-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QEh19vvvhwbLMyYz7V3dTUumrGW4nEnwsa7vwBZyAwSwqK5QBkCLvCmj3SU9FCxI Y9enaWxIYrEKBORO8O+grQ== 0001125282-03-006461.txt : 20031209 0001125282-03-006461.hdr.sgml : 20031209 20031209161948 ACCESSION NUMBER: 0001125282-03-006461 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMICAL & MINING CO OF CHILE INC CENTRAL INDEX KEY: 0000909037 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 000000000 STATE OF INCORPORATION: F3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12250 FILM NUMBER: 031045090 BUSINESS ADDRESS: STREET 1: EL TROVADOR 4285, 6TH FLOOR STREET 2: LAS CONDES CITY: SANTIAGO CHILE STATE: F3 ZIP: 00000 BUSINESS PHONE: 5624252485 6-K 1 b328681_6k.txt REPORT OF FOREIGN ISSUER UNITED STATES OF AMERICA SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the nine month period ended on September 30, 2003. SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. --------------------------------------- (Exact name of registrant as specified in its charter) CHEMICAL AND MINING COMPANY OF CHILE INC. ----------------------------------------- (Translation of registrant's name into English) El Trovador 4285, 6th Floor, Santiago, Chile (562) 425-2000 ----------------------------------------------------------- (Address and phone number of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F x Form 40-F ----- ----- Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No x ----- ----- If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82___________ On November 12, 2003, the Registrant filed with the Superintendencia de Valores y Seguros of Chile (the "SVS") a report that included information as to the Registrant's consolidated financial condition and results of operations for the nine-month period ended on September 30, 2003. Attached is a summary of such consolidated financial information included in the summary and in the report filed with the Superintendencia de Valores y Seguros of Chile. This financial information was prepared on the basis of accounting principles generally accepted in Chile and does not include a reconciliation of such information to accounting principles generally accepted in the United States of America. - -------------------------------------------------------------------------------- THIS REPORT IS AN ENGLISH TRANSLATION OF, AND A CHILEAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES PRESENTATION OF, A NINE MONTH PERIOD ENDED SEPTEMBER 30, 2003 REPORT FILED WITH THE SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) IN CHILE, AND UNLESS OTHERWISE INDICATED, FIGURES ARE IN US DOLLARS. - -------------------------------------------------------------------------------- Consolidated Financial Statements SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. As of September 30, 2003 and 2002 and for the years ended September 30, 2003 and 2002 (A translation of the original in Spanish- see note 2 (a)) Contents Consolidated Financial Statements Consolidated Balance Sheets .............................................. 2 Consolidated Statements of Income......................................... 4 Consolidated Statements of Cash Flows..................................... 5 Notes to the Consolidated Financial Statements ........................... 6 Ch$ - Chilean pesos ThCh $ - Thousands of Chilean pesos US$ - United States dollars ThUS$ - Thousands of United States dollars UF - The UF is an inflation-indexed, Chilean peso-denominated monetary unit. The UF rate is set daily in advance, based on the change in the Consumer Price Index of the previous month. 1 Sociedad QuImica y MinerA de Chile S.A. Consolidated Balance Sheets (A translation of the original in Spanish- see note 2 (a))
As of September 30, Note 2003 2002 ---- ---- ThUS$ ThUS$ ASSETS Current assets Cash 14,066 10,797 Time deposits 10,849 3,063 Marketable securities 04 49,811 24,534 Accounts receivable, net 05 159,069 111,748 Other accounts receivable, net 05 8,658 9,710 Accounts receivable from related companies 06 25,339 37,750 Inventories, net 07 227,238 227,745 Recoverable taxes 13,865 11,372 Prepaid expenses 2,808 3,603 Other current assets 17,819 18,067 --------------- -------------- Total current assets 529,522 458,389 --------------- -------------- Property, plant and equipment, net 08 675,980 684,598 --------------- -------------- Other Assets Investments in related companies 09 80,599 77,542 Goodwill, net 10 13,085 11,565 Negative goodwill, net 10 (543) (956) Intangible assets, net 4,774 4,021 Long-term accounts receivable, net 05 8,105 11,969 Long-term accounts receivable from related companies 06 380 509 Other long-term assets 11 50,161 49,157 --------------- -------------- Total other assets 156,561 153,807 --------------- -------------- Total assets 1,362,063 1,296,794 =============== ==============
The accompanying notes form an integral part of these consolidated financial statements. 2
As of September 30, Note 2003 2002 ---- ---- ThUS$ ThUS$ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term bank debt 12 1,274 996 Current portion of long-term debt 12 33,683 61,668 Dividends payable 238 301 Accounts payable 49,879 45,397 Other accounts payable 1,857 1,258 Notes and accounts payable to related companies 06 5,910 5,680 Accrued liabilities 13 17,229 12,085 Withholdings 3,048 3,408 Income taxes 2,747 2,327 Deferred revenues 3,436 1 Deferred income taxes 14 1,865 446 Other current liabilities 669 77 ---------------- -------------- Total current liabilities 121,835 133,644 ---------------- -------------- Long-term liabilities Long-term bank debt 12 308,000 280,000 Other accounts payable 2,878 3,652 Deferred income taxes 14 22,100 11,902 Staff severance indemnities 15 9,878 7,957 ---------------- -------------- Total long-term liabilities 342,856 303,511 ---------------- -------------- Minority interest 16 26,036 21,919 ---------------- -------------- Shareholders' equity Paid-in capital 17 477,386 477,386 Other reserves 17 132,136 122,424 Retained earnings 17 261,814 237,910 ---------------- -------------- Total shareholders' equity 871,336 837,720 ---------------- -------------- Total liabilities and shareholders' equity 1,362,063 1,296,794 ================ ==============
The accompanying notes form an integral part of these consolidated financial statements. 3 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Consolidated Statements of Income (A translation of the original in Spanish- see note 2 (a))
For the period ended September 30, Note 2003 2002 ---- ---- ThUS$ ThUS$ Operating results Sales 528,176 413,771 Cost of sales (424,706) (320,773) --------------- -------------- Gross margin 103,470 92,998 Selling and administrative expenses (36,321) (32,331) --------------- -------------- Operating income 67,149 60,667 --------------- -------------- Non-operating results Non-operating income 19 12,821 9,046 Non-operating expenses 19 (29,526) (29,699) --------------- -------------- Non-operating loss (16,705) (20,653) --------------- -------------- Income before income taxes 50,444 40,014 Income tax expense 14 (12,304) (8,086) --------------- -------------- Income before minority interest 38,140 31,928 Minority interest 16 (2,453) (1,855) --------------- -------------- Net income before extraordinary items and negative goodwill 35,687 30,073 Amortization of negative goodwill 10 420 310 --------------- -------------- Net income for the year 36,107 30,383 =============== ==============
The accompanying notes form an integral part of these consolidated financial statements. 4 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Consolidated Statements of Cash Flows (A translation of the original in Spanish- see note 2 (a))
Period Ended September 30, 2003 2002 ---- ---- ThUS$ ThUS$ Cash flows from operating activities Net income for the year 36,107 30,383 Loss on sale of fixed assets (57) (50) Charges (credits) to income not representing cash flows Depreciation expense 45,124 46,357 Amortization of intangible assets 220 146 Write-offs and accruals 12,711 9,642 Gain on equity investments in related companies (4,794) (2,742) Accrued loss in investments with related companies - 138 Amortization of goodwill 844 896 Amortization of negative goodwill (420) (310) Exchange difference (2,845) 733 Other credits to income not representing cash flows (2,299) (5,244) Other charges to income not representing cash flows 21,492 15,016 Net changes in operating assets and liabilities: (Increase) decrease in trade accounts receivable (26,510) (3,113) Decrease (increase) in inventories 10,583 (19,409) Increase in other assets 16,264 4,920 (Increase) decrease in accounts payable (18,254) 14,469 Increase in interest payable (1,961) (6,055) Increase in net income taxes payable (734) 85 Decrease in other accounts payable (1,501) (1,816) Decrease in VAT and taxes payable 1,942 900 Minority interest 2,453 1,855 ------------ --------- Net cash provided from operating activities 88,365 86,801 ------------ --------- Cash flows from financing activities Payment of dividends (21,302) (16,082) Payment of loans (3,886) (130,584) Payment of documented loans to related companies (5,275) - ------------ --------- Net cash used in from financing activities (30,463) (146,666) ------------ --------- Cash flows from investing activities Sales of property, plant and equipment 129 661 Sales of investments 532 13,974 Other income 7,320 614 Additions to property, plant and equipment (42,307) (25,450) Capitalized interest (1,827) (1,678) Purchase of permanent investments (8,049) (9,801) Investments in financial instruments (31) (224) Other disbursements - - ------------ --------- Net cash used in investing activities (44,233) (21,904) ------------ --------- Effect of inflation on cash and cash equivalents (352) (529) ------------ --------- Net change in cash and cash equivalents 13,317 (82,298) Beginning balance of cash and cash equivalents 65,204 121,536 ------------ --------- Ending balance of cash and cash equivalents 78,521 39,238 ============ =========
The accompanying notes form an integral part of these consolidated financial statements. 5 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 1 - Company Background Sociedad Quimica y Minera de Chile S.A. (the "Company") was registered with the Chilean Superintendency of Securities and Insurance ("SVS") on March 18, 1983. Note 2 - Summary of Significant Accounting Policies a) Basis for the preparation of the consolidated financial statements The accompanying consolidated financial statements have been prepared in U.S. dollars in accordance with accounting principles generally accepted in Chile ("Chilean GAAP") and the regulations of the SVS. For the convenience of the reader, the consolidated financial statements and their accompanying notes have been translated from Spanish into English. Certain accounting practices applied by the Company that conform with Chilean GAAP may not conform with generally accepted accounting principles in the United States ("US GAAP") The consolidated financial statements include the accounts of Sociedad Quimica y Minera de Chile S.A. (the "Parent Company") and subsidiaries (companies in which the Parent Company holds a controlling participation, generally equal to direct or indirect ownership of more than 50%). The Parent Company and its subsidiaries are referred to as the "Company". The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. In accordance with regulations set forth by the SVS in its Circular No. 368 and Technical Bulletins Nos. 42 and 64 of the Chilean Association of Accountants, the consolidated financial statements include the following subsidiaries: 6 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) a) Basis for the preparation of the consolidated financial statements (continued)
Direct or indirect ownership 2003 2002 ---- ---- Foreign subsidiaries: % % Nitrate Corporation of Chile Limited (United Kingdom) 100.00 100.00 Soquimich SRL - Argentina 100.00 100.00 Nitratos Naturais do Chile Ltda. (Brazil) 100.00 100.00 SQM Europe NV (Belgium) 100.00 100.00 SQM North America Corp. (USA) 100.00 100.00 North American Trading Company (USA) 100.00 100.00 SQM Peru S.A. 100.00 100.00 SQM Corporation NV (Holland) 100.00 100.00 S.Q.I. Corporation NV (Holland) 100.00 100.00 Soquimich European Holding BV (Holland) 100.00 100.00 PTM - SQM Iberica S.A. (Spain) 100.00 100.00 SQMC Holding Corporation LLP (USA) 100.00 100.00 SQM Ecuador S.A. 100.00 100.00 Cape Fear Bulk LLC (USA) 51.00 51.00 SQM Colombia Ltda. 100.00 100.00 SQM Investment Corporation NV (Holland) 100.00 100.00 PSH Limited (Cayman Islands) 100.00 100.00 SQM Brasil Ltda. 100.00 100.00 Royal Seed Trading Corporation AVV (Aruba) 100.00 100.00 SQM Japan K.K. 100.00 100.00 SQM Oceania PTY Limited (Australia) 100.00 100.00 SQM France S.A. 100.00 100.00 Fertilizantes Naturales S.A. (Spain) 50.00 50.00 Rs Agro-Chemical Trading AVV (Aruba) 100.00 100.00 SQM Comercial de Mexico S.A. de C.V. 100.00 100.00 SQM Indonesia 80.00 80.00 SQM Virginia LLC (USA) 100.00 100.00 Agricolima S.A. De C.V. (Mexico) 100.00 100.00 SQM Venezuela S.A. 100.00 100.00 SQM Italia SRL (Italy) 95.00 95.00 Comercial Caiman Internacional S.A. (Cayman Islands) 100.00 - Fertilizantes Olmeca y SQM S.A. De C.V. (Mexico) 100.00 - Mineag SQM Africa Limited 100.00 -
7 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) a) Basis for the preparation of the consolidated financial statements (continued)
Direct or indirect ownership 2003 2002 ---- ---- % % Domestic subsidiaries: Servicios Integrales de Transito y Transferencias S.A. 100.00 100.00 Cia. Industrial y Minera S.A. - 100.00 Soquimich Comercial S.A. 60.64 60.64 Sociedad Minera de Chile S.A. - 100.00 Energia y Servicios S.A. - 100.00 Isapre Norte Grande Ltda. 100.00 100.00 Almacenes y Depositos Ltda. 100.00 100.00 SQM Quimicos S.A. - 99.99 Ajay SQM Chile S.A. 51.00 51.00 SQM Nitratos S.A. 99.99 100.00 Proinsa Ltda. 60.58 60.58 SQM Potasio S.A. 100.00 100.00 SQMC International Limitada 60.64 60.64 SQM Salar S.A. 100.00 100.00 SCM SQM Boratos - 100.00 Norsk Hydro Chile S.A. 60.64 -
All significant inter-company balances, transactions and unrealized gains and losses arising from transactions between these companies have been eliminated in consolidation. As the Company exerts control over the subsidiary Fertilizantes Naturales S.A. it has been included in the consolidation for the period ended September 30, 2003 and 2002. At September 30, 2003 and 2002, the subsidiary Lithium Specialties LLP was in development stage and therefore was not included in the consolidation. At September 30, 2002, the subsidiary SCM Antucoya was in development stage and therefore was not included in the consolidation. 8 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) b) Period These consolidated financial statements have been prepared for the nine-month period between January 1st and September 30, 2003 and 2002. c) Reporting currency and monetary correction The financial statements of the Company are prepared in U.S. dollars. As a significant portion of the Company's operations are transacted in U.S. dollars, the U.S. dollar is considered the currency of the primary economic environment in which the Company operates. The Parent Company and those subsidiaries which maintain their accounting records in U.S. dollars are not required, or permitted, to restate the historical dollar amounts for the effects of inflation. The financial statements of domestic subsidiaries, which maintain their accounting records in Chilean pesos have been restated to reflect the effects of variations in the purchasing power of Chilean pesos during the period. For this purpose, and in accordance with Chilean regulations, non-monetary assets and liabilities, equity and income statement accounts have been restated in terms of periods -end constant pesos based on the change in the consumer price index during the period (1,2% and 1,3% in 2003 and 2002, respectively). The resulting net charge or credit to income arises as a result of the gain or loss in purchasing power from the holding of non-U.S. dollar denominated monetary assets and liabilities exposed to the effects of inflation. Prior period financial statements presented for comparative purposes have not been restated to reflect the change in the purchasing power of the Chilean pesos during the most recent year-end. In accordance with Chilean GAAP, amounts expressed in U.S. dollars, including amounts included in the consolidated financial statements as determined in prior years from the translation of financial statements of those Chilean subsidiaries which maintain their accounting records in Chilean pesos, are not adjusted for price-level changes. 9 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) d) Foreign currency i) Foreign currency transactions Monetary assets and liabilities denominated in Chilean pesos and other currencies have been translated to U.S. dollars at the observed exchange rates determined by the Central Bank of Chile in effect at each period-end of Ch$660.97 per US$ 1 at September 30, 2003 and Ch$748,73 per US$ 1 at September 30, 2002. ii) Translation of non-U.S. dollar financial statements In accordance with Chilean GAAP, the financial statements of foreign and domestic subsidiaries that do not maintain their accounting records in U.S. dollars are translated from the respective local currencies to U.S. dollars in accordance with Technical Bulletin No. 64 of the Chilean Association of Accountants ("BT 64") as follows: a) For those subsidiaries and affiliates located in Chile which keep their accounting records in price-level adjusted Chilean pesos: - Balance sheet accounts are translated to U.S. dollars at the period-end exchange rate without eliminating the effects of price-level restatement. - Income statement accounts are translated to U.S. dollars at the average exchange rate each month. The monetary correction account on the income statement, which is generated by the inclusion of price-level restatement on the non-monetary assets and liabilities and shareholders' equity, is translated to U.S. dollars at the average exchange rate for each month. - Translation gains and losses, as well as the price-level restatement to the balance sheet mentioned above, are included as an adjustment in shareholders' equity, in conformity with Circular No. 368 of the SVS. 10 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) d) Foreign currency (continued) b) The financial statements of those foreign subsidiaries that keep their accounting records in currencies other than U.S. dollar have been translated at historical exchange rates as follows: - Monetary assets and liabilities are translated at period-end exchange rates between the US dollar and the local currency. - All non-monetary assets and liabilities and shareholders' equity are translated at historical exchange rates between the US dollar and the local currency. - Income and expense accounts are translated at average exchange rates between the US dollar and the local currency. - Any exchange differences are included in the results of operations for the period. Foreign exchange differences for the period ended September 30, 2003 and 2002 generated net earnings (loss) of ThUS$ 2,845 and ThUS$ (733), respectively, which have been charged to the consolidated statements of income in each respective period. The monetary assets and liabilities of foreign subsidiaries were translated into U.S. dollars at the exchange rates per US dollar prevailing at September 30, as follows: 2003 2002 ---- ---- Brazilian Real 2.94 3.85 New Peruvian Sol 3.48 3.64 Colombian Peso 2,850.30 2,808.04 Argentine Peso 2.93 3.74 Japanese Yen 111.25 122.60 Sucre Ecuador 1.00 1.00 Euro 1.17 1.01 Mexican Peso 11.04 10.23 Indonesian Rupee 8,389.00 9,015.10 Australian Dollar 1.52 1.84 Pound Sterling 1.66 0.64 Rand 7.22 - The Company uses the "observed exchange rate", which is the rate determined daily by the Chilean Central Bank based on the average exchange rates at which bankers conduct authorized transactions. 11 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) e) Cash and cash equivalents The Company considers all highly liquid investments with a remaining maturity of less than 90 days as of the closing date of the financial statements to be cash equivalents. f) Time Deposits Time deposits are recorded at cost plus accrued interest. g) Marketable securities Marketable securities are recorded at the lower of cost plus accrued interest or market value. h) Allowance for doubtful accounts The Company records an allowance for doubtful accounts based on estimated probable losses. i) Inventories and materials Inventories of finished products and work in process are valued at average production cost. Raw materials and products acquired from third parties are stated at average cost and materials-in-transit are valued at cost. All such values do not exceed net realizable values. Inventories of non-critical spare parts and supplies are classified as other current assets, except for those items which the Company estimates to have a turnover period of one year or more, which are classified as other long-term assets. j) Income taxes and deferred income taxes Prior to 2000, income taxes were charged to results in the same period in which the income and expenses were recorded and were calculated in accordance with the enacted tax laws in Chile and the other jurisdictions in which the Company operated. 12 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) j) Income and deferred taxes (continued) Under Chilean law, the Parent Company and its subsidiaries are required to file separate tax declarations. Beginning January 1, 2000, the Company records deferred income taxes in accordance with Technical Bulletin Nos. 60, 69, 71 and 73 of the Chilean Association of Accountants, and with Circular No. 1466 issued on January 27, 2000 by the SVS, recognizing the deferred tax effects of temporary differences between the financial and tax values of assets and liabilities, using the liability method. The effect of the temporary differences at December 31, 1999 were recorded in complementary asset and liability accounts, which are recognized in the statement of operations over the estimated period in which they reverse. k) Property, plant and equipment Property, plant, equipment and property rights are recorded at cost, except for certain assets that were restated according to a technical appraisal in 1988. Depreciation expense has been calculated using the straight-line method based upon the estimated useful lives of the assets and is charged directly to expense. Fixed assets acquired through financing lease agreements are accounted for at the present value of the minimum lease payments plus the purchase option based on the interest rate included in each contract. The Company does not legally own these assets and therefore cannot freely dispose of them. In conformity with Technical Bulletin No. 31 of the Chilean Association of Accountants, the Company capitalizes interest cost associated with the financing of new assets during the construction period of such assets. Maintenance costs of plant and equipment are charged to expenses as incurred. The Company obtains property rights and mining concessions from the Chilean state. Other than minor filing fees, the property rights are usually obtained without initial cost, and once obtained, are retained perpetually by the Company as long as the annual fees are paid. Such fees, which are paid annually in March, are recorded as prepaid assets to be amortized over the following twelve months. Values attributable to these original mining concessions are recorded in property, plant and equipment and are being amortized on a straight-line basis over 50 years. 13 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) l) Investments in related companies Investments in related companies over which the Company has significant influence, are included in other assets and are recorded using the equity method of accounting. Accordingly, the Company's proportional share in the net income or loss of each investee is recognized in the non-operating income and expense classification in the consolidated statements of income on an accrual basis, after eliminating any unrealized profits from transactions with the related companies. The translation adjustment to U.S. dollars of investments in domestic subsidiaries, which maintain their accounting records and are controlled in Chilean pesos is recognized in the other reserves component of stockholders' equity. Direct and indirect investments in foreign subsidiaries or affiliates are controlled in U.S. dollars. m) Goodwill and negative goodwill Goodwill is calculated as the excess of the purchase price of companies acquired over their net book value, whereas negative goodwill occurs when the net book value exceeds the purchase price of companies acquired. Goodwill and negative goodwill resulting from equity method investments are maintained in the same currency in which the investment was made and are amortized based on the estimated period of investment return, generally 20 and 10 years for goodwill and negative goodwill, respectively. n) Intangible assets Intangible assets are stated at cost plus acquisition expenses and are amortized over a period of up to a maximum of 40 years, in accordance with Technical Bulletin No. 55 of the Chilean Association of Accountants. o) Mining development cost Mining development costs are recorded in other long-term assets and are amortized utilizing the unit of production basis. 14 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) p) Accrued employee severance The Company calculates the liability for staff severance indemnities based on the present value of the accrued benefits for the actual years of service worked assuming an average employee tenure of 24 years and a real annual discount rate of 9%. q) Vacations The cost of employee vacations is recognized in the financial statements on an accrual basis. r) Dividends Dividends are generally declared in U.S. dollars but are paid in Chilean pesos. s) Derivative Contracts The Company maintains derivative contracts to hedge against movements in foreign currencies, which are recorded in conformity with Technical Bulletin No. 57 of the Chilean Association of Accountants. Such contracts are recorded at fair value with net losses recognized on an accrual basis and gains recognized when realized. t) Reclassifications Certain reclassifications have been made in the 2003 and 2002 numbers to conform to the current period presentation. u) Revenue recognition Revenue is recognized on the date goods are physically delivered or when they are considered delivered according to the terms of the contract. 15 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 2 - Summary of Significant Accounting Policies (continued) v) Computer software In accordance with Circular No. 981 dated March 28, 1990 of the SVS, computer systems acquired by the Company are recorded at cost. w) Research and development expenses Research and development cost are charged to the income statement in the period in which they are incurred. Fixed assets which are acquired for their use in research and development activities and are determined to provide additional benefits to the Company are recorded under the relevant item within property, plant and equipment. Note 3 - Changes in Accounting Principles There were no changes in the accounting principles used by the Company during 2003 and 2002. Note 4 - Marketable Securities As of September 30 marketable securities are detailed as follows: 2003 2002 ThUS$ ThUS$ Mutual funds 49,811 24,534 --------------- ---------------- Total 49,811 24,534 =============== ================ 16 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 5 - Short-term and long-term Accounts Receivable a) Short term accounts receivable and other accounts receivable as of September 30 are detailed as follows:
Between 90 days Total Up to 90 days and 1 year 2003 Short-term (net) 2003 2002 2003 2002 Subtotal 2003 2002 ---- ---- ---- ---- -------- ---- ---- ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ Trade accounts receivable 108,444 87,809 24,399 7,396 132,843 126,235 90,984 Allowance for doubtful accounts (6,608) Notes receivable 20,424 18,346 15,500 5,171 35,924 32,834 20,764 Allowance for doubtful accounts (3,090) --------- --------- Accounts receivable, net 159,069 111,748 ========= ========= Other accounts receivable 6,113 9,228 3,103 1,320 9,216 8,658 9,710 Allowance for doubtful accounts (558) --------- --------- Other accounts receivable, net 8,658 9,710 ========= =========
17 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 5 - Short-term and Long-term Accounts Receivable (continued) Consolidated Short-term and Long-term Receivables - by Geographic Location
Europe, Africa and Asia and USA, Mexico Chile the Middle East Oceania and Canada 2003 2002 2003 2002 2003 2002 2003 2002 ---- ---- ---- ---- ---- ---- ---- ---- ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ --------------------------------------------------------------------------------- Net short-term trade accounts receivable Balance 46,196 29,768 33,729 21,379 3,309 4,009 29,143 27,089 % of total 36.59% 32.72% 26.72% 23.50% 2.62% 4.41% 23.09% 29.77% Net short-term notes receivable Balance 29,237 17,465 1,145 878 20 30 481 386 % of totalb 89.05% 84.11% 3.49% 4.23% 0.06% 0.14% 1.46% 1.86% Net short-term other accounts receivable Balance 4,699 5,905 1,281 1,089 3 5 2,451 2,398 % of total 54.27% 60.81% 14.80% 11.22% 0.03% 0.05% 28.31% 24.70% --------------------------------------------------------------------------------- Subtotal short-term accounts receivable, net Balance 80,132 53,138 36,155 23,346 3,332 4,044 32,075 29,873 % of total 47.78% 43.75% 21.56% 19.22% 1.98% 3.33% 19.12% 24.60% Long-term accounts receivable, net Balance 6,993 10,820 69 58 - - 1,028 51 % of total 86.28% 90.40% 0.85% 0.48% - - 12.68% 0.43% --------------------------------------------------------------------------------- Total short and long-term accounts receivable, net Balance 87,125 63,958 36,224 23,404 3,332 4,044 33,103 29,924 % of total 49.55% 47.93% 20.60% 17.54% 1.89% 3.03% 18.83% 22.43% =================================================================================
Latin America and the Caribbean Total 2003 2002 2003 2002 ---- ---- ---- ---- ThUS$ ThUS$ ThUS$ ThUS$ ---------------------------------------------- Net short-term trade accounts receivable Balance 13,858 8,739 126,235 90,984 % of total 10.98% 9.60% 100.00% 100.00% Net short-term notes receivable Balance 1,951 2,005 32,834 20,764 % of totalb 5.94% 9.66% 100.00% 100.00% Net short-term other accounts receivable Balance 224 313 8,658 9,710 % of total 2.59% 3.22% 100.00% 100.00% ---------------------------------------------- Subtotal short-term accounts receivable, net Balance 16,033 11,057 167,727 121,458 % of total 9.56% 9.10% 100.00% 100.00% Long-term accounts receivable, net Balance 15 1,040 8,105 11,969 % of total 0.19% 8.69% 100.00% 100.00% ---------------------------------------------- Total short and long-term accounts receivable, net Balance 16,048 12,097 175,832 133,427 % of total 9.13% 9.07% 100.00% 100.00% ==============================================
18 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 6 - Balances and Transactions with Related Parties Accounts receivable from and payable to related companies are stated in US dollars and accrue no interest. Transactions are made under terms and conditions which are similar to those offered to unrelated third parties. a) Amounts included in balances with related parties as of September 30 2003 and 2002 are as follows:
- -------------------------------------------------------------------------------------------------------- Short-term Long-term 2003 2002 2003 2002 ---- ---- ---- ---- Accounts receivable ThUS$ ThUS$ ThUS$ ThUS$ - -------------------------------------------------------------------------------------------------------- Ajay Europe S.A.R.L. 4,176 4,591 - - Nutrisi Holding N.V. 1,935 - - - Generale de Nutrition Vegetale S.A. 171 165 - - Fertilizantes Olmeca S.A. - 3,988 - - Mineag SQM Africa Limited - 3,987 - - Abu Dhabi Fertilizer Ind. WLL 4,366 5,573 - - NU3 N.V. 24 3,593 - - Doktor Tarsa -SQM Turkey 2,481 135 - Comercial Caiman Internacional S.A. - 3,107 - - SQM Lithium Specialties Limited 666 666 - - Empresas Melon S.A. - - 380 509 Sales de Magnesio S.A. 19 31 - - Ajay North America LLC 258 243 - - Norsk Hydro ASA 27 192 - - Hydro Agri Int.-France - 1,816 - - Hydro Asia Trade 893 1,239 - - Hydro Agri France S.A. 1,050 379 - - Hydro Poland SP 95 132 - - Hydro Agri Benelux B.V 129 100 - - Hydro Agri Hellas S.A. 62 77 - - Hydro Agri Australia Ltd. 465 602 - - Hydro Agri UK Ltd.. 104 137 - Hydro Agri GMBH & CO KG 166 59 - - Hydro Agri AB 44 39 - - Hydro Agri Colombia 981 28 - - PCS Yumbes 224 4,366 - - NU3 B.V. 530 545 - - Hydro Agri Argentina 54 653 - - Adubo Trevo S.A. 16 - - - Hydro Plant Nutr. OSLO 32 13 - - Hydro Czech Republic 2 - - - Hydro Agricola Internacional 71 451 - - Impronta SRI 4,632 - - - Hydro Agri Espana S.A. 1,627 - - - Hydro Agri North America 7 71 - - Hydro Agri Norge 11 - - - Hydro Agri Venezuela - 772 Hydro Agri Mexico S.A. de C.V. 21 - - - ------------ ------------ ------------ ------------ Total 25,339 37,750 380 509 ============ ============ ============ ============
19 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 6 - Balances and Transactions with Related Parties (continued) a) Amounts included in balances with related parties as of September 30, 2003 and 2002, continued:
Short-term 2003 2002 ---- ---- Accounts payable ThUS$ ThUS$ Ajay Europe S.A.R.L. - 820 Adm. y Servicios Santiago S.A. de C.V. 58 99 Abu Dhabi Fertilizar Ind. WLL - 90 NU3 N.V. 706 1,682 SCM Antucoya - 100 Rotem Amfert Negev Limited 1,527 168 Hydro Agri Porsgrunn 189 104 Hydro Agricola Internacional - 103 Hydro Agri North America - 182 Hydro Agri Mexico de S.A de C.V. - 109 Hydro Agri Int - France 2,407 496 Hydro Agri Colombia - 84 NU3 B.V. - 433 Hydro Fertilizante Ltda. 1,023 847 Fertilizantes Olmeca - 16 Mineag SQM Africa Limited - 347 --------------- --------------- Total 5,910 5,680 =============== ===============
There were no outstanding long-term accounts payable with related parties as September 30, 2003 and 2002 20 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 6 - Balances and Transactions with Related Parties (continued) b) During 2003 and 2002, principal transactions with related parties were as follows:
Type of Amount of Impact on income Company Relationship transaction Transaction (charge) credit - ------- ------------ ----------- ----------- --------------- 2003 2002 2003 2002 ---- ---- ---- ---- ThUS$ ThUS$ ThUS$ ThUS$ NU3 N.V. (Belgica) Indirect Sales of products 3,376 912 1,322 360 Doktor Tarsa Indirect Sales of products 1,679 471 1,090 345 Mineag SQM Africa Ltd. Indirect Sales of products - - 10,289 2,638 Abu Dhabi Fertilizer WLL Indirect Sales of products 1,523 298 1,878 502 Hydro Agri Venezuela Shareholder Sales of product - - 826 363 Ajay Europe S.A.R.L. Indirect Sales of products 4,804 1,659 5,369 1,234 NU3 B.V. Indirect Sales of products 3,380 1,329 2,631 847 Adubo Trevo S.A. Indirect Sales of products 5,148 1,220 380 173 PCS Yumbes SCM Shareholder Purchases of 14,815 2,570 - - products PCS Yumbes SCM Shareholder Sales of products 8,755 5,562 11,252 6,976 Hydro Agri (U.K) Ltd. Shareholder Sales of product 723 216 697 169 Hydro Asia trade Pte Ltd. Shareholder Sales of product 3,516 781 4,113 764 Hydro Agri France S.A. Shareholder Sales of product 5,214 1,202 3,190 602 Hydro Agri International Shareholder Sales of product 2,528 149 3,677 573 Hydro Agri International Shareholder Sales of product 5,214 1,202 3,364 1,103 France Hydro Agri Hellas S.A. Shareholder Sales of product 1,129 253 502 142 Hydro Agri Benelux B.V. Shareholder Sales of product 4,849 983 3,854 394 Hydro agri Rotterdam B.V. Shareholder Sales of product - - 534 175 Hydro Agri Australia Ltd. Shareholder Sales of product 1,195 317 987 191 Hydro Agri Espana S.A. Shareholder Sales of product 3,504 694 - - Hydro Agri Argentina Shareholder Sales of product 6,076 1,526 1,215 212 Hydro Agri Colombia Ltda Shareholder Sales of product 1,815 586 28 5 Hydro Agri GMBH & CO KG Shareholder Sales of products 936 265 322 85 Hydro Agri Planta Nutri Shareholder Sales of products 1,156 464 581 194 Poland Ajay North America LLC Indirect Sales of products 5,468 1,730 3,789 1,240 Nutrisi Holding NV Indirect Sales of products - - 1,538 471
21 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 7 - Inventories Inventories are summarized as follows:
2003 2002 ---- ---- ThUS$ ThUS$ Finished products 126,938 126,202 Work in process 88,983 90,961 Supplies 11,317 10,582 ---------------- ---------------- Total 227,238 227,745 ================ ================
Note 8 - Property, Plant and Equipment Property, plant and equipment are summarized as follows:
2003 2002 ---- ---- ThUS$ ThUS$ Land Land 20,003 13,453 Mining Concessions 29,790 16,708 Other Lands 13,157 12,777 --------------- --------------- 62,950 42,938 --------------- --------------- Buildings and infrastructure Buildings 149,168 156,268 Installations 278,210 280,133 Construction-in-progress 37,746 28,006 Other 20,190 940 --------------- --------------- 485,314 465,347 --------------- --------------- Machinery and Equipment Machinery 387,914 388,084 Equipment 104,661 100,174 Construction-in-progress 18,048 13,871 Other 16,407 10,487 --------------- --------------- 527,030 512,616 --------------- ---------------
22 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 8 - Property, Plant and Equipment (continued)
2003 2002 ---- ---- ThUS$ ThUS$ Other fixed assets Tools 7,631 7,968 Furniture and office equipment 13,582 18,190 Project-in-progress 13,987 19,755 Other 5,859 401 --------------- --------------- 41,059 46,314 --------------- --------------- Amounts relating to technical revaluation of fixed assets Land 8,651 8,651 Buildings and infrastructure 40,627 40,627 Machinery and equipment 12,109 12,127 Other assets 53 53 --------------- ------------------ 61,440 61,458 --------------- ------------------ Total property, plant and equipment 1,177,793 1,128,673 --------------- ------------------ Less: Accumulated depreciation Land (9,413) (9,135) Buildings and infrastructure (178,049) (153,942) Machinery and equipment (265,103) (234,915) Other fixed assets (16,612) (15,177) Technical appraisal (32,636) (30,906) --------------- ------------------ Total accumulated depreciation (501,813) (444,075) --------------- ------------------ Net property, plant and equipment 675,980 684,598 =============== ================== 2003 2002 Depreciation for the period ended September 30: ThUS$ ThUS$ Buildings and infrastructure 18,977 19,088 Machinery and equipment 23,810 25,013 Other fixed assets 1,030 937 Technical revaluation 1,307 1319 --------------- ------------------ Total depreciation 45,124 46,357 =============== ==================
23 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 8 - Property, Plant and Equipment (continued) The Company has capitalized assets obtained through leasing, which are included in other fixed assets and are as follows:
2003 2002 ThUS$ ThUS$ Administrative office buildings 2,086 1,988 Accumulated depreciation (401) (355) ------------------ ---------------- Total assets in leasing 1,685 1,633 ================== ================
Note 9 - Investments in and Receivables from Related Parties a) Information on foreign investments: There are no plans for the foreign investments to pay dividends, as it is the Company's policy to reinvest those earnings. The Company has not designated their foreign investments as net investment hedges. b) Transactions performed during the year 2003 On January 27, 2003, SQM Comercial de Mexico S.A. de C.V. and SQM Nitratos S.A. acquired 8,750 shares of the related company Fertilizantes Olmeca y SQM S.A. de C.V. which represented 50% of its ownership. Consequently, Fertilizantes Olmeca y SQM S.A. de C.V. became a subsidiary of SQM S.A. This transaction gave rise to goodwill for the amount of ThUS$ 279. Subsequently, SQM Nitratos S.A. acquired from SQM Comercial de Mexico S.A. de C.V. 8,749 shares in Fertilizantes Olmeca y SQM S.A. de C.V. This transaction gave rise to no goodwill or negative goodwill. On January 31, 2003, SQM S.A. acquired shares owned by SQM Nitratos S.A. in Sociedad Contractual Minera Antucoya for an amount of ThUS$ 100. This gave rise to the ownership of all the shares of SCM Antucoya in just one shareholder. Consequently, this transaction resulted in the legal and immediate liquidation of SCM Antucoya and the acquisition by SQM S.A. of all this company's equity, assets and liabilities. 24 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 9 - Investments in and Receivables from Related Parties (continued) On March 30, 2003, Fertilizantes Olmeca y SQM S.A. de C.V. increased its capital by ThUS$ 2,000 through the issuance of 431,200 shares, which were subscribed in full by SQM Nitratos S.A. As a result, SQM Nitratos S.A. has ownership interest of 78.29% and SQM Comercial de Mexico has ownership interest of 21.71%. On March 30, 2003, Soquimich European Holding acquired 50% of the ownership interest of Mineag SQM Africa Ltd. from Ravlin Investment Limited for an amount of ThUS$ 990. This transaction gave rise to goodwill of ThUS$ 705. Consequently, Mineag SQM Africa Ltd. became a subsidiary of SQM S.A. On April 28, 2003, SQM Comercial S.A. acquired from Norsk Hydro ASA , 819,999 shares from Norsk Hydro Chile S.A. and SQM Comercial Internacional Ltda., as subsidiary company of SQMC, acquired one remaining share, with which, SQMC becomes the owner and controls 100% of Norsk Hydro Chile S.A. This transaction generated a goodwill of ThUS$ 1,282. On June 30, 2003, SQM Nitratos S.A. acquired the shares owned by SQM S.A. in Sociedad Energia y Servicios S.A.. This transaction amounted to ThUS$ 2,422 . The above mentioned operation resulted in the consolidation of all the shares of Energia y Servicios, in one single shareholder, SQM Nitratos S.A., and as a consequence, through this fact and in full right, this resulted in the immediate dissolution of Energia y Servicios S.A. SQM Nitratos S.A. acquired 100% of the shareholder's equity, the assets and liabilities from the dissolved company. On June 30, 2003, the subsidiaries SQM Virginia LLC and North American Trading Company, made a capital contribution in the subsidiary SQM Lithium Specialties LLP. This capital contribution amounted to ThUS$ 1,678, by 99% and 1%, respectively. On September 30, 2003, the subsidiaries SQM Virginia LLC and North American Trading Company, made a capital contribution in the subsidiary SQM Lithium Specialties LLP. amounting to ThUS$ 367, by 99% and 1%, respectively. On September 30 2003, SQM Corporation N.V. participated to a capital increase of Ajay Europe SARL in equal parts with chemicals INC. Both maintaining its ownership percentages. 25 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 9 - Investments in and Receivables from Related Parties (continued) c) Transactions performed during the year 2002. On March 21, 2002, SQM North America Corporation acquired ownership interest of 50% of the related company SQM Venezuela S.A. for ThUS$ 250, which added to the ownership interest maintained by SQM Nitratos S.A. in the aforementioned company, results in SQM Venezuela S.A. being a 100% indirect subsidiary of SQM S.A. This transaction gave rise to goodwill of ThUS$ 166. On April 5, 2002, the subsidiary Royal Seed Trading Corportaion A.V.V. made a contribution of Th.US$ 120.5 to form a joint venture with Rui Xin Packaging Materials, Sanhe Co. Ltd. On May 1, 2002, the subsidiary Soquimich European Holdings B.V. acquired 50% ownership of the affiliate Nutrichem N.V., which subsequently changed its name to Nutrisi Holding N.V. On May 7, 2002, SQM Nitratos S.A. concurred to a capital increase in SQM Brasil Ltda. , which resulted in ownership of 88.54%, SQM Quimicos S.A. did not concur to this increase and reduced its ownership to 11.46%. During May 2002, P.S.H. Limited made a capital increase of Th.US$ 250 in its affiliate Ajay Europe S.A.R.L. During May 2002, Soquimich European Holding increased its ownership in its affiliate FNC Italy S.R.L. to 95%, thereby becoming an indirect subsidiary of SQM S.A. Subsequently, FNC Italy S.R.L. changed its name to SQM Italia S.R.L. On May 28, 2002, the subsidiary Inversiones y Asesorias SQM Limitada changed its name to Almacenes y Depositos Limitada. On June 12, 2002, Soquimich European Holding acquired 50% of Impronta S.R.L. On August 31, 2002, SQM S.A acquired shares, which were owned by SQM Nitratos S.A. over Cia. Industrial y Minera S.A. (Cimin S.A) in MUS$ 5,016. This situation produced that all shares of Cimin S.A. are concentrated on an only one shareholder, SQM S.A., and consequently, it was impacted on the immediate dissolution of Cimin S.A, owning SQM S.A. the total equity, assets and liabilities of this entity. 26 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 9 - Investments in and Receivables from Related Parties (continued) On September 27, 2002, SQM Nitratos S.A made an contribution of capital of MUS$ 12,040 over SQM North America Corporation, acquiring the ownership of 39.946782% over this entity. No concurrence for the increase of equity made the participation of the old owners decreased. SQM S.A. reduced its ownership from 81.75% to 49.093506% and Soquimich European Holding reduced its ownership from 18.25% to 10.959712%. On September 30, 2002, SQM SA acquired shares which were owned by SQM Nitratos S.A. over the subsidiary SCM SQM Boratos by MU$ 887. This situation produced that all shares of SCM SQM Boratos are concentrated on an only one shareholder, SQM S.A., and consequently, it was impacted on the immediate dissolution of SCM SQM Boratos, acquiring SQM S.A. the total shareholder`s equity, assets and liabilities of this entity. 27 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 9 - Investments in and Receivables from Related Companies (continued) d) Detail of investments in related companies
- --------------------------------------------------------------------------------------------------------------------------------- Tax Country of Controlling Number Ownership Equity of Registration of interest companies ------------------- ---------------------- Number Company origin currency shares 2003 2002 2003 2002 % % ThUS$ ThUS$ - --------------------------------------------------------------------------------------------------------------------------------- 93390000-2 Empresas Melon S.A.. Chile - 653,748,837 14.05 14.05 302,33 247,340 0-E SQM Lithium Specialties USA US$ - 100.00 100.00 26,392 25,558 Limited* 0-E Ajay North America LLC USA US$ - 49.00 49.00 11,416 14,038 77093830-9 SCM Antucoya* Chile - 490 100.00 100.00 - 6,650 0-E Abu Dhabi Fertilizer UAE US$ 1,961 37.00 37.00 3,177 3,675 Industries WL 0-E Fertilizantes Olmeca y Mexico Mex. $ 183,000 100.00 50.00 - 1,717 SQM S.A. de C.V 0-E Nutrisi Holding N.V. Belgium US$ - 50.00 50.00 3,296 742 0-E Doktor Tarsa Turkey US$ - 50.00 50.00 1,588 471 0-E Mineag SQM Africa Limited South US$ - 100.00 50.00 (217) 640 Africa 0-E Ajay Europe S.A.R.L. France US$ 36,700 50.00 50.00 3,350 634 77557430-5 Sales de Magnesio Ltda. Chile US$ - 50.00 50.00 266 150 81767200-0 Asoc. Garantizadora Chile - - 3.31 3.31 704 664 Pensiones O-E Rui Xin Packaging China US$ - 25.00 25.00 482 480 Materials Sanhe Co.Ltd O-E Impronta SRL Italia Euros - 50.00 50.00 1,131 48 Total - ------------------------------------------------------------------------------------------------------------------------------ Tax Book value Net income Equity participation Registration of investment (loss) in net income (loss) ----------------- -------------------- --------------------- Number Company 2003 2002 2003 2002 2003 2002 ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ - ------------------------------------------------------------------------------------------------------------------------------ 93390000-2 Empresas Melon S.A.. 42,478 34,751 21,893 16,902 3,076 2,375 0-E SQM Lithium Specialties 26,392 25,558 (1,564) - - - Limited* 0-E Ajay North America LLC 5,594 6,879 924 308 453 151 77093830-9 SCM Antucoya* - 6,650 - - - - 0-E Abu Dhabi Fertilizer 1,175 1,360 174 - 64 - Industries WL 0-E Fertilizantes Olmeca y - 859 382 - 191 SQM S.A. de C.V - 0-E Nutrisi Holding N.V. 1,648 371 1,511 (220) 756 (110) 0-E Doktor Tarsa 794 236 123 - 61 - 0-E Mineag SQM Africa Limited - 320 (309) - - - 0-E Ajay Europe S.A.R.L. 1,675 317 - - - - 77557430-5 Sales de Magnesio Ltda. 133 75 72 52 36 26 81767200-0 Asoc. Garantizadora 23 22 - - - - Pensiones O-E Rui Xin Packaging 121 120 - - - - Materials Sanhe Co.Ltd O-E Impronta SRL 566 24 696 - 348 - -------------------- Total 80,599 77,542 ====================
o In development stage 28 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 10 - Goodwill and Negative Goodwill Goodwill and negative goodwill and the related amortization is summarized as follows: a) Goodwill
September 30, 2003 September 30, 2002 Tax Registration Amount amortized Goodwill Amount amortized Goodwill Number Company during the balance during the period balance period ThUS$ ThUS$ ThUS$ ThUS$ 0-E PTM - SQM Iberica S.A. - 88 15 85 0-E Doktor Tarsa 62 90 16 377 79768170-9 Soquimich Comercial S.A. 113 310 113 460 78208790-8 SCM SQM Boratos - - 65 - 93390000-2 Empresas Melon S.A. 363 7,759 381 7,333 79626800-K SQM Salar S.A. 32 93 32 137 0-E SQM Mexico S.A. de C.V. 42 1,017 42 1,072 96864750-4 SQM Potassium S.A. 108 1,916 108 2,060 0-E SQM Venezuela S.A. - - 124 41 0-E Comercial Caiman Int. 17 205 - - S.A. 0-E Fertilizantes Olmeca 42 237 - - 96801610-5 Norsk Hydro Chile S.A. 65 1,229 - - O-E Impronta Italy S.R.L. - 141 - - ----------------- ----------------- ------------------- -------------- Total 844 13,085 896 11,565 ================= ================= =================== ==============
b) Negative Goodwill
September 30, 2003 September 30, 2002 Tax Negative Negative Registration Amount amortized Goodwill Amount amortized Goodwill Number Company during the period Balance during the period Balance ThUS$ ThUS$ ThUS$ ThUS$ 79626800-K SQM Salar S.A. 157 18 158 228 96575300-1 Minera Mapocho S.A. 153 525 152 728 O-E Mineag SQM Africa Limited 110 - - - ----------------- ----------------- ------------------- -------------- Total 420 543 310 956 ================= ================= =================== ==============
29 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 11 - Other Long-term Assets Other long-term assets are summarized as follows:
2003 2002 ---- ---- ThUS$ ThUS$ Engine and equipment spare-parts, net 24,445 25,507 Nitrate deposit development costs 7,257 4,061 Mineral development costs 12,056 10,821 Pension plan 1,137 1,911 Construction of Salar-Baquedano road 1,800 1,920 Deferred loan issuance costs 2,669 3,871 Other 797 1,066 --------------- --------------- Total 50,161 49,157 =============== ===============
Note 12 - Bank Debt a) Short-term bank debt is detailed as follows:
2003 2002 Bank or financial institution ThUS$ ThUS$ Other banks 1,274 996 --------------- --------------- Total 1,274 996 =============== =============== Annual average interest rate 3.04% 4.25%
30 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 12 - Bank Debt (continued) b) Long-term bank debt is detailed as follows:
2003 2002 ---- ---- Bank or financial institution ThUS$ ThUS$ Union Bank of Switzerland (1) 200,642 200,642 ING Bank (3) 60,318 60,133 Bank of America N.A. N.Y. (2) 80,723 80,893 ---------------- ------------------- Total 341,683 341,668 ---------------- ------------------- Less: Current portion (33,683) (61,668) ---------------- ------------------- Long-term portion 308,000 280,000 ================ ===================
(1) U.S. dollar-denominated loan without guarantee, interest rate of 7.7% per annum, paid semi-annually. The principal is due on September 15, 2006. (2) U.S. dollar-denominated loan without guarantee, interest rate of 2.582% per annum, paid semi-annually. The principal is divided into five equal semi-annual partial installments, beginning in November 2003 with the final installment ending in November 2005. (3) U.S. dollar-denominated loan without guarantee, interest rate of 1.99% per annum, paid semi-annually. The principal is divided into two equal partial installments, in December 2005 and in December 2006. c) The maturity of long-term debt is as follows:
2003 2002 ---- ---- ThUS$ ThUS$ Years to maturity Current portion 33,683 61,668 1 to 2 years 32,000 32,000 2 to 3 years 216,000 32,000 4 to 5 years 60,000 216,000 --------------- ---------------- Total 341,683 341,668 =============== ================
31 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 13 - Accrued Liabilities As of September 30, 2003 and 2002, accrued liabilities are summarized as follows:
2003 2002 ---- ---- ThUS$ ThUS$ Provision for royalties 1,494 932 Quarterly bonus 372 540 Commissions on consignment goods 897 629 Taxes and monthly income tax installment payments 1,028 786 Vacation accrual 5,492 4,620 Accrued employee benefits 1,248 223 Legal expenses 1,100 - Other accruals 3,498 3,175 Marketing expenses 2,100 1,180 ------------------ ----------------- Total current liabilities 17,229 12,085 ================== =================
Note 14 - Income and Deferred Taxes a) At September 30, 2003 and 2002 the Company has the following consolidated balances for retained tax earnings, income not subject to taxes, tax loss carry-forwards and credit for shareholders:
2003 2002 ---- ---- ThUS$ ThUS$ Accumulated tax basis retained earnings with tax credit 23,997 25,096 Accumulated tax basis retained earnings with no tax credit - 10 Tax loss carry-forwards (1) 92,099 116,410 Credit for shareholders 4,539 4,639
(1) Income tax losses in Chile can be carried forward indefinitely 32 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 14 - Income and Deferred Taxes (continued) b) The deferred taxes as of September 30, 2003 and 2002 represented a net liability of ThUS$ 23,965 and ThUS$ 12,348, respectively, and consisted of:
2003 Deferred tax asset Deferred tax liability Short-term Long-term Short-term Long-term ---------- --------- ---------- --------- ThUS$ ThUS$ ThUS$ ThUS$ Temporary differences Allowance for doubtful accounts 901 308 - - Vacation accrual 338 - - - Diferred income 204 - - - Accrued loss in exchange rate insurance 45 - - 73 Unrealized gain on sale of products 5,065 - - - Provision for obsolescence - 1,988 - - Production expenses - - 11,317 - Accelerated depreciation - - - 60,049 Exploration expenses - - - 4,321 Capitalized interest - - - 6,260 Staff severance indemnities - - - 1,077 Capitalized expenses - - - 665 Tax loss carry-forwards - 15,634 - - Unaccrued interest 111 - - - Provision for sinister expenses - - - 425 Other 286 - 28 130 - ------------------------------------------------------------------------------------------------------------ Total complementary accounts - (701) (2,530) (33,671) - -------------------------------------------------------------------------------------------------------------- Total deferred taxes 6,950 17,229 8,815 39,329 - --------------------------------------------------------------------------------------------------------------
33 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 14 - Income and Deferred Taxes (continued)
2002 Deferred tax asset Deferred tax liability Short-term Long-term Short-term Long-term ---------- --------- ---------- --------- ThUS$ ThUS$ ThUS$ ThUS$ Temporary differences Allowance for doubtful accounts 281 832 - - Vacation accrual 747 - - - Unrealized gain on sale of products 6,068 - 123 - Provision for obsolescence - 1,184 - - Production expenses - - 11,016 - Accelerated depreciation - - - 58,372 Exploration expenses - - - 4,114 Capitalized interest - - - 6,538 Staff severance indemnities - - - 2,457 Losses from derivative transactions - 591 - - Capitalized expenses - - - 819 Tax loss carry-forwards - 21,624 - - Other 369 - 102 648 - ----------------------------------------------------------------------------------------------------------------------- Total gross deferred taxes 7,465 24,231 11,241 72,948 Total complementary accounts (12) (1,618) (3,342) (38,433) - ----------------------------------------------------------------------------------------------------------------------- Total deferred taxes 7,453 22,613 7,899 34,515 - -----------------------------------------------------------------------------------------------------------------------
c) Income tax expense is summarized as follows:
2003 2002 ---- ---- ThUS$ ThUS$ Provision for current income tax (2,978) (3,552) Effect of deferred tax assets and liabilities (5,011) (6,092) Effect of amortization of complementary accounts (4,066) 1,138 Other tax charges and credits (249) 420 ------------------- --------------- Total income tax expense (12,304) (8,086) =================== ===============
34 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 15 - Staff Severance Indemnities Staff severance indemnities are summarized as follows:
2003 2002 ---- ---- ThUS$ ThUS$ Opening balance 9,143 8,326 Increases in obligation 2,411 1,530 Payments (2,355) (805) Exchange difference 679 (1,094) ------------------- ------------------ Balance as of September 30 9,878 7,957 =================== ==================
Note 16 - Minority Interest Minority interest is summarized as follows:
Equity Net Income/(Loss) 2003 2002 2003 2002 ---- ---- ---- ---- ThUS$ ThUS$ ThUS$ ThUS$ Soquimich Comercial S.A. 22,433 18,363 (2,154) (1,420) Ajay SQM Chile S.A. 3,084 3,159 (144) (279) Cape Fear Bulk LLC 109 116 (54) (112) SQM Indonesia (11) 3 11 7 SQM Italia S.R.L 12 17 7 4 Fenasa 409 261 (119) (55) ------------- ---------- ------------- ------------ Total 26,036 21,919 (2,453) (1,855) ============= ========== ============= ============
35 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 17 - Shareholders' Equity a) Changes to shareholders' equity consisted of:
Accumulated deficit of subsidiaries in Paid-in Other development Number capital reserves stage of shares ThUS$ ThUS$ ThUS$ - ------------------------------------------------------------------------------------------------------------------------------------ Balance January 1, 2002 263,196,524 477,386 131,066 (2,223) Transfer 2000 net income to retained earnings - - - - Definitive dividends - - - - Accumulated deficit from subsidiaries in development stage (1) - - - (874) Other comprehensive income (2) - - (8,642) - Net income for the year - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Balance September 30, 2002 263,196,524 477,386 122,424 (3,097) - ------------------------------------------------------------------------------------------------------------------------------------ Balance January 1, 2003 263,196,524 477,386 125,111 (3,661) Transfer 2002 net income to retained earnings - - - - Definitive dividends - - - - Accumulated deficit from subsidiaries in development stage (1) - - - (1,564) Other comprehensive income (2) - - 7,025 - Net income for the year - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Balance September 30, 2003 263,196,524 477,386 132,136 (5,225) - ------------------------------------------------------------------------------------------------------------------------------------
Retained Net earnings income Total ThUS$ ThUS$ ThUS$ - ---------------------------------------------------------------------------------------------------------------------- Balance January 1, 2002 195,366 30,102 831,697 Transfer 2000 net income to retained earnings 30,102 (30,102) - Definitive dividends (14,844) - (14,844) Accumulated deficit from subsidiaries in development stage (1) - - 874 Other comprehensive income (2) - - (8,642) Net income for the year - 30,383 30,383 - ---------------------------------------------------------------------------------------------------------------------- Balance September 30, 2002 210,624 30,383 837,720 - ---------------------------------------------------------------------------------------------------------------------- Balance January 1, 2003 210,624 40,202 849,662 Transfer 2002 net income to retained earnings 40,202 (40,202) - Definitive dividends (19,894) - (19,894) Accumulated deficit from subsidiaries in development stage (1) - - 1,564 Other comprehensive income (2) - - 7,025 Net income for the year - 36,107 36,107 - ---------------------------------------------------------------------------------------------------------------------- Balance September 30, 2003 230,932 36,107 871,336 - ----------------------------------------------------------------------------------------------------------------------
(1) The subsidiaries in development stage are SQM Lithium Specialties Limited in 2003 and SQM Lithium Specialties Limited and SCM Antucoya in 2002. (2) Other comprehensive income includes translation adjustments, and in 2003 other comprehensive income also includes the effect of the recognition of an additional liability for the Company's under-funded pension as of September 30, 2003. 36 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 17 - Shareholders' Equity (continued) b) The composition of other comprehensive income as of September 30, 2003 is as follows:
For the period ended As of September 30, September 30, 2003 2003 ---- ---- Detail ThUS$ ThUS$ Technical appraisal - 151,345 Changes to other comprehensive income from equity method investments: Soquimich Comercial S.A. (1) 2,923 (5,993) Isapre Norte Grande Ltda. (1) 14 (84) Inversiones Augusta S.A. (1) - (761) SQM Ecuador S.A. (1) - (270) Almacenes y Depositos Ltda. (1) 31 (59) Asociacion Garantizadora de Pensiones (1) - (18) Empresas Melon S.A. (1) 4,198 (11,437) Sales de Magnesio Ltda. (1) - (17) SQM North America Corp. (2) (141) (1,288) Other Companies (1) - 718 ---------------------- ------------------------- Total other comprehensive income 7,025 132,136 ====================== =========================
(1) Corresponds to translation adjustment and monetary correction (2) Corresponds to the effect of the recognition of an additional liability for the Company's under-funded pension as of September 30, 2003. c) Capital consists of 263,196,524 fully authorized, subscribed and paid shares with no par value, divided into 142,819,552 Series A shares and 120,376,972 Series B shares. The preferential voting rights of each series are as follows: Series A: If the election of the president of the Company results in a tied vote, the Company's directors may vote once again, without the vote of the director elected by the Series B shareholders. Series B: 1) A general or extraordinary shareholders' meeting may be called at the request of shareholders representing 5% of the Company's Series B shares. 37 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 17 - Shareholders' Equity (continued) 2) An extraordinary meeting of the Board of Directors may be called with or without the agreement of the Company's president, at the request of a director elected by Series B shareholders. Note 18 - Derivative Instruments Derivative instruments are recorded at their fair value at period. Changes in fair value are recognized in income with the liability recorded in other current liabilities. Losses from options relate to fees paid by the Company to enter into such contracts. As of September 30, 2003 the Company's derivative instruments are as follows:
Notional Accounts affected or Description of the Type of Covered Expiration contract Position Liability / Asset Income derivative Amount Type purchase/sale amount (loss) recorded Put option 21,390 4th quarter of 2003 Exchange rate P - (40) Put option 10,486 4th quarter of 2003 Exchange rate P - (20) Forwards 486 4th quarter of 2003 Exchange rate P 27 - Forwards 3,348 4th quarter of 2003 Exchange rate P 115 - Forwards 2,961 4th quarter of 2003 Exchange rate P 48 - Forwards 998 4th quarter of 2003 Exchange rate P 51 - Forwards 2,983 4th quarter of 2003 Exchange rate P 175 - Forwards 431 4th quarter of 2003 Exchange rate P 11 - Forwards 2,989 4th quarter of 2003 Exchange rate P 56 - ----------- ----------------- ------------- 46,072 483 (60) =========== ================= =============
38 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 19 - Non-Operating Income and Expenses Amounts included in non-operating income and expenses are summarized as follows: a) Non-operating income
2003 2002 ---- ---- ThUS$ ThUS$ Interest income 3,246 2,450 Reversal of allowance for doubtful accounts 426 347 Insurance recoveries 1,038 154 Net foreign exchange 2,845 - Sales of materials and services 429 833 Equity participation in net income of unconsolidated subsidiaries 4,794 2,742 Other income 1,244 1,319 -------------- -------------- Total 12,821 9,046 ============== ==============
b) Non-operating expenses
2003 2002 ---- ---- ThUS$ ThUS$ Write-off of property, plant, and equipment 6,014 1,150 Interest expense 16,392 22,536 Amortization of goodwill 844 896 Legal expenses 1,375 - Project relating to commercial effectiveness - 1,406 Net foreign exchange - 733 Equity participation in net loss of unconsolidated subsidiaries - 138 Work disruption expenses 1,476 - Other expenses 3,425 2,840 -------------- ----------- Total 29,526 29,699 ============== ===========
39 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 20 - Assets and Liabilities Denominated in Foreign Currency
2003 2002 ---- ---- Assets ThUS$ ThUS$ Total assets Chilean pesos 161,269 114,855 US dollars 1,099,608 1,100,774 Euro 7,481 7,253 UF 60,584 55,562 Other currencies 33,121 18,350 Current liabilities Chilean pesos 55,865 28,664 US dollars 48,289 85,677 Euro 10,814 13,225 UF 235 4,039 Other currencies 6,632 2,038 Long-term liabilities Chilean pesos 5,189 6,127 US dollars 334,520 294,544 UF 3,075 2,760 Other currencies 72 80
40 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 21 - Commitments and Contingencies I. Contingencies: (a) The Company did not record the potential insurance reimbursement for damages incurred in the potassium sulfate ponds in the Atacama salt deposit. (b) Material lawsuits or other legal actions of which the Company is party to: 1. Plaintiff : SQM Salar S.A. Defendants : ACE Seguros S.A. (formerly - Cigna Compania de Seguros (Chile) S.A.) and Chubb de Chile Compania de Seguros Generales S.A. Date of lawsuit : April 2002 Matter : Arbitration Status : Collection of compensation for insured claim Instance : Evidence verification Nominative value: ThUS$ 36,316 2. Plaintiffs : Du Guano de Poisson Angibaud S.A. and Generale de Nutrition Vegetale SAS Defendants : Soquimich European Holdings B.V., NU3 N.V. and SQM France S.A. Date of lawsuit : March 2003 Court : Court of Arbitration in France Matter : Termination of the company relationship and liquidation of the company Generale de Nutrition Vegetale SAS Status : The lawsuit is being contested Nominative value: ThEuro$ 30,295 41 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 21 - Commitments and Contingencies (continued) I. Contingencies (continued): (c) Models for the Production of the Maria Elena site The Company is currently reviewing the "Models for the Production of the Maria Elena site" which may be implemented as a result of the Decontamination Plan (see note 24). The different alternatives for production and technology development for the Maria Elena site, which are a part of the above-mentioned "Production Models" do not proactively generate significant changes in the present ore reserves or forecasted sales volumes. These options include possibilities to use new production methods and are related to the "leaching piles" and implementing a mixed system, which would be comprised with the use of the aforementioned technology and the current production methods. Advantages and disadvantages of the different options relate to the extension of the transition periods of new technology, the investments that will be required, production costs, changes in technologies and in productive processes and the effects on certain of the Company's assets and their value. The possible effects on the valuation of assets are not yet determinable. (d) Other The Company and its subsidiaries are involved in litigation in the ordinary course of business. Based on the advice of counsel, management believes the litigation will not have a material effect on the consolidated financial statements. II. Commitments: (a) The subsidiary SQM Salar S.A. maintains an agreement with a government agency, whereby the Company must make annual payments until 2030 based on the Company's annual sales. This amount, which has been paid since the beginning of the agreement in 1996, amounted to ThUS$ 3,419 in 2003 (ThUS$ 2,546 in 2002). (b) The Company has certain indirect guarantees, which relate to agreements with no remaining payments pending. These guarantees are still in effect and approved by the Company's Board of Directors; however, they have not been used by the subsidiaries. 42 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 22 - Third Party Guarantees As of September 30, 2003 and 2002 the Company has the following indirect guarantees outstanding:
Debtor Balances outstanding ----------------------------------------------------- --------------------------- Beneficiary Name Relationship 06/30/2003 06/30/2002 ThUS$ ThUS$ Phelps Dodge Corporation SQM Potasio S.A. Subsidiary 2,784 3,600 Bank of America N.A. RS Agro-Chemical Trading A.V.V. Subsidiary 80,723 80,893
Note 23 - Sanctions During 2003 and 2002, the SVS did not apply sanctions to the Company, its directors or managers. Note 24 - Environmental Projects Disbursements incurred by the Company as of September 30, 2003 relating to its investments in production processes and compliance with regulations related to industrial processes and facilities are as follows:
Future 2003 Disbursements ---- ------------- ThUS$ ThUS$ Project Environmental protection department 291 85 Dressing-room, Tocopilla 276 1 Renewal of water network against fire 4 35 Technology change in Maria Elena 1,260 2,117 Tocopilla dust collection 484 112 Environmental impact evaluations 69 - Plant for the treatment of wastewater, Ministry of Public Works 300 - Extension of carbonate plant 434 116 Borate plant emission control 21 79 Dry plants aspiration system 91 9 Environmental evaluation, Guggenheim camp 27 - Transfer of Steamblock boilers (environmental authorization) 73 - Modification of fire network 40 45 ----------------- -------------------- Total 3,370 2,599 ================= ====================
43 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 24 - Environmental Projects (continued) Protecting the environment is a constant concern for SQM, regarding both the Company's productive processes and the manufactured goods. SQM is currently implementing an Environmental Management System, which is based on the ISO 14000 standard, with which, the Company's environmental performance will be improved through the effective application of the Environmental Policy of SQM. The implementation program stipulates that late in 2004, all the operations maintained by the Company in Regions I and II of Chile, will have a fully implemented Environmental Management System. As part of the conversion project to natural gas, the supplier will in turn make an investment of US$ 5,500 million to be paid by the Company on a monthly basis for the duration of the contract (10 years). Technological processes are intended to be environmentally friendly in order to reduce residual materials and improve technical conditions to ensure an effective protection to the environment. A good example of this is ongoing conversion of oil to natural gas used in the Company's plants. Processes where sodium nitrate is used as a raw material are carried out in geographical areas such as the desert with favorable weather conditions for the drying of solid materials and the evaporation of liquids used in solar energy. The extraction of minerals in open pit mines, given their low waste-to-mineral ratio, gives rise to sites that have little impact on the environment. The extraction process and ore crushing produce particles that are consistent with the industry of operation. On August 10, 1993, the Ministry of Health published a resolution under the Sanitary Code that established that the levels of breathable particles present at Maria Elena Plant exceeded the level allowed for the quality of air and, which affected the nearby city of Maria Elena. Particles mainly come from dust that results from processing the sodium nitrate, particularly at the crushing process prior to leaching. The decontamination plan presented by the Company to reduce the level of particles was approved with certain modifications by means of Decree No. 164. As a result of the investments and processes implemented according to the approved plan, the Company has substantially reduced the levels of particles in the air. Resolution No. 384, made public on May 16, 2003, authorized the review and a new draw up of the decontamination plan for the city of Maria Elena. The Supreme Decree containing the final decontamination plan should be published in the Offcicial Gazette during the following months. 44 SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Notes to the Consolidated Financial Statements (A translation of the original in Spanish- see note 2 (a)) Note 24 - Environmental Projects (continued) It is not possible to assure that within such period the Company will be free from warnings, fines or even eventual temporary closing of the crushing plant in Maria Elena. The Company is continuously researching techniques, processes and systems relating to the processing of sodium nitrate that could even further reduce the level of particles in the city of Maria Elena. Ore treatment operations, as they are controlled processes, produce solid residual materials that are non-soluble by-products and a certain degree of moisture. Productive operations based on brine, are carried out at the Atacama Salt Mine and almost 95% of the energy used is solar energy and the remaining 5% comes from natural gas, electricity and fossil fuels. Residual brine left after the production processes are again injected to the Atacama Salt Mine in order to minimize the possible environmental impact. SQM entered into a contract with the National Forestry Corporation (CONAF) aimed at researching the activities of flamingo groups that live in the Atacama Salt Mine lagoons. Such research includes a population count of the birds and wildlife, breeding research, additional behavior research and the climate phenomena of the area. Consistent with the Company's ongoing commitment with the environmental authorities, the Company actively participates in the Joint Monitoring Research project for the Atacama Salt Mine watershed along with other mining companies that make use of the water resources that supply the Atacama Salt Mine watershed. Note 25 - Subsequent Events Dated October 24, 2003 the Company's Board of Directors agreed to authorize SQM S.A.'s management to suscribe the agreements required to acquire all the shares of the Chilean Company PCS Yumbes S.C.M., a subsidiary of Potash Corporation of Saskatchewan Inc. Management, except for that mentioned above, is not aware of any significant events occurred between September 30 and the date of issuance of these financial statements (November 5, 2003), which may affect them. 45 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. Conf: /s/ Ricardo Ramos ------------------ Ricardo Ramos Chief Financial Officer Date: December 9, 2003. -----END PRIVACY-ENHANCED MESSAGE-----