UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-16625
BUNGE LIMITED
(Exact name of registrant as specified in its charter)
|
Bermuda |
|
98-0231912 |
|
(State or other jurisdiction of incorporation or |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
50 Main Street, White Plains, New York |
|
10606 |
|
(Address of principal executive offices) |
|
(Zip Code) |
(914) 684-2800
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer x |
Accelerated filer o |
Non-accelerated
filer o |
Smaller reporting
company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o No x
As of August 2, 2010 the number of common shares outstanding of the registrant was:
Common shares, par value $.01: 140,278,624
BUNGE LIMITED
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(U.S. dollars in millions, except per share data)
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||||||
|
|
|
June 30, |
|
June 30, |
|
||||||||||||
|
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||||||
|
Net sales |
|
$ |
10,974 |
|
|
$ |
10,994 |
|
|
$ |
21,319 |
|
|
$ |
20,192 |
|
|
|
Cost of goods sold |
|
(10,549 |
) |
|
(10,582 |
) |
|
(20,349 |
) |
|
(19,645 |
) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gross profit |
|
425 |
|
|
412 |
|
|
970 |
|
|
547 |
|
|
||||
|
Selling, general and administrative expenses |
|
(415 |
) |
|
(309 |
) |
|
(762 |
) |
|
(603 |
) |
|
||||
|
Gain on sale of fertilizer nutrients assets |
|
2,440 |
|
|
— |
|
|
2,440 |
|
|
— |
|
|
||||
|
Interest income |
|
23 |
|
|
40 |
|
|
42 |
|
|
76 |
|
|
||||
|
Interest expense |
|
(101 |
) |
|
(66 |
) |
|
(179 |
) |
|
(133 |
) |
|
||||
|
Foreign exchange (losses) gains |
|
(49 |
) |
|
320 |
|
|
(99 |
) |
|
301 |
|
|
||||
|
Other income (expense) – net |
|
(3 |
) |
|
(1 |
) |
|
(3 |
) |
|
(8 |
) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income from operations before income tax |
|
2,320 |
|
|
396 |
|
|
2,409 |
|
|
180 |
|
|
||||
|
Income tax expense |
|
(542 |
) |
|
(79 |
) |
|
(551 |
) |
|
(45 |
) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Income from operations after income tax |
|
1,778 |
|
|
317 |
|
|
1,858 |
|
|
135 |
|
|
||||
|
Equity in earnings of affiliates |
|
9 |
|
|
5 |
|
|
9 |
|
|
11 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income |
|
1,787 |
|
|
322 |
|
|
1,867 |
|
|
146 |
|
|
||||
|
Net income attributable to noncontrolling interest |
|
(9 |
) |
|
(9 |
) |
|
(26 |
) |
|
(28 |
) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income attributable to Bunge |
|
1,778 |
|
|
313 |
|
|
1,841 |
|
|
118 |
|
|
||||
|
Convertible preference share dividends |
|
(20 |
) |
|
(20 |
) |
|
(39 |
) |
|
(39 |
) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income available to Bunge common shareholders |
|
$ |
1,758 |
|
|
$ |
293 |
|
|
$ |
1,802 |
|
|
$ |
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Earnings per common share – basic (Note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Earnings to Bunge common shareholders |
|
$ |
12.21 |
|
|
$ |
2.40 |
|
|
$ |
12.68 |
|
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Earnings per common share – diluted (Note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Earnings to Bunge common shareholders |
|
$ |
11.15 |
|
|
$ |
2.28 |
|
|
$ |
11.67 |
|
|
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Dividends per common share |
|
$ |
0.23 |
|
|
$ |
0.21 |
|
|
$ |
0.44 |
|
|
$ |
0.40 |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(U.S. dollars in millions, except share data)
|
|
|
June 30, |
|
|
December 31, |
|
||||
|
ASSETS |
|
|
|
|
|
|
|
|||
|
Current assets: |
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents |
|
$ |
2,771 |
|
|
$ |
553 |
|
|
|
|
Trade accounts receivable (less allowance of $189 and $192) |
|
2,489 |
|
|
2,363 |
|
|
|||
|
Inventories (Note 5) |
|
4,571 |
|
|
4,862 |
|
|
|||
|
Deferred income taxes |
|
145 |
|
|
506 |
|
|
|||
|
Other current assets (Note 6) |
|
2,980 |
|
|
3,499 |
|
|
|||
|
Total current assets |
|
12,956 |
|
|
11,783 |
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Property, plant and equipment, net |
|
4,651 |
|
|
5,347 |
|
|
|||
|
Goodwill (Note 7) |
|
960 |
|
|
427 |
|
|
|||
|
Other intangible assets, net (Note 8) |
|
191 |
|
|
170 |
|
|
|||
|
Investments in affiliates |
|
584 |
|
|
622 |
|
|
|||
|
Deferred income taxes |
|
966 |
|
|
979 |
|
|
|||
|
Other non-current assets |
|
1,786 |
|
|
1,958 |
|
|
|||
|
Total assets |
|
$ |
22,094 |
|
|
$ |
21,286 |
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|||
|
Current liabilities: |
|
|
|
|
|
|
|
|||
|
Short-term debt |
|
$ |
172 |
|
|
$ |
166 |
|
|
|
|
Current portion of long-term debt |
|
844 |
|
|
31 |
|
|
|||
|
Trade accounts payable |
|
3,278 |
|
|
3,275 |
|
|
|||
|
Deferred income taxes |
|
68 |
|
|
100 |
|
|
|||
|
Other current liabilities (Note 10) |
|
2,345 |
|
|
2,635 |
|
|
|||
|
Total current liabilities |
|
6,707 |
|
|
6,207 |
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Long-term debt |
|
2,828 |
|
|
3,618 |
|
|
|||
|
Deferred income taxes |
|
115 |
|
|
183 |
|
|
|||
|
Other non-current liabilities |
|
757 |
|
|
913 |
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Commitments and contingencies (Note 15) |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|||
|
Mandatory convertible preference shares, par value $.01; authorized — 862,500; issued and outstanding: 2010 and 2009 — 862,455 shares (liquidation preference $1,000 per share) |
|
863 |
|
|
863 |
|
|
|||
|
Convertible perpetual preference shares, par value $.01; authorized issued and outstanding: 2010 and 2009 — 6,900,000 shares (liquidation preference $100 per share) |
|
690 |
|
|
690 |
|
|
|||
|
Common shares, par value $.01; authorized — 400,000,000 shares; issued: 2010 — 144,713,558 shares, 2009 — 134,096,906 shares |
|
1 |
|
|
1 |
|
|
|||
|
Additional paid-in capital |
|
4,252 |
|
|
3,625 |
|
|
|||
|
Retained earnings |
|
5,734 |
|
|
3,996 |
|
|
|||
|
Accumulated other comprehensive income (loss) |
|
(25 |
) |
|
319 |
|
|
|||
|
Treasury shares, at cost (2010 — 2,050,000 shares) |
|
(107 |
) |
|
— |
|
|
|||
|
Total Bunge shareholders’ equity |
|
11,408 |
|
|
9,494 |
|
|
|||
|
Noncontrolling interest |
|
279 |
|
|
871 |
|
|
|||
|
Total equity |
|
11,687 |
|
|
10,365 |
|
|
|||
|
Total liabilities and shareholders’ equity |
|
$ |
22,094 |
|
|
$ |
21,286 |
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in millions)
|
|
|
Six Months Ended |
|
||||||
|
|
|
2010 |
|
2009 |
|
||||
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
||
|
Net income |
|
$ |
1,867 |
|
|
$ |
146 |
|
|
|
Adjustments to reconcile net income to cash used for operating activities: |
|
|
|
|
|
|
|
||
|
Foreign exchange loss (gain) on debt |
|
225 |
|
|
(359 |
) |
|
||
|
Gain on sale of fertilizer nutrients assets |
|
(2,440 |
) |
|
— |
|
|
||
|
Impairment of assets |
|
12 |
|
|
— |
|
|
||
|
Bad debt expense |
|
16 |
|
|
23 |
|
|
||
|
Depreciation, depletion and amortization |
|
215 |
|
|
200 |
|
|
||
|
Stock-based compensation expense |
|
34 |
|
|
16 |
|
|
||
|
Recoverable taxes provision |
|
1 |
|
|
37 |
|
|
||
|
Deferred income taxes |
|
202 |
|
|
(104 |
) |
|
||
|
Equity in earnings of affiliates |
|
(9 |
) |
|
(11 |
) |
|
||
|
Changes in operating assets and liabilities, excluding the effects of acquisitions: |
|
|
|
|
|
|
|
||
|
Trade accounts receivable |
|
(645 |
) |
|
361 |
|
|
||
|
Inventories |
|
(80 |
) |
|
(528 |
) |
|
||
|
Prepaid commodity purchase contracts |
|
(126 |
) |
|
(211 |
) |
|
||
|
Secured advances to suppliers |
|
67 |
|
|
257 |
|
|
||
|
Trade accounts payable |
|
522 |
|
|
(1,111 |
) |
|
||
|
Advances on sales |
|
20 |
|
|
21 |
|
|
||
|
Unrealized net gain/loss on derivative contracts |
|
15 |
|
|
213 |
|
|
||
|
Margin deposits |
|
153 |
|
|
(279 |
) |
|
||
|
Accrued liabilities |
|
179 |
|
|
(69 |
) |
|
||
|
Other—net |
|
(387 |
) |
|
(356 |
) |
|
||
|
Cash used for operating activities |
|
(159 |
) |
|
(1,754 |
) |
|
||
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
||
|
Payments made for capital expenditures |
|
(547 |
) |
|
(346 |
) |
|
||
|
Acquisitions of businesses (net of cash acquired) |
|
(133 |
) |
|
(19 |
) |
|
||
|
Proceeds from sale of fertilizer nutrients assets |
|
3,886 |
|
|
— |
|
|
||
|
Cash disposed in sale of fertilizer nutrients assets |
|
(106 |
) |
|
— |
|
|
||
|
Proceeds from investments |
|
28 |
|
|
60 |
|
|
||
|
Proceeds from disposal of property, plant and equipment |
|
3 |
|
|
5 |
|
|
||
|
Related party loans |
|
(7 |
) |
|
(19 |
) |
|
||
|
Investments in affiliates |
|
(2 |
) |
|
— |
|
|
||
|
Change in restricted cash |
|
— |
|
|
(28 |
) |
|
||
|
Cash provided by (used for) investing activities |
|
3,122 |
|
|
(347 |
) |
|
||
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
||
|
Net change in short-term debt with maturities of 90 days or less |
|
219 |
|
|
364 |
|
|
||
|
Proceeds from short-term debt with maturities greater than 90 days |
|
267 |
|
|
784 |
|
|
||
|
Repayments of short-term debt with maturities greater than 90 days |
|
(852 |
) |
|
(625 |
) |
|
||
|
Proceeds from long-term debt |
|
132 |
|
|
2,857 |
|
|
||
|
Repayment of long-term debt |
|
(306 |
) |
|
(1,754 |
) |
|
||
|
Proceeds from sale of common shares |
|
2 |
|
|
1 |
|
|
||
|
Repurchase of common shares |
|
(86 |
) |
|
— |
|
|
||
|
Dividends paid to preference shareholders |
|
(39 |
) |
|
(39 |
) |
|
||
|
Dividends paid to common shareholders |
|
(60 |
) |
|
(46 |
) |
|
||
|
Dividends paid to noncontrolling interest |
|
— |
|
|
(8 |
) |
|
||
|
Other |
|
22 |
|
|
(3 |
) |
|
||
|
Cash (used for) provided by financing activities |
|
(701 |
) |
|
1,531 |
|
|
||
|
Effect of exchange rate changes on cash and cash equivalents |
|
(44 |
) |
|
55 |
|
|
||
|
Net increase (decrease) in cash and cash equivalents |
|
2,218 |
|
|
(515 |
) |
|
||
|
Cash and cash equivalents, beginning of period |
|
553 |
|
|
1,004 |
|
|
||
|
Cash and cash equivalents, end of period |
|
$ |
2,771 |
|
|
$ |
489 |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(U.S. dollars in millions, except share data)
|
|
|
Convertible |
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Additional |
|
Retained |
|
Accumulated |
|
Treasury |
|
Non - |
|
Total Equity |
|
Comprehensive |
|
|
Balance, January 1, 2009 |
|
7,762,455 |
|
$1,553 |
|
121,632,456 |
|
$1 |
|
$2,849 |
|
$3,844 |
|
$(811) |
|
$— |
|
$692 |
|
$8,128 |
|
|
|
|
Comprehensive income (loss)—2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
— |
|
— |
|
— |
|
— |
|
— |
|
118 |
|
— |
|
— |
|
28 |
|
146 |
|
$146 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation adjustment, net of tax expense of $0 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
596 |
|
— |
|
101 |
|
697 |
|
697 |
|
|
Unrealized gains on commodity futures and foreign exchange contracts, net of tax expense of $12 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
32 |
|
— |
|
— |
|
32 |
|
32 |
|
|
Unrealized investment gains, net of tax expense of $1 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
2 |
|
— |
|
— |
|
2 |
|
2 |
|
|
Reclassification of realized net gains, net of tax of $18 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
33 |
|
— |
|
(2) |
|
31 |
|
31 |
|
|
Pension adjustment, net of tax benefit $5 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(4) |
|
— |
|
(6) |
|
(10) |
|
(10) |
|
|
Total comprehensive income |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
659 |
|
— |
|
121 |
|
|
|
$898 |
|
|
Dividends on common shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(71) |
|
— |
|
— |
|
— |
|
(71) |
|
|
|
|
Dividends on preference shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(39) |
|
— |
|
— |
|
— |
|
(39) |
|
|
|
|
Dividends paid to noncontrolling interest on subsidiary common stock |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(17) |
|
(17) |
|
|
|
|
Return of capital to noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(43) |
|
(43) |
|
|
|
|
Capital contribution from noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
41 |
|
41 |
|
|
|
|
Consolidation of a subsidiary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
5 |
|
|
|
|
Purchase of additional shares in subsidiary from noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
(4) |
|
— |
|
— |
|
— |
|
— |
|
(4) |
|
|
|
|
Stock-based compensation expense |
|
— |
|
— |
|
— |
|
— |
|
16 |
|
— |
|
— |
|
— |
|
— |
|
16 |
|
|
|
|
Issuance of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—stock options and award plans, net of shares withheld for taxes |
|
— |
|
— |
|
404,464 |
|
— |
|
(4) |
|
— |
|
— |
|
— |
|
— |
|
(4) |
|
|
|
|
Balance June 30, 2009 |
|
7,762,455 |
|
$1,553 |
|
122,036,920 |
|
$1 |
|
$2,857 |
|
$3,852 |
|
$(152) |
|
$— |
|
$799 |
|
$8,910 |
|
|
|
(Continued on following page)
|
|
|
Convertible |
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Additional |
|
Retained |
|
Accumulated |
|
Treasury |
|
Non- |
|
Total Equity |
|
Comprehensive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2010 |
|
7,762,455 |
|
$1,553 |
|
134,096,906 |
|
$1 |
|
$3,625 |
|
$3,996 |
|
$319 |
|
$— |
|
$871 |
|
$10,365 |
|
|
|
|
Comprehensive income (loss)—2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1,841 |
|
— |
|
— |
|
26 |
|
1,867 |
|
$1,867 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation adjustment, net of tax expense of $0 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(346) |
|
— |
|
(45) |
|
(391) |
|
(391) |
|
|
Unrealized gains on commodity futures and foreign exchange contracts, net of tax of $0 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1 |
|
— |
|
— |
|
1 |
|
1 |
|
|
Unrealized investment gains, net of tax expense of $0 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1) |
|
— |
|
— |
|
(1) |
|
(1) |
|
|
Other postretirement healthcare subsidy tax deduction adjustment |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
2 |
|
— |
|
— |
|
2 |
|
2 |
|
|
Total comprehensive income (loss) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(344) |
|
|
|
(19) |
|
|
|
$1,478 |
|
|
Dividends on common shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(64) |
|
— |
|
— |
|
— |
|
(64) |
|
|
|
|
Dividends on preference shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(39) |
|
— |
|
— |
|
— |
|
(39) |
|
|
|
|
Dividends to noncontrolling interest on subsidiary common stock |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(9) |
|
(9) |
|
|
|
|
Return of capital to noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(6) |
|
(6) |
|
|
|
|
Capital contribution from noncontrolling interest |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
27 |
|
27 |
|
|
|
|
Initial consolidation of subsidiary |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3 |
|
3 |
|
|
|
|
Sale of non-wholly owned subsidiary (Note 18) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(588) |
|
(588) |
|
|
|
|
Stock-based compensation expense |
|
— |
|
— |
|
— |
|
— |
|
34 |
|
— |
|
— |
|
— |
|
— |
|
34 |
|
|
|
|
Repurchase of common shares |
|
— |
|
— |
|
(2,050,000) |
|
— |
|
— |
|
— |
|
— |
|
(107) |
|
— |
|
(107) |
|
|
|
|
Issuance of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—Business acquisition (Note 3) |
|
— |
|
— |
|
10,252,895 |
|
— |
|
597 |
|
— |
|
— |
|
— |
|
— |
|
597 |
|
|
|
|
—stock options and award plans, net of shares withheld for taxes |
|
— |
|
— |
|
363,757 |
|
— |
|
(4) |
|
— |
|
— |
|
— |
|
— |
|
(4) |
|
|
|
|
Balance June 30, 2010 |
|
7,762,455 |
|
$1,553 |
|
142,663,558 |
|
$1 |
|
$4,252 |
|
$5,734 |
|
$(25) |
|
$(107) |
|
$279 |
|
$11,687 |
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Bunge Limited and its subsidiaries (Bunge) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended (Exchange Act). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 2009 has been derived from Bunge’s audited consolidated financial statements at that date. Operating results for the three and six months ended June 30, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2009, forming part of Bunge’s 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 1, 2010.
Reclassifications — Certain reclassifications related to Bunge’s change in segments were made to the prior period condensed consolidated financial statements to conform to the current period presentation (see Note 20 of the notes to the condensed consolidated financial statements).
2. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
Amendment to Consolidation — In June 2009, the FASB issued a standard that requires an enterprise to (1) determine whether an entity is a variable interest entity (VIE), (2) determine whether the enterprise has a controlling financial interest indicating it is a primary beneficiary of a VIE, which would result in the enterprise being required to consolidate the VIE in its financial statements, and (3) provide enhanced disclosures about the enterprise’s involvement in VIEs. As a result of the adoption of this standard on January 1, 2010, Bunge consolidated one of its agribusiness joint ventures (see Note 18 of notes to the condensed consolidated financial statements).
Accounting for Transfers of Financial Assets — In June 2009, the FASB issued a standard that amended a previously issued standard to improve the information reported in financial statements related to the transfer of financial assets and the effects of the transfers of such assets on the financial position, results from operations and cash flows of the transferor and a transferor’s continuing involvement, if any, with transferred financial assets. In addition, the amendment limits the circumstances in which a financial asset or a portion of a financial asset should be derecognized in the financial statements of the transferor when the transferor has not transferred the entire original financial asset. Upon adoption of this standard on January 1, 2010, all trade accounts receivables sold after that date under Bunge’s accounts receivable securitization programs (the “securitization programs”) are included in trade accounts receivable and the amounts outstanding under the securitization programs are accounted for as secured borrowings and are reflected as short-term debt on Bunge’s condensed consolidated balance sheet. In addition, during the six months ended June 30, 2010 Bunge reduced its utilization of the securitization programs. As a result, the amounts outstanding under the securitization programs at June 30, 2010 are not significant. The adoption of this standard did not have a material impact on Bunge’s financial position, results from operations or cash flows.
3. BUSINESS ACQUISITIONS
Moema Acquisition — In February 2010, Bunge acquired a 100% interest in five Brazilian sugarcane mills in São Paulo and Minas Gerais states that were formerly part of the Moema Group through the acquisition of Usina Moema Patricpacãoes S.A. (Moema Par) and remaining interests in four mills that were not wholly-owned by Moema Par. Bunge collectively refers to the acquired entities as Moema. The purchase consideration for the Moema acquisition was as follows:
|
(US$ in millions) |
|
|
|
|
|
Fair value of Bunge Limited common shares issued |
|
$ |
597 |
|
|
Cash paid |
|
51 |
|
|
|
Contingent purchase price at fair value |
|
3 |
|
|
|
Total purchase price |
|
$ |
651 |
|
Bunge issued 9,718,632 of its common shares with a fair value of $570 million and paid 97 million Brazilian reais in cash, which equated to approximately $51 million, at the closing of the transaction. The final purchase price was subject to a post-closing purchase price adjustment based on working capital and net debt of the acquired companies at closing under Brazilian generally accepted accounting principles. During the second quarter of 2010, Bunge issued 534,263 of its common shares, with a fair value of $27 million and paid 0.5 million Brazilian reais in cash, which equated to approximately $0.3 million, in connection with the finalization of the post-closing purchase price adjustments with certain of the sellers. In addition, included in other current liabilities in the condensed consolidated balance sheet at June 30, 2010 is approximately $3 million representing a contingent liability pending determination of the remaining post-closing purchase price adjustments. These remaining purchase price adjustments settled in the third quarter of 2010.
Acquisition related expenses of $11 million were recorded in selling, general and administrative expenses in the condensed consolidated statements of income in the three months ended March 31, 2010. There were no additional acquisition related expenses recorded for the three months ended June 30, 2010 associated with the Moema Acquisition.
The table below includes Bunge’s preliminary assessment of the fair values of assets and liabilities acquired and related goodwill, including certain reclassifications made during the three months ended June 30, 2010:
|
(US$ in millions) |
|
March 31, |
|
Reclassifications |
|
June 30, |
|
||||
|
Assets acquired: |
|
|
|
|
|
|
|
|
|||
|
Cash |
|
$ |
3 |
|
$ |
— |
|
|
$ |
3 |
|
|
Inventories |
|
184 |
|
3 |
|
|
187 |
|
|||
|
Other current assets |
|
64 |
|
2 |
|
|
66 |
|
|||
|
Property, plant and equipment |
|
642 |
|
15 |
|
|
657 |
|
|||
|
Other intangible assets |
|
44 |
|
— |
|
|
44 |
|
|||
|
Other non-current assets |
|
100 |
|
3 |
|
|
103 |
|
|||
|
Total assets |
|
1,037 |
|
23 |
|
|
1,060 |
|
|||
|
Liabilities acquired: |
|
|
|
|
|
|
|
|
|||
|
Short-term debt |
|
(378) |
|
— |
|
|
(378) |
|
|||
|
Other current liabilities |
|
(349) |
|
47 |
|
|
(302) |
|
|||
|
Long-term debt |
|
(177) |
|
— |
|
|
(177) |
|
|||
|
Other non-current liabilities |
|
(30) |
|
(61 |
) |
|
(91) |
|
|||
|
Total liabilities |
|
(934) |
|
(14 |
) |
|
(948) |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Goodwill |
|
545 |
|
(6 |
) |
|
539 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Total purchase price |
|
$ |
648 |
|
$ |
3 |
|
|
$ |
651 |
|
Intangible assets consist of the following:
|
|
|
|
|
Useful Life |
|
|
(US$ in millions) |
|
|
|
|
|
|
Land lease agreements |
|
$ |
43 |
|
7 years |
|
Other |
|
1 |
|
2-20 years |
|
|
Total |
|
$ |
44 |
|
|
The fair value assigned to intangible assets associated with land lease agreements for the production of sugarcane was determined using the income approach. The fair value of the other intangibles was primarily determined using the market approach. The intangible assets have no expected residual value at the end of their useful lives and are subject to amortization on a straight-line basis. The fair values of tangible assets were derived using a combination of the income approach, the market approach and the cost approach as considered appropriate for the specific assets being valued. None of the acquired assets or liabilities will be measured at fair value on a recurring basis in periods subsequent to the initial recognition.
Moema is a party to a number of claims and lawsuits, primarily civil, labor and environmental claims arising out of the normal course of business. Included in other noncurrent liabilities is $13 million related to Moema’s probable contingencies.
Moema is included in the sugar and bioenergy segment and the goodwill from this acquisition has been assigned to that segment. The acquisition is expected to complement Bunge’s existing sugarcane milling and trading and merchandising activities. The acquisition increases Bunge’s presence in the sugar and sugarcane-based ethanol industry in Brazil, substantially increasing Bunge’s total current annual sugarcane crushing capacity. The acquired mills form a cluster within a highly productive region for sugarcane in Brazil. The Moema management team’s experience in sugarcane agricultural and industrial processes is expected to complement Bunge’s expertise in trade and financial risk management. Bunge also expects synergies with its fertilizer business and logistics efficiencies from the acquisition. The goodwill of $539 million is deductible for tax purposes. In addition, the tax deductible goodwill exceeds the U.S. GAAP goodwill by approximately $59 million resulting in tax deductible goodwill of approximately $598 million. As a result, a deferred tax asset of approximately $30 million, relating to the excess tax deductible goodwill has been recorded in other long-term assets as part of the preliminary purchase price allocation. Final amounts will be determined upon final settlement of the contingent purchase price.
Supplemental pro forma financial information is not presented for the three and six months ended June 30, 2009 because it is not practical to provide this information as Moema historically did not prepare quarterly financial statements and did not report results under U.S. GAAP.
Included in the condensed consolidated statements of income for the three and six months ended June 30, 2010 were net sales and income (loss) from operations before income taxes of $110 million and zero and $181 million and $(19) million, respectively.
Argentina Fertilizer Acquisition — On January 11, 2010, Bunge acquired the Argentine fertilizer business of Petrobras Energía S.A., a subsidiary of Petroleo Brasileiro S.A. (Petrobras), for approximately $80 million. The acquired business is included in Bunge’s fertilizer segment. This acquisition expands Bunge’s presence in the Argentine retail fertilizer market, allowing it to further develop synergies with its grain origination operations through the sale of products to farmers from whom it may purchase commodities. With the preliminary determination of the fair values of assets and liabilities acquired, $66 million of the purchase price was allocated to property, plant and equipment, $6 million to other current assets, $4 million to other intangible assets, primarily a non-compete agreement, and $4 million to goodwill. There were no adjustments to the preliminary allocations during the second quarter of 2010.
Other — In 2010, Bunge finalized the purchase price allocation related to its 2009 acquisition of the European margarine businesses of Raisio plc. The purchase price was 81 million Euros in cash, which equated to approximately $115 million, net of $5 million of cash received. Bunge initially recognized $50 million as goodwill in its edible oil products segment related to this acquisition. Upon completion of acquisition accounting, goodwill was reduced by $4 million and $4 million was allocated to deferred tax liabilities.
4. BUSINESS DIVESTITURE
In January 2010, Bunge and two of its wholly owned subsidiaries entered into a definitive agreement (as amended, the Agreement) with Vale S.A., a Brazil-based global mining company (Vale), and an affiliate of Vale, pursuant to which Vale would acquire Bunge’s fertilizer nutrients assets in Brazil, including its interest in Fertilizantes Fosfatados S.A. (Fosfertil). The transaction closed on May 27, 2010. Bunge received cash proceeds of $3.9 billion and recognized a gain of $2.4 billion ($1.9 billion net of tax) in its fertilizer segment. Included in the calculation of the gain is $152 million of transaction costs incurred in connection with the divestiture. Total income tax associated with the transaction was $539 million, of which $275 million was paid during the three months ended June 30, 2010, $5 million is expected to be paid in the second half of 2010 and approximately $259 million is expected to be offset by deferred tax assets and other tax credits and therefore is not expected to result in cash tax payments. Approximately $56 million related to a post-closing adjustment is expected to be received by Bunge in the second half of 2010.
Approximately $142 million of transaction costs and $275 million of withholding taxes are included as a component of cash used for operating activities in Bunge’s condensed consolidated statements of cash flows in the six months ended June 30, 2010. Gross proceeds of $3.9 billion and cash disposed of $106 million related to the sale of the Brazilian fertilizer nutrients assets are included as a component of cash provided by investing activities in Bunge’s condensed consolidated statements of cash flows in the six months ended June 30, 2010.
Assets and liabilities disposed of as part of this transaction were classified as held for sale in Bunge’s condensed consolidated balance sheet at March 31, 2010, which included approximately $1,516 million of property, plant and equipment, net, related to fertilizer mining properties and other plants and equipment of the fertilizer nutrients activities.
5. INVENTORIES
Inventories by segment are included in the table below. Readily marketable inventories refers to inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.
|
(US$ in millions) |
|
June 30, |
|
December 31, |
|
||
|
Agribusiness (1) |
|
$ |
3,264 |
|
$ |
3,535 |
|
|
Sugar and Bioenergy (2) |
|
269 |
|
89 |
|
||
|
Fertilizer (3) |
|
557 |
|
749 |
|
||
|
Edible oil products (4) |
|
356 |
|
371 |
|
||
|
Milling products (4) |
|
125 |
|
118 |
|
||
|
Total |
|
$ |
4,571 |
|
$ |
4,862 |
|
(1) Includes readily marketable agricultural commodity inventories carried at fair value of $3,013 and $3,197 at June 30, 2010 and December 31, 2009, respectively. All other agribusiness segment inventories are carried at lower of cost or market.
(2) Includes readily marketable sugar inventories of $63 million and $21 million at June 30, 2010 and December 31, 2009, respectively. Of these readily marketable sugar inventories, $35 million and $21 million, respectively, were inventories carried at fair value in our trading and merchandising business. Sugar inventories in our industrial production business are readily marketable, but are carried at lower of cost or market.
(3) Fertilizer inventories are carried at lower of cost or market.
(4) Edible oil products and milling products inventories are generally carried at lower of cost or market, with the exception of readily marketable inventories of bulk soybean oil and corn, which are carried at fair value in the aggregate amount of $157 million and $162 million at June 30, 2010 and December 31, 2009, respectively.
6. OTHER CURRENT ASSETS
Other current assets consist of the following:
|
(US$ in millions) |
|
June 30, |
|
December 31, |
|
||
|
Prepaid commodity purchase contracts (1) |
|
$ |
299 |
|
$ |
110 |
|
|
Secured advances to suppliers (2) |
|
197 |
|
275 |
|
||
|
Unrealized gains on derivative contracts at fair value |
|
754 |
|
1,202 |
|
||
|
Recoverable taxes (3) |
|
503 |
|
680 |
|
||
|
Margin deposits (4) |
|
375 |
|
530 |
|
||
|
Marketable securities |
|
74 |
|
15 |
|
||
|
Other |
|
778 |
|
687 |
|
||
|
Total |
|
$ |
2,980 |
|
$ |
3,499 |
|
(1) Prepaid commodity purchase contracts represent advance payments against fixed priced contracts for future delivery of specified quantities of agricultural commodities. These contracts are recorded at fair value based on prices of the underlying agricultural commodities.
(2) Bunge makes cash advances to suppliers, primarily Brazilian farmers of soybeans and other agricultural commodities, to finance a portion of the suppliers’ production costs. These advances are strictly financial in nature. Bunge does not bear any of the costs or risks associated with the related growing crops. The advances are largely collateralized by future crops and physical assets of the suppliers, carry a local market interest rate and settle when the farmer’s crop is harvested and sold. In addition to current secured advances, Bunge has non-current secured advances to suppliers, primarily farmers in Brazil, in the amount of $281 million and $308 million at June 30, 2010 and December 31, 2009, respectively, net of allowance for uncollectible advances, which are included in other non-current assets in the condensed consolidated balance sheets. The allowance for uncollectible advances totaled $79 million and $75 million at June 30, 2010 and December 31, 2009, respectively. The repayment terms of the non-current secured advances generally range from two to three years. Included in the secured advances to suppliers recorded in other current assets are advances that were renegotiated from their original terms, equal to an aggregate of $19 million and $36 million at June 30, 2010 and December 31, 2009, respectively. Included in the secured advances to suppliers recorded in other non-current assets are advances that were renegotiated from their original terms, equal to an aggregate of $15 million and $20 million at June 30, 2010 and December 31, 2009, respectively. These renegotiated advances are largely collateralized by future crops and mortgages on assets such as land, buildings and equipment.
Also included in non-current secured advances to suppliers are advances for which Bunge has initiated legal action to collect the outstanding balance or obtain title to the assets pledged by the farmers as collateral, equal to an aggregate of $259 million and $264 million at June 30, 2010 and December 31, 2009, respectively. Collections being pursued through legal action largely reflect loans made for the 2006 and 2005 crop years.
Interest earned on secured advances to suppliers of $6 million and $9 million for the three months ended June 30, 2010 and 2009, respectively, and $15 million and $25 million for the six months ended June 30, 2010 and 2009, respectively, is included in net sales in the condensed consolidated statements of income.
(3) Bunge has an additional recoverable taxes balance of $879 million and $769 million at June 30, 2010 and December 31, 2009, respectively, which is included in other non-current assets in the condensed consolidated balance sheets. The balance of current and non-current recoverable taxes is net of the allowance for recoverable taxes of $118 million and $164 million at June 30, 2010 and December 31, 2009, respectively.
(4) Margin deposits include U.S. treasury securities at fair value and cash.
7. GOODWILL
For the six months ended June 30, 2010, the changes in the carrying value of goodwill by segment are as follows:
|
(US$ in millions) |
|
Agribusiness |
|
Sugar and |
|
Fertilizer |
|
Edible Oil |
|
Milling |
|
Total |
|
||||||
|
Balance, December 31, 2009 |
|
$ |
204 |
|
$ |
130 |
|
$ |
— |
|
$ |
83 |
|
$ |
10 |
|
$ |
427 |
|
|
Acquired goodwill (1) |
|
— |
|
539 |
|
4 |
|
— |
|
— |
|
543 |
|
||||||
|
Reallocation of acquired goodwill (1) |
|
— |
|
— |
|
— |
|
(4) |
|
— |
|
(4) |
|
||||||
|
Tax benefit on goodwill amortization (2) |
|
(3) |
|
— |
|
— |
|
— |
|
— |
|
(3) |
|
||||||
|
Foreign exchange translation |
|
(6) |
|
15 |
|
— |
|
(11) |
|
(1) |
|
(3) |
|
||||||
|
Balance, June 30, 2010 |
|
$ |
195 |
|
$ |
684 |
|
$ |
4 |
|
$ |
68 |
|
$ |
9 |
|
$ |
960 |
|
(1) See Note 3 of the notes to the condensed consolidated financial statements.
(2) Bunge’s Brazilian subsidiaries’ tax deductible goodwill is in excess of book goodwill. For financial reporting purposes, for goodwill acquired prior to 2009, the tax benefits attributable to the excess tax goodwill are first used to reduce associated goodwill and then other intangible assets to zero, prior to recognizing any income tax benefit in the condensed consolidated statements of income.
8. OTHER INTANGIBLE ASSETS
Other intangible assets, net consist of the following:
|
(US$ in millions) |
|
June 30, |
|
December 31, |
||
|
Trademarks/brands, finite-lived |
|
$ |
118 |
|
$ |
130 |
|
Licenses |
|
11 |
|
12 |
||
|
Other |
|
114 |
|
72 |
||
|
|
|
243 |
|
214 |
||
|
Less accumulated amortization: |
|
|
|
|
||
|
Trademarks/brands (1) |
|
(49) |
|
(47) |
||
|
Licenses |
|
(2) |
|
(2) |
||
|
Other |
|
(28) |
|
(23) |
||
|
|
|
(79) |
|
(72) |
||
|
Trademarks/brands, indefinite-lived |
|
27 |
|
28 |
||
|
Intangible assets, net of accumulated amortization |
|
$ |
191 |
|
$ |
170 |
(1) Bunge’s Brazilian subsidiary’s tax deductible goodwill in the agribusiness segment is in excess of its book goodwill. For financial reporting purposes, for other intangible assets acquired prior to 2009, before recognizing any income tax benefit of tax deductible goodwill in excess of book goodwill in the condensed consolidated statements of income and after the related book goodwill has been reduced to zero, any such remaining tax deductible goodwill in excess of book goodwill is used to reduce other intangible assets to zero.
In the first quarter of 2010, Bunge assigned values totaling $48 million to other intangible assets acquired in business acquisitions, with $44 million and $4 million, respectively, in the sugar and bioenergy and fertilizer segments. Finite lives of these assets range from 2 and 20 years. (See Note 3 of the notes to the condensed consolidated financial statements). In addition, $9 million of other intangible assets, net have been disposed of as part of the sale of the Brazilian fertilizer nutrients assets (see Note 4 to the condensed consolidated financial statements). Aggregate amortization expense was $7 million and $2 million for the three months ended June 30, 2010 and 2009, respectively, and $11 million and $4 million for the six months ended June 30, 2010 and 2009, respectively. The annual estimated aggregate amortization expense for 2010 is approximately $27 million with approximately $21 million estimated per year for 2011 through 2014.
9. IMPAIRMENT AND RESTRUCTURING CHARGES
Impairment —Bunge recorded no pretax impairment charges for the three months ended June 30, 2010 in its consolidated statements of income. In the six months ended June 30, 2010, Bunge recorded pretax non-cash impairment charges of $12 million in cost of goods sold in its consolidated statements of income, of which $10 million was allocated to its agribusiness segment and $2 million was allocated to its milling products segments, respectively, relating to the closure of an older, less efficient oilseed processing facility in the United States and a co-located corn oil extraction line. Declining results of operations at this facility due to local competitive pressures, as well as Bunge’s additions of new, larger and better located facilities in recent years led management to decide to permanently close this facility. The fair values of the facility are not material and were determined internally by Bunge’s management.
Restructuring — Bunge recorded pretax restructuring charges of $14 million and $26 million in the three and six months ended June 30, 2010, respectively, primarily related to its Brazilian, North American and European operations. In the three and six months ended June 30, 2010, these charges consisted of termination benefit costs and other expenses related to the consolidation of Bunge’s Brazilian operations that were recorded as selling, general and administrative expenses totaling $4 million, $3 million, $3 million, and $2 million in the agribusiness, sugar and bioenergy, milling products and edible oil products segments, respectively. Also in the three and six months ended June 30, 2010, restructuring charges of $2 million were recorded in cost of goods sold in the edible oil products segment related to certain of Bunge’s European operations. For the six months ended June 30, 2010, additional restructuring costs of $5 million, $1 million, $1 million, $1 million and $4 million in the agribusiness, sugar and bioenergy, milling products, edible oil products and fertilizer segments, respectively, were included in cost of goods sold related primarily to the closure of the oilseed processing facility in the United States and the consolidation of management and administrative functions in Brazil.
Termination benefit costs in the agribusiness segment for the six months ended June 30, 2010 related to benefit obligations associated with approximately 90 employees related to the closure of the U.S. oilseed processing facility and the consolidation of our operations in Brazil. This consolidation also impacted Bunge’s sugar and bioenergy, fertilizer, edible oil products and milling products segments. Termination benefit costs in our edible oil products segment related to 514 employees in connection with the reorganization of certain of our operations in Europe. Bunge has a $12 million accrued liability related to the Brazilian restructuring as of June 30, 2010. Substantially all of these costs will be paid in 2010 under severance plans that were defined and communicated in 2010. Funding for the payments will be provided by cash flows from operations.
10. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
(US$ in millions) |
|
June 30, |
|
December 31, |
|
||||
|
Accrued liabilities |
|
$ |
1,200 |
|
|
$ |
1,046 |
|
|
|
Unrealized losses on derivative contracts at fair value |
|
842 |
|
|
1,250 |
|
|
||
|
Advances on sales |
|
273 |
|
|
253 |
|
|
||
|
Other |
|
30 |
|
|
86 |
|
|
||
|
Total |
|
$ |
2,345 |
|
|
$ |
2,635 |
|
|
11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Bunge’s various financial instruments include certain components of working capital such as cash and cash equivalents, trade accounts receivable and trade accounts payable. Additionally, Bunge uses short- and long-term debt to fund operating requirements and derivative instruments to manage its foreign exchange, interest rate, commodity price, freight and energy cost exposures. Bunge also uses derivative instruments to reduce volatility in its income tax expense that results from foreign exchange gains and losses on certain U.S. dollar-denominated loans in Brazil. Cash and cash equivalents, trade accounts receivable and accounts payable and short-term debt are stated at their carrying value, which is a reasonable estimate of fair value. For long-term debt, see Note 12 of the notes to the condensed consolidated financial statements. All derivative instruments and marketable securities are stated at fair value.
Fair value is the price that would be received for an asset or paid to transfer a liability (an exit price) in Bunge’s principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Bunge determines the fair values of its readily marketable inventories, derivative contracts, and certain other assets based on the fair value hierarchy established under US GAAP, which
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs based on market data obtained from sources independent of the reporting entity that reflect the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are inputs that are developed based on the best information available in circumstances that reflect Bunge’s own assumptions based on market data and on assumptions that market participants would use in pricing the asset or liability. The standard describes three levels within its hierarchy that may be used to measure fair value.
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include exchange traded derivative contracts.
Level 2: Observable inputs, including Level 1 prices (adjusted); quoted prices for similar assets or liabilities; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include readily marketable inventories and over-the-counter (OTC) commodity purchase and sales contracts and other OTC derivatives whose value is determined using pricing models with inputs that are generally based on exchange traded prices, adjusted for location specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data.
Level 3: Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. In evaluating the significance of fair value inputs, Bunge gives consideration to items that individually, or when aggregated with other inputs, generally represent more than 10% of the fair value of the assets or liabilities. For such identified inputs, judgments are required when evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification and disclosure. Level 3 assets and liabilities include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation.
The following table sets forth by level Bunge’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2010 and December 31, 2009. Bunge’s exchange traded agricultural commodity futures are predominantly settled daily generally through its clearing subsidiary and therefore such futures are not included in the table below. Assets and liabilities are classified in their entirety based on the lowest level of input that is a significant component of the fair value measurement. The lowest level of input is considered Level 3. Bunge’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels.
|
|
|
Fair Value Measurements at Reporting Date Using |
|||||||||||||||||||||||||||||
|
|
|
June 30, 2010 |
|
December 31, 2009 |
|||||||||||||||||||||||||||
|
(US$ in millions) |
|
Level 1 (1) |
|
Level 2 (2) |
|
Level 3 (3) |
|
Total |
|
Level 1 (1) |
|
Level 2 (2) |
|
Level 3 (3) |
|
Total |
|||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Readily marketable inventories (Note 5) |
|
$ |
— |
|
|
$ |
2,851 |
|
|
$ |
354 |
|
|
$ |
3,205 |
|
|
$ |
— |
|
|
$ |
3,271 |
|
|
$ |
109 |
|
|
$ |
3,380 |
|
Unrealized gain on designated derivative contracts (4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Interest Rate |
|
— |
|
|
7 |
|
|
— |
|
|
7 |
|
|
— |
|
|
9 |
|
|
— |
|
|
9 |
||||||||
|
Foreign Exchange |
|
— |
|
|
16 |
|
|
— |
|
|
16 |
|
|
— |
|
|
11 |
|
|
— |
|
|
11 |
||||||||
|
Freight |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
||||||||
|
Unrealized gain on undesignated derivative contracts (4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Foreign Exchange |
|
— |
|
|
76 |
|
|
2 |
|
|
78 |
|
|
— |
|
|
41 |
|
|
3 |
|
|
44 |
||||||||
|
Commodities |
|
48 |
|
|
440 |
|
|
107 |
|
|
595 |
|
|
34 |
|
|
905 |
|
|
94 |
|
|
1,033 |
||||||||
|
Freight |
|
— |
|
|
43 |
|
|
10 |
|
|
53 |
|
|
— |
|
|
68 |
|
|
8 |
|
|
76 |
||||||||
|
Energy |
|
5 |
|
|
14 |
|
|
3 |
|
|
22 |
|
|
10 |
|
|
22 |
|
|
13 |
|
|
45 |
||||||||
|
Other (5) |
|
175 |
|
|
133 |
|
|
— |
|
|
308 |
|
|
138 |
|
|
16 |
|
|
— |
|
|
154 |
||||||||
|
Total assets |
|
$ |
228 |
|
|
$ |
3,580 |
|
|
$ |
476 |
|
|
$ |
4,284 |
|
|
$ |
182 |
|
|
$ |
4,343 |
|
|
$ |
227 |
|
|
$ |
4,752 |
|
|
|
Fair Value Measurements at Reporting Date Using |
|||||||||||||||||||||||||||||
|
|
|
June 30, 2010 |
|
December 31, 2009 |
|||||||||||||||||||||||||||
|
(US$ in millions) |
|
Level 1 (1) |
|
Level 2 (2) |
|
Level 3 (3) |
|
Total |
|
Level 1 (1) |
|
Level 2 (2) |
|
Level 3 (3) |
|
Total |
|||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Unrealized loss on designated derivative contracts (6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Interest Rate |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
7 |
|
|
$ |
— |
|
|
$ |
7 |
|
Foreign Exchange |
|
— |
|
|
85 |
|
|
— |
|
|
85 |
|
|
— |
|
|
123 |
|
|
— |
|
|
123 |
||||||||
|
Freight |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
||||||||
|
Unrealized loss on undesignated derivative contracts (6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Interest Rate |
|
— |
|
|
1 |
|
|
— |
|
|
1 |
|
|
— |
|
|
2 |
|
|
— |
|
|
2 |
||||||||
|
Foreign Exchange |
|
— |
|
|
33 |
|
|
— |
|
|
33 |
|
|
7 |
|
|
15 |
|
|
— |
|
|
22 |
||||||||
|
Commodities |
|
125 |
|
|
442 |
|
|
73 |
|
|
640 |
|
|
113 |
|
|
693 |
|
|
84 |
|
|
890 |
||||||||
|
Freight |
|
40 |
|
|
63 |
|
|
— |
|
|
103 |
|
|
98 |
|
|
106 |
|
|
— |
|
|
204 |
||||||||
|
Energy |
|
3 |
|
|
3 |
|
|
2 |
|
|
8 |
|
|
8 |
|
|
7 |
|
|
3 |
|
|
18 |
||||||||
|
Total liabilities |
|
$ |
168 |
|
|
$ |
627 |
|
|
$ |
75 |
|
|
$ |
870 |
|
|
$ |
226 |
|
|
$ |
953 |
|
|
$ |
87 |
|
|
$ |
1,266 |
(1) Quoted prices in active markets for identical assets.
(2) Significant other observable inputs.
(3) Significant unobservable inputs.
(4) Unrealized gains on designated and undesignated derivative contracts are generally included in other current assets. At June 30, 2010 and December 31, 2009, $7 million and $8 million, respectively, of designated and undesignated derivative contracts are included in other non-current assets.
(5) Other assets include primarily the fair values of U.S. Treasury securities held as margin deposits.
(6) Unrealized losses on designated and undesignated derivative contracts are generally included in other current liabilities. At June 30, 2010 and December 31, 2009, $17 million and $8 million, respectively, of designated and undesignated derivative contracts are included in other non-current liabilities.
Derivatives — Exchange traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Bunge’s forward commodity purchase and sale contracts are classified as derivatives along with other OTC derivative instruments relating primarily to freight, energy, foreign exchange and interest rates, and are classified with Level 2 or Level 3 as described below. Bunge estimates fair values based on exchange quoted prices, adjusted as appropriate for differences in local markets. These differences are generally valued using inputs from broker or dealer quotations, or market transactions in either the listed or OTC markets. In such cases, these derivative contracts are classified within Level 2. Changes in the fair values of these contracts are recognized in the consolidated financial statements as a component of cost of goods sold, foreign exchange gain or loss, other income (expense) or other comprehensive income (loss).
OTC derivative contracts include swaps, options and structured transactions that are valued at fair value and may be offset with similar positions in exchange traded markets. The fair values of OTC derivative instruments are determined using quantitative models that require the use of multiple market inputs including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets which are not highly active, other observable inputs relevant to the asset or liability, and market inputs corroborated by correlation or other means. These valuation models include inputs such as interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. Certain OTC derivatives trade in less active markets with less availability of pricing information and certain structured transactions can require internally developed model inputs that might not be observable in or corroborated by the market. When unobservable inputs have a significant impact on the measurement of fair value, the instrument is categorized in Level 3.
Bunge designates certain derivative instruments as fair value hedges or cash flow hedges and assesses, both at inception of the hedge and on an ongoing basis, whether derivatives that are designated as hedges are highly effective in offsetting changes in the hedged items or anticipated cash flows.
Readily marketable inventories—The majority of Bunge’s readily marketable inventories are valued at fair value. These agricultural commodity inventories are readily marketable, have quoted market prices and may be sold without significant additional processing. Bunge determines fair value based on quoted prices on exchange-traded
futures contracts with appropriate adjustments for differences in local markets where the related inventories are located. Changes in the fair values of these inventories are recognized in the consolidated statements of income as a component of cost of goods sold.
Readily marketable inventories at fair value are valued based on commodity futures exchange quotations, broker or dealer quotations, or market transactions in either listed or OTC markets. In such cases, the inventory is classified within Level 2. Certain inventories may utilize significant unobservable data related to local market adjustments to determine fair value. In such cases, the inventory is classified as Level 3.
If Bunge used different methods or factors to determine fair values, amounts reported as unrealized gains and losses on derivative contracts and readily marketable inventories at fair value in the consolidated balance sheets and consolidated statements of income could differ. Additionally, if market conditions change subsequent to the reporting date, amounts reported in future periods as unrealized gains and losses on derivative contracts and readily marketable inventories in the consolidated balance sheets and consolidated statements of income could differ.
Level 3 Valuation — Bunge’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy. In evaluating the significance of fair value inputs, Bunge gives consideration to items that individually, or when aggregated with other inputs, represent more than 10% of the fair value of the asset or liability. For such identified inputs, judgments are required when evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification and disclosure. Because of differences in the availability of market pricing data over their terms, inputs for some assets and liabilities may fall into any one of the three levels in the fair value hierarchy or some combination thereof. While FASB guidance requires Bunge to classify these assets and liabilities in the lowest level in the hierarchy for which inputs are significant to the fair value measurement, a portion of that measurement may be determined using inputs from a higher level in the hierarchy.
Transfers in and/or out of Level 3 represent existing assets or liabilities that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during the period. Bunge did not have significant transfers in and/or out of Level 3 during the three and six months ended June 30, 2010.
Level 3 Derivatives — The fair values of Level 3 derivative instruments are estimated using pricing information that is less observable. Level 3 derivative instruments utilize both market observable and unobservable inputs within the fair value measurements. These inputs include commodity prices, price volatility factors, interest rates, volumes and locations. In addition, with the exception of the exchange-cleared instruments where Bunge clears trades through an exchange, Bunge is exposed to loss in the event of the non-performance by counterparties on over-the-counter derivative instruments and forward purchase and sale contracts. Adjustments are made to fair values on occasions when non-performance risk is determined to represent a significant input in our fair value determination. These adjustments are based on Bunge’s estimate of the potential loss in the event of counterparty non-performance. Bunge did not have significant adjustments relating to non-performance by counterparties as of June 30, 2010.
Level 3 Readily marketable inventories — Readily marketable inventories are considered Level 3 when at least one significant assumption or input is unobservable. These assumptions or unobservable inputs include certain management estimations regarding costs of transportation and other local market or location-related adjustments.
The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and six months ended June 30, 2010 and 2009. Level 3 instruments presented in the tables include certain readily marketable inventories and derivatives. These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions that would be used by a marketplace participant to determine fair value.
|
|
|
Level 3 Instruments: |
||||||||||
|
|
|
Fair Value Measurements |
||||||||||
|
(US$ in millions) |
|
Derivatives, |
|
Readily |
|
Total |
||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Balance, April 1, 2010 |
|
$ |
49 |
|
|
$ |
354 |
|
|
$ |
403 |
|
|
Total gains and losses (realized/unrealized) included in cost of goods sold |
|
(10 |
) |
|
104 |
|
|
94 |
|
|||
|
Total gains and losses (realized/unrealized) included in foreign exchange gains (losses) |
|
(1 |
) |
|
— |
|
|
(1 |
) |
|||
|
Purchases, issuances and settlements |
|
(2 |
) |
|
(104 |
) |
|
(106 |
) |
|||
|
Transfers into Level 3 |
|
19 |
|
|
— |
|
|
19 |
|
|||
|
Transfers (out) of Level 3 |
|
(8 |
) |
|
— |
|
|
(8 |
) |
|||
|
Balance, June 30, 2010 |
|
$ |
47 |
|
|
$ |
354 |
|
|
$ |
401 |
|
(1) Derivatives, net include Level 3 derivative assets and liabilities.
|
|
|
Level 3 Instruments: |
||||||||||
|
|
|
Fair Value Measurements |
||||||||||
|
(US$ in millions) |
|
Derivatives, |
|
Readily |
|
Total |
||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
Balance, January 1, 2010 |
|
$ |
31 |
|
||||||||