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, 2013
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 o |
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 April 29, 2013, the number of shares issued of the registrant was:
Common shares, par value $.01 per share: 147,090,570
BUNGE LIMITED
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(U.S. dollars in millions, except per share data)
|
|
|
Three Months Ended |
| ||||
|
|
|
March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
Net sales |
|
$ |
14,785 |
|
$ |
12,909 |
|
|
Cost of goods sold |
|
(14,138 |
) |
(12,372 |
) | ||
|
|
|
|
|
|
| ||
|
Gross profit |
|
647 |
|
537 |
| ||
|
Selling, general and administrative expenses |
|
(349 |
) |
(393 |
) | ||
|
Interest income |
|
9 |
|
25 |
| ||
|
Interest expense |
|
(76 |
) |
(62 |
) | ||
|
Foreign exchange gain (loss) |
|
(40 |
) |
58 |
| ||
|
Other income (expense) — net |
|
39 |
|
(1 |
) | ||
|
|
|
|
|
|
| ||
|
Income from continuing operations before income tax |
|
230 |
|
164 |
| ||
|
Income tax (expense) benefit |
|
(73 |
) |
(40 |
) | ||
|
|
|
|
|
|
| ||
|
Income from continuing operations |
|
157 |
|
124 |
| ||
|
Income (loss) from discontinued operations, net of tax |
|
(9 |
) |
(35 |
) | ||
|
|
|
|
|
|
| ||
|
Net income |
|
148 |
|
89 |
| ||
|
Net (income) loss attributable to noncontrolling interests |
|
32 |
|
3 |
| ||
|
|
|
|
|
|
| ||
|
Net income attributable to Bunge |
|
180 |
|
92 |
| ||
|
Convertible preference share dividends and other obligations |
|
(10 |
) |
(8 |
) | ||
|
|
|
|
|
|
| ||
|
Net income available to Bunge common shareholders |
|
$ |
170 |
|
$ |
84 |
|
|
|
|
|
|
|
| ||
|
Earnings per common share—basic (Note 17) |
|
|
|
|
| ||
|
Net income (loss) from continuing operations |
|
$ |
1.22 |
|
$ |
0.81 |
|
|
Net income (loss) from discontinued operations |
|
(0.06 |
) |
(0.24 |
) | ||
|
|
|
|
|
|
| ||
|
Net income (loss) to Bunge common shareholders |
|
$ |
1.16 |
|
$ |
0.57 |
|
|
|
|
|
|
|
| ||
|
Earnings per common share—diluted (Note 17) |
|
|
|
|
| ||
|
Net income (loss) from continuing operations |
|
$ |
1.21 |
|
$ |
0.81 |
|
|
Net income (loss) from discontinued operations |
|
(0.06 |
) |
(0.24 |
) | ||
|
|
|
|
|
|
| ||
|
Net income (loss) to Bunge common shareholders |
|
$ |
1.15 |
|
$ |
0.57 |
|
|
|
|
|
|
|
| ||
|
Dividends per common share |
|
$ |
0.27 |
|
$ |
0.25 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(U.S. dollars in millions)
|
|
|
Three Months Ended |
| ||||
|
|
|
March 31, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
Net income |
|
$ |
148 |
|
$ |
89 |
|
|
Other comprehensive income (loss): |
|
|
|
|
| ||
|
Foreign exchange translation adjustment |
|
80 |
|
335 |
| ||
|
Unrealized gains (losses) on foreign exchange contracts designated as cash flow or net investment hedges, net of tax (expense) benefit of $(1) in 2013 and $(4) in 2012 |
|
11 |
|
9 |
| ||
|
Unrealized gains (losses) on investments, net of tax (expense) benefit of $(7) in 2012 |
|
–– |
|
13 |
| ||
|
Reclassification of realized net losses (gains) to net income, net of tax expense (benefit) of $2 in 2013 |
|
(3 |
) |
— |
| ||
|
Pension adjustment, net of tax (expense) benefit of nil in all periods |
|
— |
|
1 |
| ||
|
Total other comprehensive income (loss) |
|
88 |
|
358 |
| ||
|
Total comprehensive income (loss) |
|
236 |
|
447 |
| ||
|
Less: comprehensive (income) loss attributable to noncontrolling interests |
|
28 |
|
(10 |
) | ||
|
Total comprehensive income (loss) attributable to Bunge |
|
$ |
264 |
|
$ |
437 |
|
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, |
| ||
|
|
|
2013 |
|
2012 |
| ||
|
ASSETS |
|
|
|
|
| ||
|
Current assets: |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
801 |
|
$ |
569 |
|
|
Time deposits under trade structured finance program (Note 5) |
|
4,375 |
|
3,048 |
| ||
|
Trade accounts receivable (less allowances of $111 and $125) (Note 13) |
|
2,957 |
|
2,471 |
| ||
|
Inventories (Note 6) |
|
6,074 |
|
6,590 |
| ||
|
Deferred income taxes |
|
219 |
|
108 |
| ||
|
Current assets held for sale (Note 4) |
|
747 |
|
660 |
| ||
|
Other current assets (Note 7) |
|
4,620 |
|
3,818 |
| ||
|
Total current assets |
|
19,793 |
|
17,264 |
| ||
|
|
|
|
|
|
| ||
|
Property, plant and equipment, net |
|
6,017 |
|
5,888 |
| ||
|
Goodwill |
|
351 |
|
351 |
| ||
|
Other intangible assets, net |
|
287 |
|
295 |
| ||
|
Investments in affiliates |
|
277 |
|
273 |
| ||
|
Deferred income taxes |
|
1,163 |
|
1,213 |
| ||
|
Non-current assets held for sale (Note 4) |
|
251 |
|
250 |
| ||
|
Other non-current assets (Note 8) |
|
1,760 |
|
1,746 |
| ||
|
Total assets |
|
$ |
29,899 |
|
$ |
27,280 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND EQUITY |
|
|
|
|
| ||
|
Current liabilities: |
|
|
|
|
| ||
|
Short-term debt |
|
$ |
1,582 |
|
$ |
1,598 |
|
|
Current portion of long-term debt (Note 12) |
|
775 |
|
719 |
| ||
|
Letter of credit obligations under trade structured finance program (Note 5) |
|
4,375 |
|
3,048 |
| ||
|
Trade accounts payable |
|
3,643 |
|
3,319 |
| ||
|
Deferred income taxes |
|
100 |
|
86 |
| ||
|
Current liabilities held for sale (Note 4) |
|
278 |
|
297 |
| ||
|
Other current liabilities (Note 10) |
|
2,813 |
|
2,494 |
| ||
|
Total current liabilities |
|
13,566 |
|
11,561 |
| ||
|
|
|
|
|
|
| ||
|
Long-term debt (Note 12) |
|
3,897 |
|
3,532 |
| ||
|
Deferred income taxes |
|
62 |
|
84 |
| ||
|
Non-current liabilities held for sale (Note 4) |
|
21 |
|
13 |
| ||
|
Other non-current liabilities |
|
867 |
|
797 |
| ||
|
|
|
|
|
|
| ||
|
Commitments and contingencies (Note 15) |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Redeemable noncontrolling interests |
|
32 |
|
38 |
| ||
|
|
|
|
|
|
| ||
|
Equity (Note 16): |
|
|
|
|
| ||
|
Convertible perpetual preference shares, par value $.01; authorized, issued and outstanding: |
|
|
|
|
| ||
|
2013 and 2012 — 6,900,000 shares (liquidation preference $100 per share) |
|
690 |
|
690 |
| ||
|
Common shares, par value $.01; authorized — 400,000,000 shares; issued and outstanding: |
|
|
|
|
| ||
|
2013 — 147,065,424 shares, 2012 — 146,348,499 shares |
|
1 |
|
1 |
| ||
|
Additional paid-in capital |
|
4,920 |
|
4,909 |
| ||
|
Retained earnings |
|
6,924 |
|
6,792 |
| ||
|
Accumulated other comprehensive income (loss) (Note 16) |
|
(1,326 |
) |
(1,410 |
) | ||
|
Treasury shares, at cost - 1,933,286 shares |
|
(120 |
) |
(120 |
) | ||
|
Total Bunge shareholders’ equity |
|
11,089 |
|
10,862 |
| ||
|
Noncontrolling interests |
|
365 |
|
393 |
| ||
|
Total equity |
|
11,454 |
|
11,255 |
| ||
|
Total liabilities and equity |
|
$ |
29,899 |
|
$ |
27,280 |
|
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, |
| ||||
|
|
|
2013 |
|
2012 |
| ||
|
OPERATING ACTIVITIES |
|
|
|
|
| ||
|
Net income |
|
$ |
148 |
|
$ |
89 |
|
|
Adjustments to reconcile net income to cash provided by (used for) operating activities: |
|
|
|
|
| ||
|
Foreign exchange loss (gain) on debt |
|
77 |
|
(15 |
) | ||
|
Bad debt expense |
|
6 |
|
16 |
| ||
|
Depreciation, depletion and amortization |
|
121 |
|
120 |
| ||
|
Stock-based compensation expense |
|
4 |
|
19 |
| ||
|
Deferred income taxes |
|
(56 |
) |
(34 |
) | ||
|
Other, net |
|
(4 |
) |
— |
| ||
|
Changes in operating assets and liabilities, excluding the effects of acquisitions: |
|
|
|
|
| ||
|
Trade accounts receivable |
|
(583 |
) |
(439 |
) | ||
|
Inventories |
|
415 |
|
(549 |
) | ||
|
Prepayments and advances to suppliers |
|
(171 |
) |
(57 |
) | ||
|
Trade accounts payable and accrued liabilities |
|
302 |
|
653 |
| ||
|
Net unrealized gain/loss on derivative contracts |
|
165 |
|
(3 |
) | ||
|
Margin deposits |
|
(66 |
) |
(95 |
) | ||
|
Other, net |
|
(255 |
) |
(7 |
) | ||
|
Cash provided by (used for) operating activities |
|
103 |
|
(302 |
) | ||
|
INVESTING ACTIVITIES |
|
|
|
|
| ||
|
Payments made for capital expenditures |
|
(224 |
) |
(224 |
) | ||
|
Acquisitions of businesses (net of cash acquired) |
|
(11 |
) |
(98 |
) | ||
|
Proceeds from investments |
|
13 |
|
18 |
| ||
|
Payments for investments |
|
(6 |
) |
(9 |
) | ||
|
Payment for investments in affiliates |
|
(14 |
) |
(49 |
) | ||
|
Other, net |
|
(40 |
) |
41 |
| ||
|
Cash provided by (used for) investing activities |
|
(282 |
) |
(321 |
) | ||
|
FINANCING ACTIVITIES |
|
|
|
|
| ||
|
Net change in short-term debt with maturities of 90 days or less |
|
(64 |
) |
69 |
| ||
|
Proceeds from short-term debt with maturities greater than 90 days |
|
115 |
|
194 |
| ||
|
Repayments of short-term debt with maturities greater than 90 days |
|
(78 |
) |
(225 |
) | ||
|
Proceeds from long-term debt |
|
1,452 |
|
1,488 |
| ||
|
Repayments of long-term debt |
|
(972 |
) |
(457 |
) | ||
|
Proceeds from sale of common shares |
|
9 |
|
8 |
| ||
|
Dividends paid |
|
(48 |
) |
(47 |
) | ||
|
Other, net |
|
— |
|
3 |
| ||
|
Cash provided by (used for) financing activities |
|
414 |
|
1,033 |
| ||
|
Effect of exchange rate changes on cash and cash equivalents |
|
(3 |
) |
5 |
| ||
|
Net increase (decrease) in cash and cash equivalents |
|
232 |
|
415 |
| ||
|
Cash and cash equivalents, beginning of period |
|
569 |
|
835 |
| ||
|
Cash and cash equivalents, end of period |
|
$ |
801 |
|
$ |
1,250 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(U.S. dollars in millions, except share data)
|
|
|
|
|
Convertible |
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
| |||||||||||
|
|
|
Redeemable |
|
Preference |
|
|
|
|
|
Additional |
|
|
|
Other |
|
|
|
Non |
|
|
| |||||||||||
|
|
|
Noncontrolling |
|
Shares |
|
Common Shares |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Treasury |
|
Controlling |
|
Total |
| |||||||||||||
|
|
|
Interests |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Shares |
|
Interests |
|
Equity |
| |||||||||
|
Balance, January 1, 2012 |
|
$ |
— |
|
6,900,000 |
|
$ |
690 |
|
145,610,029 |
|
$ |
1 |
|
$ |
4,829 |
|
$ |
6,917 |
|
$ |
(610 |
) |
$ |
(120 |
) |
$ |
368 |
|
$ |
12,075 |
|
|
Net income (loss) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
92 |
|
— |
|
— |
|
(3 |
) |
89 |
| |||||||||
|
Other comprehensive income (loss) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
345 |
|
— |
|
13 |
|
358 |
| |||||||||
|
Dividends on common shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(37 |
) |
— |
|
— |
|
— |
|
(37 |
) | |||||||||
|
Dividends on preference shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(8 |
) |
— |
|
— |
|
— |
|
(8 |
) | |||||||||
|
Dividends to noncontrolling interests on subsidiary common stock |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(3 |
) |
(3 |
) | |||||||||
|
Capital contributions from noncontrolling interests |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
270 |
|
270 |
| |||||||||
|
Stock-based compensation expense |
|
— |
|
— |
|
— |
|
— |
|
— |
|
19 |
|
— |
|
— |
|
— |
|
— |
|
19 |
| |||||||||
|
Issuance of common shares |
|
— |
|
— |
|
— |
|
297,561 |
|
— |
|
7 |
|
— |
|
— |
|
— |
|
— |
|
7 |
| |||||||||
|
Balance, March 31, 2012 |
|
$ |
— |
|
6,900,000 |
|
$ |
690 |
|
145,907,590 |
|
$ |
1 |
|
$ |
4,855 |
|
$ |
6,964 |
|
$ |
(265 |
) |
$ |
(120 |
) |
$ |
645 |
|
$ |
12,770 |
|
|
|
|
|
|
Convertible |
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
| |||||||||||
|
|
|
Redeemable |
|
Preference |
|
|
|
|
|
Additional |
|
|
|
Other |
|
|
|
Non |
|
|
| |||||||||||
|
|
|
Noncontrolling |
|
Shares |
|
Common Shares |
|
Paid-in |
|
Retained |
|
Comprehensive |
|
Treasury |
|
Controlling |
|
Total |
| |||||||||||||
|
|
|
Interests |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Shares |
|
Interests |
|
Equity |
| |||||||||
|
Balance, January 1, 2013 |
|
$ |
38 |
|
6,900,000 |
|
$ |
690 |
|
146,348,499 |
|
$ |
1 |
|
$ |
4,909 |
|
$ |
6,792 |
|
$ |
(1,410 |
) |
$ |
(120 |
) |
$ |
393 |
|
$ |
11,255 |
|
|
Net income (loss) |
|
(8 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
180 |
|
— |
|
— |
|
(32 |
) |
148 |
| |||||||||
|
Accretion of noncontrolling interests |
|
2 |
|
— |
|
— |
|
— |
|
— |
|
(2 |
) |
— |
|
— |
|
— |
|
— |
|
(2 |
) | |||||||||
|
Other comprehensive income (loss) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
84 |
|
— |
|
4 |
|
88 |
| |||||||||
|
Dividends on common shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(40 |
) |
— |
|
— |
|
— |
|
(40 |
) | |||||||||
|
Dividends on preference shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(8 |
) |
— |
|
— |
|
— |
|
(8 |
) | |||||||||
|
Dividends to noncontrolling interests on subsidiary common stock |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(1 |
) |
(1 |
) | |||||||||
|
Capital contributions from noncontrolling interests |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1 |
|
1 |
| |||||||||
|
Stock-based compensation expense |
|
— |
|
— |
|
— |
|
— |
|
— |
|
4 |
|
— |
|
— |
|
— |
|
— |
|
4 |
| |||||||||
|
Issuance of common shares |
|
— |
|
— |
|
— |
|
716,925 |
|
— |
|
9 |
|
— |
|
— |
|
— |
|
— |
|
9 |
| |||||||||
|
Balance, March 31, 2013 |
|
$ |
32 |
|
6,900,000 |
|
$ |
690 |
|
147,065,424 |
|
$ |
1 |
|
$ |
4,920 |
|
$ |
6,924 |
|
$ |
(1,326 |
) |
$ |
(120 |
) |
$ |
365 |
|
$ |
11,454 |
|
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 AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited condensed consolidated financial statements include the accounts of Bunge Limited (Bunge), its subsidiaries and variable interest entities (VIEs) in which it is considered the primary beneficiary, and as a result, include the assets, liabilities, revenues and expenses of all entities over which Bunge exercises control. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended (Exchange Act). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to Securities and Exchange Commission (SEC) rules. 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, 2012 has been derived from Bunge’s audited consolidated financial statements at that date. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2012, forming part of Bunge’s 2012 Annual Report on Form 10-K filed with the SEC on March 1, 2013.
Equity investments in which Bunge has the ability to exercise significant influence but does not control are accounted for by the equity method of accounting. Investments in which Bunge does not exercise significant influence are accounted for by the cost method of accounting. Intercompany accounts and transactions are eliminated. Bunge consolidates VIEs in which it is considered the primary beneficiary and reconsiders such conclusion at each reporting period. An enterprise is determined to be the primary beneficiary if it has a controlling financial interest under GAAP, defined as (a) the power to direct the activities of a VIE that most significantly impact the VIE’s business and (b) the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE’s operations. Performance of that analysis requires the exercise of judgment. Where Bunge has an interest in an entity that has qualified for the deferral of the consolidation rules, it follows consolidation rules prior to January 1, 2010. These rules require an analysis to (a) determine whether an entity in which Bunge has a variable interest is a VIE and (b) whether Bunge’s involvement, through the holding of equity interests directly or indirectly in the entity or contractually through other variable interests, would be expected to absorb a majority of the variability of the entity. This latter evaluation resulted in the consolidation of certain private equity and other investment funds (the consolidated funds) related to an asset management business acquisition completed in 2012.
The consolidated funds are, for GAAP purposes, investment companies and therefore are not required to consolidate their majority owned and controlled investments. Rather, Bunge reflects these investments at fair value. In addition, certain of these consolidated funds have limited partner investors with investments in the form of equity, which are accounted for as noncontrolling interests and investments in the form of debt for which Bunge has elected the fair value option.
Noncontrolling interests related to Bunge’s ownership of less than 100% are reported as noncontrolling interests in subsidiaries in the condensed consolidated balance sheets. The noncontrolling ownership interests in Bunge’s earnings, net of tax, are reported as net (income) loss attributable to noncontrolling interests in the condensed consolidated statements of income.
Certain prior year amounts have been reclassified to conform to the current year presentation (see Note 18).
Discontinued Operations — In determining whether a group of assets disposed (or to be disposed) of should be presented as discontinued operations, Bunge makes a determination of whether the group of assets being disposed of comprises a component of the entity; that is, whether it has historical operations and cash flows that can be clearly distinguished (both operationally and for financial reporting purposes). Bunge also determines whether the cash flows associated with the group of assets have been significantly (or will be significantly) eliminated from
the ongoing operations of Bunge as a result of the disposal transaction and whether Bunge has no significant continuing involvement in the operations of the group of assets after the disposal transaction. If these determinations can be made affirmatively, the results of operations of the group of assets being disposed of (as well as any gain or loss on the disposal transaction) are aggregated for separate presentation apart from the continuing operations of the Company in the condensed consolidated financial statements (see Note 4).
2. NEW ACCOUNTING PRONOUNCEMENTS
Adoption of New Accounting Pronouncements — In December 2011 and January 2013, Financial Accounting Standards Board (FASB) amended the guidance in ASC Topic 210, Balance Sheet. This amendment requires an entity to disclose both gross and net information about financial instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement. Bunge’s derivative assets and liabilities are presented on a gross basis in its condensed consolidated balance sheets. The adoption of this amendment on January 1, 2013 did not have a significant impact on Bunge’s condensed consolidated financial statements.
In February 2013, FASB amended the guidance in ASC Topic 220, Comprehensive Income. This amendment requires an entity to disclose on a prospective basis the impact on income statement line items for significant items reclassified from other comprehensive income to net income during the period. The adoption of this amendment expanded Bunge’s disclosures in its condensed consolidated financial statements.
3. BUSINESS ACQUISITIONS
In January 2013, Bunge acquired two biodiesel facilities adjacent to existing Bunge facilities from its European biodiesel joint venture for $11 million in cash, net of cash acquired. The preliminary purchase price allocation resulted in $4 million of inventory, $17 million of other current assets, $10 million of property, plant and equipment, $19 million of other current liabilities and $1 million of long-term deferred taxes. There were no changes to the joint venture ownership or governance structure as a result of this transaction.
4. DISCONTINUED OPERATIONS
On December 6, 2012, Bunge entered into a definitive agreement with Yara International ASA (Yara) under which Yara will acquire Bunge’s Brazilian fertilizer distribution business, including blending facilities, brands and warehouses, for $750 million in cash. Upon completion of the transaction, which is expected in 2013, Bunge will not have significant ongoing cash flows related to the Brazilian fertilizer business or any significant ongoing participation in the operations of this business. Assets and liabilities subject to the purchase and sale agreement have been classified as held for sale in Bunge’s condensed consolidated balance sheets. The operating results of the Brazilian fertilizer distribution businesses are reported as income from discontinued operations, net of tax, in the condensed consolidated statements of income and have been excluded from segment results for all periods presented (see Note 18).
The following table summarizes the results from discontinued operations.
|
|
|
Three Months Ended March 31, |
| ||||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Net sales |
|
$ |
456 |
|
$ |
537 |
|
|
Cost of goods sold |
|
(431 |
) |
(553 |
) | ||
|
Gross profit |
|
25 |
|
(16 |
) | ||
|
Selling, general and administrative expenses |
|
(19 |
) |
(26 |
) | ||
|
Interest income |
|
4 |
|
1 |
| ||
|
Interest expense |
|
(3 |
) |
— |
| ||
|
Foreign exchange gain (loss) |
|
3 |
|
8 |
| ||
|
Other income (expenses)—net |
|
1 |
|
(28 |
) | ||
|
Income (loss) from discontinued operations before income tax |
|
11 |
|
(61 |
) | ||
|
Income tax (expense) benefit |
|
(20 |
) |
26 |
| ||
|
Income (loss) from discontinued operations, net of tax |
|
$ |
(9 |
) |
$ |
(35 |
) |
Assets held for sale associated with discontinued operations as of March 31, 2013 and December 31, 2012 are as follows:
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Assets: |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
2 |
|
$ |
2 |
|
|
Trade accounts receivable (less allowance of $2 and $2) |
|
265 |
|
189 |
| ||
|
Inventories |
|
445 |
|
402 |
| ||
|
Other current assets |
|
35 |
|
67 |
| ||
|
Current assets held for sale |
|
$ |
747 |
|
$ |
660 |
|
|
Property, plant and equipment, net |
|
$ |
227 |
|
$ |
218 |
|
|
Deferred income taxes |
|
24 |
|
40 |
| ||
|
Other non-current assets |
|
— |
|
(8 |
) | ||
|
Non-current assets held for sale |
|
$ |
251 |
|
$ |
250 |
|
|
|
|
|
|
|
| ||
|
Liabilities: |
|
|
|
|
| ||
|
Trade accounts payable |
|
$ |
181 |
|
$ |
157 |
|
|
Other current liabilities |
|
97 |
|
140 |
| ||
|
Current liabilities held for sale |
|
$ |
278 |
|
$ |
297 |
|
|
Deferred income taxes |
|
$ |
8 |
|
$ |
— |
|
|
Other non-current liabilities |
|
13 |
|
13 |
| ||
|
Non-current liabilities held for sale |
|
$ |
21 |
|
$ |
13 |
|
5. TRADE STRUCTURED FINANCE PROGRAM
Bunge engages in various trade structured finance activities to leverage the value of its trade flows across its operating regions. These activities include a Program under which a Bunge entity generally obtains U.S. dollar-denominated letters of credit (LCs) (each based on an underlying commodity trade flow) from financial institutions, foreign exchange forward contracts, and time deposits denominated in the local currency of the financial institution counterparties, all of which are subject to legally enforceable set-off agreements. The LCs and foreign exchange contracts are presented within the line item letter of credit obligations under trade structured finance program on the condensed consolidated balance sheets. The net return from activities under this Program, including fair value changes, is included as a reduction of cost of goods sold in the accompanying condensed consolidated statements of income.
At March 31, 2013 and December 31, 2012, time deposits (with weighted-average interest rates of 8.11% and 8.95%, respectively) and LCs (including foreign exchange contracts) totaled $4,375 million and $3,048 million, respectively. In addition, at March 31, 2013 and December 31, 2012, the fair values of the time deposits (Level 2 measurements) totaled approximately $4,375 million and $3,048 million, respectively, and the fair values of the LCs (Level 2 measurements) totaled approximately $4,295 million and $3,024 million, respectively. The fair values approximated the carrying amount of the related financial instruments due to their short-term nature. The fair values of the foreign exchange forward contracts (Level 2 measurements) were $80 million and $24 million, respectively.
During the quarters ended March 31, 2013 and 2012, total proceeds from issuances of LCs were $2,417 million and $1,314 million, respectively. These cash inflows are offset by the related cash outflows resulting from placement of the time deposits and repayment of the LCs.
6. INVENTORIES
Inventories by segment are presented below. Readily marketable inventories refers to inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Agribusiness (1) |
|
$ |
4,842 |
|
$ |
5,240 |
|
|
Sugar and Bioenergy (2) |
|
371 |
|
488 |
| ||
|
Edible Oil Products (3) |
|
561 |
|
617 |
| ||
|
Milling Products (4) |
|
231 |
|
184 |
| ||
|
Fertilizer (4) (5) |
|
69 |
|
61 |
| ||
|
Total |
|
$ |
6,074 |
|
$ |
6,590 |
|
(1) Includes readily marketable agricultural commodity inventories at fair value of $4,453 million and $4,892 million at March 31, 2013 and December 31, 2012, respectively. All other agribusiness segment inventories are carried at lower of cost or market.
(2) Includes readily marketable sugar inventories of $37 million and $199 million at March 31, 2013 and December 31, 2012, respectively. Of these, $26 million and $144 million, respectively, are carried at fair value, in Bunge’s trading and merchandising business. Sugar and ethanol inventories in Bunge’s industrial production business are carried at lower of cost or market.
(3) Edible oil products inventories are generally carried at lower of cost or market, with the exception of readily marketable inventories of bulk soybean oil which are carried at fair value in the aggregate amount of $106 million and $215 million at March 31, 2013 and December 31, 2012, respectively.
(4) Milling products and fertilizer inventories are carried at lower of cost or market.
(5) Fertilizer inventories exclude amounts classified as held for sale (see Note 4).
7. OTHER CURRENT ASSETS
Other current assets consist of the following:
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Prepaid commodity purchase contracts (1) |
|
$ |
436 |
|
$ |
299 |
|
|
Secured advances to suppliers, net (2) |
|
434 |
|
390 |
| ||
|
Unrealized gains on derivative contracts at fair value |
|
1,336 |
|
1,230 |
| ||
|
Recoverable taxes, net |
|
416 |
|
465 |
| ||
|
Margin deposits (3) |
|
429 |
|
363 |
| ||
|
Marketable securities |
|
167 |
|
105 |
| ||
|
Deferred purchase price receivable (4) |
|
137 |
|
134 |
| ||
|
Prepaid expenses |
|
321 |
|
314 |
| ||
|
Other |
|
944 |
|
518 |
| ||
|
Total |
|
$ |
4,620 |
|
$ |
3,818 |
|
(1) Prepaid commodity purchase contracts represent advance payments against fixed price 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 sugarcane, to finance a portion of the suppliers’ production costs. 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 $13 million and $12 million at March 31, 2013 and December 31, 2012, respectively.
Interest earned on secured advances to suppliers of $9 million and $8 million for the three months ended March 31, 2013 and 2012, respectively, is included in net sales in the condensed consolidated statements of income.
(3) Margin deposits include U.S. treasury securities at fair value and cash.
(4) Deferred purchase price receivable represents additional credit support for the investment conduits in Bunge’s accounts receivables sales program (see Note 13) and is recognized at its estimated fair value.
8. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Recoverable taxes, net |
|
$ |
344 |
|
$ |
309 |
|
|
Long-term receivables from farmers in Brazil, net |
|
166 |
|
164 |
| ||
|
Judicial deposits |
|
179 |
|
169 |
| ||
|
Other long-term receivables |
|
41 |
|
60 |
| ||
|
Income taxes receivable |
|
426 |
|
431 |
| ||
|
Long-term investments |
|
385 |
|
414 |
| ||
|
Affiliate loans receivable, net |
|
76 |
|
59 |
| ||
|
Other |
|
143 |
|
140 |
| ||
|
Total |
|
$ |
1,760 |
|
$ |
1,746 |
|
Recoverable taxes, net — Recoverable taxes are reported net of valuation allowances of $76 million and $47 million at March 31, 2013 and December 31, 2012, respectively.
Long-term receivables from farmers in Brazil, net — Bunge provides financing to farmers in Brazil, primarily through secured advances against farmer commitments to deliver agricultural commodities (primarily soybeans) upon harvest of the then-current year’s crop and through credit sales of fertilizer to farmers.
The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil for amounts in the legal collection process and renegotiated amounts.
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Legal collection process (1) |
|
$ |
266 |
|
$ |
269 |
|
|
Renegotiated amounts (2) |
|
124 |
|
119 |
| ||
|
Total |
|
$ |
390 |
|
$ |
388 |
|
(1) All amounts in legal process are considered past due upon initiation of legal action.
(2) All renegotiated amounts are current on repayment terms.
The average recorded investment in long-term receivables from farmers in Brazil for the three months ended March 31, 2013 and the year ended December 31, 2012 was $398 million and $444 million, respectively. The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil and the related allowance amounts.
|
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||||||||
|
|
|
Recorded |
|
|
|
Recorded |
|
|
| ||||
|
(US$ in millions) |
|
Investment |
|
Allowance |
|
Investment |
|
Allowance |
| ||||
|
For which an allowance has been provided: |
|
|
|
|
|
|
|
|
| ||||
|
Legal collection process |
|
$ |
177 |
|
$ |
163 |
|
$ |
178 |
|
$ |
165 |
|
|
Renegotiated amounts |
|
70 |
|
61 |
|
67 |
|
59 |
| ||||
|
For which no allowance has been provided: |
|
|
|
|
|
|
|
|
| ||||
|
Legal collection process |
|
89 |
|
— |
|
91 |
|
— |
| ||||
|
Renegotiated amounts |
|
54 |
|
— |
|
52 |
|
— |
| ||||
|
Total |
|
$ |
390 |
|
$ |
224 |
|
$ |
388 |
|
$ |
224 |
|
The table below summarizes the activity in the allowance for doubtful accounts related to long-term receivables from farmers in Brazil.
|
|
|
Three Months Ended |
| ||||
|
|
|
March 31, |
| ||||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Beginning balance |
|
$ |
224 |
|
$ |
199 |
|
|
Bad debt provisions |
|
1 |
|
15 |
| ||
|
Recoveries |
|
(3 |
) |
(4 |
) | ||
|
Foreign exchange translation |
|
2 |
|
5 |
| ||
|
Ending balance |
|
$ |
224 |
|
$ |
215 |
|
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 (the benchmark rate of the Brazilian central bank).
Income taxes receivable — Income taxes receivable at March 31, 2013 includes overpayments of current income taxes plus accrued interest. These income tax prepayments are expected to be utilized for settlement of future income tax obligations. Income taxes receivable in Brazil bear interest at the SELIC rate (the benchmark rate of the Brazilian central bank).
Long-term investments — Long-term investments represent investments held by certain managed investment funds, which are included in Bunge’s condensed consolidated financial statements. The consolidated funds are, for GAAP purposes, investment companies and therefore are not required to consolidate their majority owned and controlled investments. Bunge reflects these investments at fair value. The fair value of these investments (a Level 3 measurement) is $321 million and $349 million at March 31, 2013 and December 31, 2012, respectively.
Affiliate loans receivable, net — Affiliate loans receivable, net is primarily interest bearing receivables from unconsolidated affiliates with an initial maturity of greater than one year.
9. INCOME TAXES
Income tax expense is provided on an interim basis based upon management’s estimate of the annual effective income tax rate and includes the tax effects of certain discrete items, such as changes in tax laws or tax rates or other unusual or nonrecurring tax adjustments in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The effective tax rate is highly dependent upon the geographic distribution of Bunge’s worldwide earnings or losses and tax regulations in each jurisdiction. Management regularly monitors the assumptions used in estimating its annual effective tax rate and adjusts estimates accordingly. If actual results differ from management’s estimates, reported income tax expense in future periods could be materially affected.
For the three months ended March 31, 2013 and 2012, income tax expense related to continuing operations was $73 million and $40 million, respectively. The related effective tax rates were 32% and 25%, respectively. Included in these effective tax rates were approximately $31 million and $5 million, respectively, of discrete items.
As a global enterprise, Bunge files income tax returns that are subject to periodic examination and challenge by federal, state and foreign tax authorities. In many jurisdictions, income tax examinations, including settlement negotiations or litigation, may take several years to finalize. While it is often difficult to predict the final outcome or timing of resolution of any particular matter with the various tax authorities, management believes that the condensed consolidated financial statements reflect the largest amount of tax benefit that will be more likely than not realized. During the three months ended March 31, 2013, Bunge increased its liability for uncertain tax positions by $44 million and recorded income tax expense as a result of recently published litigation precedents in Brazil. Of this amount, $27 million is included in income taxes related to income from continuing operations and $17 million is included in discontinued operations, net of tax. Also during the three months ended March 31, 2013, Bunge recorded income tax expense of $4 million related to the finalization of a tax audit in Europe.
During 2011, the Brazilian IRS commenced an examination of the income tax returns of one of Bunge’s Brazilian subsidiaries for the years 2005-2009 and proposed adjustments totaling approximately $160 million plus applicable interest and penalties. Management, in consultation with external legal advisors, has reviewed and responded to the proposed adjustments and believes that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability.
In 2010, the Brazilian IRS had proposed certain significant adjustments to the income tax returns for one of Bunge’s Brazilian subsidiaries for the years 2005 to 2007. The proposed adjustments totaled approximately $525 million plus applicable interest and penalties. In late 2011, Bunge received a decision from the Tax Inspector that dismissed approximately $170 million of the Brazilian IRS’s case against Bunge. Management is appealing the remainder of the case, and has not changed its position that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability.
10. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
|
|
|
March 31, |
|
December 31, |
| ||
|
(US$ in millions) |
|
2013 |
|
2012 |
| ||
|
Accrued liabilities |
|
$ |
1,024 |
|
$ |
1,069 |
|
|
Unrealized losses on derivative contracts at fair value |
|
1,447 |
|
1,185 |
| ||
|
Advances on sales |
|
326 |
|
223 |
| ||
|
Other |
|
16 |
|
17 |
| ||
|
Total |
|
$ |
2,813 |
|
$ |
2,494 |
|
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. Cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt are stated at their carrying value, which is a reasonable estimate of fair value. See Note 13 for deferred purchase price receivable (DPP) related to sales of trade receivables. See Note 8 for long-term receivables from farmers in Brazil, net and other long-term investments and Note 12 for long-term debt. 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 the 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 ASC Topic 820, Fair Value Measurements and Disclosures, 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 topic 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 which are primarily related to inland transportation costs, 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. Bunge believes a change in these inputs would not result in a significant change in the fair values.
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, 2013 |
|
December 31, 2012 |
| ||||||||||||||||||||
|
(US$ in millions) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Readily marketable inventories (Note 6) |
|
$ |
— |
|
$ |
3,398 |
|
$ |
1,187 |
|
$ |
4,585 |
|
$ |
— |
|
$ |
4,815 |
|
$ |
436 |
|
$ |
5,251 |
|
|
Unrealized gain on designated derivative contracts (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Interest rate |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||||
|
Foreign exchange |
|
— |
|
17 |
|
— |
|
17 |
|
— |
|
1 |
|
— |
|
1 |
| ||||||||
|
Unrealized gain on undesignated derivative contracts (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Interest rate |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||||
|
Foreign exchange |
|
— |
|
229 |
|
— |
|
229 |
|
— |
|
194 |
|
— |
|
194 |
| ||||||||
|
Commodities |
|
376 |
|
545 |
|
103 |
|
1,024 |
|
61 |
|
697 |
|
264 |
|
1,022 |
| ||||||||
|
Freight |
|
10 |
|
5 |
|
— |
|
15 |
|
— |
|
— |
|
1 |
|
1 |
| ||||||||
|
Energy |
|
36 |
|
2 |
|
13 |
|
51 |
|
9 |
|
2 |
|
1 |
|
12 |
| ||||||||
|
Deferred purchase price receivable (Note 13) |
|
— |
|
137 |
|
— |
|
137 |
|
— |
|
134 |
|
— |
|
134 |
| ||||||||
|
Other (2) |
|
248 |
|
75 |
|
— |
|
323 |
|
234 |
|
32 |
|
— |
|
266 |
| ||||||||
|
Total assets |
|
$ |
670 |
|
$ |
4,408 |
|
$ |
1,303 |
|
$ |
6,381 |
|
$ |
304 |
|
$ |
5,875 |
|
$ |
702 |
|
$ |
6,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Unrealized loss on designated derivative contracts (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Interest rate |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
Foreign exchange |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||||
|
Unrealized loss on undesignated derivative contracts (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Interest rate |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||||
|
Foreign exchange |
|
— |
|
303 |
|
— |
|
303 |
|
1 |
|
119 |
|
— |
|
120 |
| ||||||||
|
Commodities |
|
414 |
|
510 |
|
99 |
|
1,023 |
|
153 |
|
667 |
|
180 |
|
1,000 |
| ||||||||
|
Freight |
|
17 |
|
— |
|
1 |
|
18 |
|
3 |
|
— |
|
— |
|
3 |
| ||||||||
|
Energy |
|
56 |
|
— |
|
47 |
|
103 |
|
42 |
|
— |
|
20 |
|
62 |
| ||||||||
|
Total liabilities |
|
$ |
487 |
|
$ |
813 |
|
$ |
147 |
|
$ |
1,447 |
|
$ |
199 |
|
$ |
786 |
|
$ |
200 |
|
$ |
1,185 |
|
(1) Unrealized gains on designated and undesignated derivative contracts are generally included in other current assets. There are $20 million and zero included in other non-current assets at March 31, 2013 and December 31, 2012.
(2) Other assets include primarily the fair values of U.S. Treasury securities held as margin deposits and other marketable securities.
(3) Unrealized losses on designated and undesignated derivative contracts are generally included in other current liabilities. There are no such amounts included in other non-current liabilities at March 31, 2013 and December 31, 2012.
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), interest income (expense), 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’s policy is to only classify exchange traded or cleared derivative contracts in Level 1, thus transfers of assets and liabilities into and/or out of Level 1 occur infrequently. Transfers into Level 1 would generally only be expected to occur when an exchange cleared derivative contract historically valued using a valuation model as the result of a lack of observable inputs becomes sufficiently observable, resulting in the valuation price being essentially the exchange traded price. There were no significant transfers into or out of Level 1 during the periods presented.
Bunge may designate certain derivative instruments as either 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 at fair value 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.
The significant unobservable inputs resulting in Level 3 classification relate to freight in the interior of Brazil and the lack of market corroborated information in Canada. In both situations, Bunge uses proprietary information such as purchase and sale contracts and contracted prices for freight, premiums and discounts to value its contracts. Movements in the price of these unobservable inputs alone would not have a material effect on Bunge’s financial statements as these contracts do not typically exceed one future crop cycle.
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’s policy regarding the timing of transfers between levels is to record the transfers at the beginning of the reporting 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. Bunge did not have significant adjustments related to non-performance by counterparties at March 31, 2013.
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, 2013 and 2012. 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 |
| |||||||
|
|
|
Three Months Ended March 31, 2013 |
| |||||||
|
|
|
|
|
Readily |
|
|
| |||
|
|
|
Derivatives, |
|
Marketable |
|
|
| |||
|
(US$ in millions) |
|
Net (1) |
|
Inventories |
|
Total |
| |||
|
Balance, January 1, 2013 |
|
$ |
66 |
|
$ |
436 |
|
$ |
502 |
|
|
Total gains and (losses) (realized/unrealized) included in cost of goods sold |
|
(24 |
) |
(84 |
) |
(108 |
) | |||
|
Purchases |
|
— |
|
952 |
|
952 |
| |||
|
Sales |
|
— |
|
(266 |
) |
(266 |
) | |||
|
Settlements |
|
(73 |
) |
— |
|
(73 |
) | |||
|
Transfers into Level 3 |
|
(1 |
) |
149 |
|
148 |
| |||
|
Transfers out of Level 3 |
|
1 |
|
— |
|
1 |
| |||
|
Balance, March 31, 2013 |
|
$ |
(31 |
) |
$ |
1,187 |
|
$ |
1,156 |
|
(1) Derivatives, net include Level 3 derivative assets and liabilities.
|
|
|
Level 3 Instruments |
| |||||||
|
|
|
Fair Value Measurements |
| |||||||
|
|
|
Three Months Ended March 31, 2012 |
| |||||||
|
|
|
|
|
Readily |
|
|
| |||
|
|
|
Derivatives, |
|
Marketable |
|
|
| |||
|
(US$ in millions) |
|
Net (1) |
|
Inventories |
|
Total |
| |||
|
Balance, January 1, 2012 |
|
$ |
(2 |
) |
$ |
283 |
|
$ |
281 |
|
|
Total gains and (losses) (realized/unrealized) included in cost of goods sold |
|
75 |
|
40 |
|
115 |
| |||
|
Purchases |
|
2 |
|
765 |
|
767 |
| |||
|
Sales |
|
— |
|
(526 |
) |
(526 |
) | |||
|
Issuances |
|
(1 |
) |
— |
|
(1 |
) | |||
|
Settlements |
|
17 |
|
— |
|
17 |
| |||
|
Transfers into Level 3 |
|
(14 |
) |
180 |
|
166 |
| |||
|
Transfers out of Level 3 |
|
(15 |
) |
(65 |
) |
(80 |
) | |||
|
Balance, March 31, 2012 |
|
$ |
62 |
|
$ |
677 |
|
$ |
739 |
|
(1) Derivatives, net include Level 3 derivative assets and liabilities.
The table below summarizes changes in unrealized gains or (losses) recorded in earnings during the three months ended March 31, 2013 and 2012 for Level 3 assets and liabilities that were held at March 31, 2013 and 2012.
|
|
|
Level 3 Instruments |
| |||||||
|
|
|
Fair Value Measurements |
| |||||||
|
|
|
Three Months Ended |
| |||||||
|
|
|
|
|
Readily |
|
|
| |||
|
|
|
Derivatives, |
|
Marketable |
|
|
| |||
|
(US$ in millions) |
|
Net (1) |
|
Inventories |
|
Total |
| |||
|
Changes in unrealized gains and (losses) relating to assets and liabilities held at March 31, 2013 |
|
|
|
|
|
|
| |||
|
Cost of goods sold |
|
$ |
(106 |
) |
$ |
703 |
|
$ |
597 |
|
|
Changes in unrealized gains and (losses) relating to assets and liabilities held at March 31, 2012 |
|
|
|
|
|
|
| |||
|
Cost of goods sold |
|
$ |
83 |
|
$ |
568 |
|
$ |
651 |
|
(1) Derivatives, net include Level 3 derivative assets and liabilities.
Derivative Instruments
Interest rate derivatives — Interest rate swaps used by Bunge as hedging instruments are recorded at fair value in the condensed consolidated balance sheets with changes in fair value recorded contemporaneously in earnings. Certain of these swap agreements may be designated as fair value hedges. The carrying amount of the associated hedged debt is also adjusted through earnings for changes in the fair value arising from changes in benchmark interest rates. Ineffectiveness is recognized to the extent that these two adjustments do not offset. Bunge may enter into interest rate swap agreements for the purpose of managing certain of its interest rate exposures. Bunge may also enter into interest rate basis swap agreements that do not qualify as hedges for accounting purposes. Changes in fair value of such interest rate basis swap agreements are recorded in earnings.
Foreign exchange derivatives — Bunge uses a combination of foreign exchange forward, swap and option contracts in certain of its operations to mitigate the risk from exchange rate fluctuations in connection with certain commercial and balance sheet exposures. The foreign exchange forward and option contracts may be designated as cash flow hedges. Bunge may also use net investment hedges to partially offset the translation adjustments arising from the remeasurement of its investment in certain of its foreign subsidiaries.
Bunge assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedge transactions are highly effective in offsetting changes in the hedged items.
The table below summarizes the notional amounts of open foreign exchange positions.
|
|
|
March 31, 2013 |
| |||||||||
|
|
|
Exchange Traded |
|
|
|
|
|
|
| |||
|
|
|
Net (Short) |
|
Non-exchange Traded |
|
Unit of |
| |||||
|
(US$ in millions) |
|
& Long (1) |
|
(Short) (2) |
|
Long (2) |
|
Measure |
| |||
|
Foreign Exchange |
|
|
|
|
|
|
|
|
| |||
|
Options |
|
$ |
(4 |
) |
$ |
(311 |
) |
$ |
135 |
|
Delta |
|
|
Forwards |
|
30 |
|
(14,819 |
) |
11,996 |
|
Notional |
| |||
|
Swaps |
|
— |
|
(106 |
) |
235 |
|
Notional |
| |||
(1) Exchange traded futures and options are presented on a net (short) and long position basis.
(2) Non-exchange traded swaps, options and forwards are presented on a gross (short) and long position basis.
Commodity derivatives — Bunge uses derivative instruments to manage its exposure to movements associated with agricultural commodity prices. Bunge generally uses exchange traded futures and options contracts to minimize the effects of changes in the prices of agricultural commodities on its agricultural commodity inventories and forward purchase and sale contracts, but may also from time to time enter into OTC commodity transactions, including swaps, which are settled in cash at maturity or termination based on exchange-quoted futures prices. Changes in fair values of exchange traded futures contracts representing the unrealized gains and/or losses on these instruments are settled daily generally through Bunge’s wholly-owned futures clearing subsidiary. Forward purchase and sale contracts are primarily settled through delivery of agricultural commodities. While Bunge considers these exchange traded futures and forward purchase and sale contracts to be effective economic hedges, Bunge does not designate or account for the majority of its commodity contracts as hedges. Changes in fair values of these contracts and related readily marketable agricultural commodity inventories are included in cost of goods sold in the condensed consolidated statements of income. The forward contracts require performance of both Bunge and the contract counterparty in future periods. Contracts to purchase agricultural commodities generally relate to current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of agricultural commodities generally do not extend beyond one future crop cycle.
The table below summarizes the volumes of open agricultural commodities derivative positions.
|
|
|
March 31, 2013 |
| ||||||
|
|
|
Exchange Traded |
|
|
|
|
|
|
|
|
|
|
Net (Short) & |
|
Non-exchange Traded |
|
Unit of |
| ||
|
|
|
Long (1) |
|
(Short) (2) |
|
Long (2) |
|
Measure |
|
|
Agricultural Commodities |
|
|
|
|
|
|
|
|
|
|
Futures |
|
(3,697,199 |
) |
— |
|
— |
|
Metric Tons |
|
|
Options |
|
(4,410,008 |
) |
(49,206 |
) |
— |
|
Metric Tons |
|
|
Forwards |
|
— |
|
(27,344,262 |
) |
26,110,212 |
|
Metric Tons |
|
|
Swaps |
|
— |
|
(6,110,451 |
) |
— |
|
Metric Tons |
|
(1) Exchange traded futures and options are presented on a net (short) and long position basis.
(2) Non-exchange traded swaps, options and forwards are presented on a gross (short) and long position basis.
Ocean freight derivatives — Bunge uses derivative instruments referred to as freight forward agreements, or FFAs, and FFA options, to hedge portions of its current and anticipated ocean freight costs. Changes in the fair value of the ocean freight derivatives that are qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged firm commitments to purchase time on ocean freight vessels that is attributable to the hedged risk, are recorded in earnings. Changes in the fair values of ocean freight derivatives that are not designated as hedges are also recorded in earnings.
The table below summarizes the open ocean freight positions.
|
|
|
March 31, 2013 |
| ||||||
|
|
|
Exchange Cleared |
|
|
|
|
|
|
|
|
|
|
Net (Short) & |
|
Non-exchange Cleared |
|
Unit of |
| ||
|
|
|
Long (1) |
|
(Short) (2) |
|
Long (2) |
|
Measure |
|
|
Ocean Freight |
|
|
|
|
|
|
|
|
|
|
FFA |
|
(8,755 |
) |
— |
|
— |
|
Hire Days |
|
|
FFA Options |
|
(1,247 |
) |
— |
|
— |
|
Hire Days |
|
(1) Exchange cleared futures and options are presented on a net (short) and long position basis.
(2) Non-exchange cleared options and forwards are presented on a gross (short) and long position basis.
Energy derivatives — Bunge uses derivative instruments for various purposes including to manage its exposure to volatility in energy costs. Bunge’s operations use substantial amounts of energy, including natural gas, coal and fuel oil, including bunker fuel.
The table below summarizes the open energy positions.
|
|
|
March 31, 2013 |
| ||||||
|
|
|
Exchange |
|
|
|
|
|
|
|
|
|
|
Net (Short) & |
|
Non-exchange Cleared |
|
Unit of |
| ||
|
|
|
Long (1) |
|
(Short) (2) |
|
Long (2) |
|
Measure (3) |
|
|
Natural Gas (3) |
|
|
|
|
|
|
|
|
|
|
Futures |
|
5,639,563 |
|
— |
|
— |
|
MMBtus |
|
|
Swaps |
|
— |
|
— |
|
583,791 |
|
MMBtus |
|
|
Options |
|
(8,017,907 |
) |
— |
|
— |
|
MMBtus |
|
|
Energy—Other |
|
|
|
|
|
|
|
|
|
|
Futures |
|
3,693,601 |
|
— |
|
— |
|
Metric Tons |
|
|
Forwards |
|
||||||||