NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1.
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BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION, AND SIGNIFICANT ACCOUNTING POLICIES
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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 has a controlling financial interest. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X 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 U.S. 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, 2018 has been derived from Bunge’s audited consolidated financial statements at that date. Operating results for the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018, forming part of Bunge’s 2018 Annual Report on Form 10-K filed with the SEC on February 22, 2019.
Cash, Cash Equivalents, and Restricted Cash
Restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheet that sums to the total of the same such amounts shown in the condensed consolidated statement of cash flows.
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(US$ in millions)
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June 30, 2019
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June 30, 2018
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Cash and cash equivalents
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$
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238
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$
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221
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Restricted cash included in other current assets
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10
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4
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Total
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$
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248
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$
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225
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Statement of Cash Flows
On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). Subsequent to the Company's initial adoption of ASU 2016-15, additional interpretative guidance was released by the SEC in the third quarter of 2018 that clarified the method to be used for calculating the cash received from payments on the deferred purchase price of securitized receivables. This additional guidance indicated that an entity must evaluate daily transaction activity to calculate the value of cash received from payments on the deferred purchase price. The company has applied this guidance on a retrospective basis, effective with the Form 10-Q for the quarterly period ended September 30, 2018, which resulted in a reclassification of cash inflows from operating activities to cash inflows from investing activities. Therefore, the condensed consolidated statement of cash flows for the six months ended June 30, 2018 has been revised to reflect this change.
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2.
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ACCOUNTING PRONOUNCEMENTS
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The below outlines updates on certain previously disclosed ASUs.
New Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which introduces a new accounting model, referred to as the current expected credit losses ("CECL") model, for estimating credit losses on certain financial instruments and expands the disclosure requirements for estimating such credit losses. Under the new model, an entity is required to estimate the credit losses expected over the life of an exposure (or pool of exposures). The guidance also amends the current impairment model for debt securities classified as available-for-sale
securities. The new guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Bunge is evaluating the impact of this standard on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
On January 1, 2019 the Company adopted ASU 2016-02, Leases (Topic 842). Under the new provisions, all leases, except short-term leases, are recognized on the balance sheet as right-of-use assets and lease liabilities for the obligation to make payments under such leases. Bunge has elected the amended transition approach provided by ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities to apply the guidance as of the date of initial application by recognizing a cumulative-effect adjustment to opening retained earnings, with no retrospective adjustments. The Company also elected the package of practical expedients that permits the Company to not reassess under the new standard prior conclusions about lease identification, lease classification, and initial direct costs, as well as the practical expedient to not separate lease components from non-lease components in accounting for all classes of underlying assets. Upon adoption, the Company recorded $1,006 million of operating lease assets and $962 million of operating lease liabilities. Included in Operating lease assets at January 1, 2019 was $44 million of prepaid lease balances that were reclassified from Other non-current assets.
On January 1, 2019 the Company adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("Tax Act"). Consequently, the ASU eliminates the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. However, because this ASU only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The Company's stranded tax effects relate to unrecognized costs associated with certain pension plans for which the tax benefit was initially recorded to AOCI. Absent this ASU, the Company's policy is to release stranded tax effects upon the pension plans' termination. Upon the adoption of this ASU, the Company elected to reclassify the income tax effects of the Tax Act, resulting in a decrease to AOCI and an increase to retained earnings of $21 million.
3. GLOBAL COMPETITIVENESS PROGRAM
In July 2017, Bunge announced a comprehensive global competitiveness program to improve its cost position and deliver increased value to shareholders (the “Global Competitiveness Program” or "GCP"). When fully implemented, the GCP is expected to reduce the Company’s overhead costs by approximately $250 million annually by the end of 2019. The Company identified key elements of its strategy to meet this goal, including adopting a zero-based budgeting process that will target excess costs in specific budget categories and improving efficiency and scalability by simplifying organizational structures, streamlining processes and consolidating back office functions globally. In conjunction with the GCP, the Company has implemented other cost reduction and strategic initiatives to enhance the efficiency and performance of the Company’s business.
The table below sets forth, by segment, the types of costs recorded for the GCP.
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Six Months Ended June 30,
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2019
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2018
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(US$ in millions)
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Severance and Other Employee Benefit Costs
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Consulting and Professional Services
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Other Program Costs
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Total Program Costs
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Severance and Other Employee Benefit Costs
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Consulting and Professional Services
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Total Program Costs
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Agribusiness Segment
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$
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7
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$
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2
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$
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3
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$
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12
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$
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11
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$
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12
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$
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23
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Edible Oils Segment
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2
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1
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—
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3
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2
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3
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5
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Milling Segment
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1
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—
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—
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1
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—
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2
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2
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Sugar and Bioenergy Segment
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(1
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)
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—
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1
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—
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2
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3
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5
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Fertilizer Segment
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—
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—
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—
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—
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2
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1
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3
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Total
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$
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9
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$
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3
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$
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4
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$
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16
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$
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17
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$
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21
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$
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38
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In addition to the above charges, $1 million and $1 million of severance and other employee benefit costs were recorded related to other industrial productivity initiatives for the six months ended June 30, 2019 and 2018, respectively. For
the six months ended June 30, 2019 and 2018 costs recorded above, $1 million and $7 million, respectively, were recorded in Cost of goods sold and $16 million and $32 million, respectively, were recorded in Selling, general and administrative expenses.
Bunge's liability associated with the GCP and other associated initiatives is primarily comprised of accruals for severance and other employee benefit costs. The following table sets forth the activity affecting the liability for severance and other employee benefit costs related to the GCP and other associated initiatives, which is recorded in Other current liabilities on the condensed consolidated balance sheet.
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(US$ in millions)
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Severance and Other Employee Benefit Costs
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Balance at January 1, 2019
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$
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3
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Charges incurred
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9
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Cash payments
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(5
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Balance at June 30, 2019
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$
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7
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In addition to the cash charges described above, the Company's restructuring initiatives may include the sale or disposal of long-lived assets and rationalization of certain investments. As Bunge continues to review its opportunities, certain gains and charges may be recorded in earnings, including those related to the disposal of assets or investments. For the six months ended June 30, 2019 and 2018, nil and $15 million, respectively, of such charges have been recognized.
4. LEASES
Bunge routinely leases storage facilities, transportation equipment, land, and office facilities which are typically classified as operating leases. The accounting for some of Bunge's leases may require significant judgment when determining whether a contract is or contains a lease, the lease term, and the likelihood of renewal or termination options. Leases with an initial term of more than 12 months are recognized on the balance sheet as right-of-use assets (Operating lease assets) and lease liabilities for the obligation to make payments under such leases (Current operating lease obligations and Non-current operating lease obligations). As of the lease commencement date, the lease liability is initially measured as the present value of lease payments not yet paid. The lease asset is initially measured equal to the lease liability and adjusted for lease payments made at or before lease commencement (e.g., prepaid rent), lease incentives, and any initial direct costs. Over time, the lease liability is reduced for lease payments made and the lease asset is reduced through expense, classified as either Cost of goods sold or Selling, general and administrative expense depending upon the nature of the lease. Lease assets are subject to review for impairment in a manner consistent with Property, plant and equipment. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet, and lease expense for these short-term leases is recognized on a straight-line basis over the lease term.
The Company’s leases range in length of term, with an average remaining lease term of 6.2 years, but with certain land leases continuing for up to 94 years. Additionally, certain leases contain renewal options that can extend the lease term up to an additional 5 years. Renewal options are generally exercisable solely at the Company’s discretion. When a renewal option is reasonably certain to be exercised, such additional terms are considered when calculating the associated operating lease asset and liability. When determining the lease liability at commencement of the lease, the present value of lease payments is based on the Company’s incremental borrowing rate determined using a portfolio approach and the Company’s incremental cost of debt, adjusted to arrive to the rate in the applicable country and for the applicable term of the lease, as the rate implicit in the lease is generally not readily determinable. As of June 30, 2019, such weighted average discount rate was 6.8%.
Certain of the Company’s freight supply agreements for ocean freight vessels and rail cars, as well as land leases associated with agricultural partnership agreements for the production of sugarcane, may include rental payments that are variable in nature. Variable payments on time charter agreements for ocean freight vessels under freight supply agreements are dependent on then current market daily hire rates. Variable payments for certain rail cars can be based on volumes, and in some cases, benchmark interest rates. Payments under the Company's agricultural partnership agreements in Brazil are dependent on the quantity of sugarcane produced per hectare, the total recoverable sugar ("ATR") per ton of sugarcane produced, and the price for each kilogram of ATR as determined by Consecana, the state of São Paulo sugarcane, sugar and ethanol council. All such variable payments are not included in the calculation of the associated operating lease asset or liability subsequent to the inception date of the associated lease and are recorded as expense in the period in which the adjustment to the variable payment obligation is incurred. Certain of the Company’s lease agreements related to railcars and barges contain residual value
guarantees (see Note 16, Commitments and Contingencies). None of the Company’s lease agreements contain material restrictive covenants.
The components of lease expense were as follows:
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(US$ in millions)
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Three Months Ended
June 30, 2019
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Six Months Ended
June 30, 2019
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Operating lease cost
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$
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80
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$
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160
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Short-term lease cost
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149
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301
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Variable lease cost
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5
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8
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Sublease income
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(20
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)
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(50
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)
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Total lease cost
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$
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214
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$
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419
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Supplemental cash flow information related to leases was as follows:
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(US$ in millions)
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Six Months Ended
June 30, 2019
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Cash paid for amounts included in the measurement of lease liabilities:
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Operating cash flows associated with operating leases
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$
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160
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Supplemental non-cash information:
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Right-of-use assets obtained in exchange for lease obligations
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$
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150
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Maturities of lease liabilities for operating leases as of June 30, 2019, are as follows:
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(US$ in millions)
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Remaining in 2019
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$
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151
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2020
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253
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2021
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211
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2022
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166
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2023
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128
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Thereafter
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306
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Total lease payments (1)
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1,215
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Less imputed interest
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234
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Present value of lease liabilities
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$
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981
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(1) Minimum lease payments have not been reduced by minimum sublease income receipts of $37 million due in future periods under non-cancelable subleases. Non-cancelable subleases primarily relate to agreements with third parties for the use of portions of certain facilities with remaining sublease terms of approximately 5 years, as well as an agreement with an unconsolidated joint venture in which Bunge subleases rail cars with remaining sublease terms of approximately three to four years. Additionally, Bunge may enter into re-let agreements to sell the right to use ocean freight vessels under time charter agreements when excess capacity is available.
As of June 30, 2019, the Company has additional operating leases for freight supply agreements on ocean freight vessels, that have not yet commenced, of $185 million. These operating leases will commence in 2019 and 2020, with lease terms of up to eight years.
Prior year lease disclosures
The following pertains to previously disclosed information from Note 21, Commitments and contingencies and Note 26, Lease commitments, contained in Bunge's 2018 Annual Report on Form 10-K, which incorporates information about leases now in scope of ASC 842, Leases, disclosed above.
Operating lease for storage facilities, transportation equipment and office facilities—Future minimum lease payments by year and in the aggregate under non-cancelable operating leases with initial term of one year or more at December 31, 2018 are as follows:
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(US$ in millions)
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2019
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$
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134
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|
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2020
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107
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|
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2021
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84
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2022
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58
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|
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2023
|
48
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Thereafter
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126
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Total (1)
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$
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557
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(1) Minimum lease payments have not been reduced by minimum sublease income receipts of $43 million due in future periods under non-cancelable subleases.
Freight Supply Agreements—In the ordinary course of business, Bunge enters into time charter agreements for the use of ocean freight vessels for the purpose of transporting agricultural commodities. In addition, Bunge sells the right to use these ocean freight vessels when excess freight capacity is available. These agreements generally range from two months to approximately seven years. Future minimum payment obligations due under these agreements as of December 31, 2018 are as follows:
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(US$ in millions)
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2019
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$
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172
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|
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2020 and 2021
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176
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|
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2022 and 2023
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121
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2024 and thereafter
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37
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Total
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$
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506
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5. TRADE STRUCTURED FINANCE PROGRAM
Bunge engages in various trade structured finance activities to leverage the value of its global trade flows. For the six months ended June 30, 2019 and 2018, net returns from these activities were $9 million and $14 million, respectively, and were included as a reduction of Cost of goods sold in the accompanying condensed consolidated statements of income. These activities include programs under which Bunge generally obtains U.S. dollar-denominated letters of credit (“LCs”), each based on an underlying commodity trade flow, from financial institutions and time deposits denominated in either the local currency of the financial institutions' counterparties or in U.S. dollars, as well as foreign exchange forward contracts, and other programs in which trade related payables are set-off against receivables, all of which are subject to legally enforceable set-off agreements.
As of June 30, 2019 and December 31, 2018, time deposits and LCs of $3,923 million and $4,729 million, respectively, were presented net on the condensed consolidated balance sheets as the criteria of ASC 210-20, Offsetting, had been met. At June 30, 2019 and December 31, 2018, time deposits, including those presented on a net basis, carried weighted-average interest rates of 3.69% and 3.76%, respectively. During the six months ended June 30, 2019 and 2018, total net proceeds from issuances of LCs were $2,030 million and $3,243 million, respectively. These cash inflows are offset by the
related cash outflows resulting from placement of the time deposits and repayment of the LCs. All cash flows related to the programs are included in operating activities in the condensed consolidated statements of cash flows.
Inventories by segment are presented below. Readily marketable inventories (“RMI”) are agricultural commodity inventories, such as soybeans, soybean meal, soybean oil, corn, and wheat carried at fair value because of their commodity characteristics, widely available markets, and international pricing mechanisms. Bunge engages in trading and distribution, or merchandising activities, and part of RMI can be attributable to such activities and is not held for processing. All other inventories are carried at lower of cost or net realizable value.
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|
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|
|
|
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(US$ in millions)
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|
June 30,
2019
|
|
December 31,
2018
|
|
Agribusiness (1)
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$
|
4,508
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|
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$
|
4,551
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Edible Oil Products (2)
|
|
737
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|
|
742
|
|
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Milling Products
|
|
199
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|
|
220
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|
|
Sugar and Bioenergy (3)
|
|
315
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|
|
280
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|
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Fertilizer
|
|
116
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|
|
78
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Total
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$
|
5,875
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|
|
$
|
5,871
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|
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(1)
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Includes RMI of $4,275 million and $4,365 million at June 30, 2019 and December 31, 2018, respectively. Of these amounts, $3,327 million and $3,300 million can be attributable to merchandising activities at June 30, 2019 and December 31, 2018, respectively.
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(2)
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Includes RMI of $102 million and $88 million at June 30, 2019 and December 31, 2018, respectively.
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|
|
|
(3)
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Includes RMI of $46 million and $79 million at June 30, 2019 and December 31, 2018, respectively. Of these amounts, $42 million and $74 million can be attributable to merchandising activities at June 30, 2019 and December 31, 2018, respectively.
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Other current assets consist of the following:
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|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
June 30,
2019
|
|
December 31,
2018
|
|
Unrealized gains on derivative contracts, at fair value
|
|
$
|
936
|
|
|
$
|
1,071
|
|
|
Prepaid commodity purchase contracts (1)
|
|
372
|
|
|
253
|
|
|
Secured advances to suppliers, net (2)
|
|
263
|
|
|
257
|
|
|
Recoverable taxes, net
|
|
450
|
|
|
500
|
|
|
Margin deposits
|
|
227
|
|
|
348
|
|
|
Marketable securities, at fair value, and other short-term investments
|
|
514
|
|
|
162
|
|
|
Deferred purchase price receivable, at fair value (3)
|
|
102
|
|
|
128
|
|
|
Income taxes receivable
|
|
37
|
|
|
102
|
|
|
Prepaid expenses
|
|
147
|
|
|
165
|
|
|
Other
|
|
235
|
|
|
185
|
|
|
Total
|
|
$
|
3,283
|
|
|
$
|
3,171
|
|
|
|
|
|
(1)
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Prepaid commodity purchase contracts represent advance payments against contracts for future delivery of specified quantities of agricultural commodities.
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|
|
|
|
(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 operational 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 nil at June 30, 2019 and $1 million at December 31, 2018.
|
Interest earned on secured advances to suppliers of $6 million and $8 million for the three months ended June 30, 2019 and 2018, respectively, and $13 million and $18 million for the six months ended June 30, 2019 and 2018, respectively, is included in net sales in the condensed consolidated statements of income.
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|
|
|
(3)
|
Deferred purchase price receivable represents additional credit support for the investment conduits in Bunge’s trade receivables securitization program (see Note 14).
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Marketable Securities and Other Short-Term Investments - Bunge invests in foreign government securities, corporate debt securities, deposits, equity securities, and other securities. The following is a summary of amounts recorded in the condensed consolidated balance sheets for marketable securities and other short-term investments.
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|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
June 30,
2019
|
|
December 31,
2018
|
|
Foreign government securities
|
|
$
|
145
|
|
|
$
|
55
|
|
|
Corporate debt securities
|
|
120
|
|
|
91
|
|
|
Certificates of deposit/time deposits
|
|
91
|
|
|
15
|
|
|
Equity securities
|
|
157
|
|
|
—
|
|
|
Other
|
|
1
|
|
|
1
|
|
|
Total
|
|
$
|
514
|
|
|
$
|
162
|
|
As of June 30, 2019 and December 31, 2018, $422 million and $144 million, respectively, of marketable securities and other short-term investments are recorded at fair value. All other investments are recorded at cost, and due to the short-term nature of these investments, their carrying value approximates fair value. For the six months ended June 30, 2019, unrealized gains of $159 million have been recorded for investments still held at June 30, 2019.
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|
|
8.
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OTHER NON-CURRENT ASSETS
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Other non-current assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
June 30,
2019
|
|
December 31,
2018
|
|
Recoverable taxes, net (1)
|
|
$
|
82
|
|
|
$
|
112
|
|
|
Judicial deposits (1)
|
|
121
|
|
|
115
|
|
|
Other long-term receivables
|
|
6
|
|
|
8
|
|
|
Income taxes receivable (1)
|
|
227
|
|
|
221
|
|
|
Long-term investments
|
|
76
|
|
|
91
|
|
|
Affiliate loans receivable
|
|
30
|
|
|
29
|
|
|
Long-term receivables from farmers in Brazil, net (1)
|
|
77
|
|
|
93
|
|
|
Other
|
|
131
|
|
|
154
|
|
|
Total
|
|
$
|
750
|
|
|
$
|
823
|
|
|
|
|
|
(1)
|
These non-current assets arise primarily from Bunge’s Brazilian operations and their realization could take several years.
|
Recoverable taxes, net - Recoverable taxes are reported net of allowances of $29 million and $27 million at June 30, 2019 and December 31, 2018, 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, which is the benchmark rate of the Brazilian central bank.
Income taxes receivable - Income taxes receivable includes overpayments of current income taxes plus accrued interest. These income tax prepayments are expected to be primarily utilized for settlement of future income tax obligations. Income taxes receivable in Brazil bear interest at the SELIC rate.
Affiliate loans receivable - Affiliate loans receivable are primarily interest-bearing receivables from unconsolidated affiliates with a remaining 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. Certain of such long-term receivables from farmers are originally recorded in other current assets as prepaid commodity contracts or secured advances to suppliers (see Note 7) and reclassified to other non-current assets when collection issues with farmers arise and amounts become past due and resolution of matters is expected to take more than one year.
The average recorded investment in long-term receivables from farmers in Brazil for the six months ended June 30, 2019 and the year ended December 31, 2018 was $203 million and $215 million, respectively. The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil and the related allowance amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
(US$ in millions)
|
|
Recorded
Investment
|
|
Allowance
|
|
Recorded
Investment
|
|
Allowance
|
|
For which an allowance has been provided:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal collection process (1)
|
|
$
|
106
|
|
|
$
|
90
|
|
|
$
|
105
|
|
|
$
|
89
|
|
|
Renegotiated amounts (2)
|
|
13
|
|
|
13
|
|
|
17
|
|
|
17
|
|
|
For which no allowance has been provided:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal collection process (1)
|
|
56
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
Renegotiated amounts (2)
|
|
5
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
Other long-term receivables
|
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
Total
|
|
$
|
180
|
|
|
$
|
103
|
|
|
$
|
199
|
|
|
$
|
106
|
|
|
|
|
|
(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 table below summarizes the activity in the allowance for doubtful accounts related to long-term receivables from farmers in Brazil.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
(US$ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Beginning balance
|
|
$
|
105
|
|
|
$
|
116
|
|
|
$
|
106
|
|
|
$
|
113
|
|
|
Bad debt provisions
|
|
—
|
|
|
—
|
|
|
1
|
|
|
4
|
|
|
Recoveries
|
|
(4
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
(3
|
)
|
|
Write-offs
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
Foreign exchange translation
|
|
2
|
|
|
(15
|
)
|
|
1
|
|
|
(15
|
)
|
|
Ending balance
|
|
$
|
103
|
|
|
$
|
98
|
|
|
$
|
103
|
|
|
$
|
98
|
|
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 non-
recurring 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, including the realizability of deferred tax assets. Volatility in earnings within a taxing jurisdiction could result in a determination that additional valuation allowance adjustments may be warranted.
For the six months ended June 30, 2019 and 2018, income tax expense related to continuing operations was $98 million and $21 million, respectively. The effective tax rates for the six months ended June 30, 2019 and 2018 were impacted by an unfavorable earnings mix associated with pretax losses in certain jurisdictions.
As a global enterprise, Bunge files income tax returns that are subject to periodic examination and challenge by federal, state and foreign tax authorities. In many jurisdictions, income tax examinations, including settlement negotiations or litigation, may take several years to finalize. Bunge is currently under examination or litigation in various locations throughout the world. While it is difficult to predict the outcome or timing of resolution of any particular matter, management believes that the condensed consolidated financial statements reflect the largest amount of tax benefit that is more likely than not to be realized.
|
|
|
|
10.
|
OTHER CURRENT LIABILITIES
|
Other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
June 30,
2019
|
|
December 31,
2018
|
|
Unrealized losses on derivative contracts, at fair value
|
|
$
|
838
|
|
|
$
|
1,192
|
|
|
Accrued liabilities
|
|
535
|
|
|
618
|
|
|
Advances on sales
|
|
237
|
|
|
405
|
|
|
Other
|
|
254
|
|
|
287
|
|
|
Total
|
|
$
|
1,864
|
|
|
$
|
2,502
|
|
|
|
|
|
11.
|
FAIR VALUE MEASUREMENTS
|
The fair value standard describes three levels within its hierarchy that may be used to measure fair value.
|
|
|
|
|
|
|
Level
|
Description
|
Financial Instrument (Assets / Liabilities)
|
|
Level 1
|
Quoted price (unadjusted) in active markets for identical assets or liabilities.
|
Exchange traded derivative contracts.
Marketable securities in active markets.
|
|
Level 2
|
Observable inputs, including adjusted Level 1 quotes, 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.
|
Exchange traded derivative contracts (less liquid market).
Readily marketable inventories.
Over-the-counter (‘‘OTC’’) commodity purchase and sale contracts.
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.
Marketable securities in less active markets.
|
|
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.
|
Assets and liabilities whose value is determined using proprietary pricing models, discounted cash flow methodologies or similar techniques.
Assets and liabilities for which the determination of fair value requires significant management judgment or estimation.
|
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurement determines the placement of the entire fair value measurement in the hierarchy. Bunge’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels.
Bunge’s policy regarding the timing of transfers between levels, including both transfers into and transfers out of Level 3, is to measure and record the transfers at the end of the reporting period.
For a further definition of fair value and the associated fair value levels, refer to Note 15, Financial Instruments and Fair Value Measurements, included in Bunge's 2018 Annual Report on Form 10-K.
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, 2019
|
|
December 31, 2018
|
|
(US$ in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Readily marketable inventories (Note 6)
|
|
$
|
—
|
|
|
$
|
3,651
|
|
|
$
|
772
|
|
|
$
|
4,423
|
|
|
$
|
—
|
|
|
$
|
4,286
|
|
|
$
|
246
|
|
|
$
|
4,532
|
|
|
Trade accounts receivable (1)
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Unrealized gain on derivative contracts (2):
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
|
|
—
|
|
|
48
|
|
|
—
|
|
|
48
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
Foreign exchange
|
|
—
|
|
|
377
|
|
|
—
|
|
|
377
|
|
|
—
|
|
|
473
|
|
|
—
|
|
|
473
|
|
|
Commodities
|
|
35
|
|
|
415
|
|
|
13
|
|
|
463
|
|
|
128
|
|
|
407
|
|
|
18
|
|
|
553
|
|
|
Freight
|
|
14
|
|
|
—
|
|
|
2
|
|
|
16
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
12
|
|
|
Energy
|
|
72
|
|
|
—
|
|
|
—
|
|
|
72
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
Credit
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Deferred purchase price receivable (Note 14)
|
|
—
|
|
|
102
|
|
|
—
|
|
|
102
|
|
|
—
|
|
|
128
|
|
|
—
|
|
|
128
|
|
|
Other (3)
|
|
171
|
|
|
274
|
|
|
—
|
|
|
445
|
|
|
67
|
|
|
98
|
|
|
—
|
|
|
165
|
|
|
Total assets
|
|
$
|
292
|
|
|
$
|
4,869
|
|
|
$
|
787
|
|
|
$
|
5,948
|
|
|
$
|
231
|
|
|
$
|
5,398
|
|
|
$
|
270
|
|
|
$
|
5,899
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable (1)
|
|
$
|
—
|
|
|
$
|
386
|
|
|
$
|
335
|
|
|
$
|
721
|
|
|
$
|
—
|
|
|
$
|
394
|
|
|
$
|
47
|
|
|
$
|
441
|
|
|
Unrealized loss on derivative contracts (4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
|
|
—
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
42
|
|
|
—
|
|
|
42
|
|
|
Foreign exchange
|
|
—
|
|
|
272
|
|
|
—
|
|
|
272
|
|
|
—
|
|
|
499
|
|
|
—
|
|
|
499
|
|
|
Commodities
|
|
54
|
|
|
375
|
|
|
23
|
|
|
452
|
|
|
152
|
|
|
446
|
|
|
23
|
|
|
621
|
|
|
Freight
|
|
20
|
|
|
—
|
|
|
4
|
|
|
24
|
|
|
13
|
|
|
—
|
|
|
6
|
|
|
19
|
|
|
Energy
|
|
68
|
|
|
—
|
|
|
2
|
|
|
70
|
|
|
43
|
|
|
—
|
|
|
1
|
|
|
44
|
|
|
Credit
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Equity
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total liabilities
|
|
$
|
143
|
|
|
$
|
1,055
|
|
|
$
|
364
|
|
|
$
|
1,562
|
|
|
$
|
208
|
|
|
$
|
1,381
|
|
|
$
|
77
|
|
|
$
|
1,666
|
|
|
|
|
|
(1)
|
These receivables and payables are hybrid financial instruments for which Bunge has elected the fair value option.
|
|
|
|
|
(2)
|
Unrealized gains on derivative contracts are generally included in other current assets. There were $41 million and $3 million included in other non-current assets at June 30, 2019 and December 31, 2018, respectively.
|
|
|
|
|
(3)
|
Other includes the fair values of marketable securities, cash and cash equivalents and investments in other current assets and other non-current assets.
|
|
|
|
|
(4)
|
Unrealized losses on derivative contracts are generally included in other current liabilities. There are $3 million and $33 million included in other non-current liabilities at June 30, 2019 and December 31, 2018, respectively.
|
Readily marketable inventories—RMI 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 RMI at fair value in the consolidated balance sheets and consolidated statements of income could differ. Additionally, if market conditions change subsequent to the reporting date, amounts reported in future periods as unrealized gains and losses on derivative contracts and RMI at fair value in the consolidated balance sheets and consolidated statements of income could differ.
Derivatives—The majority of exchange traded futures and options contracts and exchange cleared contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. The majority of the Bunge’s exchange-traded agricultural commodity futures are cash-settled on a daily basis and, therefore, are not included in these tables. 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 generally fair valued 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.
Level 3 Measurements
The following relates to Level 3 measurements. An instrument may transfer into or out of Level 3 due to inputs becoming either observable or unobservable.
Level 3 Readily marketable inventories and other—The significant unobservable inputs resulting in Level 3 classification for RMI, physically settled forward purchase and sale contracts, and trade accounts payable, 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 to value freight, premiums and discounts in 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.
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.
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 three and six months ended June 30, 2019 and 2018. These instruments were valued using pricing models that management believes reflect the assumptions that would be used by a marketplace
participant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
(US$ in millions)
|
|
Readily
Marketable
Inventories
|
|
Derivatives,
Net
|
|
Trade
Accounts
Payable
|
|
Total
|
|
Balance, April 1, 2019
|
|
$
|
633
|
|
|
$
|
(2
|
)
|
|
$
|
(397
|
)
|
|
$
|
234
|
|
|
Total gains and losses (realized/unrealized) included in cost of goods sold (1)
|
|
145
|
|
|
(9
|
)
|
|
7
|
|
|
143
|
|
|
Purchases
|
|
626
|
|
|
—
|
|
|
(71
|
)
|
|
555
|
|
|
Sales
|
|
(764
|
)
|
|
—
|
|
|
—
|
|
|
(764
|
)
|
|
Issuances
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
Settlements
|
|
—
|
|
|
—
|
|
|
113
|
|
|
113
|
|
|
Transfers into Level 3
|
|
189
|
|
|
(2
|
)
|
|
(2
|
)
|
|
185
|
|
|
Transfers out of Level 3
|
|
(57
|
)
|
|
—
|
|
|
15
|
|
|
(42
|
)
|
|
Balance, June 30, 2019
|
|
$
|
772
|
|
|
$
|
(14
|
)
|
|
$
|
(335
|
)
|
|
$
|
423
|
|
|
|
|
|
1)
|
Readily marketable inventories, derivatives, net and trade accounts payable, include gains/(losses) of $63 million, $(11) million and $0 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at June 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
(US$ in millions)
|
|
Readily
Marketable
Inventories
|
|
Derivatives,
Net
|
|
Trade
Accounts Payable
|
|
Total
|
|
Balance, April 1, 2018
|
|
$
|
860
|
|
|
$
|
5
|
|
|
$
|
(317
|
)
|
|
$
|
548
|
|
|
Total gains and losses (realized/unrealized) included in cost of goods sold (1)
|
|
46
|
|
|
14
|
|
|
3
|
|
|
63
|
|
|
Purchases
|
|
532
|
|
|
1
|
|
|
(3
|
)
|
|
530
|
|
|
Sales
|
|
(267
|
)
|
|
—
|
|
|
—
|
|
|
(267
|
)
|
|
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Settlements
|
|
—
|
|
|
(1
|
)
|
|
110
|
|
|
109
|
|
|
Transfers into Level 3
|
|
151
|
|
|
(2
|
)
|
|
(76
|
)
|
|
73
|
|
|
Transfers out of Level 3
|
|
(97
|
)
|
|
(1
|
)
|
|
18
|
|
|
(80
|
)
|
|
Balance, June 30, 2018
|
|
$
|
1,225
|
|
|
$
|
16
|
|
|
$
|
(265
|
)
|
|
$
|
976
|
|
1) Readily marketable inventories, derivatives, net and trade accounts payable, includes gains/(losses) of $(16) million, $13 million and $0 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at June 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
(US$ in millions)
|
|
Readily
Marketable
Inventories
|
|
Derivatives,
Net
|
|
Trade
Accounts
Payable
|
|
Total
|
|
Balance, January 1, 2019
|
|
$
|
246
|
|
|
$
|
(6
|
)
|
|
$
|
(47
|
)
|
|
$
|
193
|
|
|
Total gains and losses (realized/unrealized) included in cost of goods sold (1)
|
|
183
|
|
|
(7
|
)
|
|
12
|
|
|
188
|
|
|
Purchases
|
|
1,325
|
|
|
—
|
|
|
(432
|
)
|
|
893
|
|
|
Sales
|
|
(1,334
|
)
|
|
—
|
|
|
—
|
|
|
(1,334
|
)
|
|
Issuances
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
Settlements
|
|
—
|
|
|
—
|
|
|
145
|
|
|
145
|
|
|
Transfers into Level 3
|
|
465
|
|
|
—
|
|
|
(28
|
)
|
|
437
|
|
|
Transfers out of Level 3
|
|
(113
|
)
|
|
—
|
|
|
15
|
|
|
(98
|
)
|
|
Balance, June 30, 2019
|
|
$
|
772
|
|
|
$
|
(14
|
)
|
|
$
|
(335
|
)
|
|
$
|
423
|
|
|
|
|
|
1)
|
Readily marketable inventories, derivatives, net and trade accounts payable, include gains/(losses) of $99 million, $(6) million and $0 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at June 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
(US$ in millions)
|
|
Readily
Marketable
Inventories
|
|
Derivatives,
Net
|
|
Trade
Accounts
Payable
|
|
Total
|
|
Balance, January 1, 2018
|
|
$
|
365
|
|
|
$
|
2
|
|
|
$
|
(116
|
)
|
|
$
|
251
|
|
|
Total gains and losses (realized/unrealized) included in cost of goods sold (1)
|
|
109
|
|
|
11
|
|
|
13
|
|
|
133
|
|
|
Purchases
|
|
1,145
|
|
|
10
|
|
|
(251
|
)
|
|
904
|
|
|
Sales
|
|
(546
|
)
|
|
—
|
|
|
—
|
|
|
(546
|
)
|
|
Issuances
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
|
Settlements
|
|
—
|
|
|
7
|
|
|
150
|
|
|
157
|
|
|
Transfers into Level 3
|
|
275
|
|
|
(4
|
)
|
|
(79
|
)
|
|
192
|
|
|
Transfers out of Level 3
|
|
(123
|
)
|
|
(1
|
)
|
|
18
|
|
|
(106
|
)
|
|
Balance, June 30, 2018
|
|
$
|
1,225
|
|
|
$
|
16
|
|
|
$
|
(265
|
)
|
|
$
|
976
|
|
|
|
|
|
1)
|
Readily marketable inventories, derivatives, net and trade accounts payable, include gains/(losses) of $(19) million, $1 million and $0 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at June 30, 2018.
|
|
|
|
|
12.
|
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
|
Bunge uses derivative instruments to manage several market risks, such as interest rate, foreign currency rate, and commodity risk. Some of those hedges Bunge enters into qualify for hedge accounting in the financial statements (Hedge Accounting Derivatives) and some, while intended as economic hedges, do not qualify or are not designated for hedge accounting (Economic Hedge Derivatives). As these derivatives impact the financial statements in different ways, they are discussed separately below.
Hedge Accounting Derivatives - Bunge uses derivatives in qualifying hedge accounting relationships to manage certain of its interest rate, foreign currency, and commodity risks. In executing these hedge strategies, Bunge primarily relies on the shortcut and critical terms match methods in designing its hedge accounting strategy, which results in little to no net earnings impact for these hedge relationships. Bunge monitors these relationships on a quarterly basis and will perform a quantitative analysis to validate the assertion that the hedges are highly effective if there are changes to the hedged item or hedging derivative.
Fair value hedges - These derivatives are used to hedge the effect of interest rate and currency exchange rate changes on certain long-term debt. Under fair value hedge accounting, the derivative is measured at fair value and the carrying value of hedged debt is adjusted for the change in value related to the exposure being hedged, with both adjustments offset to earnings. In other words, the earnings effect of an increase in the fair value of the derivative will be substantially offset by the earnings effect of the increase in the carrying value of the hedged debt. The net impact of fair value hedge accounting for interest rate swaps is recognized in Interest expense. For cross currency swaps the changes in currency risk on the derivative are recognized in Foreign exchange gains (losses), and the changes in interest rate risk are recognized in Interest expense. Changes in basis risk are held in Accumulated other comprehensive income (loss) until realized through the coupon.
Cash flow hedges of currency risk - Bunge manages currency risk on certain forecasted purchases, sales, and selling, general and administrative expenses with currency forwards. The change in the value of the forward is classified in Accumulated other comprehensive income (loss) until the transaction affects earnings, at which time the change in value of the currency forward is reclassified to Net sales, Cost of goods sold or Selling, general and administrative expenses. These hedges mature at various times through November 2020. Of the amount currently in Accumulated other comprehensive income (loss), $2 million is expected to be reclassified to earnings in the next twelve months.
Cash flow hedges of commodity risk - Bunge manages commodity price risk on certain forecasted purchases and sales with commodity futures. The change in the value of the future is classified in Accumulated other comprehensive income (loss) until the transaction affects earnings, at which time the change in value of the commodity future is reclassified to Net sales or Cost of goods sold. These hedges mature at various times through October 2020. Of the amount currently in Accumulated other comprehensive income (loss), $3 million is expected to be reclassified to earnings in the next twelve months.
Net investment hedges - Bunge hedges the currency risk of certain of its foreign subsidiaries with currency forwards and intercompany loans for which the currency risk is remeasured through Accumulated other comprehensive income (loss). For currency forwards, the forward method is used. The change in the value of the forward is classified in Accumulated other comprehensive income (loss) until the transaction affects earnings.
The table below provides information about the balance sheet values of hedged items and the notional amount of derivatives used in hedging strategies. The notional amount of the derivative is the number of units of the underlying (for example, the notional principal amount of the debt in an interest rate swap). The notional amount is used to compute interest or other payment streams to be made under the contract and is a measure of Bunge’s level of activity. Bunge discloses derivative notional amounts on a gross basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
June 30, 2019
|
December 31, 2018
|
Unit of
Measure
|
|
Hedging instrument type:
|
|
|
|
|
Fair value hedges of interest rate risk
|
|
|
|
|
|
Carrying value of hedged debt
|
$
|
2,291
|
|
$
|
2,229
|
|
$ Notional
|
|
|
Cumulative adjustment to long-term debt from application of hedge accounting
|
$
|
38
|
|
$
|
(29
|
)
|
$ Notional
|
|
|
Interest rate swap - notional amount
|
$
|
2,260
|
|
$
|
2,266
|
|
$ Notional
|
|
|
|
|
|
|
|
Fair value hedges of currency risk
|
|
|
|
|
|
Carrying value of hedged debt
|
$
|
320
|
|
$
|
312
|
|
$ Notional
|
|
|
Cross currency swap - notional amount
|
$
|
321
|
|
$
|
313
|
|
$ Notional
|
|
|
|
|
|
|
|
Cash flow hedges of currency risk
|
|
|
|
|
|
Foreign currency forward - notional amount
|
$
|
164
|
|
$
|
50
|
|
$ Notional
|
|
|
|
|
|
|
|
Cash flow hedges of commodity risk
|
|
|
|
|
|
Commodity price risk future - notional amount
|
296
|
|
—
|
|
Metric Tons
|
|
|
|
|
|
|
|
Net investment hedges
|
|
|
|
|
|
Foreign currency forward - notional amount
|
$
|
1,141
|
|
$
|
1,888
|
|
$ Notional
|
|
|
Carrying value of non-derivative hedging instrument
|
$
|
907
|
|
$
|
912
|
|
$ Notional
|
Economic Hedge Derivatives - In addition to using derivatives in qualifying hedge relationships, Bunge enters into derivatives to economically hedge its exposure to a variety of market risks it incurs in the normal course of operations.
Interest rate derivatives are used to hedge exposures to the Company's financial instrument portfolios and debt issuances. The impact of changes in fair value of these instruments is primarily presented in Interest expense.
Currency derivatives are used to hedge the balance sheet and commercial exposures that arise from the Company's global operations. The impact of changes in fair value of these instruments is presented in Cost of goods sold when hedging commercial exposures and Foreign exchange gains (losses) when hedging monetary exposures.
Agricultural commodity derivatives are used primarily to manage the Company's inventory and forward purchase and sales contracts. Contracts to purchase agricultural commodities generally relate to current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of agricultural commodities generally do not extend beyond one future crop cycle. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
Bunge uses derivative instruments referred to as forward freight agreements ("FFA") and FFA options to hedge portions of its current and anticipated ocean freight costs. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
Bunge uses energy derivative instruments to manage its exposure to volatility in energy costs. Hedges may be entered into for natural gas, electricity, coal and fuel oil, including bunker fuel. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
The Company may also enter into other derivatives, including credit default swaps and equity derivatives to manage exposure to credit risk and broader macroeconomic risks, respectively. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
The table below summarizes the volume of economic derivatives as of June 30, 2019 and December 31, 2018. For those contracts traded bilaterally through the over-the-counter markets (e.g., forwards, forward rate agreements ("FRA") and swaps), the gross position is provided. For exchange traded (e.g., futures, FFAs and options) and cleared positions (e.g., energy swaps), the net position is provided.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
December 31,
|
|
|
|
2019
|
2018
|
Unit of
Measure
|
|
(US$ in millions)
|
Long
|
(Short)
|
Long
|
(Short)
|
|
Interest rate
|
|
|
|
|
|
|
|
|
|
Swaps
|
$
|
7,547
|
|
$
|
(92
|
)
|
$
|
3,349
|
|
$
|
(111
|
)
|
$ Notional
|
|
Futures
|
$
|
3
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$ Notional
|
|
FRAs
|
$
|
426
|
|
$
|
(485
|
)
|
$
|
139
|
|
$
|
(149
|
)
|
$ Notional
|
|
Currency
|
|
|
|
|
|
|
Forwards
|
$
|
10,198
|
|
$
|
(11,144
|
)
|
$
|
13,713
|
|
$
|
(13,701
|
)
|
$ Notional
|
|
Swaps
|
$
|
35
|
|
$
|
(69
|
)
|
$
|
127
|
|
$
|
(535
|
)
|
$ Notional
|
|
Futures
|
$
|
62
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(16
|
)
|
$ Notional
|
|
Options
|
$
|
87
|
|
$
|
(79
|
)
|
$
|
869
|
|
$
|
(919
|
)
|
Delta
|
|
Agricultural commodities
|
|
|
|
|
|
|
Forwards
|
28,726,008
|
|
(34,604,184
|
)
|
25,523,840
|
|
(29,314,930
|
)
|
Metric Tons
|
|
Swaps
|
—
|
|
(5,624,547
|
)
|
—
|
|
(9,908,728
|
)
|
Metric Tons
|
|
Futures
|
1,959,874
|
|
—
|
|
4,136,525
|
|
—
|
|
Metric Tons
|
|
Options
|
—
|
|
(1,188,015
|
)
|
718,709
|
|
—
|
|
Metric Tons
|
|
Ocean freight
|
|
|
|
|
|
|
FFA
|
1,970
|
|
—
|
|
—
|
|
(90
|
)
|
Hire Days
|
|
FFA options
|
75
|
|
—
|
|
302
|
|
—
|
|
Hire Days
|
|
Natural gas
|
|
|
|
|
|
|
Swaps
|
349,763
|
|
—
|
|
1,205,687
|
|
—
|
|
MMBtus
|
|
Futures
|
1,605,372
|
|
—
|
|
2,268,190
|
|
—
|
|
MMBtus
|
|
Energy - other
|
|
|
|
|
|
|
Forwards
|
5,534,290
|
|
—
|
|
5,536,290
|
|
—
|
|
Metric Tons
|
|
Futures
|
—
|
|
(17,063
|
)
|
—
|
|
(29,367
|
)
|
Metric Tons
|
|
Swaps
|
163,000
|
|
—
|
|
188,800
|
|
—
|
|
Metric Tons
|
|
Other
|
|
|
|
|
|
|
Swaps and futures
|
$
|
210
|
|
$
|
(1,824
|
)
|
$
|
52
|
|
$
|
—
|
|
$ Notional
|
The Effect of Derivative Instruments and Hedge Accounting on the Condensed Consolidated Statements of Income
The tables below summarize the net effect of derivative instruments and hedge accounting on the condensed consolidated statements of income for the three and six months ended June 30, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in
Income on Derivative Instruments
|
|
|
|
Three Months Ended June 30,
|
|
(US$ in millions)
|
|
2019
|
2018
|
|
Income statement classification
|
Type of derivative
|
|
|
|
Net sales
|
|
|
|
|
Hedge accounting
|
Foreign currency
|
$
|
1
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
Hedge accounting
|
Foreign currency
|
$
|
—
|
|
$
|
1
|
|
|
Economic hedges
|
Foreign currency
|
91
|
|
(379
|
)
|
|
|
Commodities
|
(244
|
)
|
432
|
|
|
|
Other (1)
|
—
|
|
7
|
|
|
Total Cost of goods sold
|
|
$
|
(153
|
)
|
$
|
61
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
Hedge accounting
|
Interest rate
|
$
|
(5
|
)
|
$
|
(2
|
)
|
|
Economic hedges
|
Interest rate
|
(7
|
)
|
—
|
|
|
Total Interest expense
|
|
$
|
(12
|
)
|
$
|
(2
|
)
|
|
|
|
|
|
|
Foreign exchange gains (losses)
|
|
|
|
|
Hedge accounting
|
Foreign currency
|
$
|
9
|
|
$
|
(15
|
)
|
|
Economic hedges
|
Foreign currency
|
(7
|
)
|
(41
|
)
|
|
Total Foreign exchange gains (losses)
|
|
$
|
2
|
|
$
|
(56
|
)
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
Gains and losses on derivatives used as cash flow hedges of foreign currency risk included in other comprehensive income (loss) during the period
|
$
|
3
|
|
$
|
(7
|
)
|
|
Gains and losses on derivatives used as cash flow hedges of commodity price risk included in other comprehensive income (loss) during the period
|
$
|
8
|
|
$
|
—
|
|
|
Gains and losses on derivatives used as net investment hedges included in other comprehensive income (loss) during the period
|
$
|
(7
|
)
|
$
|
114
|
|
|
Foreign currency gains and losses on intercompany loans used as net investment hedges included in other comprehensive income (loss) during the period
|
$
|
(12
|
)
|
$
|
52
|
|
|
|
|
|
|
Amounts released from accumulated other comprehensive income (loss) during the period
|
|
|
|
Cash flow hedge of foreign currency risk
|
$
|
1
|
|
$
|
(4
|
)
|
(1) Other includes the results from freight, energy and other derivatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in
Income on Derivative Instruments
|
|
|
|
Six Months Ended June 30,
|
|
(US$ in millions)
|
|
2019
|
2018
|
|
Income statement classification
|
Type of derivative
|
|
|
|
Net sales
|
|
|
|
|
Hedge accounting
|
Foreign currency
|
$
|
2
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
Hedge accounting
|
Foreign currency
|
$
|
—
|
|
$
|
1
|
|
|
Economic hedges
|
Foreign currency
|
166
|
|
(414
|
)
|
|
|
Commodities
|
(106
|
)
|
172
|
|
|
|
Other (1)
|
28
|
|
—
|
|
|
Total Cost of goods sold
|
|
$
|
88
|
|
$
|
(241
|
)
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
Hedge accounting
|
Interest rate
|
$
|
(8
|
)
|
$
|
—
|
|
|
Economic hedges
|
Interest rate
|
(10
|
)
|
—
|
|
|
Total Interest expense
|
|
$
|
(18
|
)
|
$
|
—
|
|
|
|
|
|
|
|
Foreign exchange gains (losses)
|
|
|
|
|
Hedge accounting
|
Foreign currency
|
$
|
8
|
|
$
|
(12
|
)
|
|
Economic hedges
|
Foreign currency
|
31
|
|
(44
|
)
|
|
Total Foreign exchange gains (losses)
|
|
$
|
39
|
|
$
|
(56
|
)
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
Gains and losses on derivatives used as fair value hedges of foreign currency risk included in other comprehensive income (loss) during the period
|
$
|
(2
|
)
|
$
|
(1
|
)
|
|
Gains and losses on derivatives used as cash flow hedges of foreign currency risk included in other comprehensive income (loss) during the period
|
$
|
3
|
|
$
|
(5
|
)
|
|
Gains and losses on derivatives used as cash flow hedges of commodity price risk included in other comprehensive income (loss) during the period
|
$
|
8
|
|
$
|
—
|
|
|
Gains and losses on derivatives used as net investment hedges included in other comprehensive income (loss) during the period
|
$
|
(45
|
)
|
$
|
133
|
|
|
Foreign currency gains and losses on intercompany loans used as net investment hedges included in other comprehensive income (loss) during the period
|
$
|
5
|
|
$
|
35
|
|
|
|
|
|
|
Amounts released from accumulated other comprehensive income (loss) during the period
|
|
|
|
Cash flow hedge of foreign currency risk
|
$
|
2
|
|
$
|
(1
|
)
|
(1) Other includes the results from freight, energy and other derivatives.
Bunge’s commercial paper program is supported by an identical amount of committed back-up bank credit lines (the “Liquidity Facility”) provided by banks that are rated at least A-1 by Standard & Poor’s Financial Services and P-1 by Moody’s Investors Service. The cost of borrowing under the Liquidity Facility would typically be higher than the cost of issuing under Bunge’s commercial paper program. At June 30, 2019, there were $544 million of borrowings outstanding under the commercial paper program and no borrowings under the Liquidity Facility.
In addition to committed facilities, from time to time, Bunge Limited and/or its financing subsidiaries enter into uncommitted bilateral short-term credit lines as necessary based on its financing requirements. At June 30, 2019, there was
$450 million outstanding under these bilateral short-term credit lines. Loans under such credit lines are non-callable by the respective lenders. In addition, Bunge's operating companies had $891 million in short-term borrowings outstanding under local bank lines of credit at June 30, 2019 to support working capital requirements.
At June 30, 2019, Bunge had $4,221 million of unused and available borrowing capacity under its committed credit facilities totaling $5,015 million with a number of lending institutions.
The fair value of Bunge’s long-term debt is based on interest rates currently available on comparable maturities to companies with credit standing similar to that of Bunge. The carrying amounts and fair value of long-term debt are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
(US$ in millions)
|
|
Carrying
Value
|
|
Fair Value
(Level 2)
|
|
Carrying
Value
|
|
Fair Value
(Level 2)
|
|
Long-term debt, including current portion
|
|
$
|
4,463
|
|
|
$
|
4,522
|
|
|
$
|
4,622
|
|
|
$
|
4,584
|
|
On July 1, 2019, Bunge entered into an unsecured five-year multi-currency syndicated term loan agreement (the "Term Loan") in the Japanese loan market, with certain lenders party thereto. The Term Loan is comprised of two tranches: Tranche A, Japanese Yen 30.7 billion ($285 million) bearing interest at three-month LIBOR plus a margin of 0.75% and Tranche B, $90 million bearing interest at three-month LIBOR plus a margin of 1.30%. The proceeds were used to pre-pay amounts outstanding under Bunge’s existing multi-currency syndicated term loan facility in the Japanese loan market maturing in December 2019.
|
|
|
|
14.
|
TRADE RECEIVABLES SECURITIZATION PROGRAM
|
Bunge and certain of its subsidiaries participate in a trade receivables securitization program (the “Program”) with a financial institution, as administrative agent, and certain commercial paper conduit purchasers and committed purchasers that provides for funding of receivables sold into the Program. On February 19, 2019, Bunge exercised a portion of the $300 million accordion feature under the Program to increase the aggregate size of the facility by $100 million from $700 million to an aggregate of $800 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
June 30,
2019
|
|
December 31,
2018
|
|
Receivables sold which were derecognized from Bunge's balance sheet
|
|
$
|
807
|
|
|
$
|
826
|
|
|
Deferred purchase price included in other current assets
|
|
$
|
102
|
|
|
$
|
128
|
|
The table below summarizes the cash flows and discounts of Bunge’s trade receivables associated with the Program. Servicing fees under the Program were not significant in any period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
(US$ in millions)
|
|
2019
|
|
2018
|
|
Gross receivables sold
|
|
$
|
4,663
|
|
|
$
|
4,830
|
|
|
Proceeds received in cash related to transfer of receivables
|
|
$
|
4,469
|
|
|
$
|
4,626
|
|
|
Cash collections from customers on receivables previously sold
|
|
$
|
3,846
|
|
|
$
|
4,711
|
|
|
Discounts related to gross receivables sold included in SG&A
|
|
$
|
8
|
|
|
$
|
6
|
|
Non-cash activity for the program in the reporting period is represented by the difference between gross receivables sold and cash collections from customers on receivables previously sold.
|
|
|
|
15.
|
RELATED PARTY TRANSACTIONS
|
Notes receivable - Bunge holds a note receivable from Navegações Unidas Tapajós S.A., a 50% equity method investment in Brazil, having a carrying value of $21 million at June 30, 2019, which matures in September 2021, with interest based on CDI, the average overnight interbank loan rate in Brazil.
Bunge holds a note receivable from Bunge SCF Grain LLC, a 50% equity method investment in the U.S., with a carrying value of $7 million at June 30, 2019, which matures on March 31, 2023, with an interest rate based on LIBOR.
In addition, Bunge held notes receivables from other related parties totaling $4 million at June 30, 2019.
Notes payable - Bunge holds a note payable with Bunge SCF Grain LLC with a carrying value of $14 million at June 30, 2019. This note matures on March 31, 2023 with a variable interest rate of 2.43%.
Other - Bunge purchased soybeans and other agricultural commodity products from certain of its unconsolidated investees and other related parties totaling $307 million and $352 million for the three months ended June 30, 2019 and 2018, respectively, and $661 million and $663 million for the six months ended June 30, 2019 and 2018, respectively. Bunge also sold soybeans and other agricultural commodity products to certain of its unconsolidated investees and other related parties totaling $96 million and $118 million for the three months ended June 30, 2019 and 2018, respectively, and $206 million and $219 million for the six months ended June 30, 2019 and 2018, respectively. In addition, Bunge receives services from and provides services to its unconsolidated investees, including tolling, port services, administrative support, and other services. During the three months ended June 30, 2019 and 2018, Bunge received services totaling $26 million and $31 million, respectively, and provided services of $6 million and $8 million, respectively. During the six months ended June 30, 2019 and 2018, Bunge received services totaling $50 million and $56 million, respectively, and provided services of $10 million and $11 million, respectively. Bunge believes all transaction values to be similar to those that would be conducted with third parties.
At June 30, 2019 and December 31, 2018, Bunge had approximately $42 million and $28 million of receivables from these related parties included in trade accounts receivable in the condensed consolidated balance sheets as of those dates. In addition, at June 30, 2019 and December 31, 2018, Bunge had approximately $55 million and $26 million of payables to these related parties included in trade accounts payable in the condensed consolidated balance sheets as of those dates.
16. COMMITMENTS AND CONTINGENCIES
Bunge is party to claims and lawsuits, primarily non-income tax and labor claims in South America, arising in the normal course of business. Bunge is also involved from time to time in various contract, antitrust, environmental litigation and remediation and other litigation, claims, government investigations and legal proceedings. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. Bunge records liabilities related to legal matters when the exposure item becomes probable and can be reasonably estimated. Bunge management does not expect these matters to have a material adverse effect on Bunge’s financial condition, results of operations or liquidity. However, these matters are subject to inherent uncertainties and there exists the remote possibility that a liability arising from these matters could have a material adverse impact in the period the uncertainties are resolved should the liability substantially exceed the amount of provisions included in the condensed consolidated balance sheets. Included in other non-current liabilities at June 30, 2019 and December 31, 2018 are the following amounts related to these matters:
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
June 30,
2019
|
|
December 31,
2018
|
|
Non-income tax claims
|
|
$
|
92
|
|
|
$
|
94
|
|
|
Labor claims
|
|
78
|
|
|
78
|
|
|
Civil and other claims
|
|
98
|
|
|
95
|
|
|
Total
|
|
$
|
268
|
|
|
$
|
267
|
|
Brazil Indirect Taxes
Non-income tax claims - These tax claims relate principally to claims against Bunge’s Brazilian subsidiaries, primarily value-added tax claims (ICMS, ISS, IPI and PIS/COFINS). The determination of the manner in which various Brazilian federal, state and municipal taxes apply to the operations of Bunge is subject to varying interpretations arising from the complex nature of Brazilian tax law. In addition to the matter discussed below, Bunge monitors other potential claims in Brazil regarding these value-added taxes. In particular, Bunge monitors the Brazilian federal and state governments’ responses to recent Brazilian Supreme Court decisions invalidating on constitutional grounds certain ICMS incentives and benefits granted by various states. While Bunge was not a recipient of any of the incentives and benefits that were the subject of these Supreme Court decisions, it has received other similar tax incentives and benefits which are being challenged before the Supreme Court. In August 2017, Complementary Law 160/2017 (“LC 160/2017”) was published, authorizing the states, through an agreement to be reached within the framework of CONFAZ (National Council of Fiscal Policy), to grant amnesty for tax debts arising from existing tax benefits granted without previous CONFAZ authorization and to maintain such existing benefits still in force for up to 15 years. In December 2017, Interstate Agreement ICMS 190/2017 was published to regulate Complementary Law 160/2017, which endorsed the past incentives granted by the Brazilian states of CONFAZ. Bunge has not received any tax assessment from the states that granted these incentives or benefits related to their validity and, based on Bunge's evaluation of this matter as required by U.S. GAAP, no liability has been recorded in the condensed consolidated financial statements.
On February 13, 2015, Brazil’s Supreme Federal Court ruled in a leading case that certain state ICMS tax credits for staple foods (including soy oil, margarine, mayonnaise and wheat flours) are unconstitutional. Bunge, like other companies in the Brazilian food industry, is involved in several administrative and judicial disputes with Brazilian states regarding these tax credits. While the leading case does not involve Bunge and each case is unique in facts and circumstances and applicable state law, the ruling has general precedent authority in lower court cases. Based on management’s review of the ruling (without considering the future success of any potential clarification or modulation of the ruling) and its general application to Bunge’s pending cases, management recorded a liability in the fourth quarter of 2014. Since 2015, Bunge settled a portion of its outstanding liabilities in amnesty programs in certain Brazilian states. In the fourth quarter of 2018, Bunge participated in an amnesty program in the Brazilian state of Rio Grande do Sul, which resulted in a discounted settlement of certain cases. As a result, the liability was reduced to 241 million Brazilian reais (approximately $63 million) as of June 30, 2019.
As of June 30, 2019, the Brazilian federal and state authorities have concluded examinations of the ICMS and PIS COFINS tax returns and have issued the outstanding claims (including applicable interest and penalties) as of:
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
Years Examined
|
June 30, 2019
|
December 31, 2018
|
|
ICMS
|
1990 to Present
|
$
|
268
|
|
$
|
264
|
|
|
PIS/COFINS
|
2004 through 2015
|
$
|
234
|
|
$
|
231
|
|
Argentina Export Tax
Since 2010, the Argentine tax authorities have been conducting a review of income and other taxes paid by exporters and processors of cereals and other agricultural commodities in the country. In that regard, the Company has been subject to a number of assessments, proceedings, and claims related to its activities. During 2011, Bunge’s subsidiary in Argentina paid $112 million of accrued export tax obligations under protest and preserved its rights with respect to such payment. In 2012, the Argentine tax authorities further assessed interest on these payments, which as of June 30, 2019, totaled approximately $310 million. In 2012, the Argentine government suspended Bunge’s Argentine subsidiary from a registry of grain traders. While the suspension has not had a material adverse effect on Bunge’s business in Argentina, these actions have resulted in additional administrative requirements and increased logistical costs on domestic grain shipments within Argentina. Bunge is challenging these actions in the Argentine courts.
Labor claims — The labor claims are principally claims against Bunge’s Brazilian subsidiaries. The labor claims primarily relate to dismissals, severance, health and safety, salary adjustments and supplementary retirement benefits.
Civil and other claims — The civil and other claims relate to various disputes with third parties, including suppliers and customers.
During the first quarter of 2016, Bunge received a notice from the Brazilian Administrative Council for Economic Defense ("CADE") initiating an administrative proceeding against its Brazilian subsidiary and two of its employees, certain of its former employees, several other companies in the Brazilian wheat milling industry, and others for alleged anticompetitive activities in the north and northeast of Brazil. Additionally, in the second quarter of 2018, Bunge received a notification from CADE that it has extended the scope of an existing administrative proceeding relating to alleged anticompetitive practices in the Rio Grande port in Brazil to include certain of Bunge's Brazilian subsidiaries and certain former employees of those subsidiaries. Bunge is defending against these actions; however, the proceedings are at an early stage and Bunge cannot, at this time, reasonably predict the ultimate outcome of the proceedings or sanctions, if any, which may be imposed.
Guarantees — Bunge has issued or was a party to the following guarantees at June 30, 2019:
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
Maximum
Potential
Future
Payments
|
|
Unconsolidated affiliates guarantee (1) (2)
|
|
$
|
310
|
|
|
Residual value guarantee (3)
|
|
260
|
|
|
Total
|
|
$
|
570
|
|
|
|
|
|
(1)
|
Bunge has issued guarantees to certain financial institutions related to debt of certain of its unconsolidated affiliates. The terms of the guarantees are equal to the terms of the related financings which have maturity dates through 2034. There are no recourse provisions or collateral that would enable Bunge to recover any amounts paid under these guarantees. In addition, a Bunge subsidiary has guaranteed the obligations of two of its affiliates and in connection therewith has secured its guarantee obligations through a pledge of one of its affiliate's shares plus loans receivable
|
from the affiliate to the financial institutions in the event that the guaranteed obligations are enforced. Based on the amounts drawn under such debt facilities at June 30, 2019, Bunge's potential liability was $159 million, and it has recorded a $18 million obligation related to these guarantees.
|
|
|
|
(2)
|
Bunge has issued guarantees to certain third parties related to performance of its unconsolidated affiliates. The terms of the guarantees are equal to the completion date of a port terminal which is expected to be completed in 2020. There are no recourse provisions or collateral that would enable Bunge to recover any amounts paid under these guarantees. At June 30, 2019, Bunge's maximum potential future payments under these guarantees was $59 million, and no obligation has been recorded related to these guarantees.
|
|
|
|
|
(3)
|
Bunge has issued guarantees to certain financial institutions which are party to certain operating lease arrangements for railcars and barges. These guarantees provide for a minimum residual value to be received by the lessor at the conclusion of the lease term. These leases expire at various dates from 2019 through 2024. At June 30, 2019, no obligation has been recorded related to these guarantees. Any obligation recorded would be recognized in Current operating lease obligations or Non-current operating lease obligations (see Note 4, Leases).
|
Bunge Limited has provided a guarantee to the Director of the Illinois Department of Agriculture as Trustee for Bunge North America, Inc. (“BNA”), an indirect wholly‑owned subsidiary, which guarantees all amounts due and owing by BNA to grain producers and/or depositors in the State of Illinois who have delivered commodities to BNA’s Illinois facilities.
In addition, Bunge Limited has provided full and unconditional parent level guarantees of the outstanding indebtedness under certain credit facilities entered into, and senior notes issued, by its 100% owned subsidiaries. At June 30, 2019, Bunge’s condensed consolidated balance sheet includes debt with a carrying amount of $5,890 million related to these guarantees. This debt includes the senior notes issued by two of Bunge’s 100% owned finance subsidiaries, Bunge Limited Finance Corp. and Bunge Finance Europe, B.V. There are largely no restrictions on the ability of Bunge Limited Finance Corp. and Bunge Finance Europe B.V. or any other Bunge subsidiary to transfer funds to Bunge Limited.
17. REDEEMABLE NONCONTROLLING INTEREST
In connection with the acquisition of a 70% ownership interest in IOI Loders Croklaan ("Loders"), the Company has entered into a put/call arrangement with the Loders minority shareholder and may be required or elect to purchase the additional 30% ownership interest in Loders within a specified time frame.
The Company classifies these redeemable equity securities outside of permanent stockholders’ equity as the equity securities are redeemable at the option of the holder. The carrying amount of redeemable noncontrolling interests is the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss, equity capital contributions and distributions or (ii) the redemption value. Any resulting increases in the redemption amount, in excess of the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and distributions, are affected by corresponding charges against retained earnings. Additionally, any such charges to retained earnings will affect net income (loss) available to Bunge common shareholders as part of Bunge's calculation of earnings per common share.
Accumulated other comprehensive income (loss) attributable to Bunge — The following table summarizes the balances of related after-tax components of accumulated other comprehensive income (loss) attributable to Bunge:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
Foreign Exchange
Translation
Adjustment
|
|
Deferred
Gains (Losses)
on Hedging
Activities
|
|
Pension and Other
Postretirement
Liability
Adjustments
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance, April 1, 2019
|
|
$
|
(6,657
|
)
|
|
$
|
(169
|
)
|
|
$
|
(174
|
)
|
|
$
|
(7,000
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
90
|
|
|
(8
|
)
|
|
—
|
|
|
82
|
|
|
Amount reclassified from accumulated other comprehensive income (loss)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
Balance, June 30, 2019
|
|
$
|
(6,567
|
)
|
|
$
|
(178
|
)
|
|
$
|
(174
|
)
|
|
$
|
(6,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
Foreign Exchange
Translation
Adjustment
|
|
Deferred
Gains (Losses)
on Hedging
Activities
|
|
Pension and Other
Postretirement
Liability
Adjustments
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance, April 1, 2018
|
|
$
|
(5,562
|
)
|
|
$
|
(244
|
)
|
|
$
|
(141
|
)
|
|
$
|
(5,947
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
(1,028
|
)
|
|
161
|
|
|
2
|
|
|
(865
|
)
|
|
Amount reclassified from accumulated other comprehensive income (loss)
|
|
14
|
|
|
3
|
|
|
—
|
|
|
17
|
|
|
Balance, June 30, 2018
|
|
$
|
(6,576
|
)
|
|
$
|
(80
|
)
|
|
$
|
(139
|
)
|
|
$
|
(6,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
Foreign Exchange
Translation
Adjustment
|
|
Deferred
Gains (Losses)
on Hedging
Activities
|
|
Pension and Other
Postretirement
Liability
Adjustments
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance, January 1, 2019
|
|
$
|
(6,637
|
)
|
|
$
|
(145
|
)
|
|
$
|
(153
|
)
|
|
$
|
(6,935
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
70
|
|
|
(31
|
)
|
|
—
|
|
|
39
|
|
|
Amount reclassified from accumulated other comprehensive income (loss)
|
|
—
|
|
|
(2
|
)
|
|
(21
|
)
|
|
(23
|
)
|
|
Balance, June 30, 2019
|
|
$
|
(6,567
|
)
|
|
$
|
(178
|
)
|
|
$
|
(174
|
)
|
|
$
|
(6,919
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US$ in millions)
|
|
Foreign Exchange
Translation
Adjustment
|
|
Deferred
Gains (Losses)
on Hedging
Activities
|
|
Pension and Other
Postretirement
Liability
Adjustments
|
|
Unrealized
Gains (Losses)
on
Investments
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance, January 1, 2018
|
|
$
|
(5,547
|
)
|
|
$
|
(244
|
)
|
|
$
|
(140
|
)
|
|
$
|
1
|
|
|
$
|
(5,930
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
(1,043
|
)
|
|
164
|
|
|
1
|
|
|
—
|
|
|
(878
|
)
|
|
Amount reclassified from accumulated other comprehensive income (loss)
|
|
14
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
13
|
|
|
Balance, June 30, 2018
|
|
$
|
(6,576
|
)
|
|
$
|
(80
|
)
|
|
$
|
(139
|
)
|
|
$
|
—
|
|
|
$
|
(6,795
|
)
|
19. EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per common share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
(US$ in millions, except for share data)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Income (loss) from continuing operations
|
|
$
|
212
|
|
|
$
|
(17
|
)
|
|
$
|
262
|
|
|
$
|
(34
|
)
|
|
Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests
|
|
2
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
Income (loss) from continuing operations attributable to Bunge
|
|
214
|
|
|
(19
|
)
|
|
259
|
|
|
(38
|
)
|
|
Convertible preference share dividends
|
|
(9
|
)
|
|
(9
|
)
|
|
(17
|
)
|
|
(17
|
)
|
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
7
|
|
|
—
|
|
|
5
|
|
|
Net income (loss) available to Bunge common shareholders - Basic
|
|
205
|
|
|
(21
|
)
|
|
242
|
|
|
(50
|
)
|
|
Add back convertible preference share dividends
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net income (loss) available to Bunge common shareholders - Diluted
|
|
$
|
214
|
|
|
$
|
(21
|
)
|
|
$
|
242
|
|
|
$
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
141,497,071
|
|
|
140,959,421
|
|
|
141,351,844
|
|
|
140,848,779
|
|
|
Effect of dilutive shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—stock options and awards (1)
|
|
310,272
|
|
|
—
|
|
|
345,445
|
|
|
—
|
|
|
—convertible preference shares (2)
|
|
8,329,297
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Diluted
|
|
150,136,640
|
|
|
140,959,421
|
|
|
141,697,289
|
|
|
140,848,779
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$
|
1.46
|
|
|
$
|
(0.20
|
)
|
|
$
|
1.72
|
|
|
$
|
(0.39
|
)
|
|
Net income (loss) from discontinued operations
|
|
—
|
|
|
0.05
|
|
|
—
|
|
|
0.03
|
|
|
Net income (loss) attributable to Bunge common shareholders—basic
|
|
$
|
1.46
|
|
|
$
|
(0.15
|
)
|
|
$
|
1.72
|
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$
|
1.43
|
|
|
$
|
(0.20
|
)
|
|
$
|
1.71
|
|
|
$
|
(0.39
|
)
|
|
Net income (loss) from discontinued operations
|
|
—
|
|
|
0.05
|
|
|
—
|
|
|
0.03
|
|
|
Net income (loss) attributable to Bunge common shareholders—diluted
|
|
$
|
1.43
|
|
|
$
|
(0.15
|
)
|
|
$
|
1.71
|
|
|
$
|
(0.36
|
)
|
|
|
|
|
(1)
|
The weighted-average common shares outstanding-diluted excludes approximately 6 million and 7 million stock options and contingently issuable restricted stock units, which were not dilutive and not included in the computation of earnings per share for the three months ended June 30, 2019 and 2018, respectively.
|
The weighted-average common shares outstanding-diluted excludes approximately 5 million and 7 million stock options and contingently issuable restricted stock units, which were not dilutive and not included in the computation of earnings per share for the six months ended June 30, 2019 and 2018, respectively.
|
|
|
|
(2)
|
Weighted-average common shares outstanding-diluted for the three months ended June 30, 2018 excludes approximately 8 million weighted-average common shares that are issuable upon conversion of the convertible preference shares that were not dilutive and not included in the weighted-average number of common shares, respectively.
|
Weighted-average common shares outstanding-diluted for the six months ended June 30, 2019 and 2018 excludes approximately 8 million and 8 million, respectively, weighted-average common shares that are issuable upon conversion of the convertible preference shares that were not dilutive and not included in the weighted-average number of common shares, respectively.
Bunge has five reportable segments - Agribusiness, Edible Oil Products, Milling Products, Sugar and Bioenergy, and Fertilizer, which are organized based upon similar economic characteristics and are similar in nature of products and services offered, the nature of production processes, and the type and class of customer and distribution methods. The Agribusiness segment is characterized by both inputs and outputs being agricultural commodities and thus high volume and low margin. The Edible Oil Products segment involves the processing, production and marketing of products derived from vegetable oils. The Milling Products segment involves the processing, production and marketing of products derived primarily from wheat and corn. The Sugar and Bioenergy segment involves sugarcane growing and milling in Brazil, as well as sugarcane-based ethanol production and corn-based ethanol investments and related activities. The Fertilizer segment includes its port operations in Brazil and Argentina and its blending and retail operations in Argentina.
The “Other” column in the following table contains the reconciliation between the totals for reportable segments and Bunge consolidated totals, which consists primarily of amounts attributable to corporate and other items not allocated to the reportable segments, discontinued operations, and inter-segment eliminations. Transfers between the segments are generally valued at market. The segment revenues generated from these transfers are shown in the following table as “Inter-segment revenues.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Other (1)
|
|
Total
|
|
Net sales to external customers
|
|
$
|
7,068
|
|
|
$
|
2,206
|
|
|
$
|
430
|
|
|
$
|
284
|
|
|
$
|
108
|
|
|
$
|
—
|
|
|
$
|
10,096
|
|
|
Inter–segment revenues
|
|
1,078
|
|
|
41
|
|
|
—
|
|
|
1
|
|
|
18
|
|
|
(1,138
|
)
|
|
—
|
|
|
Foreign exchange gains (losses)
|
|
(10
|
)
|
|
(3
|
)
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
Noncontrolling interests (1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
Other income (expense) – net
|
|
35
|
|
|
(1
|
)
|
|
9
|
|
|
(2
|
)
|
|
(1
|
)
|
|
147
|
|
|
187
|
|
|
Segment EBIT (2)
|
|
182
|
|
|
25
|
|
|
17
|
|
|
(11
|
)
|
|
6
|
|
|
135
|
|
|
354
|
|
|
Depreciation, depletion and amortization
|
|
(65
|
)
|
|
(40
|
)
|
|
(13
|
)
|
|
(36
|
)
|
|
(1
|
)
|
|
—
|
|
|
(155
|
)
|
|
Total assets
|
|
$
|
12,429
|
|
|
$
|
3,907
|
|
|
$
|
1,480
|
|
|
$
|
1,890
|
|
|
$
|
361
|
|
|
$
|
357
|
|
|
$
|
20,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Other (1)
|
|
Total
|
|
Net sales to external customers
|
|
$
|
8,725
|
|
|
$
|
2,325
|
|
|
$
|
426
|
|
|
$
|
582
|
|
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
12,147
|
|
|
Inter–segment revenues
|
|
1,228
|
|
|
54
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(1,282
|
)
|
|
—
|
|
|
Foreign exchange gains (losses)
|
|
(93
|
)
|
|
5
|
|
|
(2
|
)
|
|
(4
|
)
|
|
(2
|
)
|
|
—
|
|
|
(96
|
)
|
|
Noncontrolling interests (1)
|
|
1
|
|
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
Other income (expense) – net
|
|
22
|
|
|
(1
|
)
|
|
(2
|
)
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
Segment EBIT (2)
|
|
106
|
|
|
11
|
|
|
26
|
|
|
(63
|
)
|
|
(9
|
)
|
|
—
|
|
|
71
|
|
|
Discontinued operations (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
Depreciation, depletion and amortization
|
|
(64
|
)
|
|
(41
|
)
|
|
(14
|
)
|
|
(41
|
)
|
|
(2
|
)
|
|
—
|
|
|
(162
|
)
|
|
Total assets
|
|
$
|
14,113
|
|
|
$
|
4,077
|
|
|
$
|
1,527
|
|
|
$
|
1,974
|
|
|
$
|
280
|
|
|
$
|
153
|
|
|
$
|
22,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Other (1)
|
|
Total
|
|
Net sales to external customers
|
|
$
|
13,987
|
|
|
$
|
4,445
|
|
|
$
|
856
|
|
|
$
|
569
|
|
|
$
|
177
|
|
|
$
|
—
|
|
|
$
|
20,034
|
|
|
Inter–segment revenues
|
|
2,246
|
|
|
73
|
|
|
—
|
|
|
1
|
|
|
20
|
|
|
(2,340
|
)
|
|
—
|
|
|
Foreign exchange gains (losses)
|
|
(18
|
)
|
|
(1
|
)
|
|
3
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
Noncontrolling interests (1)
|
|
2
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(3
|
)
|
|
Other income (expense) – net
|
|
67
|
|
|
—
|
|
|
8
|
|
|
(2
|
)
|
|
(2
|
)
|
|
147
|
|
|
218
|
|
|
Segment EBIT (2)
|
|
291
|
|
|
73
|
|
|
34
|
|
|
(35
|
)
|
|
7
|
|
|
135
|
|
|
505
|
|
|
Discontinued operations (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Depreciation, depletion and amortization
|
|
(128
|
)
|
|
(80
|
)
|
|
(27
|
)
|
|
(56
|
)
|
|
(3
|
)
|
|
—
|
|
|
(294
|
)
|
|
Total assets
|
|
$
|
12,429
|
|
|
$
|
3,907
|
|
|
$
|
1,480
|
|
|
$
|
1,890
|
|
|
$
|
361
|
|
|
$
|
357
|
|
|
$
|
20,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Other (1)
|
|
Total
|
|
Net sales to external customers
|
|
$
|
16,187
|
|
|
$
|
4,474
|
|
|
$
|
835
|
|
|
$
|
1,145
|
|
|
$
|
147
|
|
|
$
|
—
|
|
|
$
|
22,788
|
|
|
Inter–segment revenues
|
|
2,294
|
|
|
91
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
(2,403
|
)
|
|
—
|
|
|
Foreign exchange gains (losses)
|
|
(93
|
)
|
|
4
|
|
|
—
|
|
|
(3
|
)
|
|
(4
|
)
|
|
—
|
|
|
(96
|
)
|
|
Noncontrolling interests (1)
|
|
1
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
(4
|
)
|
|
Other income (expense) – net
|
|
46
|
|
|
(4
|
)
|
|
(2
|
)
|
|
(13
|
)
|
|
1
|
|
|
—
|
|
|
28
|
|
|
Segment EBIT (2)
|
|
148
|
|
|
39
|
|
|
43
|
|
|
(87
|
)
|
|
(11
|
)
|
|
—
|
|
|
132
|
|
|
Discontinued operations (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|
Depreciation, depletion and amortization
|
|
(131
|
)
|
|
(73
|
)
|
|
(29
|
)
|
|
(67
|
)
|
|
(4
|
)
|
|
—
|
|
|
(304
|
)
|
|
Total assets
|
|
$
|
14,113
|
|
|
$
|
4,077
|
|
|
$
|
1,527
|
|
|
$
|
1,974
|
|
|
$
|
280
|
|
|
$
|
153
|
|
|
$
|
22,124
|
|
|
|
|
|
(1)
|
Includes noncontrolling interests share of interest and tax to reconcile to consolidated noncontrolling interest.
|
|
|
|
|
(2)
|
Total segment earnings before interest and taxes (“EBIT”) is an operating performance measure used by Bunge’s management to evaluate segment operating activities. Bunge’s management believes total segment EBIT is a useful measure of operating profitability, since the measure allows for an evaluation of the performance of its segments without regard to its financing methods or capital structure. In addition, total segment EBIT is a financial measure that is widely used by analysts and investors in Bunge’s industry. However, total segment EBIT is a non-GAAP financial measure and is not intended to replace net income (loss) attributable to Bunge, the most directly comparable U.S. GAAP financial measure. Further, total segment EBIT is not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to net income (loss) or any other measure of consolidated operating results under U.S. GAAP. See the reconciliation of total segment EBIT to net income (loss) in the table below.
|
|
|
|
|
(3)
|
Represents net income (loss) from discontinued operations.
|
A reconciliation of total Segment EBIT to net income (loss) attributable to Bunge follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
(US$ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Total Segment EBIT from continuing operations
|
|
$
|
354
|
|
|
$
|
71
|
|
|
$
|
505
|
|
|
$
|
132
|
|
|
Interest income
|
|
7
|
|
|
6
|
|
|
14
|
|
|
14
|
|
|
Interest expense
|
|
(88
|
)
|
|
(94
|
)
|
|
(163
|
)
|
|
(164
|
)
|
|
Income tax (expense) benefit
|
|
(60
|
)
|
|
(2
|
)
|
|
(98
|
)
|
|
(21
|
)
|
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
7
|
|
|
—
|
|
|
5
|
|
|
Noncontrolling interests' share of interest and tax
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Net income (loss) attributable to Bunge
|
|
$
|
214
|
|
|
$
|
(12
|
)
|
|
$
|
259
|
|
|
$
|
(33
|
)
|
The Company’s revenue comprises sales from commodity contracts that are accounted for under ASC 815, Derivatives and Hedging (ASC 815) and sales of other products and services that are accounted for under ASC 606, Revenue from Contracts with Customers (ASC 606). The following tables provide a disaggregation of net sales to external customers between sales from contracts with customers and sales from other arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Total
|
|
Sales from other arrangements
|
|
$
|
6,842
|
|
|
$
|
453
|
|
|
$
|
20
|
|
|
$
|
151
|
|
|
$
|
—
|
|
|
$
|
7,466
|
|
|
Sales from contracts with customers
|
|
226
|
|
|
1,753
|
|
|
410
|
|
|
133
|
|
|
108
|
|
|
2,630
|
|
|
Net sales to external customers
|
|
$
|
7,068
|
|
|
$
|
2,206
|
|
|
$
|
430
|
|
|
$
|
284
|
|
|
$
|
108
|
|
|
$
|
10,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Total
|
|
Sales from other arrangements
|
|
$
|
8,430
|
|
|
$
|
420
|
|
|
$
|
14
|
|
|
$
|
435
|
|
|
$
|
—
|
|
|
$
|
9,299
|
|
|
Sales from contracts with customers
|
|
295
|
|
|
1,905
|
|
|
412
|
|
|
147
|
|
|
89
|
|
|
2,848
|
|
|
Net sales to external customers
|
|
$
|
8,725
|
|
|
$
|
2,325
|
|
|
$
|
426
|
|
|
$
|
582
|
|
|
$
|
89
|
|
|
$
|
12,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Total
|
|
Sales from other arrangements
|
|
$
|
13,559
|
|
|
$
|
912
|
|
|
$
|
35
|
|
|
$
|
356
|
|
|
$
|
—
|
|
|
$
|
14,862
|
|
|
Sales from contracts with customers
|
|
428
|
|
|
3,533
|
|
|
821
|
|
|
213
|
|
|
177
|
|
|
5,172
|
|
|
Net sales to external customers
|
|
$
|
13,987
|
|
|
$
|
4,445
|
|
|
$
|
856
|
|
|
$
|
569
|
|
|
$
|
177
|
|
|
$
|
20,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018
|
|
(US$ in millions)
|
|
Agribusiness
|
|
Edible
Oil
Products
|
|
Milling
Products
|
|
Sugar and
Bioenergy
|
|
Fertilizer
|
|
Total
|
|
Sales from other arrangements
|
|
$
|
15,568
|
|
|
$
|
843
|
|
|
$
|
25
|
|
|
$
|
887
|
|
|
$
|
—
|
|
|
$
|
17,323
|
|
|
Sales from contracts with customers
|
|
619
|
|
|
3,631
|
|
|
810
|
|
|
258
|
|
|
147
|
|
|
5,465
|
|
|
Net sales to external customers
|
|
$
|
16,187
|
|
|
$
|
4,474
|
|
|
$
|
835
|
|
|
$
|
1,145
|
|
|
$
|
147
|
|
|
$
|
22,788
|
|
On July 22, 2019, certain indirect wholly owned subsidiaries of Bunge entered into a Business Combination Agreement (the “Business Combination Agreement”) with certain wholly owned subsidiaries of BP p.l.c. (collectively, “BP”) to form a 50/50 joint venture (the “Joint Venture”) relating to their sugar and bioenergy operations in Brazil.
Pursuant to the Business Combination Agreement, Bunge and BP will contribute their respective interests in their Brazilian sugar and bioenergy operations to the Joint Venture. Bunge will receive cash proceeds of $775 million in the transaction, comprising $700 million in respect of non-recourse Bunge debt to be assumed by the Joint Venture at closing, and $75 million from BP, subject to customary closing adjustments. Bunge intends to use the proceeds to reduce outstanding indebtedness under its credit facilities. The Joint Venture agreements will provide for certain exit rights of the parties, including private sale rights beginning 18 months after closing and the ability by Bunge to trigger an initial public offering of the Joint Venture after two years from closing, enabling future monetization potential. The transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions, including receipt of required regulatory approvals.
In connection with the entry into the Business Contribution Agreement, the Company will classify the assets and liabilities to be transferred to the Joint Venture under the Business Contribution Agreement as held for sale in its condensed, consolidated financial statements in the quarter ending September 30, 2019. Accordingly, the Company will record those assets and liabilities at fair value, less estimated transaction costs, through the closing date of the transaction. As a result of the classification as held for sale, the Company will recognize an impairment charge, principally related to the recognition of cumulative currency translation effects, estimated to be in the range of $1.5 billion to $1.7 billion, which charge will primarily be recorded in the quarter ending September 30, 2019. Other than estimated transaction costs of approximately $18 million to be included in the impairment charge, the Company does not expect to incur additional significant cash costs associated with the entry into the Joint Venture. The range of impairment charges described above represents the Company’s best estimate as of the date of this Quarterly Report on Form 10-Q. Actual amounts could differ based on operating results, changes in foreign exchange rates and other factors between the date hereof and the closing of the transaction.
Cautionary Statement Regarding Forward Looking Statements
This report contains both historical and forward looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These forward looking statements are not based on historical facts, but rather reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward looking statements by using words including “may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “plan,” “intend,” “estimate,” “continue” and similar expressions. These forward looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward looking statements. The following important factors, among others, could cause actual results to differ from these forward-looking statements: industry conditions, including fluctuations in supply, demand and prices for agricultural commodities and other raw materials and products used in our business, fluctuations in energy and freight costs; competitive developments in our industries; the effects of weather conditions and the outbreak of crop and animal disease on our business; global and regional economic, agricultural, financial and commodities market, political, social and health conditions; the outcome of pending regulatory and legal proceedings; our ability to complete, integrate and benefit from acquisitions, dispositions, joint ventures and strategic alliances; our ability to achieve the efficiencies, savings and other benefits anticipated from our cost reduction, margin improvement, operational excellence and other business optimization initiatives; changes in government policies, laws and regulations affecting our business, including agricultural and trade policies and environmental, tax and biofuels regulation; our capital allocation plans, funding needs and financing sources; changes in foreign exchange policy or rates; the outcome of our strategic review process; the effectiveness of our risk management strategies; our ability to attract and retain executive management and key personnel; operational risks, including industrial accidents, natural disasters and cybersecurity incidents; and other factors affecting our business generally.
The forward looking statements included in this report are made only as of the date of this report, and except as otherwise required by federal securities law, we do not have any obligation to publicly update or revise any forward looking statements to reflect subsequent events or circumstances.
You should refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 22, 2019, and “Part II — Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q for a more detailed discussion of these factors.
