incentive. Also, based on the advice of external legal counsels, management believes that the ADENE's decision does not invalidate the benefits already recorded during 2003 and 2004 as they were duly recognized under previously existing authorization. On March 29, 2004 the Company received advice from ADENE that it had nullified its January 9, 2004 notification in order to permit the Company to justify its position. On June 15, 2004, through Ruling No. 58, the Director-General of ADENE cancelled the basis for recognition of the fiscal benefits. Under advice from its external legal council, the Company believes that this later decision of ADENE is mistaken and does not disqualify the benefits already obtained during the period in which they were previously authorized. Consequently, the Company has not booked any loss provisions for the amounts of the benefits recognized through June 30, 2004. The Company continues to seek all available legal measures to cancel the effects of Ruling No. 58 in order to permit it to receive its full entitlement to the fiscal benefits. 14 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- The major components of the deferred tax accounts in the balance sheet are as follows:
JUNE 30, DECEMBER 31, 2004 2003 ------------------- --------------------- (UNAUDITED) Assets (liabilities) Deductible temporary differences 51,251 48,596 Other capitalized investments (80,545 ) (75,063 ) Non-realized profits on intercompany 16,888 13,181 transactions ------------------- --------------------- (12,406 ) (13,286 ) Current assets 16,888 13,181 ------------------- --------------------- Long-term assets (liabilities) (29,294 ) (26,467 ) =================== =====================
At June 30, 2004, the Company had recoverable taxes in the total amount of US$2,931 relating mainly to the withholding income tax on financial income, which can be offset against future income tax payable.
4 CASH AND CASH EQUIVALENTS JUNE 30, DECEMBER 31, 2004 2003 ------------------- --------------------- (UNAUDITED) Brazilian reais 1,164 3,307 United States dollars 65,070 61,775 European currencies 892 1.202 ------------------- --------------------- 67,126 66.284 =================== =====================
Cash equivalents denominated in Brazilian Reais represent principally investments in certificates of deposit placed with major financial institutions in Brazil. The amount invested in United States dollars as of June 30, 2004 consists primarily of time deposits with prime financial institutions. 15 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- 5 TIME DEPOSITS At June 30, 2004, time deposits are certificates of deposit with prime institutions in Brazil, with daily liquidity.
6 ACCOUNTS RECEIVABLE JUNE 30, DECEMBER 31, 2004 2003 --------------------- ------------------- (UNAUDITED) Customers - pulp sales Domestic 6,325 7,383 Export 156,726 196,911 Advances to suppliers 2,751 4,258 Other 13,028 18,007 --------------------- ------------------- 178,830 226,559 Allowance for doubtful accounts (3,756 ) (3,511 ) --------------------- ------------------- Total accounts receivable, net 175,074 223,048 ===================== =================== 7 INVENTORIES JUNE 30, DECEMBER 31, 2004 2003 ------------------- --------------------- (UNAUDITED) Finished products 95,326 67,903 Work in process 1,156 1,380 Timber 5,003 4,840 Raw materials 13,438 24,893 Spare parts and maintenance supplies 37,560 34,579 ------------------- --------------------- Provision for losses (1,954) (2,109) ------------------- --------------------- Total inventories 150,529 131,486 =================== =====================
16 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
8 PROPERTY, PLANT AND EQUIPMENT , NET JUNE, 30 2004 ------------------------------------------------------- (UNAUDITED) ACCUMULATED COST DEPRECIATION NET ---------------- ------------------- ---------------- Land 287,823 287,823 Timber resources 323,658 71,396 252,262 Buildings, improvements and installations 567,505 320,707 246,798 Equipment 2,485,694 1,149,928 1,335,766 Information technology equipment 52,851 40,512 12,339 Other 183,603 128,620 54,983 ---------------- ------------------- ---------------- 3,901,134 1,711,163 2,189,971 Construction in progress 18,092 18,092 ---------------- ------------------- ---------------- Total 3,919,226 1,711,163 2,208,063 ---------------- ------------------- ---------------- DECEMBER, 31 2003 ------------------------------------------------------- ACCUMULATED COST DEPRECIATION NET ---------------- ------------------- ---------------- Land 295,364 295,364 Timber resources 341,054 75,087 265,967 Buildings, improvements and installations 563,872 326,633 237,239 Equipment 2,606,971 1,193,750 1,413,221 Information technology equipment 55,926 41,303 14,623 Other 153,481 125,653 27,828 ---------------- ------------------- ---------------- 4,016,668 1,762,426 2,254,242 Construction in progress 16,127 16,127 ---------------- ------------------- ---------------- Total 4,032,795 1,762,426 2,270,369 ---------------- ------------------- ----------------
Depreciation is computed on the straight-line basis at rates, which take into consideration the useful lives of the assets, principally an average of 25 years for buildings, 10 years for improvements and installations, and 4 to 25 years for machinery and equipments and other assets. 17 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- FIBERLINE C - EXPANSION PROJECT The new production capacity, after the start-up of Fiberline C in May 2002, required an increase in the forest base of the Company of approximately 72,000 hectares of eucalyptus plantations. The Company reached full production capacity in the first quarter of 2003. ACQUISITION OF FLORESTAS RIO DOCE S.A. In September 2002, Aracruz Celulose S.A., together with Bahia Sul Celulose S.A., signed an agreement with Companhia Vale do Rio Doce S.A. (CVRD) and its subsidiary Florestas Rio Doce S.A. (FRDSA), for the acquisition of the assets consist of FRDSA, located in the Municipality of Sao Mateus, in the State of Espirito Santo. Such assets are comprised of approximately 40,000 hectares of land and eucalyptus forests. Consideration was R$ 193.3 million - US$ 49.6 million, net of the assignment to the buyers of the rights of a preexisting wood supply agreement valued at R$ 49.5 million - US$ 13.3 million, resulting in a combined net price of R$ 143.8 million (approximately US$ 36.3 million), which is being paid in 12 quarterly installments, of which 5 are outstanding as of June 30, 2004. 9 INVESTMENT IN AFFILIATED COMPANY a) Affiliated Company - Veracel Celulose S.A. On October 10, 2000, the Company acquired a 45% interest in Veracel Celulose S.A. ("Veracel") for US$ 81,011. Veracel is growing eucalyptus plantations in the state of Bahia in Brazil and did not begin operations until January 2002. Stora Enso OYJ ("Stora Enso") and Odebrecht S.A. ("Odebrecht") owned the remaining 45% and 10%, respectively. Upon closing of the purchase agreement, the Company and Veracel entered into a three-year contract to provide wood for the Company<180>s mill expansion. Under the terms of the contract, which began in January 2002, Veracel supplies up to 3.85 million cubic meters of wood at US$ 40.50 per cubic meter. During the first quarter of 2003, the Company, together with Stora Enso, acquired Odebrecht's 10% stake on a 50 percent basis. The cost to the Company of this additional investment was US$ 9,658, including US$ 443 of unallocated goodwill. The Company accounts for its investment in Veracel using the equity method of accounting. At June 30, 2004 the Company's investment in Veracel included goodwill of US$ 16,026. For the first six-months of the year, the Company recognized an equity gain of US$ 77 (First six months of 2003 - loss of US$ 4,990) In May 2003, the Company and Stora Enso jointly decided to proceed with the planned construction of Veracel's own green field plant which will have a capacity of 900,000 tons of pulp per year and will require investments of approximately US$ 1,250 million. 18 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- c) Business Combination - Acquisition of Riocell S.A. On July 2, 2003, the Company completed the acquisition of all outstanding shares of Riocell S.A. (formerly Klabin Riocell S.A.) and its subsidiaries ("Riocell") from Klabin S.A. and Klabin do Parana Produtos Florestais Ltda. Riocell is a producer of bleached eucalyptus pulp, most of which is exported, with a production capacity of 400,000 tons of pulp per year and forestry operations which encompass 40,000 hectares of eucalyptus plantations. The acquisition is in line with the Company's strategic objective of increasing capacity. The goodwill paid is related to potential operating synergy gains. The final price paid is within the market value evaluation made by independent appraisers. After the completion of the due diligence process, the final purchase price was US$ 567,296. The Company retained an independent appraiser to perform a detailed fair value valuation of Riocell's assets and liabilities. This valuation was completed as of December 23, 2003 and after the final allocation of the purchase price to the net assets acquired, the Company recognized goodwill in the amount of US$ 192,035 at December 31, 2003. There were no intangible assets identified in the acquisition. 19 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- The following table summarizes the estimated fair value of Riocell's assets and liabilities at July 2, 2003, after giving effect to the final price adjustments:
JULY 2, 2003 ------------------- Cash and cash-equivalents 4,088 Inventory 29,525 Property, Plant and equipment 340,129 Other assets acquired 77,068 Total assets 450,810 Liabilities 75,549 Net worth 375,261 Shares owned 100% Company's interest 375,261 Consideration paid 567,296 Goodwill 192,035
As described in note 1, the Riocell subsidiary was merged into Aracruz Celulose S.A on January 7, 2004.
10 LONG TERM DEBT JUNE 30, DECEMBER 31, 2004 2003 --------------------- -------------------- (UNAUDITED) Denominated in Brazilian reais 178,920 210,955 Denominated in foreign currency, principally United States dollars 1,209,141 1,036,142 --------------------- -------------------- Total 1,388,061 1,247,097 Less current maturities 159,957 267,662 --------------------- -------------------- Long-term debt 1,228,104 979,435 ===================== ====================
20 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- The long-term portion at June 30, 2004 falls due in the following years 2005 84,563 2006 279,729 2007 328,044 2008 224,872 2009 and 2011 310,896 --------------- Total 1,228,104 =============== a) Export Receivables As of June 30, 2004, the Company had an outstanding balance of bank financing export receivables in the amount of US$ 345 million, with annual interest rates ranging from 1.67% to 4.98%, to be repaid from December 2004 through March 2008. b) Loan from Related Party - BNDES As of June 30, 2004, the Company had an outstanding balance of BNDES loans in the amount of R$687 million (equivalent to US$221 million), denominated in Brazilian Reais and basket of foreign currencies, with annual interest rates ranging from 7.80% to 9.90%, to be repaid from 2004 through 2009. c) Debt of Aracruz Trading S.A. and Aracruz Trading Hungary Ltd. During June 2001, Aracruz Trading S.A. obtained long term financing of US$ 100 million, with maturities from May 2004 to June 2004 with contractual clauses of early maturity and annual interest rates ranging from 2.72% to 2.74%, secured against future export sales receivables. Aracruz Trading S.A. pre-paid the amounts of US$37.5 million in December 2002 and US$ 25.0 million in May 2003. The outstanding balance was paid on maturity: US$ 25.0 million in May 2004 and US$ 12.5 million in June 2004. In February 2002, the Company, through Aracruz Trading S.A., signed a financing agreement with a special-purpose entity (SPE) under which such entity received and advanced to the Company US$250 million, as an issuance of Senior Secured Export Notes. In August 2003, a second tranche of Senior Secured Export Notes was issued, in the amount of US$400 million under the same securitization program established in February 2002. In May 2004, a third tranche of Senior Secured Export Notes was issued, in the amount of US$175 million under the same securitization program. In return, the Company securitized the financing by selling to the SPE 95% of its current and future export accounts receivables. In June 2003 this obligation was reduced to 80% of such receivables. In February 2004, Aracruz Trading Hungary Ltd. had been included in the securitization program, additionally to Aracruz Trading S.A.. Each month the collections in excess of contractual funding requirements are transferred to Aracruz Trading S.A and Aracruz Trading Hungary Ltd. The table below summarizes the terms of the three tranches under the securitization programs: 21 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - --------------------------------------------------------------------------------
OUTSTANDING BALANCE (PRINCIPAL AMOUNTS) ------------------------------ ORIGINAL LINE ANNUAL JUNE DECEMBER OF CREDIT CHARGES DUE DATE 2004 2003 ---------------- ------------ --------------------- ------------- --------------- Tranche February 2002 250,000 5.984% March 2009 233,520 250,000 August 2003 400,000 7.048% September 2011 400,000 400,000 May 2004 175,000 6.361% May 2012 175,000 ---------------- ------------- --------------- 825,000 808,520 650,000 ---------------- ------------- ---------------
11 COMMITMENTS AND CONTINGENCIES The accounting books as well as operations of the Company are subject to the examination of tax authorities and eventual notifications for additional payments of certain taxes according to tax legislation. The Company is party to many labor, civil and tax law suits in the normal course of business. Based on the opinion of its external legal counsels and on the controls maintained over these contingencies, the Company understands that contingent liabilities provision are adequately estimated and accounted. a) Labor and Social Securities As of June 30, 2004, the Company had labor contingent liabilities in the amount of US$9,882 thousand, considered enough to cover future possible losses. In March 1997, the Company received notifications from Social Security inspectors considering that the amounts of contributions paid was understated. The Company appealed against this decision as it believes it is incorrect and based on its legal counsel's opinion did not account for any contingent liability. 22 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- b) Pis and Cofins The Company is taking action in court against certain changes in the rates and rules for the calculation of the PIS (Social Integration Program) and COFINS (Social Fund) contributions determined by Law 9.718/98, the basis of calculation of which includes financial income and exchange and monetary variations. As of June 30, 2004, the provision for contingencies included US$ 42.1 million related to PIS and COFINS on exchange gains on U.S. dollar denominated debt resulting from the appreciation of the Real against the U.S. dollar that resulted from the significant devaluation in early 1999. After analyzing certain legal decisions on similar legal actions of other companies and their implications for Aracruz's case, the Company decided to cancel part of the legal action, regarding the rate increase and the basis of calculation modifications (except for foreign exchange variation), and decided to pay the accrued amount in installments according to a special program of tax collection called PAES, enacted by the law 10.684/2003, in a total amount of US$ 20,293. The remaining balance of US$19.2 is recorded in other current and long-term liabilities. c) "Plano Verao" In March 2003, the Company obtained a favorable final court ruling regarding the determination of its income tax and social contribution liabilities ("Plano Verao") and, consequently, reversed this provision, which includes interest and monetary variation, against income tax expense and financial expense in the amounts of US$ 9,106 and US$ 6,832, respectively. d) Environmental Regulations The Company's forestry and manufacturing operations are subject to both Federal and State government environmental regulations. The Company's management believes that it is in compliance, in all material respects, with all applicable environmental regulations. e) ICMS Credit In 2002, the Company took action in court against the government of the State of Espirito Santo to confirm the legal right to use its accumulated ICMS credits arising from fixed assets, raw material and other goods acquired for utilization in the process of pulp production. As of June 30, 2004, the balance recorded as an asset was US$101,559, of which the amount of US$ 96,972 had a provision for loss. 23 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- f) Social Contribution of profits generated by export sales On September 10, 2003, the Company obtained a Court Order that gave it the right not to pay Social Contribution on profits generated by export sales beginning in January 2002 as well as the right to recognize the amounts of tax credits previously offset against such social contribution paid on profits from past export sales. The accumulated amount as of June 30, 2004 is US$ 30.9 million, which is being accrued as a liability until a final decision is reached. 12 Stockholders' equity Stockholders' equity included in the financial information presented herein differs from that included in the Company's statutory accounting records as a result of differences between the variations in the US dollar exchange rate and in the indexes mandated, in previous years, for indexation of the statutory financial statements, and of adjustments made to reflect the requirements of US GAAP. Brazilian law permits the payment of cash dividends only from unappropriated retained earnings and certain reserves registered in the Company's statutory accounting records. At June 30, 2004, the statutory reserves available for distribution as dividends, upon approval by the Company's stockholders, amounted to the equivalent of US$ 319 million. BASIC AND DILUTED EARNINGS PER SHARE Basic and diluted earnings per share ("EPS") as of June 30, 2004 and 2003, as presented in the Company's statement of income, have been calculated on the following basis taking into consideration the Dividend Allocation between Class A and Class B preferred stock and common stock as discussed below: Class A preferred stock may be converted into Class B preferred stock at any time at the option of the stockholder. Preferred stock does not have voting rights but has priority in the return of capital in the event the Company is liquidated and has the right to receive cash dividends in an amount 10% higher than dividends attributable to each common stock. Stock dividends payable to Class A preferred stockholders are effected through issuance of Class B preferred stock. Class A preferred stock has priority in the distribution of a minimum annual cash dividend equivalent to 6% of the related capital. Additionally, in order to comply with Law 9457/97, the Company's By-laws were changed to grant Class B preferred stock the right to receive an annual dividend in an amount that is 10% higher than dividends paid to common stockholders (the "Dividend Allocation"). 24 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- Earnings, if any, in excess of the Class A preferred stock minimum dividend will be distributed as dividends to Class B preferred stock and common stock, up to the equivalent on a per-share basis of those paid to Class A preferred stock, while maintaining the Dividend Allocation between Class B preferred stock and common stock. Any earnings remaining for distribution thereafter are shared rateably among Class A preferred, Class B preferred and common stocks while maintaining the Dividend Allocation between Class A and Class B preferred stock and common stock. In the event that Class A preferred stock is not paid dividends for three consecutive years, holders of that stock are entitled to voting rights until the dividends in arrears for those three years are paid. The earnings per share calculations are as follows:
SIX-MONTHS PERIOD ENDED JUNE 30 -------------------------------------- 2004 2003 --------------- --------------------- (unaudited) (unaudited) Net income 135,481 60,716 Less priority Class A preferred stock dividends (662 ) (758 ) Less Class B preferred stock and common stock dividends up to the Class A preferred stock dividends on a per-share basis, while maintaining the Dividend Allocation (16,527 ) (17,839 ) --------------- --------------------- Remaining net income to be equally allocated to Class A and Class B preferred stock and common stock, while maintaining the Dividend Allocation (118,292 ) (42,119 ) =============== ===================== Weighted average number of shares outstanding (thousands) Class A preferred 38,103 40,325 Class B preferred 537,682 535,464 Common 454,908 454,908 Basic and diluted earnings per share Class A preferred 0.137 0.061 Class B preferred 0.137 0.061 Common 0.126 0.056
25 ARACRUZ CELULOSE S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT NUMBER OF SHARES) (Unaudited) - -------------------------------------------------------------------------------- 13 GEOGRAPHICAL INFORMATION The Company's exports from Brazil, classified by geographic destination, are as follows:
THREE-MONTH PERIOD SIX-MONTH PERIOD ENDED JUNE 30, ENDED JUNE 30, 2004 2003 2004 2003 -------------------- -------------------- -------------------- -------------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) North America 123,590 93,973 185,611 182,269 Europe 130,681 82,501 259,448 172,870 Asia 49,604 34,084 125,886 84,820 Other 10,757 6,300 13,872 6,327 -------------------- -------------------- -------------------- -------------------- Total 314,632 216,858 584,817 446,286
Sales to one unaffiliated customer represented 30 % of net sales in 2004. In 2003, one client represented 39% of net sales and another one represented 13%. No other individual customers represented more than 10% of net sales. * * * 26 -----END PRIVACY-ENHANCED MESSAGE-----