UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES AND EXCHANGE ACT OF 1934
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
(Exact name of registrant as specified in its charter)
CHEMICAL AND MINING COMPANY OF CHILE INC.
(Translation of registrant’s name into English)
El Trovador 4285, Santiago, Chile (562) 425-2000
(Address and phone number of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F | Form 40-F |
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes | No |
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82___________
On August 09, 2005, the Registrant filed with the Superintendencia de Valores y Seguros of Chile (the “SVS”) a report that included information as to the Registrant’s consolidated financial condition and results of operations for the six-month period ended on June 30, 2005. Attached is a summary of such consolidated financial information included in the summary and in the report filed with the Superintendencia de Valores y Seguros of Chile. This financial information was prepared on the basis of accounting principles generally accepted in Chile and does not include a reconciliation of such information to accounting principles generally accepted in the United States of America.
THIS REPORT IS AN ENGLISH TRANSLATION OF, AND A CHILEAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES PRESENTATION OF, A SIX MONTH PERIOD ENDED JUNE 30, 2005 REPORT FILED WITH THE SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) IN CHILE, AND UNLESS OTHERWISE INDICATED, FIGURES ARE IN US DOLLARS. |
Consolidated Financial Statements
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Santiago, Chile
June 30, 2005 and 2004
Consolidated Financial Statements
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
As of June 30, 2005 and 2004
and for the years ended June 30, 2005 and 2004
(A translation of the original in Spanish- see note 2 (a))
Contents
Consolidated Financial Statements | |
Consolidated Balance Sheets | 3 |
Consolidated Statements of Income | 5 |
Consolidated Statements of Cash Flows | 6 |
Notes to the Consolidated Financial Statements | 7 |
Ch$ | - | Chilean pesos |
ThCh $ | - | Thousands of Chilean pesos |
US$ | - | United States dollars |
ThUS$ | - | Thousands of United States dollars |
UF | - | The UF is an inflation-indexed, Chilean peso-denominated monetary unit. The UF rate is set daily in advance, based on the change in the Consumer Price Index of the previous month. |
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Balance Sheets
(A translation of the original in Spanish- see note 2 (a))
As of June 30, | |||||||||
Note | 2005 | 2004 | |||||||
ThUS$ | ThUS$ | ||||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash | 13,894 | 12,775 | |||||||
Time deposits | 18,733 | 28,079 | |||||||
Marketable securities | 35,288 | 31,425 | |||||||
Accounts receivable, net | 4 | 125,236 | 125,520 | ||||||
Other accounts receivable, net | 4 | 10,910 | 10,430 | ||||||
Accounts receivable from related companies | 5 | 71,126 | 47,426 | ||||||
Inventories, net | 6 | 321,193 | 254,742 | ||||||
Recoverable taxes | 32,400 | 13,539 | |||||||
Prepaid expenses | 5,105 | 4,300 | |||||||
Other current assets | 8,678 | 15,651 | |||||||
Total current assets | 642,563 | 543,887 | |||||||
Property, plant and equipment, net | 7 | 721,766 | 674,603 | ||||||
Other Assets | |||||||||
Investments in related companies | 8 | 19,286 | 58,394 | ||||||
Goodwill, net | 9 | 16,712 | 12,623 | ||||||
Negative goodwill, net | 9 | (169 | ) | (373 | ) | ||||
Intangible assets, net | 4,326 | 4,595 | |||||||
Long-term accounts receivable, net | 4 | 264 | 7,158 | ||||||
Long-term accounts receivable from related companies | 5 | — | 340 | ||||||
Other long-term assets | 10 | 51,003 | 53,771 | ||||||
Total Other Assets | 91,422 | 136,508 | |||||||
Total assets | 1,455,751 | 1,354,998 | |||||||
The accompanying notes form an integral part of these consolidated financial statements.
3
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Balance Sheets
(A translation of the original in Spanish- see note 2 (a))
As of June 30, | |||||||
Note | 2005 | 2004 | |||||
ThUS$ | ThUS$ | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities | |||||||
Short-term bank debt | 11 | — | 100,127 | ||||
Current portion of long-term debt | 11 | 4,865 | 4,577 | ||||
Dividends payable | 208 | 164 | |||||
Accounts payable | 61,828 | 50,251 | |||||
Other accounts payable | 1,662 | 1,550 | |||||
Notes and accounts payable to related companies | 5 | 1,629 | 10,208 | ||||
Accrued liabilities | 12 | 27,270 | 15,568 | ||||
Withholdings | 4,396 | 2,216 | |||||
Income taxes | 14,277 | 2,852 | |||||
Deferred income taxes | 13 | 2,743 | 6,093 | ||||
Deferred income | 1,206 | 1,279 | |||||
Other current liabilities | 590 | 172 | |||||
Total current liabilities | 120,674 | 195,057 | |||||
Long-term liabilities | |||||||
Long-term bank debt | 11 | 300,000 | 200,000 | ||||
Other accounts payable | 998 | 1,955 | |||||
Deferred income taxes | 13 | 36,605 | 31,444 | ||||
Staff severance indemnities | 14 | 12,122 | 9,883 | ||||
Total long-term liabilities | 349,725 | 243,282 | |||||
Minority interest | 15 | 31,656 | 27,397 | ||||
Shareholders' equity | |||||||
Paid-in capital | 16 | 477,386 | 477,386 | ||||
Other reserves | 16 | 149,577 | 135,891 | ||||
Retained earnings | 16 | 326,733 | 275,985 | ||||
Total shareholders' equity | 953,696 | 889,262 | |||||
Total liabilities and shareholders' equity | 1,455,751 | 1,354,998 | |||||
The accompanying notes form an integral part of these consolidated financial statements.
4
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Income
(A translation of the original in Spanish- see note 2 (a))
For the years ended | ||||||
June 30, | ||||||
Note | 2005 | 2004 | ||||
ThUS$ | ThUS$ | |||||
Operating results | ||||||
Sales | 436,224 | 373,130 | ||||
Cost of sales | (316,962 | ) | (292,751 | ) | ||
Gross margin | 119,262 | 80,379 | ||||
Selling and administrative expenses | (30,362 | ) | (26,721 | ) | ||
Operating income | 88,900 | 53,658 | ||||
Non-operating results | ||||||
Non-operating income | 18 | 8,521 | 7,921 | |||
Non-operating expenses | 18 | (25,329 | ) | (18,694 | ) | |
Non-operating loss | (16,808 | ) | (10,773 | ) | ||
Income before income taxes | 72,092 | 42,885 | ||||
Income tax expense | 13 | (16,628 | ) | (11,380 | ) | |
Income before minority interest | 55,464 | 31,505 | ||||
Minority interest | 15 | (1,070 | ) | (1,745 | ) | |
Net income before negative goodwill | 54,394 | 29,760 | ||||
Amortization of negative goodwill | 9 | 102 | 102 | |||
Net income for the year | 54,496 | 29,862 | ||||
The accompanying notes form an integral part of these consolidated financial statements.
5
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Cash Flows
(A translation of the original in Spanish- see note 2 (a))
For the years ended June 30 | ||||||
2005 | 2004 | |||||
ThUS$ | ThUS$ | |||||
Cash flows from operating activities | ||||||
Net income for the year | 54,496 | 29,862 | ||||
Charges (credits) to income not representing cash flows | ||||||
Depreciation expense | 7 | 32,989 | 29,967 | |||
Amortization of intangible assets | 244 | 119 | ||||
Write-offs and accruals | 13,003 | 17,955 | ||||
Gain on equity investments in related companies | (1,797 | ) | (4,292 | ) | ||
Loss on equity investments in related companies | 35 | 12 | ||||
Amortization of goodwill | 9 | 673 | 620 | |||
Amortization of negative goodwill | 9 | (102 | ) | (102 | ) | |
(Profit) loss on sales of assets | — | 12 | ||||
Other credits to income not representing cash flows | (5,115 | ) | (657 | ) | ||
Other charges to income not representing cash flows | 45,996 | 27,438 | ||||
Foreign exchange difference, net | 3,130 | 1,963 | ||||
Net changes in operating assets and liabilities (Increase) decrease: | ||||||
Trade accounts receivable | (14,359 | ) | (4,717 | ) | ||
Inventories | (53,269 | ) | (15,278 | ) | ||
Other assets | (7,925 | ) | (7,979 | ) | ||
Accounts payable | (2,779 | ) | (3,064 | ) | ||
Interest payable | 330 | 151 | ||||
Net income taxes payable | (15,213 | ) | 852 | |||
Other accounts payable | (8,865 | ) | (2,020 | ) | ||
VAT and taxes payable | (5,590 | ) | (2,007 | ) | ||
Minority interest | 15 | (1,070 | ) | 1,789 | ||
Net cash provided from operating activities | 34,812 | 70,624 | ||||
Cash flows from financing activities | ||||||
Proceeds from short term bank financing | 100,000 | 82,998 | ||||
Payment of dividends | (51,540 | ) | (25,275 | ) | ||
Repayment of bank financing | (6,000 | ) | (97,813 | ) | ||
Payment relation chip enter praise | — | — | ||||
Net cash used in financing activities | 42,460 | (40,090 | ) | |||
Cash flows from investing activities | ||||||
Sales of property, plant and equipment | — | 606 | ||||
Sales of investments | — | 203 | ||||
Other investing income | 21 | 740 | 121 | |||
Additions to property, plant and equipment | (74,345 | ) | (17,056 | ) | ||
Capitalized interest | (1,928 | ) | (748 | ) | ||
Purchase of permanent investments | (1,002 | ) | (902 | ) | ||
Other disbursements | (666 | ) | — | |||
Net cash used in investing activities | (77,201 | ) | (17,776 | ) | ||
Effect of inflation on cash and cash equivalents | 983 | 1 | ||||
Net change in cash and cash equivalents | 71 | 12,758 | ||||
Beginning balance of cash and cash equivalents | 66,753 | 69,273 | ||||
Ending balance of cash and cash equivalents | 67,807 | 82,032 | ||||
The accompanying notes form an integral part of these consolidated financial statements.
6
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 1 – Company Background
Sociedad Química y Minera de Chile S.A. (the “Company”) was registered with the Chilean Superintendency of Securities and Insurance (“SVS”) on March 18, 1983.
Note 2 – Summary of Significant Accounting Policies
a) | Basis for the preparation of the consolidated financial statements |
The accompanying consolidated financial statements have been prepared in U.S. dollars in accordance with accounting principles generally accepted in Chile (“Chilean GAAP”) and the regulations of the SVS. Certain accounting practices applied by the Company that conform with Chilean GAAP may not conform with generally accepted accounting principles in the United States (“US GAAP”). For the convenience of the reader, the consolidated financial statements and their accompanying notes have been translated from Spanish into English.
The consolidated financial statements include the accounts of Sociedad Química y Minera de Chile S.A. (the “Parent Company”) and subsidiaries (companies in which the Parent Company holds a controlling participation, generally equal to direct or indirect ownership of more than 50%). The Parent Company and its subsidiaries are referred to as the “Company”.
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
In accordance SVS Circular No. 1.697 and Technical Bulletins Nos. 64 and 72 of the Chilean Association of Accountants, the consolidated financial statements include the following subsidiaries:
7
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
a) | Basis for the preparation of the consolidated financial statements (continued) |
Direct or indirect ownership | ||||
2005 | 2004 | |||
% | % | |||
Foreign subsidiaries: | ||||
Nitrate Corp. of Chile Limited (United Kingdom) | 100.00 | 100.00 | ||
Soquimich SRL – Argentina | 100.00 | 100.00 | ||
Nitratos Naturais do Chile Ltda. (Brazil) | 100.00 | 100.00 | ||
SQM Europe NV (Belgium) | 100.00 | 100.00 | ||
SQM North America Corp. (USA) | 100.00 | 100.00 | ||
North American Trading Company (USA) | 100.00 | 100.00 | ||
SQM Peru S.A. | 100.00 | 100.00 | ||
SQM Corporation NV (Dutch Antilles) | 100.00 | 100.00 | ||
S.Q.I. Corporation NV (Dutch Antilles) | 100.00 | 100.00 | ||
Soquimich European Holding BV (Holland) | 100.00 | 100.00 | ||
PTM – SQM Ibérica S.A. (Spain) | 100.00 | 100.00 | ||
SQMC Holding Corporation LLP (USA) | 100.00 | 100.00 | ||
SQM Ecuador S.A. | 100.00 | 100.00 | ||
Cape Fear Bulk LLC (USA) | 51.00 | 51.00 | ||
SQM Investment Corporation NV (Dutch Antilles) | 100.00 | 100.00 | ||
SQM Brasil Ltda. | 100.00 | 100.00 | ||
Royal Seed Trading Corporation AVV (Aruba) | 100.00 | 100.00 | ||
SQM Japon Co. Ltda. | 100.00 | 100.00 | ||
SQM Oceanía PTY Limited (Australia) | 100.00 | 100.00 | ||
SQM France S.A. | 100.00 | 100.00 | ||
RS Agro-Chemical Trading AVV (Aruba) | 100.00 | 100.00 | ||
SQM Comercial de México S.A. de C.V. | 100.00 | 100.00 | ||
SQM Indonesia | 80.00 | 80.00 | ||
SQM Virginia LLC (USA) | 100.00 | 100.00 | ||
Agricolima S.A. de C.V. (Mexico) | 100.00 | 100.00 | ||
SQM Venezuela S.A. | 100.00 | 100.00 | ||
SQM Italia SRL (Italy) | 95.00 | 95.00 | ||
Comercial Caiman Internacional S.A. (Cayman Islands) | 100.00 | 100.00 | ||
Mineag SQM Africa Limited (South Africa) | 100.00 | 100.00 | ||
Fertilizantes Olmeca y SQM S.A. de C.V. (Mexico) | 100.00 | 100.00 | ||
Administración y Servicios Santiago S.A. de C.V. (Mexico) | 100.00 | 100.00 | ||
SQM Lithium Specialties LLC (USA) | 100.00 | 100.00 | ||
SQM Nitratos México S.A. de C.V. | 51.00 | 51.00 |
8
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
a) | Basis for the preparation of the consolidated financial statements (continued) |
Direct or indirect ownership | |||||
2005 | 2004 | ||||
% | % | ||||
Domestic subsidiaries: | |||||
Servicios Integrales de Tránsitos y Transferencias S.A. | 100.00 | 100.00 | |||
Soquimich Comercial S.A. | 60.64 | 60.64 | |||
Isapre Norte Grande Ltda. | 100.00 | 100.00 | |||
Almacenes y Depósitos Ltda. | 100.00 | 100.00 | |||
Ajay SQM Chile S.A. | 51.00 | 51.00 | |||
SQM Nitratos S.A. | 99.99 | 99.99 | |||
Proinsa Ltda. | 60.58 | 60.58 | |||
SQM Potasio S.A. | 100.00 | 100.00 | |||
SQMC International Limitada. | 60.64 | 60.64 | |||
SQM Salar S.A. | 100.00 | 100.00 | |||
Yumbes SCM | 100.00 | — | |||
Comercial Hydro S.A. | 60.84 | 60,84 |
All significant inter-company balances, transactions and unrealized gains and losses arising from transactions between these companies have been eliminated in consolidation.
9
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
b) | Period |
These consolidated financial statements have been prepared as of June 30, 2005 and 2004 and for the years then ended.
c) | Reporting currency and monetary correction |
The financial statements of the Company are prepared in U.S. dollars. As a significant portion of the Company’s operations are transacted in U.S. dollars, the U.S. dollar is considered the currency of the primary economic environment in which the Company operates.
The Parent Company and those subsidiaries which maintain their accounting records in U.S. dollars are not required, or permitted, to restate the historical dollar amounts for the effects of inflation.
The financial statements of domestic subsidiaries, which maintain their accounting records in Chilean pesos have been restated to reflect the effects of variations in the purchasing power of Chilean pesos during the year. For this purpose, and in accordance with Chilean regulations, non-monetary assets and liabilities, equity and income statement accounts have been restated in terms of year-end constant pesos based on the change in the consumer price index during the year (1.0% and 0.8% in 2005 and 2004, respectively). The resulting net charge or credit to income arises as a result of the gain or loss in purchasing power from the holding of non-U.S. dollar denominated monetary assets and liabilities exposed to the effects of inflation.
Prior period financial statements presented for comparative purposes have not been restated to reflect the change in the purchasing power of the Chilean pesos during the most recent year-end. In accordance with Chilean GAAP, amounts expressed in U.S. dollars, including amounts included in the consolidated financial statements as determined in prior years from the translation of financial statements of those Chilean subsidiaries which maintain their accounting records in Chilean pesos, are not adjusted for price-level changes.
10
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
d) | Foreign currency |
i) | Foreign currency transactions |
Monetary assets and liabilities denominated in Chilean pesos and other currencies have been translated to U.S. dollars at the observed exchange rates determined by the Central Bank of Chile in effect at each year-end of Ch$579.00 per US$1 at June 30, 2005 and Ch$636.30 per US$1 at June 30, 2004. |
ii) | Translation of non-U.S. dollar financial statements | |
In accordance with Chilean GAAP, the financial statements of foreign and domestic subsidiaries that do not maintain their accounting records in U.S. dollars are translated from the respective local currencies to U.S. dollars in accordance with Technical Bulletin No. 64 and No. 72 of the Chilean Association of Accountants (“BT 64-BT 72”) as follows: |
a) | For those subsidiaries and affiliates located in Chile which keep their accounting records in price-level adjusted Chilean pesos: | ||
– | Balance sheet accounts are translated to U.S. dollars at the year-end exchange rate without eliminating the effects of price-level restatement. |
– | Income statement accounts are translated to U.S. dollars at the average exchange rate each month. The monetary correction account on the income statement, which is generated by the inclusion of price-level restatement on the non-monetary assets and liabilities and shareholders’ equity, is translated to U.S. dollars at the average exchange rate for each month. |
– | Translation gains and losses, as well as the price-level restatement to the balance sheet mentioned above, are included as an adjustment in shareholders’ equity, in conformity with Circular No. 1.697 of the SVS. |
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SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
b) | The financial statements of those foreign subsidiaries that keep their accounting records in currencies other than the U.S. dollar have been translated at historical exchange rates as follows: |
– | Monetary assets and liabilities are translated at year-end exchange rates between the US dollar and the local currency. |
– | All non-monetary assets and liabilities and shareholders’ equity are translated at historical exchange rates between the US dollar and the local currency. |
– | Income and expense accounts are translated at average exchange rates between the US dollar and the local currency. |
– | Any exchange differences are included in the results of operations for the period. |
d) | Foreign currency (continued) |
Foreign exchange differences for the period ended June 30, 2005 and 2004 generated net earnings (loss) of ThUS$ (3,130) and ThUS$ (1,963) respectively, which have been charged to the consolidated statements of income in each respective period.
The monetary assets and liabilities of foreign subsidiaries were translated into US dollars at the exchange rates per US dollar prevailing at June 30, as follows:
2005 | 2004 | ||||||
Brazilian Real | 2.35 | 3.12 | |||||
New Peruvian Sol | 3.25 | 3.47 | |||||
Argentine Peso | 2.89 | 2.96 | |||||
Japanese Yen | 110.62 | 108.43 | |||||
Euro | 1.21 | 1.22 | |||||
Mexican Peso | 10.76 | 11.53 | |||||
Indonesian Rupee | 9,290.00 | 9,415.00 | |||||
Australian Dollar | 1.32 | 1.40 | |||||
Pound Sterling | 1.92 | 1.72 | |||||
South African Rand | 6.72 | 6.85 |
The Company uses the “observed exchange rate”, which is the rate determined daily by the Chilean Central Bank based on the average exchange rates at which bankers conduct authorized transactions. |
12
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
e) | Cash and cash equivalents |
The Company considers all highly liquid investments with a remaining maturity of less than 90 days as of the closing date of the financial statements to be cash equivalents.
f) | Time Deposits |
Time deposits are recorded at cost plus accrued interest.
g) | Marketable securities |
Marketable securities are recorded at the lower of cost plus accrued interest or market value.
h) | Allowance for doubtful accounts |
The Company records an allowance for doubtful accounts based on estimated probable losses.
i) | Inventories and materials |
Inventories of finished products and work in process are valued at average production cost. Raw materials and products acquired from third parties are stated at average cost and materials-in-transit are valued at cost. All such values do not exceed net realizable values.
Inventories of non-critical spare parts and supplies are classified as other current assets, except for those items which the Company estimates to have a turnover period of one year or more, which are classified as other long-term assets.
j) | Income taxes and deferred income taxes |
Prior to 2000, income taxes were charged to results in the same period in which the income and expenses were recorded and were calculated in accordance with the enacted tax laws in Chile and the other jurisdictions in which the Company operated.
13
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
j) | Income and deferred taxes (continued) |
Under Chilean law, the Parent Company and its subsidiaries are required to file separate tax declarations.
Beginning January 1, 2000, the Company records deferred income taxes in accordance with Technical Bulletin Nos. 60, 69, 71 and 73 of the Chilean Association of Accountants, and with Circular No. 1466 issued on January 27, 2000 by the SVS, recognizing the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities, using the liability method. The effect of the temporary differences at March 31, 1999 were recorded in complementary asset and liability accounts, which are recognized in the statement of operations over the estimated period in which they reverse.
k) | Property, plant and equipment |
Property, plant, equipment and property rights are recorded at acquisition cost, considering in general an average residual value of 5%, except for certain assets that were restated in accordance with a technical appraisal in 1989. Depreciation expense has been calculated using the straight-line method based on the estimated useful lives of the assets and is charged directly to expenses.
Property, plant and equipment acquired through financial lease agreements are accounted for at the present value of the minimum lease payments plus the purchase option based on the interest rate included in each contract. The Company does not legally own these assets and therefore cannot freely dispose of them.
In conformity with Technical Bulletin No. 31 and 33 of the Chilean Association of Accountants, the Company capitalizes interest cost associated with the financing of new assets during the construction period of such assets.
Maintenance costs of plant and equipment are charged to expenses as incurred.
The Company obtains property rights and mining concessions from the Chilean state. Other than minor filing fees, the property rights are usually obtained without initial cost, and once obtained, are retained by the Company as long as the annual fees are paid. Such fees, which are paid annually in June, are recorded as prepaid assets to be amortized over the following twelve months. Values attributable to these original mining concessions are recorded in property, plant and equipment.
14
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
l) | Investments in related companies |
Investments in related companies over which the Company has significant influence, are included in other assets and are recorded using the equity method of accounting, in accordance with SVS Circulars Nos. 368 and 1,697 and Technical Bulletins Nos. 64 and 72 issued by the Chilean Association of Accountants. Accordingly, the Company’s proportional share in the net income or loss of each investee is recognized in the non-operating income and expense classification in the consolidated statements of income on an accrual basis, after eliminating any unrealized profits from transactions with the related companies.
The translation adjustment to U.S. dollars of investments in domestic subsidiaries that maintain their accounting records and are controlled in Chilean pesos is recognized in other reserves within shareholders’ equity. Direct and indirect investments in foreign subsidiaries or affiliates are controlled in U.S. dollars.
Investments in which the Company has less than 20% participation and the capacity to exert significant influence or control over the investment, because SQM forms part of its Board of Directors, have been valued using the equity method.
m) | Goodwill and negative goodwill |
Goodwill is calculated as the excess of the purchase price of companies acquired over their net book value, whereas negative goodwill occurs when the net book value exceeds the purchase price of companies acquired. Goodwill and negative goodwill resulting from equity method investments are maintained in the same currency in which the investment was made and are amortized based on the estimated period of investment return, generally 20 and 10 years for goodwill and negative goodwill, respectively.
n) | Intangible assets |
Intangible assets are stated at cost plus acquisition expenses and are amortized over a period of up to a maximum of 40 years, in accordance with Technical Bulletin No. 55 of the Chilean Association of Accountants.
o) | Mining development cost |
Mining development costs are recorded in other long-term assets and are amortized utilizing the unit of production basis.
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SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 – Summary of Significant Accounting Policies (continued)
p) | Accrued employee severance |
The Company calculates the liability for staff severance indemnities based on the present value of the accrued benefits for the actual years of service worked assuming an average employee tenure of 24 years and a real annual discount rate of 9%.
q) | Vacations |
The cost of employee vacations is recognized in the financial statements on an accrual basis.
r) | Saleback operations |
These operations are registered in Other Current Assets at the amount of the purchase. Starting at the purchase date, the respective interest is recorded in accordance with SVS Circular 768.
s) | Dividends |
Dividends are generally declared in U.S. dollars but are paid in Chilean pesos.
t) | Derivative Contracts |
The Company maintains derivative contracts to hedge against movements in foreign currencies, which are recorded in conformity with Technical Bulletin No. 57 of the Chilean Association of Accountants. Such contracts are recorded at fair value with net losses recognized on the accrual basis and gains recognized when realized.
u) | Reclassifications |
For comparison purposes, certain reclassifications have been made to the 2003 financial statements.
v) | Revenue recognition |
Revenue is recognized on the date goods are physically delivered or when they are considered delivered according to the terms of the contract.
16
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
w) | Computer software |
Computational systems developed internally using the Company’s personnel and materials are charged to income during the year in which the expenses are incurred. In accordance with Circular No. 981 dated December 28, 1990 of the SVS, computer systems acquired by the Company are recorded at cost.
x) | Research and development expenses |
Research and development cost are charged to the income statement in the period in which they are incurred. Property, plant and equipment that are acquired for use in research and development activities and determined to provide additional benefits to the Company are recorded in property, plant and equipment.
Note 3 – Changes in Accounting Principles
a) | Changes in Accounting Principles |
Up to December 31, 2004, the financial statements of the subsidiary Fertilizantes Naturales S.A. were considered in consolidation given that the Company maintained the control of this subsidiary (due to its right to manage this subsidiary's financial and operating policies). Beginning on January 1, 2005, the Company no longer controls this subsidiary and therefore the aforementioned subsidiary has been excluded from consolidation in accordance with letters a) to d) of No.6 in Attachment 1 to Technical Bulletin No. 72 issued by the Chilean Association of Accountants.
There were no other changes in the accounting principles used by the Company during 2005 and 2004.
b) | Reformulation of 2004 Financial Statements |
For comparison purposes, the financial statements as of June 30, 2004 have been reformulated excluding and incorporate the following assets and liabilities of Fertilizantes Naturales S.A. and SQM Lithium Specialties LLP, respectively. Consequently, assets and liabilities excluded and included are detailed as follows:
Fertilizantes Naturales S.A. ThUS$ | SQM Lithium Specialties LLP ThUS$ | |||
Current Asset | (12,232 | ) | 304 | |
Property, Plant and Equipment | (94 | ) | 27,257 | |
Other Assets | (66 | ) | 7 | |
Current Liability | (11,901 | ) | 2,716 | |
Results (*) | 88 | — |
* 50% of the proportional income in Fertilizantes Naturales S.A. is presented under “Gain on equity investments in related companies”.
17
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a)
Note 4 – Short-term and long-term Accounts Receivable
a) | Short term and long-term accounts receivable and other accounts receivable as of June 30 are detailed as follows: |
Between 90 days | Total | |||||||||||
Up to 90 days | and 1 year | Short-term (net) | ||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||
Short-term | ||||||||||||
Trade accounts receivable | 92,629 | 107,856 | 15,349 | 3,247 | 107,978 | 111,103 | ||||||
Allowance for doubtful accounts | (9,080 | ) | (7,178 | ) | ||||||||
Notes receivable | 23,633 | 19,238 | 5,671 | 5,242 | 29,304 | 24,480 | ||||||
Allowance for doubtful accounts | (2,966 | ) | (2,885 | ) | ||||||||
Accounts receivable, net | 125,236 | 125,520 | ||||||||||
Other accounts receivable | 9,189 | 8,486 | 2,449 | 2,425 | 11,638 | 10,911 | ||||||
Allowance for doubtful accounts | (728 | ) | (481 | ) | ||||||||
Other accounts receivable, net | 10,910 | 10,430 | ||||||||||
Long-term receivables | 264 | 7,158 | ||||||||||
18
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 4 – Short-term and Long-term Accounts Receivable (continued)
Consolidated Short-term and Long-term Receivables – by Geographic Location
Chile | Europe, Africa and the Middle East | Asia and Oceania | USA, Mexico and Canada | Latin America and the Caribbean | Total | ||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | ||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||
Net short-term trade accounts receivable | |||||||||||||||||||||||||
Balance | 24,467 | 26,381 | 20,884 | 19,329 | 5,410 | 4,423 | 29,337 | 27,126 | 18,800 | 26,666 | 98,898 | 103,925 | |||||||||||||
% of total | 24.74 | % | 25.38 | % | 21.12 | % | 18.60 | % | 5.47 | % | 4.26 | % | 29.66 | % | 26.10 | % | 19.01 | % | 25.66 | % | 100.00 | % | 100.00 | % | |
Net short-term notes receivable | |||||||||||||||||||||||||
Balance | 17,176 | 16,635 | 3,913 | 1,813 | 609 | 187 | 883 | 477 | 3,757 | 2,483 | 26,338 | 21,595 | |||||||||||||
% of total | 65.21 | % | 77.03 | % | 14.86 | % | 8.40 | % | 2.31 | % | 0.87 | % | 3.36 | % | 2.20 | % | 14.26 | % | 11.50 | % | 100.00 | % | 100.00 | % | |
Net short-term other accounts receivable | |||||||||||||||||||||||||
Balance | 3,423 | 3,758 | 3,519 | 467 | 98 | 8 | 3,720 | 5,949 | 150 | 248 | 10,910 | 10,430 | |||||||||||||
% of total | 31.37 | % | 36.03 | % | 32.25 | % | 4.47 | % | 0.90 | % | 0.08 | % | 34.11 | % | 57.04 | % | 1.37 | % | 2.38 | % | 100.00 | % | 100.00 | % | |
Subtotal short-term accounts receivable, net | |||||||||||||||||||||||||
Balance | 45,066 | 46,774 | 28,316 | 21,609 | 6,117 | 4,618 | 33,940 | 33,552 | 22,707 | 29,397 | 136,146 | 135,950 | |||||||||||||
% of total | 33.10 | % | 34.41 | % | 20.80 | % | 15.89 | % | 4.49 | % | 3.40 | % | 24.93 | % | 24.68 | % | 16.68 | % | 21.62 | % | 100.00 | % | 100.00 | % | |
Long-term accounts receivable, net | |||||||||||||||||||||||||
Balance | 245 | 7,138 | 4 | 5 | — | — | — | — | 15 | 15 | 264 | 7,158 | |||||||||||||
% of total | 92.80 | % | 99.72 | % | 1.52 | % | 0.07 | % | — | — | — | — | 5.68 | % | 0.21 | % | 100.00 | % | 100.00 | % | |||||
Total short and long-term accounts receivable, net | |||||||||||||||||||||||||
Balance | 45,311 | 53,912 | 28,320 | 21,614 | 6,117 | 4,618 | 33,940 | 33,552 | 22,722 | 29,412 | 136,410 | 143,108 | |||||||||||||
% of total | 33.22 | % | 37.67 | % | 20.76 | % | 15.10 | % | 4.48 | % | 3.23 | % | 24.88 | % | 23.45 | % | 16.66 | % | 20.55 | % | 100.00 | % | 100.00 | % | |
19
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 5 – Balances and Transactions with Related Parties
Accounts receivable from and payable to related companies are stated in US dollars and accrue no interest.
Transactions are made under terms and conditions which are similar to those offered to unrelated third parties.
a) | Amounts included in balances with related parties as of June 30, 2005 and 2004 are as follows: |
Short-term | Long-term | ||||||||
2005 | 2004 | 2005 | 2004 | ||||||
Accounts receivable | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||
Ajay Europe S.A.R.L. | 2,663 | 2,409 | — | — | |||||
Nutrisi Holding N.V. | 1,470 | 1,584 | — | — | |||||
Generale de Nutrition Vegetale S.A. | 132 | 173 | — | — | |||||
Abu Dhabi Fertilizer Ind. WLL | 5,039 | 4,012 | — | — | |||||
NU3 N.V. | — | 39 | — | — | |||||
Doktor Tarsa –SQM Turkey | 9,712 | 3,854 | — | — | |||||
Yara North America | 9,674 | 7,339 | — | — | |||||
Yara Iberian S.A. | 3,154 | 1,956 | — | — | |||||
Fertilizantes Naturales S.A. | 6,927 | 6,481 | — | — | |||||
Empresas Melón S.A. | — | — | — | 340 | |||||
Sales de Magnesio S.A. | 42 | 66 | — | — | |||||
Ajay North America LLC | 2,670 | 1,623 | — | — | |||||
PCS Sales Inc | 25 | — | — | — | |||||
Yara Agri Norge | 7 | — | — | — | |||||
Yara International Asia Trade Pte Ltd | 1,738 | 1,080 | — | — | |||||
Yara France S.A. | 50 | — | — | — | |||||
Yara Poland SP | 445 | 903 | — | — | |||||
Yara Benelux B.V | 590 | 619 | — | — | |||||
Yara Hellas S.A. | 928 | 795 | — | — | |||||
Yara International Australia PTY. | 730 | 400 | — | — | |||||
Yara UK Ltd. | 443 | 398 | — | — | |||||
Yara GMBH & CO KG | 493 | 433 | — | — | |||||
Yara AB | 96 | 102 | — | — | |||||
Yara Colombia Ltda.. | 707 | 1,408 | — | — | |||||
Yara Fertilizers | 90 | — | — | — | |||||
Yara East Africa Limited | 626 | — | — | — | |||||
Yara International ASA | 308 | — | — | — | |||||
Yara Agri CZECH Republic SRO | 12 | 11 | — | — | |||||
Yara France BU Africa | 775 | 72 | — | — | |||||
Yara France BU Latin America | 2,760 | 2,560 | — | — | |||||
NU3 B.V. | 902 | 835 | — | — | |||||
Yara Argentina S.A. | 6,817 | 334 | — | — | |||||
Adubo Trevo S.A. | 530 | 16 | — | — | |||||
Yara Italia SPA | 75 | 63 | — | — | |||||
Yara Internacional Wholesale Spec. South Africa | 3,173 | — | — | — | |||||
Impronta SRL | 7,323 | 7,861 | — | — | |||||
Total | 71,126 | 47,426 | — | 340 | |||||
20
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 5 – Balances and Transactions with Related Parties (continued)
a) | Amounts included in balances with related parties as of June 30, 2005 and 2004, continued: |
Short-term | |||||
Accounts payable | 2005 | 2004 | |||
ThUS$ | ThUS$ | ||||
PCS Yumbes SCM | — | 8,323 | |||
NU3 N.V. | 848 | — | |||
Rotem Amfert Negev Limited | 16 | — | |||
Yara Internacional ASA | — | 103 | |||
Yara Fertilizantes Ltda. | 765 | 1,412 | |||
Yara France S.A. | — | 370 | |||
Total | 1,629 | 10,208 | |||
There were no outstanding long-term accounts payable with related parties as of June 30, 2005 and 2004 |
21
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 5 – Balances and Transactions with Related Parties (continued) | ||
b) | During 2005 and 2004, principal transactions with related parties were as follows: |
Amount of | Impact on income | ||||||||||||
Company | Relationship | Type of transaction | Transaction | (charge) credit | |||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||
NU3 N.V. (Belgium) | Indirect | Sales of products | 3,009 | 3,161 | 1,023 | 1,022 | |||||||
Doktor Tarsa | Indirect | Sales of products | 7,885 | 3,484 | 2,310 | 952 | |||||||
Abu Dhabi Fertilizer WLL | Indirect | Sales of products | 1,153 | 151 | 380 | 21 | |||||||
Impronta SRL | Indirect | Sales of products | 2,567 | — | 998 | — | |||||||
Ajay Europe S.A.R.L. | Indirect | Sales of products | 3,975 | 2,806 | 2,117 | 1,236 | |||||||
NU3 B.V. | Indirect | Sales of products | 3,433 | 2,931 | 372 | 1,387 | |||||||
Fenasa | Indirect | Sales of products | 10,858 | — | 3,878 | — | |||||||
Ajay North America LLC | Indirect | Sales of products | 6,549 | 3,859 | 3,544 | 1,719 | |||||||
Yara UK Ltd. | Shareholder | Sales of products | 907 | 696 | 114 | 255 | |||||||
Yara International Asia Trade Pte Ltd. | Shareholder | Sales of products | 4,747 | 2,789 | 1,267 | 656 | |||||||
Yara France BU Africa | Shareholder | Sales of products | 7,033 | — | 2,485 | — | |||||||
Yara Benelux B.V. | Shareholder | Sales of products | 4,759 | 3,900 | 1,101 | 967 | |||||||
Yara AB Sweden | Shareholder | Sales of products | 597 | 548 | 61 | 172 | |||||||
Yara International Australia Pty Ltd. | Shareholder | Sales of products | 1,397 | 701 | 237 | 179 | |||||||
Yara Iberian S.A. | Shareholder | Sales of products | 4,699 | 2,663 | 1,793 | 615 | |||||||
Yara Colombia Ltda. | Shareholder | Sales of products | 2,974 | 1,525 | 1,547 | 290 | |||||||
Yara Poland SP | Shareholder | Sales of products | 1,022 | 1,146 | 136 | 403 | |||||||
Yara GMBH & Co Kg | Shareholder | Sales of products | 1,075 | 900 | 180 | 306 | |||||||
Yara France | Shareholder | Sales of products | 5,344 | 5,261 | 1,562 | 1,342 | |||||||
Yara Hellas S.A. | Shareholder | Sales of products | 1,069 | 803 | 360 | 202 | |||||||
Yara Argentina S.A. | Shareholder | Sales of products | 7,797 | 5,607 | 2,413 | 1,381 | |||||||
Adubo Trevo S.A. | Shareholder | Sales of products | 2,006 | 5,303 | 864 | 1,502 | |||||||
PCS Yumbes SCM | Shareholder | Sales of products | — | 4,776 | — | 2,173 | �� | ||||||
Purchases of products | — | 15,114 | — | — | |||||||||
Yara Internacional ASA | Shareholder | Sales of products | 1,834 | — | 358 | — | |||||||
Yara North America | Shareholder | Sales of products | 25,436 | 2,305 | 8,685 | 552 | |||||||
Yara International Wholesale | Shareholder | Sales of products | 9,767 | — | 2,259 | — |
22
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 6 – Inventories
Net inventories are summarized as follows:
2005 | 2004 | |||
ThUS$ | ThUS$ | |||
Finished products | 202,959 | 148,329 | ||
Work in process | 102,168 | 94,240 | ||
Supplies | 16,066 | 12,173 | ||
Total | 321,193 | 254,742 | ||
23
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 7 – Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
2005 | 2004 | |||
ThUS$ | ThUS$ | |||
Land | ||||
Land | 20,003 | 20,003 | ||
Mining Concessions | 44,183 | 42,730 | ||
Total | 64,186 | 62,733 | ||
Buildings and infrastructure | ||||
Buildings | 163,583 | 161,417 | ||
Installations | 177,930 | 168,078 | ||
Construction-in-progress | 84,098 | 28,945 | ||
Other | 172,533 | 146,464 | ||
Total | 598,144 | 504,904 | ||
Machinery and Equipment | ||||
Machinery | 416,960 | 412,950 | ||
Equipment | 99,341 | 107,573 | ||
Project-in-progress | 29,805 | 11,464 | ||
Other | 18,626 | 18,239 | ||
Total | 564,732 | 550,226 | ||
Other fixed assets | ||||
Tools | 8,640 | 7,743 | ||
Furniture and office equipment | 14,333 | 14,205 | ||
Project-in-progress | 14,276 | 10,001 | ||
Other | 7,878 | 6,500 | ||
Total | 45,127 | 38,449 | ||
24
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 7 – Property, Plant and Equipment (continued)
2005 | 2004 | |||
ThUS$ | ThUS$ | |||
Amounts relating to technical revaluation of fixed assets | ||||
Land | 8,651 | 8,651 | ||
Buildings and infrastructure | 40,627 | 40,627 | ||
Machinery and equipment | 12,091 | 12,091 | ||
Other assets | 53 | 53 | ||
61,422 | 61,422 | |||
Total property, plant and equipment | 1,333,611 | 1,217,734 | ||
Less: Accumulated depreciation | ||||
Buildings and infrastructure | (235,392 | ) | (198,515 | ) |
Machinery and equipment | (312,092 | ) | (283,630 | ) |
Other fixed assets | (29,403 | ) | (27,288 | ) |
Technical appraisal | (34,958 | ) | (33,698 | ) |
Total accumulated depreciation | (611,845 | ) | (543,131 | ) |
Net property, plant and equipment | 721,766 | 674,603 | ||
2005 | 2004 | |||
ThUS$ | ThUS$ | |||
Depreciation for the year ended June 30: | ||||
Buildings and infrastructure | (14,548 | ) | (13,032 | ) |
Machinery and equipment | (17,000 | ) | (15,512 | ) |
Other fixed assets | (827 | ) | (778 | ) |
Technical revaluation | (614 | ) | (645 | ) |
Total depreciation | (32,989 | ) | (29,967 | ) |
The Company has capitalized assets obtained through leasing, which are included in other fixed assets and are as follows:
2005 | 2004 | |||
ThUS$ | ThUS$ | |||
Administrative office buildings | 2,086 | 2,086 | ||
Accumulated depreciation | (496 | ) | (443 | ) |
Total assets in leasing | 1,590 | 1,643 | ||
25
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
The administrative office buildings were acquired for 230 installments of UF 663.75 each and an annual, contractually established interest rate of 8.5%.
The vehicles were acquired for 36 installments of ThUS$ 98 each.
Note 8 – Investments in and Receivables from Related Parties
a) | Information on foreign investments |
There are no plans for the foreign investments to pay dividends, as it is the Company’s policy to reinvest those earnings.
The Company has not designated their foreign investments as net investment hedges.
b) | Empresas Melon S.A. |
The financial statements at 2004 of Empresas Melon S.A. were audited (limited audited) by Deloitte & Touche
c) | Transactions executed in 2005 |
• | Up to December 31, 2004, the financial statements of the subsidiary Fertilizantes Naturales S.A. were considered in consolidation given that the Company maintained the control of this subsidiary (due to its right to manage this subsidiary's financial and operating policies). Beginning on January 1, 2005, the Company no longer controls this subsidiary and therefore the aforementioned subsidiary has been excluded from consolidation in accordance with letters a) to d) of No.6 in Attachment 1 to Technical Bulletin No. 72 issued by the Chilean Association of Accountants. | |
• | On February 28, 2005, SQM Nitratos S.A. made a capital contribution of ThUS$484 to SQM Corporation N.V., with which it obtained participation of 99.9794% in this subsidiary . SQM S.A. did not concur to this contribution thereby reducing its participation to 0.0002% and ownership held by SQI Corporation N.V. by 0.0204%. In accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants, this investment was stated using the pooling-of-interests method | |
• | In March 2005, the subsidiary Soquimich European Holding B.V. made a capital increase of ThUS$ 411 in its related company Misr Specialty Fertilizers. In accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants and the regulations in Circular No. 1697 issued by the Chilean Superintendency of Securities and Insurance, the valuation was performed in consideration of the book value of the equity of Misr Specialty Fertilizers as of December 31, 2004, which does not significantly differ from its fair value determined at that date. | |
26
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
• | On March 10, 2005, the subsidiary PCS Yumbes SCM, changed its name to Yumbes SCM. | |
• | Assets, liabilities and equity of Yumbes SCM included in consolidation at their respective fair values as of June 30, 2005 are detailed as follows: |
ThUS$ | ||
Current assets | 8,300 | |
Property, plant & equipment | 17,237 | |
Other assets | 676 | |
Current liabilities | 8,074 | |
Long-term liabilities | 9 | |
Shareholders' equity | 18,130 | |
The method applied for the acquisition of Yumbes S.C.M. was the acquisition method.
The Company continues to review valuation at fair value and for this purpose it will use the term permitted to refine the adjustment established in paragraph 66 of Technical Bulletin No. 72 issued by the Chilean Association of Accountants.
• | In April 2005, SQM Nitratos S.A. made a capital contribution of ThUS$ 5,641 in SQM Corporation N.V., thereby obtaining ownership interest of 99.99835% in that subsidiary. SQM S.A. did not participate in this increase and reduced its ownership interest to 0.00002% and that of SQI Corporation N.V. by 0.00163%. In accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants, this investment was valued using the pooling of interest method. | |
• | In April 2005, the subsidiary SQM Corporation N.V. acquired 13% of the affiliate Abu Dhabi Fertilizers for a sum of ThUS$ 484. In accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants and Circular No. 1697 issued by the Chilean Superintendency of Securities and Insurance (SVS) the Company valued this investment in consideration of the book value of equity of Abu Dhabi Fertilizers as of December 31, 2004, which does not significantly differ from its fair value at that date. | |
• | In April 2005, the subsidiary SQM Corporation N.V. made a capital increase of ThUS$ 5,641 in its subsidiary Soquimich European Holding B.V., the owner of 100% of the shares of this company. This capital increase was valued in accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants and Circular No. 1697 issued by the Chilean Superintendency of Securities and Insurance (SVS). | |
• | On May 11, 2005, SQM Salar S.A. distributed dividends for a sum of ThUS$ 21,500 to its shareholders SQM Potasio S.A. (81.82%) and SQM S.A.(18.18%). | |
• | On May 11, 2005, SQM Potasio S.A. distributed dividends for a sum of ThUS$ 15,000 to its shareholders SQM S.A. (99.98%) and SQM Nitratos S.A.(0.02%). |
27
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
• | On May 11, 2005, SQM Nitratos S.A. distributed dividends for a sum of ThUS$ 16,900 to its shareholders SQM S.A. (99.99%) and Inversiones Pascuala S.A.(0.01%). | |
d) | Transactions executed in 2004 | |
• | In January 2004, the subsidiary Soquimich European Holding B.V. made a capital contribution of ThUS$ 475 on its affiliate Misr Specialty Fertilizers. In accordance with BT 72 of the Chilean Association of Accountants and SVS Circular 1697, the investment in Misr Specialty Fertilizers was valued using the book value of equity as of December 31, 2003, which does not differ significantly from its fair value determined as of the same date. | |
• | At the meeting of the shareholders of Empresas Melón S.A. held on February 25, 2004, the shareholders agreed its spin-off in 2 companies, Empresas Melón S.A. and Inmobiliaria San Patricio S.A. As a result, SQM S.A. maintained its ownership of 14.05% in Empresas Melón S.A. and a same ownership percentage was assigned to this entity in the new company. | |
• | In April 2004, the subsidiary Soquimich European Holding B.V. increased capital by ThUS$ 475 in its affiliate Misr Specialty Fertilizers. In accordance with BT 72 of the Chilean Association of Accountants and SVS Circular 1697, the investment in Misr Specialty Fertilizers was valued using the book value of equity as of March 31, 2004, which does not differ significantly from its fair value determined as of the same date. | |
• | On August 13, 2004, SQM S.A. transferred 653,748,837 shares of Inmobiliaria San Patricio to Blue Circle South American Holding S.A., which was the totality of the shares held by SQM S.A. (14.05% participation). This transfer was performed in accordance with the contract for acquiring shares of Empresas Melón during 1998. The effect on income is presented as part of the gain from the sale of Empresas Melón. | |
• | On August 18, 2004, 653,748,837 shares of Empresas Melón S.A. were sold in a public auction in the Santiago Stock Market, which was the totality of the shares held by SQM S.A. (14.05% participation), for ThUS$69,337, paid in cash on the same date. As a result of this sale, a gain before taxes of ThUS$8,179. | |
• | On August 20, 2004, SQM Potasio S.A. decreased its capital in RS Agro Chemical Trading A.V.V. by ThUS$ 25,000, leaving it with 99.98% participation and SQM S.A. with 0.02%. This operation did not produce goodwill or negative goodwill. | |
28
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
• | In October 2004, the subsidiary Soquimich European Holding B.V. increased its capital in Misr Specialty Fertilizers by ThUS$ 475. In accordance with BT 72 of the Chilean Association of Accountants and SVS Circular 1697, the investment in Misr Specialty Fertilizers was valued using the book value of equity as of September 30, 2004, which does not differ significantly from its fair value determined as of the same date. | |
• | On November 18, 2004, the subsidiary Soquimich European Holding B.V., contributed ThUS$268 to a joint venture with SQM Eastmed Turkey. | |
• | On November 25, 2004, SQM Potasio S.A. decreased its capital in RS Agro Chemical Trading A.V.V. by ThUS$ 30,000, leaving it with 1.667% participation and SQM S.A. with 98.333%. This operation did not produce goodwill or negative goodwill. | |
• | On December 20, 2004, SQM Nitratos S.A. contributed capital of ThUS$1,350 to SQM Brasil Ltda, thus obtaining participation of 98.77% in this subsidiary. SQM S.A. did not contribute to this increase, thereby reducing its participation to 1.23%. In accordance with Technical Bulletin No. 72 issued by the Chilean Association of Accountants, this investment was valued using the pooling of interests method. | |
• | On December 23, 2004, SQM S.A. and SQM Nitratos S.A. acquired 43,733,165 and 2,000 shares, respectively, of PSC Yumbes S.C.M. for ThUS$ 39,708 (equivalent to 99.9954% and 0.0046% participation, respectively), of which ThUS$34,511 was paid on the date of acquisition and the remaining ThUS$5,197 will be paid on January 27, 2005. | |
Investments in related companies made starting January 1, 2004, are valued in accordance with BT 72 of the Chilean Association of Accountants and SVS Circular 1697, which establish that investments in related companies made until December 31, 2003 will continue to be valued using the equity method and investments in related companies realized starting January 1, 2004 are valued as described in Note 3 “Changes in Accounting Principles”.
In accordance with the aforementioned standards, the Company began valuing the assets and liabilities of the individual financial statements of PCS Yumbes S.C.M. as of December 31, 2004, valuing them at their respective fair values. This valuation method created goodwill of ThUS$ 12,637, produced principally by the valuation of property, plant and equipment carried out using appraisals performed in accordance with SVS Circular 1698. The goodwill will be amortized over period of 20 years.
Therefore, the assets, liabilities and equity incorporated in the consolidation of the respective fair values as of December 31, 2004 are as follows:
Adjustment to | ||||||
Book value | Fair value | Adjusted value | ||||
ThUS$ | ThUS$ | ThUS$ | ||||
Current assets | 10,958 | — | 10,958 | |||
Property, plant and equipment | 25,708 | (7,954 | ) | 17,754 | ||
Other assets | 293 | — | 293 | |||
Current liabilities | 1,935 | — | 1,935 | |||
Equity | 35,024 | (7,954 | ) | 27,070 | ||
The purchase method was applied to the purchase of PCS Yumbes S.C.M.
The Company will continue to review the valuation of fair value to comply with timelines established in paragraph 66 of BT 72.
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