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 March 31, 2011
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 May 3, 2011 the number of common shares issued of the registrant was:
Common shares, par value $.01: 147,237,832
BUNGE LIMITED
TABLE OF CONTENTS
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(U.S. dollars in millions, except per share data)
|
|
|
Three Months Ended | |||||
|
|
|
March 31, | |||||
|
|
|
2011 |
|
2010 |
| ||
|
Net sales |
|
$ |
12,194 |
|
$ |
10,345 |
|
|
Cost of goods sold |
|
(11,555) |
|
(9,800 |
) | ||
|
|
|
|
|
|
| ||
|
Gross profit |
|
639 |
|
545 |
| ||
|
Selling, general and administrative expenses |
|
(344) |
|
(347 |
) | ||
|
Interest income |
|
21 |
|
19 |
| ||
|
Interest expense |
|
(72) |
|
(78 |
) | ||
|
Foreign exchange gains (losses) |
|
42 |
|
(50 |
) | ||
|
Other income (expense) – net |
|
(8) |
|
- |
| ||
|
|
|
|
|
|
| ||
|
Income from operations before income tax |
|
278 |
|
89 |
| ||
|
Income tax expense |
|
(43) |
|
(9 |
) | ||
|
Equity in earnings of affiliates |
|
- |
|
- |
| ||
|
|
|
|
|
|
| ||
|
Net income |
|
235 |
|
80 |
| ||
|
Net income attributable to noncontrolling interest |
|
(3) |
|
(17 |
) | ||
|
|
|
|
|
|
| ||
|
Net income attributable to Bunge |
|
232 |
|
63 |
| ||
|
Convertible preference share dividends |
|
(8) |
|
(19 |
) | ||
|
|
|
|
|
|
| ||
|
Net income available to Bunge common shareholders |
|
$ |
224 |
|
$ |
44 |
|
|
|
|
|
|
|
| ||
|
Earnings per common share – basic (Note 18) |
|
|
|
|
| ||
|
Earnings to Bunge common shareholders |
|
$ |
1.53 |
|
$ |
0.31 |
|
|
|
|
|
|
|
| ||
|
Earnings per common share – diluted (Note 18) |
|
|
|
|
| ||
|
Earnings to Bunge common shareholders |
|
$ |
1.49 |
|
$ |
0.31 |
|
|
|
|
|
|
|
| ||
|
Dividends per common share |
|
$ |
0.23 |
|
$ |
0.21 |
|
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)
|
|
|
March 31, |
|
December 31, |
| ||
|
|
|
2011 |
|
2010 |
| ||
|
ASSETS |
|
|
|
|
| ||
|
Current assets: |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
812 |
|
$ |
578 |
|
|
Trade accounts receivable (less allowance of $178 and $177) |
|
3,138 |
|
2,901 |
| ||
|
Inventories (Note 5) |
|
6,719 |
|
6,635 |
| ||
|
Deferred income taxes |
|
197 |
|
233 |
| ||
|
Other current assets (Note 6) |
|
5,037 |
|
5,468 |
| ||
|
Total current assets |
|
15,903 |
|
15,815 |
| ||
|
|
|
|
|
|
| ||
|
Property, plant and equipment, net |
|
5,564 |
|
5,312 |
| ||
|
Goodwill (Note 7) |
|
969 |
|
934 |
| ||
|
Other intangible assets, net |
|
213 |
|
186 |
| ||
|
Investments in affiliates |
|
605 |
|
609 |
| ||
|
Deferred income taxes |
|
1,297 |
|
1,200 |
| ||
|
Other non-current assets (Note 8) |
|
1,922 |
|
1,945 |
| ||
|
Total assets |
|
$ |
26,473 |
|
$ |
26,001 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
| ||
|
Current liabilities: |
|
|
|
|
| ||
|
Short-term debt |
|
$ |
1,018 |
|
$ |
1,718 |
|
|
Current portion of long-term debt (Note 11) |
|
629 |
|
612 |
| ||
|
Trade accounts payable |
|
4,033 |
|
3,637 |
| ||
|
Deferred income taxes |
|
212 |
|
262 |
| ||
|
Other current liabilities (Note 9) |
|
3,464 |
|
3,775 |
| ||
|
Total current liabilities |
|
9,356 |
|
10,004 |
| ||
|
|
|
|
|
|
| ||
|
Long-term debt (Note 11) |
|
3,041 |
|
2,551 |
| ||
|
Deferred income taxes |
|
145 |
|
84 |
| ||
|
Other non-current liabilities |
|
826 |
|
808 |
| ||
|
|
|
|
|
|
| ||
|
Commitments and contingencies (Note 14) |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Shareholders’ equity (Note 15): |
|
|
|
|
| ||
|
Convertible perpetual preference shares, par value $.01; authorized, issued and outstanding: |
|
|
|
|
| ||
|
2011 and 2010 – 6,900,000 shares (liquidation preference $100 per share) |
|
690 |
|
690 |
| ||
|
Common shares, par value $.01; authorized – 400,000,000 shares; issued: |
|
|
|
|
| ||
|
2011 – 147,206,447 shares, 2010 – 146,635,083 shares |
|
1 |
|
1 |
| ||
|
Additional paid-in capital |
|
4,816 |
|
4,793 |
| ||
|
Retained earnings |
|
6,343 |
|
6,153 |
| ||
|
Accumulated other comprehensive income (Note 16) |
|
874 |
|
583 |
| ||
|
Total Bunge shareholders’ equity |
|
12,724 |
|
12,220 |
| ||
|
Noncontrolling interest (Note 17) |
|
381 |
|
334 |
| ||
|
Total equity |
|
13,105 |
|
12,554 |
| ||
|
Total liabilities and shareholders’ equity |
|
$ |
26,473 |
|
$ |
26,001 |
|
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)
|
|
|
Three Months Ended | ||||||
|
|
|
March 31, | ||||||
|
|
|
2011 |
|
|
2010 |
| ||
|
OPERATING ACTIVITIES |
|
|
|
|
|
| ||
|
Net income |
|
$ |
235 |
|
|
$ |
80 |
|
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
| ||
|
Foreign exchange loss (gain) on debt |
|
(43 |
) |
|
93 |
| ||
|
Impairment of assets |
|
- |
|
|
12 |
| ||
|
Bad debt expense |
|
(4 |
) |
|
11 |
| ||
|
Depreciation, depletion and amortization |
|
104 |
|
|
102 |
| ||
|
Stock-based compensation expense |
|
15 |
|
|
6 |
| ||
|
Recoverable taxes provision |
|
1 |
|
|
4 |
| ||
|
Deferred income taxes |
|
(11 |
) |
|
(39 |
) | ||
|
Changes in operating assets and liabilities, excluding the effects of acquisitions: |
|
|
|
|
|
| ||
|
Trade accounts receivable |
|
(212 |
) |
|
(380 |
) | ||
|
Inventories |
|
40 |
|
|
632 |
| ||
|
Prepaid commodity purchase contracts |
|
(91 |
) |
|
(25 |
) | ||
|
Secured advances to suppliers |
|
(7 |
) |
|
31 |
| ||
|
Trade accounts payable |
|
355 |
|
|
434 |
| ||
|
Advances on sales |
|
89 |
|
|
65 |
| ||
|
Unrealized net gain/loss on derivative contracts |
|
84 |
|
|
(304 |
) | ||
|
Margin deposits |
|
330 |
|
|
166 |
| ||
|
Accrued liabilities |
|
(13 |
) |
|
145 |
| ||
|
Other—net |
|
(138 |
) |
|
(273 |
) | ||
|
Cash provided by operating activities |
|
734 |
|
|
760 |
| ||
|
INVESTING ACTIVITIES |
|
|
|
|
|
| ||
|
Payments made for capital expenditures |
|
(207 |
) |
|
(287 |
) | ||
|
Acquisitions of businesses (net of cash acquired) |
|
(62 |
) |
|
(133 |
) | ||
|
Related party loans |
|
(10 |
) |
|
(15 |
) | ||
|
Proceeds from investments |
|
16 |
|
|
52 |
| ||
|
Payments for investments |
|
(12 |
) |
|
- |
| ||
|
Proceeds from disposal of property, plant and equipment |
|
1 |
|
|
2 |
| ||
|
Investments in affiliates |
|
(8 |
) |
|
- |
| ||
|
Cash used for investing activities |
|
(282 |
) |
|
(381 |
) | ||
|
FINANCING ACTIVITIES |
|
|
|
|
|
| ||
|
Net change in short-term debt with maturities of 90 days or less |
|
(70 |
) |
|
36 |
| ||
|
Proceeds from short-term debt with maturities greater than 90 days |
|
76 |
|
|
170 |
| ||
|
Repayments of short-term debt with maturities greater than 90 days |
|
(732 |
) |
|
(514 |
) | ||
|
Proceeds from long-term debt |
|
731 |
|
|
129 |
| ||
|
Repayments of long-term debt |
|
(221 |
) |
|
(107 |
) | ||
|
Proceeds from sale of common shares |
|
12 |
|
|
1 |
| ||
|
Dividends paid to preference shareholders |
|
(8 |
) |
|
(19 |
) | ||
|
Dividends paid to common shareholders |
|
(34 |
) |
|
(30 |
) | ||
|
Dividends paid to noncontrolling interest |
|
(6 |
) |
|
- |
| ||
|
Capital contribution from noncontrolling interest in less than wholly-owned subsidiaries |
|
42 |
|
|
13 |
| ||
|
Financing related fees |
|
(20 |
) |
|
- |
| ||
|
Cash used for financing activities |
|
(230 |
) |
|
(321 |
) | ||
|
Effect of exchange rate changes on cash and cash equivalents |
|
12 |
|
|
- |
| ||
|
Net increase in cash and cash equivalents |
|
234 |
|
|
58 |
| ||
|
Cash related to assets held for sale |
|
- |
|
|
(138 |
) | ||
|
Cash and cash equivalents, beginning of period |
|
578 |
|
|
553 |
| ||
|
Cash and cash equivalents, end of period |
|
$ |
812 |
|
|
$ |
473 |
|
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 |
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Preference |
|
|
|
|
|
Additional |
|
|
|
Other |
|
Non - |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Common Shares |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Controlling |
|
Total |
|
Comprehensive |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Interest |
|
Equity |
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2010 |
|
7,762,455 |
|
$ 1,553 |
|
134,096,906 |
|
$ 1 |
|
$ 3,625 |
|
$ 3,996 |
|
$ 319 |
|
$ 871 |
|
$ 10,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income — 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
- |
|
- |
|
- |
|
- |
|
- |
|
63 |
|
- |
|
17 |
|
80 |
|
$ 80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation adjustment, net of tax expense of $0 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(96 |
) |
(18 |
) |
(114 |
) |
(114 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on commodity futures and foreign exchange contracts, net of tax expense of $1 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3 |
|
- |
|
3 |
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of realized net losses, net of tax benefit of $1 to net income |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
- |
|
1 |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement healthcare subsidy tax deduction adjustment |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
2 |
|
- |
|
2 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
63 |
|
(90 |
) |
(1 |
) |
|
|
$ (28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on common shares |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(32 |
) |
- |
|
- |
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preference shares |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(19 |
) |
- |
|
- |
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution from noncontrolling interest |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
13 |
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial consolidation of subsidiary |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
3 |
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
- |
|
- |
|
- |
|
- |
|
6 |
|
- |
|
- |
|
- |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—Business acquisition (Note 3) |
|
- |
|
- |
|
9,718,632 |
|
- |
|
570 |
|
- |
|
- |
|
- |
|
570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—stock options and award plans, net of shares withheld for taxes |
|
- |
|
- |
|
337,333 |
|
- |
|
(5) |
|
- |
|
- |
|
- |
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2010 |
|
7,762,455 |
|
$ 1,553 |
|
144,152,871 |
|
$ 1 |
|
$ 4,196 |
|
$ 4,008 |
|
$ 229 |
|
$ 886 |
|
$ 10,873 |
|
|
|
(Continued on following page)
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
(U.S. dollars in millions, except share data)
|
|
|
Convertible |
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
Preference |
|
|
|
|
|
Additional |
|
|
|
Other |
|
Non - |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Common Shares |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Controlling |
|
Total |
|
Comprehensive |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Interest |
|
Equity |
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2011 |
|
6,900,000 |
|
$ 690 |
|
146,635,083 |
|
$ 1 |
|
$ 4,793 |
|
$ 6,153 |
|
$ 583 |
|
$ 334 |
|
$ 12,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income— 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
- |
|
- |
|
- |
|
- |
|
- |
|
232 |
|
- |
|
3 |
|
235 |
|
$ 235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation adjustment, net of tax expense of $0 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
289 |
|
8 |
|
297 |
|
297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on commodity futures and foreign exchange contracts, net of tax expense of $2 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
4 |
|
- |
|
4 |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension adjustment, net of tax expense of $0 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(2 |
) |
- |
|
(2 |
) |
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
- |
|
- |
|
- |
|
- |
|
- |
|
232 |
|
291 |
|
11 |
|
|
|
$ 534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on common shares |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(34 |
) |
- |
|
- |
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preference shares |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(8 |
) |
- |
|
- |
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends to noncontrolling interest on subsidiary common stock |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(6 |
) |
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution from noncontrolling interest |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
42 |
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
- |
|
- |
|
- |
|
- |
|
15 |
|
- |
|
- |
|
- |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—stock options and award plans, net of shares withheld for taxes |
|
- |
|
- |
|
571,364 |
|
- |
|
8 |
|
- |
|
- |
|
- |
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2011 |
|
6,900,000 |
|
$ 690 |
|
147,206,447 |
|
$ 1 |
|
$ 4,816 |
|
$ 6,343 |
|
$ 874 |
|
$ 381 |
|
$ 13,105 |
|
|
|
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 condensed consolidated balance sheet at December 31, 2010 has been derived from Bunge’s audited consolidated financial statements at that date. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2010, forming part of Bunge’s 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 1, 2011.
2. NEW ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Pronouncements — Receivables, Disclosures about the Credit of Financing Receivables and the Allowance for Credit Losses - In July 2010, the FASB issued a standard that amended a previously issued standard requiring an entity to include additional disaggregated disclosures in their financial statements about their financing receivables, including credit risk disclosures and the allowance for credit losses. Entities with financing receivables are required to disclose a roll forward of the allowance for credit losses, certain credit quality information, impaired loan information, modification information, and past due information. Trade receivables with maturities of less than one year are excluded from the scope of the new disclosures. Bunge has adopted this disclosure as of December 31, 2010. As a result of the adoption of this standard, we have expanded our disclosures (see Note 8 of the notes to the condensed consolidated financial statements). The adoption of the standard did not have a material impact on our financial position, results from operations or cash flows.
3. BUSINESS ACQUISITIONS
In the first quarter of 2011, Bunge completed the acquisition of a port facility in Ukraine for a total purchase price of approximately $100 million net of $2 million cash acquired, consisting of approximately $62 million in cash and approximately $38 million of short-term debt and other payables related to assets under construction. The preliminary purchase price allocation for the transaction included approximately $60 million allocated to property, plant and equipment, $27 million to other intangible assets, $15 million to goodwill and other liabilities of $2 million.
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 Participacões 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. 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 adjustment based on working capital and net debt of the acquired companies at closing under Brazilian generally accepted accounting principles. During the second and third quarters of 2010, Bunge issued 596,768 of its common shares, with a fair value of $30 million and paid 1 million Brazilian reais in cash, which equated to approximately $1 million. The acquisition increases Bunge’s presence in the sugar and sugarcane-based ethanol industry in Brazil, substantially increasing Bunge’s annual sugarcane crushing capacity. Bunge also expects synergies with its fertilizer business and logistics efficiencies from the acquisition.
Included in Bunge’s condensed consolidated statement of income for the three months ended March 31, 2011 are Moema net sales and loss from operations before income taxes of $103 million and $(6) million, respectively. Included in Bunge’s condensed consolidated statement of income for the three months ended March 31, 2010 are Moema net sales and loss from operations before income taxes of $70 million and $(19) million, respectively, representing the results of Moema from the acquisition date through March 31, 2010.
4. BUSINESS DIVESTITURE
In January 2010, Bunge and two of its wholly-owned subsidiaries entered into a definitive agreement (the Agreement) with Vale S.A., a Brazil-based global mining company (Vale), and an affiliate of Vale, pursuant to which Vale acquired Bunge’s fertilizer nutrients assets in Brazil, including its interest in Fertilizantes Fosfatados S.A. (Fosfertil) when the transaction closed on May 27, 2010. Final settlement of the post-closing adjustment occurred on August 13, 2010. Bunge received total cash proceeds of $3,914 and recognized a gain of $2,440 million ($1,901 million net of tax) in its fertilizer segment related to this transaction. Results of operations and cash flows related to Bunge’s fertilizer nutrients assets, including its interest in Fosfertil were included in the condensed consolidated financial statements until the transaction closing date of May 27, 2010.
5. INVENTORIES
Inventories by segment are presented below. Readily marketable inventories refers to inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2011 |
|
2010 |
| ||
|
Agribusiness (1) |
|
$ |
4,886 |
|
$ |
5,137 |
|
|
Sugar and Bioenergy (2) |
|
358 |
|
359 |
| ||
|
Edible oil products (3) |
|
530 |
|
460 |
| ||
|
Milling products (3) |
|
168 |
|
163 |
| ||
|
Fertilizer (4) |
|
777 |
|
516 |
| ||
|
Total |
|
$ |
6,719 |
|
$ |
6,635 |
|
(1) Includes readily marketable agricultural commodity inventories at fair value of $4,192 million and $4,540 million at March 31, 2011 and December 31, 2010, respectively. All other agribusiness segment inventories are carried at lower of cost or market.
(2) Includes readily marketable sugar inventories of $97 million and $86 million at March 31, 2011 and December 31, 2010, respectively. Of these sugar inventories, $80 million and $66 million are carried at fair value at March 31, 2011 and December 31, 2010, respectively, in Bunge’s trading and merchandising business. Sugar and ethanol inventories in our industrial production business are carried at lower of cost or market.
(3) 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 $240 million and $225 million at March 31, 2011 and December 31, 2010, respectively.
(4) Fertilizer inventories are carried at lower of cost or market.
6. OTHER CURRENT ASSETS
Other current assets consist of the following:
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2011 |
|
2010 |
| ||
|
Prepaid commodity purchase contracts (1) |
|
$ |
367 |
|
$ |
267 |
|
|
Secured advances to suppliers, net (2) |
|
267 |
|
245 |
| ||
|
Unrealized gains on derivative contracts at fair value |
|
2,145 |
|
2,619 |
| ||
|
Recoverable taxes - current |
|
532 |
|
500 |
| ||
|
Margin deposits (3) |
|
596 |
|
926 |
| ||
|
Marketable securities |
|
41 |
|
39 |
| ||
|
Other |
|
1,089 |
|
872 |
| ||
|
Total |
|
$ |
5,037 |
|
$ |
5,468 |
|
(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 provides 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. The secured advances to farmers are reported net of allowances of $5 million at March 31, 2011 and $3 million at December 31, 2010. Changes in the allowance for the three months ended March 31, 2011 included an increase of $1 million for additional bad debt provisions. Changes in the allowance for the year ended 2010 included an increase of $1 million for additional bad debt provisions and a reduction in the allowance for recoveries of $1 million.
Interest earned on secured advances to suppliers of $7 million and $9 million for the three months ended March 31, 2011 and 2010, respectively, is included in net sales in the condensed consolidated statements of income.
(3) Margin deposits include U.S. treasury securities at fair value and cash.
7. GOODWILL
Changes in the carrying value of goodwill by segment for the three months ended March 31, 2011, are as follows:
|
(US$ in millions) |
|
Agribusiness |
|
Sugar and |
|
Edible Oil |
|
Milling |
|
Fertilizer |
|
Total |
|
|
Balance, December 31, 2010 |
|
$ 215 |
|
$ 631 |
|
$ 80 |
|
$ 7 |
|
$ 1 |
|
$ 934 |
|
|
Acquired goodwill (1) |
|
15 |
|
- |
|
- |
|
- |
|
- |
|
15 |
|
|
Reallocation of acquired goodwill |
|
(2 |
) |
- |
|
- |
|
- |
|
- |
|
(2 |
) |
|
Tax benefit on goodwill amortization (2) |
|
(2 |
) |
- |
|
- |
|
- |
|
- |
|
(2 |
) |
|
Foreign exchange translation |
|
5 |
|
15 |
|
4 |
|
- |
|
- |
|
24 |
|
|
Balance, March 31, 2011 |
|
$ 231 |
|
$ 646 |
|
$ 84 |
|
$ 7 |
|
$ 1 |
|
$ 969 |
|
(1) See Note 3 of the notes to the condensed consolidated financial statements.
(2) Bunge’s Brazilian subsidiary’s tax deductible goodwill is in excess of its 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 NON-CURRENT ASSETS
Other non-current assets consist of the following:
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2011 |
|
2010 |
| ||
|
|
|
|
|
|
| ||
|
Recoverable taxes, net |
|
$ |
957 |
|
$ |
964 |
|
|
Long-term receivables from farmers in Brazil, net |
|
379 |
|
377 |
| ||
|
Judicial deposits |
|
183 |
|
172 |
| ||
|
Other long-term receivables |
|
73 |
|
129 |
| ||
|
Pension plan assets in excess of benefit obligations |
|
7 |
|
12 |
| ||
|
Other |
|
323 |
|
291 |
| ||
|
Total |
|
$ |
1,922 |
|
$ |
1,945 |
|
Recoverable taxes—Recoverable taxes are reported net of valuation allowances of $38 million at March 31, 2011 and December 31, 2010.
Long-term receivables from farmers in Brazil—Bunge provides financing to farmers in Brazil, primarily through secured advances against farmer commitments to deliver agricultural commodities (primarily soybeans) upon harvest of the then-current year’s crop and through credit sales of fertilizer to farmers. These are commercial transactions that are intended to be short-term in nature with amounts expected to be repaid either in cash or through delivery to Bunge of agricultural commodities when the related crops are harvested. These arrangements are typically secured by the farmer’s expected current year crop and liens on land, buildings and equipment to ensure recoverability in the event of crop failure. The terms of fertilizer credit sales do not include interest. The secured advances against commitments to deliver soybeans provide for interest between the advance date and the scheduled soybean delivery date. The credit factors considered by Bunge in evaluating farmers before initial advance or extension of credit include, among other things, the credit history of the farmer, financial strength, available agricultural land, and available collateral in addition to the expected crop.
Upon farmer default, Bunge generally initiates legal proceedings to recover the defaulted amounts. However, the legal recovery process through the judicial system is a long-term process, generally spanning a number of years. As a result, once accounts have been submitted to the judicial process for recovery, Bunge may also seek to renegotiate certain terms with the defaulting farmer in order to accelerate recovery.
Bunge adopted the accounting guidance on disclosure about the credit quality of financing receivables and the allowance for credit losses as of December 31, 2010. This guidance requires information to be disclosed at disaggregated levels, defined as portfolio segments and classes. Based upon its analysis of credit losses and risk factors to be considered in determining the allowance for credit losses, Bunge has determined that the long-term receivables from farmers in Brazil is a single portfolio segment.
Bunge evaluates this single portfolio segment by class of receivables, which is defined as a level of information (below a portfolio segment) in which the receivables have the same initial measurement attribute and a similar method for assessing and monitoring risk. Bunge has identified accounts in legal collection processes and renegotiated amounts as classes of long-term receivables from farmers. Valuation allowances for accounts in legal collection processes are determined by Bunge on individual accounts based on the fair value of the collateral provided as security for the secured advance or credit sale. The fair value is determined using a combination of internal and external resources, including published information concerning Brazilian land values by region. For determination of the valuation allowances for renegotiated amounts, Bunge considers historical experience with the individual farmers, current weather and crop conditions, as well as the fair value of non-crop collateral.
For both classes, a long-term receivable from farmers in Brazil is considered impaired, based on current information and events, if Bunge determines it to be probable that all amounts due under the original terms of the receivable will not be collected. Recognition of interest income on secured advances to farmers is suspended once the farmer defaults on the originally scheduled delivery of agricultural commodities as the collection of future income is determined to not be probable. No additional interest income is accrued from the point of default until ultimate recovery, where amounts collected are credited first against the receivable and then to any unrecognized interest income.
The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil for renegotiated amounts and amounts in the legal collection process.
|
|
|
March 31, |
|
December 31, |
| ||
|
|
|
|
|
|
| ||
|
(US$ in millions) |
|
2011 |
|
2010 |
| ||
|
Legal collection process (1) |
|
$ |
452 |
|
$ |
441 |
|
|
Renegotiated amounts: |
|
|
|
|
| ||
|
Current on repayment terms |
|
132 |
|
137 |
| ||
|
Ending balance |
|
$ |
584 |
|
$ |
578 |
|
(1) All amounts in legal process are considered past due upon initiation of legal action.
The average recorded investment in long-term receivables from farmers in Brazil for the three months ended March 31, 2011 and the year ended December 31, 2010 was $579 million and $582 million, respectively. The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil and the related allowance amounts.
|
|
|
March 31, 2011 |
|
December 31, 2010 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
Recorded |
|
|
|
Recorded |
|
|
| ||||
|
(US$ in millions) |
|
Investment |
|
Allowance |
|
Investments |
|
Allowance |
| ||||
|
For which an allowance has been provided: |
|
|
|
|
|
|
|
|
| ||||
|
Renegotiated amounts |
|
$ |
47 |
|
$ |
39 |
|
$ |
66 |
|
$ |
39 |
|
|
Legal collection process |
|
184 |
|
166 |
|
180 |
|
162 |
| ||||
|
For which no allowance has been provided: |
|
|
|
|
|
|
|
|
| ||||
|
Renegotiated amounts |
|
85 |
|
- |
|
71 |
|
- |
| ||||
|
Legal collection process |
|
268 |
|
- |
|
261 |
|
- |
| ||||
|
Total |
|
$ |
584 |
|
$ |
205 |
|
$ |
578 |
|
$ |
201 |
|
The table below summarizes the activity in the allowance for doubtful accounts related to long-term receivables from farmers in Brazil.
|
|
|
March 31, |
| ||||||
|
|
|
|
|
|
| ||||
|
(US$ in millions) |
|
2011 |
|
2010 |
| ||||
|
Beginning Balance |
|
$ |
201 |
|
|
$ |
232 |
|
|
|
Bad debt provision |
|
1 |
|
|
4 |
|
| ||
|
Recoveries |
|
(1 |
) |
|
(4 |
) |
| ||
|
Write-offs |
|
- |
|
|
(4 |
) |
| ||
|
Foreign exchange translation |
|
4 |
|
|
(1 |
) |
| ||
|
Ending balance |
|
$ |
205 |
|
|
$ |
227 |
|
|
Judicial deposits—Judicial deposits are funds that Bunge has placed on deposit with the courts in Brazil. These funds are held in judicial escrow relating to certain legal proceedings pending legal resolution and bear interest at the SELIC rate (benchmark rate of the Brazilian central bank).
Other long-term receivables—Other long-term receivables primarily include installment payments to be received from Bunge’s sale of its 33.34% interest in Saipol S.A.S. in December 2009 for 145 million Euros, or its equivalent at that date of approximately $209 million. The sale agreement provided for payment in four equal annual installments, two of which have been received as of January 2011. The reported long-term balance related to Saipol represents the final installment expected January 2013. The January 2012 installment is included in other current assets.
9. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2011 |
|
2010 |
| ||
|
Accrued liabilities |
|
$ |
1,271 |
|
$ |
1,268 |
|
|
Unrealized losses on derivative contracts at fair value |
|
1,716 |
|
2,105 |
| ||
|
Advances on sales |
|
417 |
|
323 |
| ||
|
Other |
|
60 |
|
79 |
| ||
|
Total |
|
$ |
3,464 |
|
$ |
3,775 |
|
10. 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. 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 receivables from farmers in Brazil, net, see Note 8 of the notes to the condensed consolidated financial statements. For long-term debt, see Note 11 of the notes to the condensed consolidated financial statements. Bunge’s financial instruments also include derivative instruments and marketable securities, which are stated at fair value.
Fair value is the expected 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, derivatives, and certain other assets based on the fair value hierarchy established in a FASB issued standard, 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 Bunge 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 sale 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 proprietary 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 majority of Bunge’s exchange traded agricultural commodity futures are 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. The following table sets forth, by level, Bunge’s assets and liabilities that were accounted for at fair value on a recurring basis.
|
|
|
Fair Value Measurements at Reporting Date |
| ||||||||||||||
|
|
|
March 31, 2011 |
|
December 31, 2010 |
| ||||||||||||
|
(US$ in millions) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Readily marketable inventories (Note 5) |
|
$ - |
|
$ 3,716 |
|
$ 796 |
|
$ 4,512 |
|
$ - |
|
$ 4,567 |
|
$ 264 |
|
$ 4,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on designated derivative contracts (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate |
|
- |
|
2 |
|
- |
|
2 |
|
- |
|
- |
|
- |
|
- |
|
|
Foreign Exchange |
|
- |
|
19 |
|
- |
|
19 |
|
- |
|
22 |
|
- |
|
22 |
|
|
Unrealized gain on undesignated derivative contracts (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate |
|
- |
|
22 |
|
- |
|
22 |
|
- |
|
4 |
|
- |
|
4 |
|
|
Foreign Exchange |
|
1 |
|
285 |
|
3 |
|
289 |
|
2 |
|
209 |
|
1 |
|
212 |
|
|
Commodities |
|
91 |
|
1,322 |
|
322 |
|
1,735 |
|
114 |
|
1,754 |
|
454 |
|
2,322 |
|
|
Freight |
|
13 |
|
19 |
|
3 |
|
35 |
|
1 |
|
22 |
|
3 |
|
26 |
|
|
Energy |
|
- |
|
20 |
|
48 |
|
68 |
|
9 |
|
11 |
|
16 |
|
36 |
|
|
Other (2) |
|
216 |
|
163 |
|
- |
|
379 |
|
252 |
|
88 |
|
- |
|
340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ 321 |
|
$ 5,568 |
|
$ 1,172 |
|
$ 7,061 |
|
$ 378 |
|
$ 6,677 |
|
$ 738 |
|
$ 7,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on designated derivative contracts (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate |
|
$ - |
|
$ 2 |
|
$ - |
|
$ 2 |
|
$ - |
|
$ - |
|
$ - |
|
$ - |
|
|
Foreign Exchange |
|
- |
|
19 |
|
- |
|
19 |
|
- |
|
22 |
|
- |
|
22 |
|
|
Unrealized loss on undesignated derivative contracts (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate |
|
- |
|
1 |
|
- |
|
1 |
|
- |
|
1 |
|
- |
|
1 |
|
|
Foreign Exchange |
|
- |
|
142 |
|
- |
|
142 |
|
- |
|
69 |
|
- |
|
69 |
|
|
Commodities |
|
369 |
|
1,057 |
|
129 |
|
1,555 |
|
692 |
|
1,167 |
|
162 |
|
2,021 |
|
|
Energy |
|
6 |
|
5 |
|
10 |
|
21 |
|
8 |
|
1 |
|
5 |
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ 375 |
|
$ 1,226 |
|
$ 139 |
|
$ 1,740 |
|
$ 700 |
|
$ 1,260 |
|
$ 167 |
|
$ 2,127 |
|
(1) Unrealized gains on designated and undesignated derivative contracts are generally included in other current assets. There are no such amounts included in other non-current assets at March 31, 2011, and December 31, 2010.
(2) Other assets include primarily the fair values of U.S. Treasury securities held as margin deposits.
(3) Unrealized losses on designated and undesignated derivative contracts are generally included in other current liabilities. At March 31, 2011, $2 million of designated and undesignated derivative contracts are included in other non-current liabilities. There are no such amounts included in other non-current liabilities at December 31, 2010.
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 within 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 condensed consolidated financial statements as a component of cost of goods sold, foreign exchange gains (losses), other income (expense), net or other comprehensive income (loss).
OTC derivative contracts include swaps, options and structured transactions that are valued at fair value generally 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 commodity 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. Changes in the fair values of these inventories are recognized in the condensed consolidated statements of income as a component of cost of goods sold.
Readily marketable inventories reported at fair value are valued based on commodity futures exchange quotations, broker or dealer quotations, or market transactions in either listed or OTC markets with appropriate adjustments for differences in local markets where Bunge’s inventories are located. 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 condensed consolidated balance sheets and condensed 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 condensed consolidated balance sheets and condensed 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.
Level 3 Derivatives —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 Bunge’s fair value determination. These adjustments are based on Bunge’s estimate of the potential loss in the event of counterparty non-performance.
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 months ended March 31, 2011 and 2010. Level 3 instruments presented in the tables include 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, January 1, 2011 |
|
$ |
307 |
|
|
$ |
264 |
|
|
$ |
571 |
|
|
|
Total gains and (losses) (realized/unrealized) included in cost of goods sold |
|
(42 |
) |
|
(38 |
) |
|
(80 |
) |
| |||
|
Total gains and (losses) (realized/unrealized) included in foreign exchange gains (losses) |
|
1 |
|
|
- |
|
|
1 |
|
| |||
|
Purchases |
|
36 |
|
|
872 |
|
|
908 |
|
| |||
|
Sales |
|
- |
|
|
(400 |
) |
|
(400 |
) |
| |||
|
Issuances |
|
(26 |
) |
|
- |
|
|
(26 |
) |
| |||
|
Settlements |
|
(51 |
) |
|
- |
|
|
(51 |
) |
| |||
|
Transfers into Level 3 |
|
5 |
|
|
117 |
|
|
122 |
|
| |||
|
Transfers out of Level 3 |
|
7 |
|
|
(19 |
) |
|
(12 |
) |
| |||
|
Balance, March 31, 2011 |
|
$ |
237 |
|
|
$ |
796 |
|
|
$ |
1,033 |
|
|
(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 |
|
$ |
109 |
|
$ |
140 |
|
|
Total gains and (losses) (realized/unrealized) included in cost of goods sold |
|
(5) |
|
50 |
|
45 |
| |||
|
Total gains and (losses) (realized/unrealized) included in foreign exchange gains (losses) |
|
|||||||||