Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2014

 

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
organization)

 

(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

(Do not check if a 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 July 25, 2014 the number of shares issued of the registrant was:

 

Common shares, par value $.01 per share: 145,902,037

 

 

 



Table of Contents

 

BUNGE LIMITED

 

TABLE OF CONTENTS

 

 

 

Page

PART I — FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2014 and 2013

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2014 and 2013

4

 

 

 

 

Condensed Consolidated Balance Sheets at June 30, 2014 and December 31, 2013

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013

6

 

 

 

 

Condensed Consolidated Statements of Changes in Equity and Redeemable Noncontrolling Interests for the Six Months Ended June 30, 2014 and 2013

7

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

8

 

 

 

 

Cautionary Statement Regarding Forward-Looking Statements

28

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

 

 

 

Item 4.

Controls and Procedures

47

 

 

 

PART II — INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

48

 

 

 

Item 1A.

Risk Factors

48

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

 

 

 

Item 3.

Defaults upon Senior Securities

48

 

 

 

Item 4.

Mine Safety Disclosures

49

 

 

 

Item 5.

Other Information

49

 

 

 

Item 6.

Exhibits

49

 

 

 

Signatures

50

 

 

 

Exhibit Index

E-1

 

2



Table of Contents

 

PART I— FINANCIAL INFORMATION

 

ITEM 1.                                                FINANCIAL STATEMENTS

 

BUNGE LIMITED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

(U.S. dollars in millions, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net sales

 

$

16,793

 

$

15,491

 

$

30,254

 

$

30,276

 

Cost of goods sold

 

(16,000

)

(14,875

)

(29,047

)

(29,013

)

 

 

 

 

 

 

 

 

 

 

Gross profit

 

793

 

616

 

1,207

 

1,263

 

Selling, general and administrative expenses

 

(392

)

(379

)

(758

)

(728

)

Interest income

 

33

 

12

 

52

 

21

 

Interest expense

 

(76

)

(86

)

(155

)

(162

)

Foreign exchange gains (losses)

 

14

 

(3

)

36

 

(43

)

Other income (expense) — net

 

1

 

(1

)

7

 

38

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income tax

 

373

 

159

 

389

 

389

 

Income tax (expense) benefit

 

(111

)

(38

)

(141

)

(111

)

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

262

 

121

 

248

 

278

 

Income (loss) from discontinued operations, net of tax

 

15

 

1

 

10

 

(8

)

 

 

 

 

 

 

 

 

 

 

Net income

 

277

 

122

 

258

 

270

 

Net loss (income) attributable to noncontrolling interests

 

11

 

14

 

17

 

46

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Bunge

 

288

 

136

 

275

 

316

 

Convertible preference share dividends and other obligations

 

(16

)

(26

)

(30

)

(36

)

 

 

 

 

 

 

 

 

 

 

Net income available to Bunge common shareholders

 

$

272

 

$

110

 

$

245

 

$

280

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share—basic (Note 16)

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

1.75

 

$

0.74

 

$

1.59

 

$

1.97

 

Net income (loss) from discontinued operations

 

0.10

 

0.02

 

0.07

 

(0.06

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) to Bunge common shareholders

 

$

1.85

 

$

0.76

 

$

1.66

 

$

1.91

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share—diluted (Note 16)

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

1.71

 

$

0.74

 

$

1.58

 

$

1.95

 

Net income (loss) from discontinued operations

 

0.10

 

0.01

 

0.07

 

(0.05

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) to Bunge common shareholders

 

$

1.81

 

$

0.75

 

$

1.65

 

$

1.90

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

$

0.34

 

$

0.30

 

$

0.64

 

$

0.57

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3



Table of Contents

 

BUNGE LIMITED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

(U.S. dollars in millions)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net income

 

$

277

 

$

122

 

$

258

 

$

270

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Foreign exchange translation adjustment

 

227

 

(834

)

358

 

(758

)

Unrealized gains (losses) on designated cash flow and net investment hedges, net of tax (expense) benefit of $7 and nil in 2014 and $9 and $6 in 2013

 

(3

)

15

 

(16

)

26

 

Unrealized gains (losses) on investments, net of tax (expense) benefit of nil and nil in 2014, $(2) and $(2) in 2013

 

 

4

 

 

4

 

Reclassification of realized net losses (gains) to net income, net of tax expense (benefit) of nil and nil in 2014, nil and $2 in 2013

 

(5

)

 

(4

)

(3

)

Pension adjustment, net of tax (expense) benefit of nil and nil in 2014, $(1) and $(1) in 2013

 

(1

)

2

 

(1

)

2

 

Total other comprehensive income (loss)

 

218

 

(813

)

337

 

(729

)

Total comprehensive income (loss)

 

495

 

(691

)

595

 

(459

)

Less: comprehensive (income) loss attributable to noncontrolling interest

 

 

18

 

(2

)

46

 

Total comprehensive income (loss) attributable to Bunge

 

$

495

 

$

(673

)

$

593

 

$

(413

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4



Table of Contents

 

BUNGE LIMITED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(U.S. dollars in millions, except share data)

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

523

 

$

742

 

Time deposits under trade structured finance program (Note 4)

 

3,008

 

4,470

 

Trade accounts receivable (less allowances of $131 and $123) (Note 12)

 

2,981

 

2,144

 

Inventories (Note 5)

 

6,145

 

5,796

 

Deferred income taxes

 

206

 

183

 

Other current assets (Note 6)

 

3,809

 

4,437

 

Total current assets

 

16,672

 

17,772

 

 

 

 

 

 

 

Property, plant and equipment, net

 

6,290

 

6,075

 

Goodwill

 

399

 

392

 

Other intangible assets, net

 

305

 

326

 

Investments in affiliates

 

274

 

241

 

Deferred income taxes

 

580

 

564

 

Other non-current assets (Note 7)

 

1,491

 

1,411

 

Total assets

 

$

26,011

 

$

26,781

 

LIABILITIES AND EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Short-term debt

 

$

1,361

 

$

703

 

Current portion of long-term debt (Note 11)

 

131

 

762

 

Letter of credit obligations under trade structured finance program (Note 4)

 

3,008

 

4,470

 

Trade accounts payable

 

3,427

 

3,522

 

Deferred income taxes

 

74

 

60

 

Other current liabilities (Note 9)

 

2,376

 

3,018

 

Total current liabilities

 

10,377

 

12,535

 

Long-term debt (Note 11)

 

4,231

 

3,179

 

Deferred income taxes

 

237

 

185

 

Other non-current liabilities

 

735

 

757

 

Commitments and contingencies (Note 14)

 

 

 

 

 

Redeemable noncontrolling interests

 

40

 

37

 

Equity (Note 15):

 

 

 

 

 

Convertible perpetual preference shares, par value $.01; authorized, issued and outstanding: 2014 and 2013 — 6,900,000 shares (liquidation preference $100 per share)

 

690

 

690

 

Common shares, par value $.01; authorized — 400,000,000 shares; issued and outstanding: 2014 — 145,891,379 shares, 2013 — 147,796,784 shares

 

1

 

1

 

Additional paid-in capital

 

4,996

 

4,967

 

Retained earnings

 

7,056

 

6,891

 

Accumulated other comprehensive income (loss) (Note 15)

 

(2,254

)

(2,572

)

Treasury shares, at cost - 2014 - 4,501,886 and 2013 - 1,933,286 shares, respectively

 

(320

)

(120

)

Total Bunge shareholders’ equity

 

10,169

 

9,857

 

Noncontrolling interests

 

222

 

231

 

Total equity

 

10,391

 

10,088

 

Total liabilities and equity

 

$

26,011

 

$

26,781

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5



Table of Contents

 

BUNGE LIMITED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

(U.S. dollars in millions)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2014

 

2013

 

OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

258

 

$

270

 

Adjustments to reconcile net income to cash provided by (used for) operating activities:

 

 

 

 

 

Foreign exchange loss (gain) on debt

 

62

 

49

 

Bad debt expense

 

8

 

7

 

Depreciation, depletion and amortization

 

286

 

270

 

Stock-based compensation expense

 

28

 

21

 

Deferred income tax expense (benefit)

 

(5

)

35

 

Other, net

 

(45

)

12

 

Changes in operating assets and liabilities, excluding the effects of acquisitions:

 

 

 

 

 

Trade accounts receivable

 

(835

)

(632

)

Inventories

 

(298

)

(316

)

Prepayments and advances to suppliers

 

68

 

(562

)

Trade accounts payable and accrued liabilities

 

(219

)

460

 

Net unrealized gain/loss on derivative contracts

 

(9

)

55

 

Margin deposits

 

73

 

(7

)

Other, net

 

(163

)

(175

)

Cash provided by (used for) operating activities

 

(791

)

(513

)

INVESTING ACTIVITIES

 

 

 

 

 

Payments made for capital expenditures

 

(351

)

(470

)

Acquisitions of businesses (net of cash acquired)

 

(12

)

(11

)

Proceeds from investments

 

225

 

38

 

Payments for investments

 

(112

)

(29

)

Payments for investments in affiliates

 

(28

)

(24

)

Other, net

 

24

 

(32

)

Cash provided by (used for) investing activities

 

(254

)

(528

)

FINANCING ACTIVITIES

 

 

 

 

 

Net change in short-term debt with maturities of 90 days or less

 

492

 

883

 

Proceeds from short-term debt with maturities greater than 90 days

 

677

 

569

 

Repayments of short-term debt with maturities greater than 90 days

 

(442

)

(377

)

Proceeds from long-term debt

 

5,524

 

3,026

 

Repayments of long-term debt

 

(5,116

)

(2,748

)

Proceeds from sale of common shares

 

13

 

12

 

Repurchases of common shares

 

(200

)

 

Dividends paid

 

(105

)

(96

)

Other, net

 

(17

)

(3

)

Cash provided by (used for) financing activities

 

826

 

1,266

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(68

)

Net increase (decrease) in cash and cash equivalents

 

(219

)

157

 

Cash and cash equivalents, beginning of period

 

742

 

569

 

Cash and cash equivalents, end of period

 

$

523

 

$

726

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6



Table of Contents

 

BUNGE LIMITED AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

(Unaudited)

 

(U.S. dollars in millions, except share data)

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Non-

 

Convertible

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

Non-

 

 

 

 

 

Controlling

 

Preference 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)

 

(24

)

 

 

 

 

 

316

 

 

 

(46

)

270

 

Accretion of noncontrolling interest

 

19

 

 

 

 

 

(19

)

 

 

 

 

(19

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

(729

)

 

 

(729

)

Dividends on common shares

 

 

 

 

 

 

 

(84

)

 

 

 

(84

)

Dividends on preference shares

 

 

 

 

 

 

 

(17

)

 

 

 

(17

)

Dividends to noncontrolling interests on subsidiary common stock

 

 

 

 

 

 

 

 

 

 

(3

)

(3

)

Capital contributions from noncontrolling interests

 

 

 

 

 

 

 

 

 

 

1

 

1

 

Stock-based compensation expense

 

 

 

 

 

 

21

 

 

 

 

 

21

 

Issuance of common shares

 

 

 

 

853,111

 

 

12

 

 

 

 

 

12

 

Balance, June 30, 2013

 

$

33

 

6,900,000

 

$

690

 

147,201,610

 

$

1

 

$

4,923

 

$

7,007

 

$

(2,139

)

$

(120

)

$

345

 

$

10,707

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Non-

 

Convertible

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

Non-

 

 

 

 

 

Controlling

 

Preference 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, 2014

 

$

37

 

6,900,000

 

$

690

 

147,796,784

 

$

1

 

$

4,967

 

$

6,891

 

$

(2,572

)

$

(120

)

$

231

 

$

10,088

 

Net income (loss)

 

(10

)

 

 

 

 

 

275

 

 

 

(17

)

258

 

Accretion of noncontrolling interests

 

13

 

 

 

 

 

(13

)

 

 

 

 

(13

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

318

 

 

19

 

337

 

Dividends on common shares

 

 

 

 

 

 

 

(93

)

 

 

 

(93

)

Dividends on preference shares

 

 

 

 

 

 

 

(17

)

 

 

 

(17

)

Dividends to noncontrolling interests on subsidiary common stock

 

 

 

 

 

 

 

 

 

 

(8

)

(8

)

Return of capital to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

(3

)

(3

)

Stock-based compensation expense

 

 

 

 

 

 

28

 

 

 

 

 

28

 

Repurchase of common shares

 

 

 

 

(2,568,600

)

 

 

 

 

(200

)

 

(200

)

Issuance of common shares

 

 

 

 

663,195

 

 

14

 

 

 

 

 

14

 

Balance, June 30, 2014

 

$

40

 

6,900,000

 

$

690

 

145,891,379

 

$

1

 

$

4,996

 

$

7,056

 

$

(2,254

)

$

(320

)

$

222

 

$

10,391

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7



Table of Contents

 

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 Bunge is considered to be 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, 2013 has been derived from Bunge’s audited consolidated financial statements at that date.  Operating results for the six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.  The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2013, forming part of Bunge’s 2013 Annual Report on Form 10-K filed with the SEC on February 28, 2014.

 

2.                                    ACCOUNTING PRONOUNCEMENTS

 

Adoption of Accounting Pronouncements — In July 2013, the FASB issued guidance in ASC (Topic 740) Income Taxes. Topic 740 provides guidance regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The adoption of this amendment on January 1, 2014 did not have a significant impact on Bunge’s condensed consolidated financial statements.

 

In February 2013, the FASB issued guidance in ASC (Topic 405) Liabilities: Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.  The amended guidance addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The adoption of this amendment on January 1, 2014 did not have a significant impact on Bunge’s condensed consolidated financial statements.

 

New Accounting Pronouncements - In May 2014, the FASB amended ASC 605 Revenue Recognition and created ASC (Topic 606) Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, including interim periods within that reporting. Early application is not permitted. Bunge is evaluating the expected impact of this standard on its condensed consolidated financial statements.

 

In April 2014, the FASB amended existing guidance in ASC (Topic 205) Presentation of Financial Statements and ASC (Topic 360) Property, Plant and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this update improve the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results and requires expanded disclosures for such discontinued operations. The amendments in this update include several changes to Topic 360 to improve the organization and readability of Subtopic 205-20 and Subtopic 360-10, Property, Plant, and Equipment—Overall. The adoption of these amendments would potentially expand Bunge’s disclosures of any future discontinuance of operations.

 

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3.                                      BUSINESS ACQUISITIONS

 

In February 2014, Bunge acquired the assets of Corn Flour Producers, LLC (CFP) for $12 million in cash.  The purchase price allocation resulted in $12 million, primarily property, plant and equipment with the remainder in working capital. CFP produces corn flour products and is located in Indiana in the United States.

 

In accordance with ASC 805 Business Combinations we finalized the acquisition accounting of the wheat milling business from Grupo Altex as of June 30, 2014. Upon valuation of the net operating assets after closing the final purchase price has been increased by approximately $2 million.

 

4.                                      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, as well as 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 as of June 30, 2014 and December 31, 2013. 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 June 30, 2014 and December 31, 2013, time deposits (with weighted-average interest rates of 8.8% and 8.36%, respectively) and LCs (including foreign exchange contracts) totaled $3,008 million and $4,470 million, respectively. In addition, at June 30, 2014 and December 31, 2013, the fair values of the time deposits (Level 2 measurements) totaled approximately $3,008 million and $4,470 million, respectively, and the fair values of the LCs (Level 2 measurements) totaled approximately $2,945 million and $4,360 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 losses of $63 million and $110 million at June 30, 2014 and December 31, 2013, respectively.

 

For the six months ended June 30, 2014 and 2013, total proceeds from issuances of LCs were $3,262 million and $4,951 million, respectively. These cash inflows are offset by the related cash outflows resulting from placement of the time deposits and repayment of the LCs. All cash flows related to the Program are included in operating activities in the condensed consolidated statements of cash flows.

 

5.                                      INVENTORIES

 

Inventories by segment are presented below.  Readily marketable inventories are agricultural commodity inventories, which are non-perishable with a high shelf life and exceptionally liquid due to their homogenous nature and widely available markets with international pricing mechanisms.  Readily marketable inventories are carried at fair value.  All other inventories are carried at lower of cost or market.

 

 

 

June 30,

 

December 31,

 

(US$ in millions)

 

2014

 

2013

 

Agribusiness (1)

 

$

4,852

 

$

4,498

 

Sugar and Bioenergy (2)

 

472

 

549

 

Edible Oil Products (3)

 

478

 

487

 

Milling Products

 

262

 

210

 

Fertilizer

 

81

 

52

 

Total

 

$

6,145

 

$

5,796

 

 


(1)             Includes readily marketable inventories of $4,697 million and $4,325 million at June 30, 2014 and December 31, 2013, respectively.  Of these amounts $3,589 million and $2,927 million can be attributable to merchandising activities at June 30, 2014 and December 31, 2013, respectively.

 

(2)             Includes readily marketable inventories of $126 million and $215 million at June 30, 2014 and December 31, 2013, respectively.  Of these sugar inventories, $70 million and $137 million, respectively, can be attributable to trading and merchandising business. Sugar and ethanol inventories in Bunge’s industrial production business are carried at lower of cost or market.

 

(3)             Includes readily marketable inventories of bulk soybean and canola oil in the aggregate amount of $140 million and $138 million at June 30, 2014 and December 31, 2013, respectively.

 

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6.                                      OTHER CURRENT ASSETS

 

Other current assets consist of the following:

 

 

 

June 30,

 

December 31,

 

(US$ in millions)

 

2014

 

2013

 

Prepaid commodity purchase contracts (1)

 

$

467

 

$

220

 

Secured advances to suppliers, net (2)

 

288

 

555

 

Unrealized gains on derivative contracts, at fair value

 

1,273

 

1,561

 

Recoverable taxes, net

 

445

 

442

 

Margin deposits (3)

 

230

 

305

 

Marketable securities, at fair value

 

76

 

162

 

Deferred purchase price receivable, at fair value (4)

 

96

 

96

 

Prepaid expenses

 

280

 

261

 

Other

 

654

 

835

 

Total

 

$

3,809

 

$

4,437

 

 


(1)             Prepaid commodity purchase contracts represent advance payments against fixed price contracts for future delivery of specified quantities of 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 $14 million and $20 million at June 30, 2014 and December 31, 2013, respectively.

 

Interest earned on secured advances to suppliers of $7 million and $6 million for the three months ended June 30, 2014 and 2013, respectively, and $19 million and $15 million for the six months ended June 30, 2014 and 2013, 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 12).

 

7.                                      OTHER NON-CURRENT ASSETS

 

Other non-current assets consist of the following:

 

 

 

June 30,

 

December 31,

 

(US$ in millions)

 

2014

 

2013

 

Recoverable taxes, net (1)

 

$

353

 

$

283

 

Judicial deposits (1)

 

172

 

153

 

Other long-term receivables

 

40

 

40

 

Income taxes receivable (1)

 

309

 

304

 

Long-term investments

 

294

 

296

 

Affiliate loans receivable, net

 

38

 

25

 

Long-term receivables from farmers in Brazil, net (1)

 

106

 

134

 

Other

 

179

 

176

 

Total

 

$

1,491

 

$

1,411

 

 


(1)                                     These non-current assets arise primarily from our Brazilian operations and their realization could take in excess of five years.

 

Recoverable taxes, net-Recoverable taxes are reported net of valuation allowances of $44 million and $57 million at June 30, 2014 and December 31, 2013, respectively.

 

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).

 

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Income taxes receivable-Income taxes receivable at June 30, 2014 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.

 

Long-term investments-Long-term investments represent primarily 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 $241 million and $238 million at June 30, 2014 and December 31, 2013, 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.

 

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.

 

 

 

June 30,

 

December 31,

 

(US$ in millions)

 

2014

 

2013

 

Legal collection process (1)

 

$

197

 

$

213

 

Renegotiated amounts (2)

 

85

 

117

 

Total

 

$

282

 

$

330

 

 


(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 six months ended June 30, 2014 and the year ended December 31, 2013 was $313 million and $363 million, respectively.  The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil and the related allowance amounts.

 

 

 

June 30, 2014

 

December 31, 2013

 

 

 

Recorded

 

 

 

Recorded

 

 

 

(US$ in millions)

 

Investment

 

Allowance

 

Investment

 

Allowance

 

For which an allowance has been provided:

 

 

 

 

 

 

 

 

 

Legal collection process

 

$

122

 

$

116

 

$

139

 

$

132

 

Renegotiated amounts

 

63

 

60

 

84

 

64

 

For which no allowance has been provided:

 

 

 

 

 

 

 

 

 

Legal collection process

 

75

 

 

74

 

 

Renegotiated amounts

 

22

 

 

33

 

 

Total

 

$

282

 

$

176

 

$

330

 

$

196

 

 

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The table below summarizes the activity in the allowance for doubtful accounts related to long-term receivables from farmers in Brazil.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

(US$ in millions)

 

2014

 

2013

 

2014

 

2013

 

Beginning balance

 

$

185

 

$

224

 

$

196

 

$

224

 

Bad debt provisions

 

 

12

 

2

 

13

 

Recoveries

 

(14

)

(8

)

(15

)

(11

)

Write-offs

 

 

(1

)

(22

)

(1

)

Transfers

 

 

2

 

4

 

2

 

Foreign exchange translation

 

5

 

(20

)

11

 

(18

)

Ending balance

 

$

176

 

$

209

 

$

176

 

$

209

 

 

8.                                      INCOME TAXES

 

Income tax expense is provided on an interim basis based on 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 on 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 six months ended June 30, 2014 and 2013, income tax expense related to continuing operations was $141 million and $111 million, respectively. The related effective tax rates were 36% and 29%, respectively, and included discrete tax items of $13 million and $37 million, respectively.  The higher effective tax rate for the six months ended June 30, 2014 resulted from losses in entities where no tax benefit is recorded as these entities, primarily in Bunge’s sugar segment, have cumulative taxable losses.

 

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 difficult to predict the final outcome or timing of resolution of any particular matter, 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 six months ended June 30, 2014, Bunge increased its liability for uncertain tax positions primarily in North America resulting in a $7 million charge to income tax expense.

 

As of June 30, 2014 and December 31, 2013 Bunge had received from the Brazilian tax authorities proposed adjustments totaling an aggregate amount of 1,410 million Brazilian reals ($640 million and $603 million, respectively) plus applicable interest and penalties, related to multiple examinations of income tax returns for certain subsidiaries for years up to 2009. 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 Bunge will prevail on the majority of the proposed adjustments. As of June 30, 2014 and December 31, 2013, Bunge had recognized uncertain tax positions related to these tax assessments of 192 million Brazilian reals ($87 million and $82 million, respectively). Bunge received notice in July, 2014 from the Brazilian tax authorities that they will commence an audit of Bunge’s largest Brazilian subsidiary for the tax years 2010, 2011, and 2012 in the second half of 2014.

 

In addition, as of June 30, 2014 and December 31, 2013, Bunge’s Argentine subsidiary had received an income tax assessment relating to fiscal years 2006 and 2007 with a claim of approximately 436 million Argentine pesos (approximately $54 million and $67 million, respectively), plus previously accrued interest on the outstanding amount due of approximately 828 million and 750 million Argentine pesos as of June 30, 2014 and December 31,

 

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2013, respectively (approximately $102 million and $115 million, respectively).  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 Bunge will prevail on the majority of the proposed adjustments.  Fiscal years 2008 and 2009 are currently being audited by the tax authorities. It is likely that the tax authorities will also audit fiscal years 2010-2012, although no notice has been rendered to Bunge’s Argentine subsidiary (see also Note 14).

 

9.                                      OTHER CURRENT LIABILITIES

 

Other current liabilities consist of the following:

 

 

 

June 30,

 

December 31,

 

(US$ in millions)

 

2014

 

2013

 

Accrued liabilities

 

$

708

 

$

792

 

Unrealized losses on derivative contracts at fair value

 

1,086

 

1,401

 

Advances on sales

 

235

 

330

 

Other

 

347

 

495

 

Total

 

$

2,376

 

$

3,018

 

 

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, trade accounts payable and short-term debt are stated at their carrying value, which is a reasonable estimate of fair value.  See Note 12 for deferred purchase price receivable (DPP) related to sales of trade receivables. See Note 7 for long-term receivables from farmers in Brazil, net and other long-term investments and Note 11 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, 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, 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

 

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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.

 

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

 

 

 

June 30, 2014

 

December 31, 2013

 

(US$ in millions)

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Readily marketable inventories (Note 5)

 

$

 

$

4,034

 

$

873

 

$

4,907

 

$

 

$

4,302

 

$

298

 

$

4,600

 

Trade accounts receivable(1) 

 

 

8

 

1

 

9

 

 

5

 

1

 

6

 

Unrealized gain on designated derivative contracts(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

 

 

15

 

 

15

 

 

7

 

 

7

 

Unrealized gain on undesignated derivative contracts (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

 

9

 

184

 

 

193

 

5

 

346

 

 

351

 

Commodities

 

238

 

650

 

87

 

975

 

408

 

585

 

138

 

1,131

 

Freight

 

71

 

3

 

1

 

75

 

59

 

 

 

59

 

Energy

 

13

 

 

2

 

15

 

11

 

 

2

 

13

 

Deferred purchase price receivable (Note 12)

 

 

96

 

 

96

 

 

96

 

 

96

 

Other (3) 

 

26

 

71

 

 

97

 

59

 

22

 

 

81

 

Total assets

 

$

357

 

$

5,061

 

$

964

 

$

6,382

 

$

542

 

$

5,363

 

$

439

 

$

6,344

 

 

 

 

Fair Value Measurements at Reporting Date

 

 

 

June 30, 2014

 

December 31, 2013

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts payable(1)

 

$

 

$

545

 

$

121

 

$

666

 

$

 

$

381

 

$

76

 

$

457

 

Unrealized loss on designated derivative contracts (4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

 

 

 

 

 

 

11

 

 

11

 

Unrealized loss on undesignated derivative contracts (4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

 

16

 

170

 

 

186

 

5

 

373

 

 

378

 

Commodities

 

243

 

458

 

71

 

772

 

361

 

439

 

89

 

889

 

Freight

 

82

 

 

12

 

94

 

81

 

 

14

 

95

 

Energy

 

14

 

 

20

 

34

 

11

 

 

17

 

28

 

Total liabilities

 

$

355

 

$

1,173

 

$

224

 

$

1,752

 

$

458

 

$

1,204

 

$

196

 

$

1,858

 

 


(1)             Trade accounts receivable and payable are generally accounted for at amortized cost, with the exception of $9 million and $666 million, at June 30, 2014 and $6 million and $457 million at December 31, 2013, respectively, related to certain delivered inventory for which the receivable and payable, respectively, fluctuate based on changes in commodity prices. These receivables and payables are hybrid financial instruments for which Bunge has elected the fair value option.

 

(2)             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 June 30, 2014 and December 31, 2013, respectively.

 

(3)             Other includes the fair values of marketable securities and investments in other current assets and other non-current assets.

 

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(4)             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 June 30, 2014 and December 31, 2013, respectively.

 

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.

 

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.

 

Exchange traded or cleared derivative contracts are classified 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.

 

Readily marketable inventories — 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 Measurements — 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, interest rates, volumes and locations.  In addition, with the exception of the exchange cleared instruments, 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

 

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Table of Contents

 

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 June 30, 2014 and December 31, 2013, respectively.

 

Level 3 Readily marketable inventories and other — The significant unobservable inputs resulting in Level 3 classification for readily marketable inventories, physically settled forward purchase and sale contracts, and trade accounts receivable and payable, net, relate to certain management estimations regarding costs of transportation and other local market or location-related adjustments, primarily freight related adjustments 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.

 

The tables below present reconciliations for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2014 and 2013.  These instruments were valued using pricing models that management believes reflect the assumptions that would be used by a marketplace participant.

 

 

 

Level 3 Instruments

 

 

 

Fair Value Measurements

 

 

 

Three Months Ended June 30, 2014

 

 

 

 

 

Readily

 

Trade Accounts

 

 

 

 

 

Derivatives,

 

Marketable

 

Receivable/

 

 

 

(US$ in millions)

 

Net (1)

 

Inventories

 

Payable, Net(2)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance, April 1, 2014

 

$

54

 

$

1,075

 

$

(463

)

$

666

 

Total gains and losses (realized/unrealized) included in cost of goods sold

 

12

 

35

 

 

47

 

Purchases

 

 

461

 

 

461

 

Sales

 

 

(856

)

1

 

(855

)

Issuances

 

(1

)

 

 

(1

)

Settlements

 

(109

)

 

409

 

300

 

Transfers into Level 3

 

9

 

237

 

(1

)

245

 

Transfers out of Level 3

 

22

 

(79

)

(66

)

(123

)

Balance, June 30, 2014

 

$

(13

)

$

873

 

$

(120

)

$

740

 

 


(1)             Derivatives, net include Level 3 derivative assets and liabilities.

 

(2)             Trade Accounts Receivable and Trade Accounts Payable, net, include Level 3 inventory related receivables and payables.

 

 

 

Level 3 Instruments

 

 

 

Fair Value Measurements

 

 

 

Three Months Ended June 30, 2013

 

 

 

 

 

 

 

Trade

 

 

 

 

 

 

 

Readily

 

Accounts

 

 

 

 

 

Derivatives,

 

Marketable

 

Receivable/

 

 

 

(US$ in millions)

 

Net (1)

 

Inventories

 

Payable, Net (2)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance, April 1, 2013

 

$

(31

)

$

1,187

 

$

(449

)

$

707

 

Total gains and losses (realized/unrealized) included in cost of goods sold

 

123

 

3

 

(3

)

123

 

Purchases

 

 

261

 

 

261

 

Sales

 

 

(239

)

3

 

(236

)

Issuances

 

(1

)

 

(86

)

(87

)

Settlements

 

(109

)

 

19

 

(90

)

Transfers into Level 3

 

101

 

160

 

 

261

 

Transfers out of Level 3

 

6

 

(152

)

(5

)

(151

)

Balance, June 30, 2013

 

$

89

 

$

1,220

 

$

(521

)

$

788

 

 

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Table of Contents

 


(1)             Derivatives, net include Level 3 derivative assets and liabilities.

 

(2)          Trade Accounts Receivable and Trade Accounts Payable, net, include Level 3 inventory related receivables and payables.

 

 

 

Level 3 Instruments

 

 

 

Fair Value Measurements

 

 

 

Six Months Ended June 30, 2014

 

 

 

 

 

Readily

 

Trade Accounts

 

 

 

 

 

Derivatives,

 

Marketable

 

Receivable/

 

 

 

(US$ in millions)

 

Net (1)

 

Inventories

 

Payable, Net(2)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2014

 

$

20

 

$

298

 

$

(75

)

$

243

 

Total gains and losses (realized/unrealized) included in cost of goods sold

 

77

 

47

 

1

 

125

 

Purchases

 

13

 

1,550

 

(1

)

1,562

 

Sales

 

(4

)

(1,233

)

8

 

(1,229

)

Issuances

 

(1

)

 

(393

)

(394

)

Settlements

 

(141

)

 

408

 

267

 

Transfers into Level 3

 

(7

)

363

 

(9

)

347

 

Transfers out of Level 3

 

30

 

(152

)

(59

)

(181

)

Balance, June 30, 2014

 

$

(13

)

$

873

 

$

(120

)

$

740

 

 


(1)             Derivatives, net include Level 3 derivative assets and liabilities.

 

(2)             Trade Accounts Receivable and Trade Accounts Payable, net, include Level 3 inventory related receivables and payables.

 

 

 

Level 3 Instruments

 

 

 

Fair Value Measurements

 

 

 

Six Months Ended June 30, 2013

 

 

 

 

 

Readily

 

Trade Accounts

 

 

 

 

 

Derivatives,

 

Marketable

 

Receivable/

 

 

 

(US$ in millions)

 

Net (1)

 

Inventories

 

Payable, Net (2)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2013

 

$

66

 

$

436

 

$

(40

)

$

462

 

Total gains and losses (realized/unrealized) included in cost of goods sold

 

99

 

(82

)

68

 

85

 

Purchases

 

 

1,213

 

 

1,213

 

Sales

 

1

 

(505

)

3

 

(501

)

Issuances

 

(1

)

 

(508

)

(509

)

Settlements

 

(182

)

1

 

19

 

(162

)

Transfers into Level 3

 

99

 

309

 

(58

)

350

 

Transfers out of Level 3

 

7

 

(152

)

(5

)

(150

)

Balance, June 30, 2013

 

$

89

 

$

1,220

 

$

(521

)

$

788

 

 


(1)             Derivatives, net include Level 3 derivative assets and liabilities.

 

(2)             Trade Accounts Receivable and Trade Accounts Payable, net, include Level 3 inventory related receivables and payables.

 

The tables below summarizes changes in unrealized gains or (losses) recorded in earnings during the three and six months ended June 30, 2014 and 2013 for Level 3 assets and liabilities that were held at June 30, 2014 and 2013.

 

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Table of Contents

 

 

 

Level 3 Instruments

 

 

 

Fair Value Measurements

 

 

 

Three Months Ended

 

 

 

 

 

Readily

 

Trade Accounts