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BDO Auditores Independentes, an audit partnership organized according to Brazilian law, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
(Convenience translation into English from the original previously issued in Portuguese)
NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A. FINANCIAL STATEMENTS FOR THE YEARS ENDED
31 DECEMBER 2010 AND 2009
(Convenience translation into English from the original previously issued in Portuguese) NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A.
FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
CONTENTS
Independent auditors’ report on the financial statements
Exhibit 1 – Balance sheets
Exhibit 2 - Statement of operations
Exhibit 3 – Statement of changes in shareholders’ equity
Exhibit 4 – Statement of cash flows
Exhibit 5 – Statement of value-added
Notes to the financial statements
(Convenience translation into English from the original previously issued in Portuguese) INDEPENDENT AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS
To the Shareholders and Management of Nutriplant Indústria e Comércio S.A. Paulínia - SP
We have audited the financial statements of Nutriplant Indústria e Comércio S.A. (“Company”), which consist of the balance sheet as of 31 December 2010 and 2009 and the related statements of operations, changes in shareholders’ equity and cash flows, and value added for the year then ended, as well as a summary of the significant accounting practices and other notes.
MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The Company's management is responsible for the fair presentation and preparation of the financial statements in accordance with Brazilian accounting practices and the consolidated financial statements according to the International Financial Reporting Standards (IFRS) issued by the according to the International Accounting Standards Board (IASB) and for the internal controls considered necessary to allow the preparation of financial statements free of material misstatement, whether due to fraud or error.
INDEPENDENT AUDITORS’ RESPONSIBILITY
Our responsibility is to express an opinion on these individual financial statements based on our audit, conducted in accordance with Brazilian and international auditing standards. These auditing standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit includes performing procedures to obtain evidence supporting the amounts and disclosures in the individual financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the individual financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the fair preparation and presentation of the Company’s financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall individual financial statement presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
2
OPINION
In our opinion, the individual financial statements referred to above represent fairly, in all material aspects, the financial position of Nutriplant Indústria e Comércio S.A. as of 31 December 2010, the results of its operations and cash flows for the year then ended, according to the Brazilian accounting practices and the international financial reporting standards (IFRS) issued by the International Accounting Standards Board (IASB).
OTHER ISSUES
Statement of value added
We have also examined the individual statement of value added, prepared under the responsibility of the Company’s management for the year ended 31 December 2010, whose reporting is required by the Brazilian public companies and is considered supplementary information by the International Financial Reporting Standards (IFRS), which does not require the presentation of the statement of value added. This statement was subjected to the same auditing procedures previously described and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
São Paulo, 31 March 2011
Eduardo Augusto Rocha Pocetti Henrique Herbel de Melo Campos Engagement Partner Engagement Partner BDO Auditores Independentes BDO Auditores Independentes
(Convenience translation into English from the original previously issued in Portuguese)
EXHIBIT 1
NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A.
BALANCE SHEETS AS OF 31 DECEMBER 2010 AND 2009
(In thousands of Brazilian reais)
ASSETS 12/31/2010 12/31/2009 1/1/2009 LIABILITIES 12/31/2010 12/31/2009 1/1/2009
CURRENT ASSETS CURRENT LIABILITIES
Cash and cash equivalents (note 4) 39 1,017 4,067 Trade accounts payable (note 10) 13,114 13,616 2,508
Trade accounts receivable (note 5) 7,759 14,228 17,049 Loans (note 11) 8,265 8,711 19,921
Inventories (note 6) 4,861 6,750 9,294 Salaries, accrued payroll benefits and social charges (note 12) 723 721 514
Recoverable taxes (note 7) 12 68 423 Tax liabilities (note 14) 458 431 395
Sundry advances 817 1,164 469 Accounts payable 2,228 4,033 712
Other accounts receivable 166 94 37 Advances and loans from third parties 447 461 269
Total current assets 13,654 23,321 31,339 Total current liabilities 25,235 27,973 24,319
NON-CURRENT ASSETS NON-CURRENT LIABILITIES
LONG-TERM ASSETS LONG-TERM LIABILITIES
Prepaid expenses 217 - - Trade accounts payable (note 10) 35 109 -
Financial investment 2,614 - - Loans (note 11) 3,644 - 1,123
Recoverable taxes (note 7) 20,703 17,387 15,089 Related-party payables (nota 21) 3,146 - -
Court deposits (note 14) 191 - - Provision for contingency (note 14) 879 70 75
Tax liabilities (note 13) 2,254 2,372 2,614
23,725 17,387 15,089 Tax charges on asset and liability valuation adjustment 2,206 2,370 2,527
Total non-current liabilities 12,164 4,921 6,339
Property, plant and equipment (note 8) 12,010 11,938 12,289
Intangible assets (note 9) 28 35 46 SHAREHOLDERS' EQUITY
12,038 11,973 12,335 Share capital (note 15) 22,778 22,778 22,778
Capital reserve 7,457 7,457 7,482
Asset and liability valuation adjustment 5,247 5,566 5,871
Total non-current assets 35,763 29,360 27,424 Accumulated losses (23,464) (16,014) (8,026)
12,018 19,787 28,105
TOTAL ASSETS 49,417 52,681 58,763 TOTAL LIABILITIES 49,417 52,681 58,763
The accompanying notes are an integral part of these financial statements.
(Convenience translation into English from the original previously issued in Portuguese)
EXHIBIT 2
NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A.
STATEMENT OF OPERATIONS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009(In thousands of Brazilian reais)
2010 2009
NET REVENUE (note 16) 39,163 38,338
COST OF GOODS SOLD (33,207) (35,225)
GROSS INCOME 5,956 3,113
OPERATING REVENUES (EXPENSES)
Selling expenses (note 17) (7,186) (6,645)
General and administrative expenses (note 18) (3,539) (3,410)
Other operating revenues/expenses (1,323) (2,193)
OPERATING LOSS BEFORE FINANCIAL LOSS (6,092) (9,135)
Financial loss, net (note 19) (4,239) (2,806)
LOSS BEFORE THE PROVISION FOR INCOME AND SOCIAL CONTRIBUTION TAXES (10,331) (11,941)
Deferred income and social contribution taxes 2,562 3,648
NET LOSS (7,769) (8,293)
LOSS PER SHARE (1.49) (1.59)
The accompanying notes are an integral part of these financial statements.
(Convenience translation into English from the original previously issued in Portuguese)
EXHIBIT 3
NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(In thousands of Brazilian reais)
Share Capital Revaluation Accumulated
social reserve surplus losses Total
BALANCES AS OF 1st JANUARY 2009 22,778 7,482 5,871 (8,026) 28,105
Realisation of revaluation reserve - - (305) 305 -
Treasury shares (note 15) - (25) - - (25)
Net loss - - - (8,293) (8,293)
BALANCES AS OF 31 DECEMBER 2009 22,778 7,457 5,566 (16,014) 19,787
Realisation of revaluation reserve - - (319) 319 -
Net loss - - - (7,769) (7,769)
BALANCES AS OF 31 DECEMBER 2010 22,778 7,457 5,247 (23,464) 12,018
The accompanying notes are an integral part of these financial statements.
(Convenience translation into English from the original previously issued in Portuguese)
EXHIBIT 4
NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A.
STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(In thousands of Brazilian reais)
Cash flow from operating activities 2010 2009
Loss for the period (7,769) (8,293)
Adjustments to reconcile net income to net cash:
Depreciation and amortisation 840 859
Residual value of assets written off from property, plant and equipment - 29
Provision for contingency 809 (5)
Deferred income and social contribution taxes (164) (157)
Discount to present value of trade accounts receivable (205) (85)
Discount to present value of trade accounts payable 359 (566)
Discount to present value of inventories (38) 63
Provision for inventory loss (267) 278
Exchange rate losses (1,577) (1,034)
Asset and liability valuation adjustment - -
Provisions for doubtful accounts 383 979
(7,629) (7,932)
(Increase) decrease in assets:
Trade accounts receivable 6,291 2,961
Inventories 2,194 2,203
Prepaid expenses (217) -
Recoverable taxes (3,260) (1,943)
Sundry advances 347 (695)
Other accounts receivable (72) (57)
Financial investments (2,614) -
Court deposits (191) -
Increase (decrease) in liabilities:
Trade accounts payable 649 11,783
Salaries, accrued payroll benefits and social charges 2 207
Tax liabilities (91) (206)
Tax charges on asset and liability valuation adjustment - -
Accounts payable (1,805) 3,036
Advances and loans from third parties (14) 192
Net cash provided by (used in) operating activities (6,410) 9,549
Cash flows from investing activities
Additions to property, plant and equipment and intangible assets (912) (526)
Net cash used in investing activities (912) (526)
Cash flows from financing activities
Treasury shares - (25)
Related-party transactions 3,146 -
Loans and financing (paid) raised, net 3,198 (12,048)
Net cash used in financing activities 6,344 (12,073)
Net changes in the year (978) (3,050)
Cash and cash equivalents at beginning of the period 1,017 4,067
Cash and cash equivalents at end of the period 39 1,017
Cash and cash equivalents at end of the year (978) (3,050)
The accompanying notes are an integral part of these financial statements.
(Convenience translation into English from the original previously issued in Portuguese)
EXHIBIT 5
NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A.
STATEMENT OF VALUE ADDED FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009
(In thousands of Brazilian reais)
2010 2009
REVENUES 38,779 37,579
Sales of goods 41,389 40,535
Discount to present value (2,226) (2,197)
Allowance for doubtful accounts (384) (759)
INPUT ACQUIRED FROM THIRD PARTIES (35,501) (38,736)
Cost of goods, merchandise and services (33,208) (35,150)
Impairment of property, plant and equipment items (111) (127)
Materials, energy, third-party services and others (2,183) (3,181)
Inventory valuation allowance - (278)
GROSS VALUE ADDED 3,278 (1,157)
DEPRECIATION/AMORTISATION (840) (859)
TAX CHARGES ON REVALUATION 164 157
NET VALUE ADDED GENERATED BY THE ENTITY 2,602 (1,859)
VALUE ADDED RECEIVED BY TRANSFER 1,915 926
Financial revenues 1,915 926
TOTAL VALUE ADDED TO BE DISTRIBUTED 4,517 (933)
DISTRIBUTION OF VALUE ADDED
Personnel
Direct compensation and benefits 5,461 4,631
FGTS (Severance Pay Fund) 256 325
Taxes
Federal (1,480) (3,372)
Municipal 6 6
FINANCING AGENTS 8,043 5,770
NET LOSS (7,769) (8,293)
TOTAL 4,517 (933)
The accompanying notes are an integral part of these financial statements.
(Convenience translation into English from the original previously issued in Portuguese)
NUTRIPLANT INDÚSTRIA E COMÉRCIO S.A.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2010 AND 2009 (In thousands of Brazilian reais)
1. OPERATIONS
Nutriplant Indústria e Comércio Ltda. (the “Company”) is engaged in producing, selling, importing and exporting micronutrients and intermediate products for fertilisers.
2. PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS
The financial statements, which completion was authorised at a Board of Directors’ meeting held on 31 March 2011 are presented with values expressed in thousands of Brazilian reais unless otherwise indicated, and are presented in accordance with the Brazilian accounting practices in compliance with the provisions contained in the Brazilian Corporate Act. They incorporate the changes introduced by Law No. 11638/07 and 11941/09, complemented by new pronouncements, interpretations and guidelines issued by the Committee of Accounting Pronouncements (CPC) approved by resolutions of the Federal Association of Accountants (CFC) and decisions of the Brazilian Securities and Exchange Commission (CVM) during 2009 and 2010, and are in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
2.1 2009 financial statements
In 2009, the Company's financial statements were presented in accordance with the Brazilian accounting practices that incorporated the changes made by Laws 11638/07 and 11941/09, complemented by the pronouncements of the Accounting Pronouncements Committee (CPC) and approved by Council resolutions Federal Accounting (CFC) and deliberations of the Securities and Exchange Commission (CVM).
The Company’s 2009 financial statements are therefore restated to reflect accounting standards issued in 2009 and 2010 by CPC so as to allow comparison with 2010.
3. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The accounting policies described in detail below have been consistently applied to all periods reported in these financial statements and to prepare the beginning balance sheet as of 1st January 2009 to make the transition to the new Brazilian accounting practices (CPC).
Nutriplant Indústria e Comércio S.A.
2
a) Results of operations
Results of operations are recorded on the accrual basis. Revenue is the fair value of the consideration received or receivable for trading products or rendering services over the Company’s normal course of activities.
Revenue is stated net of taxes, returns, rebates and discounts. It is recognised in statement of operations for the period when all the product’s risks and benefits are transferred to the client.
According to IAS 18/CPC 30 - Revenue, the Company recognises revenue only when:
(i) the amount of the revenue may be safely measured.
(ii) the Company has transferred to the buyer the significant risks and benefits inherent to the ownership over the property.
(iii) It is probable that future economic benefits will flow to the Company.
(iv) the Company does not keep continuous involved in the management of goods sold at a level normally associated with the ownership and effective control of these goods.
(v) The costs incurred or to be incurred in respect of the transaction can be measured reliably.
The amount of revenue is not considered as safely measurable until all the risks and benefits have been transferred to the client. The Company bases its expectations on historical results, taking into consideration the type of client and of transaction, and particulars of each sale.
b) Accounting estimates
The preparation of financial statements requires management to make estimates and assumptions that, in its best judgement, affect the reported amounts of assets and liabilities. These estimates and assumptions include the definition of the useful lives of property, plant, and equipment, the recognition of an allowance for doubtful accounts, deferred income tax assets and liabilities and a provision for contingencies and the valuation of inventories. Transaction settlement involving those estimates may result in values different from estimates, due to the possible inherent inaccuracy of the process.
c) Financial instruments
Financial instruments are only recognised as from the moment the Company becomes party to the financial instrument agreements. When a financial asset or liability is initially recognised, it is stated at fair value, plus transaction costs directly attributable to the acquisition or issue of the financial asset or liability.
Nutriplant Indústria e Comércio S.A.
3
The subsequent measurement of financial instruments occurs at each balance sheet date, according to the rules established for each type of classification of financial assets and liabilities as:
i. Financial asset or liability stated at fair value against net loss: these are the financial assets or liabilities which meet the following criteria: i) acquired or originated basically for sale or repurchase in the short-term; ii) part of a portfolio of identified financial instruments managed together and for which there is evidence of a recent trend of realisation of short-term profits, or iii) a derivative. The main financial assets or liabilities that the Company classifies under this category are the following: “cash and cash equivalents”.
ii. Loans and receivables: financial assets whose payments are fixed or may be determined. They are not priced at an active market and are stated at historical cost using the amortised cost method. The Company has “Trade accounts receivable” as its main financial assets classified in this category (see note 5).
iii. Held-to-maturity: Correspond to non-derivative financial assets whose payments are fixed or may be determined. Their maturity dates are defined and the Company intends to hold them to maturity. These are recorded at historical cost using the amortised cost method. The Company does not have financial assets or liabilities that fall into this category.
iv. Available-for-sale: refer to those financial assets and liabilities that do not fall into any of the classifications above or are classified as available for sale. They are recorded at fair value and, for any change in the subsequent measurement of fair values, the offsetting entry is in shareholders' equity. The Company does not have financial assets that fall into this category.
v. Financial liabilities not stated at fair value: Instruments of which the Company decided not to measure the fair value but to use the amortised cost method. The Company does not have liabilities that fall into this category.
d) Estimated losses on doubtful accounts
Estimated losses on doubtful accounts are calculated based on evaluated losses as probable, which amount is considered sufficient to cover possible losses on trade accounts receivable.
Expenses on recognising estimated losses on doubtful accounts were recorded in “Operating expenses” in the statement of operations. When additional cash is not expected to be recovered, the amounts recorded in the "Allowance for doubtful accounts" account are reversed as the trade bill is definitely written off against trade accounts receivable.
e) Inventories
Inventories are stated at average acquisition or production cost, not exceeding market or realisable values. The costs of these inventories are recognised in the statement of operations when they are sold.
Nutriplant Indústria e Comércio S.A.
4
f) Property, plant and equipment
The Company opted for the deemed cost to its property, plant and equipment on 1 January 2009. The method used before was the acquisition cost. When adopting the deemed cost method, the Company assessed all assets that remain in operation, ensuring that the appraiser would identify the remaining useful life of the asset and the expected residual value to determine the depreciation amount and the new depreciation rate at the first-time adoption date. An offsetting entry to the adjustment was recorded in an equity account called “Asset and liability valuation adjustment”, reduced by the deferred income tax liability. In subsequent years, part of the balance of this account will be periodically transferred to retained earnings, in the same amount as that of the depreciation and write-offs relating to the property, plant and equipment, to which a new value will be attributed. These amounts will be added to net income for purposes of calculating taxable income.
Depreciation of other assets is calculated using the straight line method to allocate costs to residual values during the estimated useful life, according to appraisal reports. The weighted average useful lives of assets are shown below:
Years Machinery and equipment 2 to 23 years Furniture and fixtures 2 to 18 years Facilities 10 to 60 years Vehicles 5 years Buildings and constructions Improvements 10 to 60 years Other property, plant and equipment 1 to 10 years Depreciation methods, useful lives and residual amounts are reviewed at every balance sheet date and possible adjustments are recognised as a change in accounting estimates.
g) Intangible assets
Intangible assets are recognised at acquisition cost less accumulated depreciation and a possible provision for impairment loss.
Software usage rights are stated at historical acquisition cost, and are linearly amortised at the rate of 20% per year.
h) Impairment
The Company periodically tests its assets for impairment. Recoverable amount is the higher of: (a) its fair value less the costs that would be incurred to sell it, and (b) its value in use. The use value is equivalent to the discounted cash flow (before taxes) resulting from the continued use of the asset until the end of its useful life.
In assessing whether there is any indication that an asset may be impaired, the Company considers, as a minimum, the following indications:
Nutriplant Indústria e Comércio S.A.
5
• External Information Sources:
i. During the period, an asset's market value has declined significantly more than would be expected as a result of the passage of time or normal use;
II. Significant changes with an adverse effect on the Company have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the Company operates or in the market to which an asset is dedicated.
Internal Information Sources:
i. available evidence of obsolescence or physical damage in an asset.
ii. significant changes with an adverse effect on the Company have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, an asset is used or is expected to be used.
iii. evidence is available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected.
The grouping for impairment is the cash generating unit, which is the smallest identifiable group of assets that generates cash inflows.
When the impairment loss is subsequently reversed, there is increase in the carrying amount of the asset (or cash-generating unit) to the reviewed estimate of its recoverable amount, provided that it does not exceed the carrying amount that would have been determined if no impairment loss had been recognised for that asset (or cash-generating unit) in prior years. Reversal of the impairment loss is recognised immediately in the statement of operations.
i) Borrowing costs
Loans and financing are initially recognised at fair value, net of transaction costs, and are then measured at their amortised cost. In addition, loans and financing are classified as current liabilities, unless the Company has unconditional right to defer the settlement of a liability at least 12 months after the balance sheet date.
Loans costs directly attributed to the acquisition, construction or production of qualifiable assets which necessarily take a substantial period of time to be ready for use or to be sold are added to the cost of these assets up to the date in which they are ready to be used or sold.
Nutriplant Indústria e Comércio S.A.
6
j) Contingent assets and liabilities
Contingent assets are recognised only when a favourable outcome is “virtually certain” or according to favourable legal decisions which are final and unappealable. Contingent assets whose favourable outcome is probable are only disclosed in a note.
A provision is recorded for contingent liabilities when the chances of loss are assessed as probable and the amounts involved can be measured with sufficient certainty. Contingent liabilities evaluated as possible losses are disclosed in an appropriate note.
k) Income and social contribution taxes
Current taxes
Income and social contribution taxes are assessed on taxable income, according to prevailing legislation and rates.
Deferred taxes
Deferred income and social contribution taxes liabilities are constituted on revaluation reserves and temporary differences. Deferred income tax assets are recognised for balances of tax losses and temporary differences.
l) Discount to present value of assets and liabilities
Long-term monetary assets and liabilities are discounted to present value and current assets and liabilities are discounted to present value when the effect is considered material with respect to the financial statements taken as a whole.
When calculating the discount to present value the Company adopted the following assumptions: (i) the amount to be discounted; (ii) the realisation and settlement dates; and (iii) the discount rate.
The discount rate used by the Company considered current market valuations about the value of money over time and the specific risks for each asset and liability.
m) Other current and non-current assets
Other current and non-current assets are stated at cost or realisable value, plus, when applicable, income earned.
n) Statements of cash flows
The Company discloses cash flows from operating activities using the indirect method, according to which net income or loss is adjusted for the effects of non-cash transactions, of any deferrals or recognitions on the accrual basis on past or future operating cash receipts or payments, and revenue or expense items related to cash flows from investing or financing activities.
Nutriplant Indústria e Comércio S.A.
7
Under the indirect method, net cash flows from operating activities are determined adjusting net income or loss for the effects of:
i) changes in inventories and operating receivables and payables in the period.
ii) non-cash items, such as depreciation, provisions, deferred taxes, unrealised exchange rate gains and losses and equity on earnings (losses) of controlled companies, when applicable.
iii) all the other items treated as cash flows from investing and financing activities.
o) Statements of value added
The Company included in its financial statements the Statement of Value Added, whose purpose is to show the value of the wealth generated by the Company and its distribution between the elements that have contributed towards generating this wealth, such as employers, financing agents, shareholders, government and other stakeholders, as well as the portion of undistributed wealth.
p) Statement of comprehensive income
Comprehensive income is the change in equity of an enterprise during a period from transactions and other events from non-owner sources.
The Company does not have revenue and expense items from a nature affecting the statement of comprehensive income, so this statement is presented within the statement of changes in shareholders’ equity.
q) Effects of changes on exchange rates and translation of financial statements
The financial statements are presented in thousands of Brazilian reais (R$).
Functional currency
Functional currency is the currency of the primary economic environment in which the Company operates. In most cases such as for the Company, the functional currency corresponds to the local one. However, in some cases the entities may have a functional currency different from that of the local when a different currency is used for its main activities and reflects its economic environment better.
Foreign-currency transactions
Foreign-currency transactions are accounted for at first using the functional currency, by applying the spot exchange rate between the functional currency and the foreign currency at the date of transition to the foreign currency amount.
Exchange rate gains and losses on the settlement of these transactions and the translation of monetary assets and liabilities denominated in foreign currency are recognised in the statement of income.
Nutriplant Indústria e Comércio S.A.
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r) Standards, changes and interpretations of rules yet to be in effect
The interpretations and changes in the Brazilian standards already issued by CPC which will be mandatory from the year ended 31 December 2011 or from the next years are:
Review of CPC 1 – Impairment loss.
2nd Review of CPC 02 – Effects of changes on exchange rates and translation of financial statements.
2nd Review of CPC 3 – Statement of Cash Flows.
Review of CPC 5 – Related-party disclosures.
ICPC 13 - Rights to Interests Arising from Decommissioning, Restoration and Environmental Funds.
ICPC 15 - Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment.
3.1 Adoption of new BRGAAPs:
When preparing its financial statements, the Company adopted all the pronouncements, guidelines and interpretations issued by CPC and approved by CVM. The Company applied the accounting practices defined in note 3 for all presented years.
The transition date to adopt the new accounting practices is 1st January 2009.
Following is a summary of the accounting practices and reconciliation of the adjustments made since the transition date:
Nutriplant Indústria e Comércio S.A.
9
Shareholders' equity Loss
Book balances in BRGAAP Ref 26.003 (2.469)
(a) 3.185 - (b) (1.083) -
Total adjustments from differences in practices 2.102 -
Book balances in IFRS 28.105 (2.469)
Shareholders' equity Loss
Book balances in BRGAAP Ref 17.812 (8.166)
(a) 3.058 (127)(b) (1.083) -
Total adjustments from differences in practices 1.975 (127)
Book balances in IFRS 19.787 (8.293)
Asset and liability valuation adjustment
Deferred income and social contribution taxes
1st January 2009
Asset and liability valuation adjustment
Deferred income and social contribution taxes
31 December 2009
(a) According to ICPC 10 - Interpretation about the First-time Adoption to Property, Plant and Equipment and Investment Property of CPC Technical Pronouncements No. 27, 28, 37 and 43, which allows an entity to assign a new cost to property, plant and equipment and investment property on the transition date for first-time adoption of the new accounting pronouncements.
(b) It refers to the impact of deferred income and social contribution taxes on identified differences in practices.
4. CASH AND CASH EQUIVALENTS
Breakdown:
31/12/2010 31/12/2009 01/01/2009
Cash and banks - current accounts 39 1.015 2.079
Financial investments - 2 1.988
Total 39 1.017 4.067
Nutriplant Indústria e Comércio S.A.
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5. TRADE ACCOUNTS RECEIVABLE
They are breakdown as follows:
31/12/2010 31/12/2009 01/01/2009
Domestic trade accounts receivable 8.758 12.542 18.324
Discount to present value (a) (1.183) (1.388) (1.473)
Allowance for doubtful accounts (1.551) (1.168) (189)
6.024 9.986 16.662
Trade accounts receivable - vendor financing contracts 1.735 3.208 387
Exchange rate gain (c) - 1.034 -
Total 7.759 14.228 17.049
(a) Discount to present value calculated on an exponential basis and pro rata temporis from the origin of each transaction at the average discount rate of 2.0%. This rate is based on the average rate applied to instalment sales.
(b) Trade accounts receivable are pledged as collateral for borrowings under vendor financing contracts whose amounts have been received by the Company, which is jointly responsible to financial institutions for the settlement of the trade bills upon their maturity.
(c) Adjustment of the balance of domestic trade accounts receivable exposed to US dollar exchange gains (losses).
Approximately 79% of the balance of trade accounts receivable is to fall due in up to 360 days.
We detail below the amounts per maturity:
External and Internal Market 31/12/2010 V% 31/12/2009 V% 01/01/2009 V%
Trade accounts payable 6,957 79% 11,642 93% 16,980 93%
Overdue rade accounts payable:From 1 to 30 days 148 2% 162 1% 392 2%From 31 to 60 days 87 1% 168 1% 248 1%From 61 to 90 days - 0% 7 0% 89 0%Above 90 days 1,566 18% 563 4% 615 3%
1,801 21% 900 7% 1,344 7%
8,758 100% 12,542 100% 18,324 100%
Nutriplant Indústria e Comércio S.A.
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Balance
Balance as of 1st January 2009 189
Set up provisions 1.046 Reversals of provisions - Receipts (67)
Balance as of 31 December 2009 1.168
Set up provisions 531 Reversals of provisions - Receipts (148)
Balance as of 31 December 2010 1.551
6. INVENTORIES
Breakdown:
31/12/2010 31/12/2009 1/1/2009
Finished goods 1,603 2,744 3,032
Raw materials 2,390 3,099 5,149
Imports in progress 269 549 -
Advance to suppliers 45 32 502
Packing materials 429 447 364
Material under consignment 169 325 205
Merchandise held by third parties 143 50 159
Other inventories 77 73 111
Inventory valuation allowance (a) (239) (506) (228)
Discount to present value (see note 10) (25) (63) -
Total 4,861 6,750 9,294
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(a) Refer to the accrual of an inventory valuation allowance according to the policy established by the Company.
Balance
Balance as of 1st January 2009 228
Set up provisions 313 Reversals of provisions (35)
Balance as of 31 December 2009 506
Set up provisions 75 Reversals of provisions (342)
Balance as of 31 December 2010 239
7. RECOVERABLE TAXES
31/12/2010 31/12/2009 01/01/2009 31/12/2010 31/12/2009 01/01/2009
IPI - - 301 1.398 1.219 579 ICMS 6 8 - 4.076 3.313 2.992 IRRF 6 60 122 150 116 - PIS - - - 283 325 565 COFINS - - - 3.190 3.187 3.050 Deferred income tax - - - 8.311 6.452 5.239 Deferred social contribution - - - 3.159 2.490 2.052 Deferred income tax and social contribution on temporary differences - - - 136 266 328 Income tax of previously years - - - - 18 271 ICMS on fixed assets - - - - 1 13
Total 12 68 423 20.703 17.387 15.089
Current Non current
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Breakdown:
IPI (FEDERAL VAT)
The credit taken on the acquisition of packaging material used in finished goods will be offset against federal taxes. The Company will file a request for refund with the Federal Revenue Service, and legal counsellors believe that the Company will have a favourable outcome.
ICMS (STATE VAT)
Credit arising from differences between acquisition and selling rates levied on interstate goods. In the nine-month period ended 31 December 2010 sales to other Brazilian States in relation to São Paulo account for approximately 82% of total sales.
PIS and COFINS (TAXES ON SALES)
Corresponds to PIS and Cofins credits available for offset taken on intermediate products from August 2004 to December 2009. These intermediate products are classified under chapter 31 of the Federal VAT Levy Table when sold and shipped to the final consumer, which leads to the suspension of the payment of PIS and Cofins, pursuant to Law No. 10637/02. On 15 January 2010, the Company filed a request for refund with the Federal Revenue Service. Legal counsellors believe that the Company will have a favourable outcome.
DEFERRED INCOME AND SOCIAL CONTRIBUTION TAXES
Income and social contribution taxes are calculated according to tax rates in effect at the balance sheet dates. Deferred taxes for income and social contribution tax losses are recorded in equity accounts. Tax credits on temporary differences were calculated according to the temporary add-backs to the Taxable Income Assessment Book.
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The composition of the calculation base and the balances of such taxes as of 31 December 2010 are as follows:
Income tax
Social contribution
tax 2010
2001 528 1,188
2002 3,821 4,434
2003 2,212 2,775
2004 2,209 2,242
2005 3,703 3,698
2006 4,923 4,918
2007 1,714 1,714
2008 3,252 3,252
2009 9,781 9,781
2009 7,436 7,433
REFIS IV (a) (6,336) (6,336)
33,243 35,099
25% 9%
8,311 3,159 11,470
Temporary differences 400 400
25% 9%
100 36 136
Total tax credits 8,411 3,195 11,606
(a) Utilisation of income and social contribution tax losses to reduce interest and fine on the tax instalment payment under REFIS IV, as set forth by Law No. 11941/2009, ruled by PGFN/RFB ordinance No. 6/2009. See note 13.
Historically, the Company has not been presenting taxable income, but in February 2008, the Company used its IPO to raise R$20.701 thousand, and according to the sole paragraph of article 2 of CVM Instruction No. 371/02, the Management understands that the history of
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profitability required is not applicable, since there has not been a relevant change in Company’s shareholding structure, management and governance.
For purposes of the annual impairment testing of deferred tax credits, the Company conducted studies projecting its future taxable income which were the basis for the impairment testing of 31 December 2010. As required by CVM Resolution No. 273/98 and CVM Instruction No. 371/02, studies by the Company's expert professionals were submitted to its Board of Directors for analysis and approved. According to the studies conducted for the year ended 31 December 2010, the tax credits estimated to be realised in the next eight years are as follows:
Realisation years
Realisable amount
2013 357 2014 829 2015 1.427 2016 1.689 2017 1.860 2018 1.972 2019 1.965 2020 1.371
11.470
The study presented now shows the impacts of the restructuring undergone by the Company over the last 5 years and the funds it raised by offering shares. The effects on taxable income and therefore the reduction in tax credits resulting from income and social contribution tax losses occur in the long-term, particularly due to the increase in the Company's market share, in addition to the estimated economic growth after the global crisis.
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8. PROPERTY, PLANT AND EQUIPMENT
01/01/2009
Cost of revalued
property, plant and
equipment
Revalued accumulated depreciation Net Net Net
Plots of land 4,283 - 4,283 4,283 4,283 Buildings and constructions 4,927 (213) 4,714 4,746 4,506 Machinery and equipment 2,741 (1,040) 1,701 2,060 2,494 Furniture and fixtures 260 (66) 194 154 179 Computers and peripherals 72 (41) 31 36 - Vehicles 408 (348) 60 43 50 Leasehold improvements 40 (40) - - - Industrial facilities 722 (149) 573 582 504 Construction in progress 454 - 454 34 273
Total property, plant and equipment 13,907 (1,897) 12,010 11,938 12,289
31/12/2010 31/12/2009
Changes in property, plant and equipment are shown below:
Net balance in Dec/09 Addition Write-off Transfer
Depreciation in the period
Net balance in Dec/10
Plots of land 4.283 - - - - 4.283 Buildings and constructions 4.746 93 - - (125) 4.714 Machinery and equipment 2.060 208 - - (567) 1.701 Furniture and fixtures 154 76 - - (36) 194 Computers and peripherals 36 16 - - (21) 31 Vehicles 43 17 - - - 60 Industrial facilities 582 82 - - (91) 573 Construction in progress 34 420 - - - 454
Total property, plant and equipment 11.938 912 - - (840) 12.010
In 2003, supported by an appraisal report and in accordance with the regulations set forth by the Accounting Standards and Procedures (NPC) No. 24, the Company recognised a revaluation of its property, plant and equipment in equity and therefore its tax effects on the revaluation surplus in long-term liabilities.
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As permitted by Law No. 11638/07, the Company opted to maintain the balances in the revaluation made, which are realised according to the depreciation and/or write-off of assets. Based on the new accounting practice, there will no longer be revaluation reserve restatement every four years.
Based on ICPC 27, the Company adopted on 1 January 2009 the deemed cost to property, plant and equipment and recognised appreciation of R$3,185 thousand, with tax effects of R$1,083 thousand. The records made in “property, plant and equipment”, “asset and liability valuation adjustment” and “tax charges on asset and liability valuation adjustment”.
The expense on the depreciation of the property, plant and equipment revaluation adjustment in the year ended 31 December 2010 totalled R$483 thousand, generating tax effects of R$164 thousand in income (loss) for the period because of the realisation of taxes charges on the revaluation surplus.
These depreciation expenses will be added, net of taxes, to the calculation base of dividends and profit sharing.
Impairment loss
The Company conducted an impairment test on its property, plant and equipment in accordance with CPC Technical Pronouncement No. 1 – Impairment. The test did not result in any adjustments to be recorded in the financial statements for the year ended 31 December 2010.
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9. INTANGIBLE ASSETS
Annual average depreciation rate Original cost
Accumulated depreciation Net Net Net
Software 20% 183 (161) 22 29 40 Other 10% 6 - 6 6 6
Total property, plant and equipment 189 (161) 28 35 46
Changes in intangible assets is as follows:
Net balance in Dec/09 Addition Write-offDepreciation in
the periodNet balance in
Dec/10
Software 29 - - (7) 22 Other 6 - - - 6
Total property, plant and equipment 35 - - (7) 28
31/12/2010 31/12/2009 01/01/200
10. TRADE ACCOUNTS PAYABLE
31/12/2010 31/12/2009 01/01/2009
Domestic 4,416 5,624 1,730
Foreign (b) 8,905 8,558 778
Discount to present value (a) (207) (566) -
Total current 13,114 13,616 2,508
Domestic 35 109 -
Total non-current 35 109 -
Grand total 13,149 13,725 2,508
(a) Discount to present value calculated on an exponential basis and pro rata temporis from the origin of each transaction with domestic and foreign suppliers, adopting as discount rate the SELIC (Central Bank overnight rate) rate – rate free of risk. This adjusts is recorded in “Costs” when products have already been sold, or in “Inventories” when the sales has not been made yet (according to note 6).
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(b) In 2009 the Company adopted the procedure of financing the acquisition of raw material directly from international suppliers. The position as of 31 December 2010 matures between April and November 2011. All transactions with international suppliers are in US dollars and are duly adjusted at the exchange rate between the acquisition date and the actual payment date.
11. LOANS
Financial institution Type Collateral Maturity Monthly rate 31/12/2010 31/12/2009 1/1/2009
Banco do Brasil Working capital Receivables Mai/10 CDI + 0.85% - 1,198 1,364
Banco BGN Overdraft protection Receivables Feb/09 CDI + 0.95% - - 947
Banco Votorantim Working capital Receivables Nov/10 CDI + 0.6% - 928 727
Banco Banrisul Working capital Receivables Mar/11 CDI + 0.75% 300 1,266 583
Banco ABC Brasil Overdraft protection Receivables Abr/11 CDI + 1.0% 248 - -
Banco ABC Brasil Overdraft protection Receivables Jul/09 CDI + 1.3% - - 2,413
Banco Sofisa Overdraft protection Receivables Set/11 CDI + 1.0% 1,245 616 -
Banco BBM Working capital Deposit Dec/09 CDI + 0.4% - - 2,386
Banco ABN Working capitalReceivables/ Mortgage Oct/10 CDI + 0.55% - 1,318 1,431
HSBC Bank Brasil Working capital Receivables Dec/09 CDI + 0.5% - - 2,523
Banco Bradesco Working capital Deposit Out/09 1.65% - - 3,172
Banco Unibanco Working capital Endorsement Jun/09 CDI + 1.0% - - 1,500
Banco IndustrialOverdraft protection/ Working capital Receivables Mar/11 CDI + 1.0% 1,502 2,339 2,036
Banco Safra Working capitalReceivables/ Inventory Jun/10 CDI + 1.45% - 310 -
BicBanco LeasingMortgage and trade notes Aug/14 CDI + 0.7% 1,020 - -
Banco Cruzeiro do Sul Working capital Receivables Nov/11 CDI + 0.85% 862 - -
Banco Daycoval Working capital Receivables Oct/11 CDI + 1.0% 488 - -
Banco Rural Working capital Receivables Mar/11 CDI + 0.9% 1,174 - -
Banco Fibra Working capital Receivables Jun/11 CDI + 0.85% 1,290 736 839
BNDESFinancing of trade accounts payable Clean 136 -
Total current 8,265 8,711 19,921
BicBanco LeaseMortgage and trade notes Ago/14 CDI + 0.7% 3,319 - -
Banco ABN Working capitalReceivables/ Mortgage Out/10 CDI + 0.55% - - 1,123
BNDESFinancing of trade accounts payable Clean 325 - -
Total non-current 3,644 - 1,123
Grand total 11,909 8,711 21,044
The maturity of long-term liabilities breaks down as follows:
2009 - - 1,123
2012 1,570 - -
2013 1,245 - -
2014 829 - -
3,644 - 1,123
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12. SALARIES, ACCRUED PAYROLL BENEFITS AND SOCIAL CHARGES
31/12/2010 31/12/2009 01/01/2009
INSS (Social security contribution) payable 97 75 82
FGTS (Severance pay fund) payable 24 23 25
Provision for vacation pay 424 423 328
Provision for profit sharing 155 188 54
Other liabilities 23 12 25
723 721 514
13. TAX LIABILITIES
Short-term 31/12/2010 31/12/2009 01/01/2009
PAEX (Extraordinary tax debt instalment payment programme) - INSS (a) 135 139 161
PAEX (Extraordinary tax debt instalment payment programme) - Federal taxes (a) 254 233 173
ICMS (State VAT) - PPI (tax instalment payment programme) 55 42 45
Other taxes 14 17 16
458 431 395
Long-term
PAEX (Extraordinary tax debt instalment payment programme) - INSS (a) 309 395 1.081
PAEX (Extraordinary tax debt instalment payment programme) - Federal taxes (a) 1.636 1.633 1.179
ICMS - PPI 309 344 354
2.254 2.372 2.614
Total 2.712 2.803 3.009
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Extraordinary Tax Debt Instalment Payment Programme (PAEX)
The Extraordinary Tax Debt Instalment Payment Programme (Paex) was introduced by Executive Act No. 303 of 29 June 2006. This Act establishes the repayment of legal entities’ debts to the Federal Revenue Service (SRF), the National Treasury Attorney General (PGFN) and the National Institute of Social Security (INSS) in 130 monthly and successive instalments (SRF/PGFN) for debts due by 28 February 2003 and incurring TJLP (long-term interest rate), and in 120 monthly and successive instalments (IRPJ - Corporate income tax, CSLL - Social contribution tax, Cofins - tax on sales, PIS - tax on sales, CPMF - Tax on bank transactions, INSS - Social security contribution, and fine) for debts due between 1st March 2003 and 31 December 2005 and incurring Selic (Central Bank overnight rate). These provisions shall be applicable whether or not these overdue taxes have been assessed, whether or not they have been listed as Federal Government or INSS Enforceable Debt, and even if challenged in court in an action filed by defendant, or with payment being claimed in court, including debts that have been included in tax debt instalment payment schemes before and not totally settled, although cancelled for lack of payment. The consolidated PAEX balance recorded in the Company is the same as the one disclosed by the Brazilian Federal Revenue Service. With the enactment of Law No. 11941, of 27 May 2009, which establishes the payment and instalment payment of debts in arrears, the Company joined this new instalment payment in November 2009, waiving the previously granted instalment payments, as established by legislation.
The Company joined instalment payments provided for in Law No. 11941/2009, settled amounts corresponding to fines, fines on arrears and penalties, and interest on arrears, including for debts registered at Federal Government Enforceable Debt (DAU), using credits resulting from tax losses of its own CSLL.
The minimal instalment arising from the Extraordinary Tax Debt Instalment Payment Programme is dealt with in articles 1 and 8 of Executive Act No. 303/2006 will be equivalent to 85% of the instalment due in November 2008 and of R$100.00 in case of other debts of the entity, due in the last business day of each month. The instalment payment period is from 32 to 180 falling due instalments.
The first instalment had been paid in the month that the formal joining request was made, causing effects on the requests made pursuant to the corresponding payment of the first instalment in an amount not lower than that established by law.
The amount of each instalment will bear interest corresponding to the variation of SELIC rate.
Upon the calculation of instalments paid during the effect of the PAEX, the debts which make up the remaining balance of the instalment payments were restated at the date of the new instalment payment plus legal additions due at the time of the corresponding taxable event, including reductions in interest, fines and legal charges, as well as the settlement of interest and fine with credits arising from CSLL tax losses.
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RFB Legal suit Social security Total
Remaining balance as of 31/12/2009 376 1,490 534 2,400 Instalments paid (a) (145) (3) (134) (282) Interest in the period 29 142 45 216
Balance consolidated as of 31/12/2010 260 1,629 445 2,334
Short-term 145 109 135 389 Long-term 115 1,520 310 1,945
260 1,629 445 2,334
Taxes
(a) Minimum payment established by Law No. 11.941/2009.
14. PROVISION FOR CONTINGENCIES
31/12/2010 31/12/2009 1/1/2009 31/12/2010 31/12/2009 1/1/2009
Contingencies 191 - - 879 70 75
Court deposits Provision for contigencies
The Company is involved in tax, labour and civil lawsuits which are under discussion at both administrative and judicial levels. Provisions for losses arising from those lawsuits are estimated and adjusted by the Company’s management according to the opinion of its legal counsellors.
During the period ended 31 December 2010, the Company’s legal counsellors changed their judgement on the lawsuits under their responsibility. Accordingly, they classified R$321 thousand, duly recorded in the Company’s books of account, as lawsuits whose unfavourable outcome is probable, and R$6,797 thousand as lawsuits whose unfavourable outcome is possible.
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Lawsuits whose unfavourable outcome is possible are as follows:
31/12/2010 31/12/2009 01/01/2009
Labour 934 153 76
Civil 4,297 1,505 9516
Tax 1,566 494 3,654
6,797 2,152 13,246
We present below a brief description of the main civil proceedings to which the Company is a party and considered by legal counsellors to be significant:
Civil contingencies
Suit No. 813/01 – Class action charging the Company of not adequately throwing off, releasing, depositing and disposing of residues or effluents in a non-waterproof area to avoid soil and groundwater contamination, therefore allowing their accumulation or infiltration. The suit’s approximate amount is R$342 thousand. Currently Cetesb (Environmental Sanitation Technology Company) will evaluate the environmental audit report to issue an opinion. Our legal counsellors consider that a favourable outcome for the Company is possible.
Suit for civil and labour damages due to an occupational accident in which the former employee died when he overthrew the Company’s forklift in a risky manoeuvre where he put it in reverse. The plaintiff claims property damage in the amount of R$334 thousand and pain and suffering of R$500 thousand, plus legal fees. Because the civil and labour judges were considered not to have proper jurisdiction over the issue, the records are in the Labour Justice. Due to this decision, the Company filed an appeal at the Justice Court of the State of São Paulo and is waiting for a decision. Our legal counsellors consider that a favourable outcome for the Company is possible.
Suit No. 707/07 – An indemnity action filed against our Company by White Martins Gases Industriais. The action was filed due to an alleged termination without case by us of the Agreement for Gas Supply which was signed between the parties. The suit’s approximate amount is R$300 thousand.
The records are currently awaiting the statement publication from the First Court, which will determine the parties to disclosure the evidence to be produced. Based on our legal counsellors’ opinion, we understand that an unfavourable outcome for this action is possible, but with a low risk.
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Labour contingencies
The Company is involved in some labour claims filed by former employees who request termination payments, salary additions, overtime and amounts due, among others. Our legal counsellors consider that a favourable outcome for the Company is possible.
Tax contingencies
Lawsuit No. 621/2005 – Court claim for ICMS filed by the Treasury Department of the state of São Paulo. An appeal against the tax collection was filed, which was not heard. The Company filed a bill of review which was denied. We filed a special appeal. We filed a petition requiring the suspension of the tax collection because the debt is paid in instalments. Waiting for approval. Our legal counsellors consider that a favourable outcome for the Company is possible.
Other information
Under Brazilian tax legislation, federal, state and municipal tax records are open to review by respective authorities for periods ranging from five to thirty years.
01.01.2009 AdditionsWrite-offs / Reversals
31.12.09 AdditionsWrite-offs / Reversals
31.12.10
Tax - - - - 369 - 369
Labour 75 - 5 70 - 29 41
Civil - - - - 469 - 469
75 - 5 70 838 29 879
15. SHAREHOLDERS’ EQUITY
Share capital
As of 31 December 2010, share capital, fully paid in, is represented by 5,217,268 common shares without par value, distributed as follows:
31/12/2010 31/12/2009 01/01/2009
Tripto Participações Ltda. 2,898,922 2,898,922 2,898,922
Market 2,070,100 2,070,100 2,070,100
Other 248,246 248,246 248,246
Total 5,217,268 5,217,268 5,217,268
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Capital reserve
The capital reserve was made up of additional paid-in capital when debts to unsecured suppliers, intercompany loans and the share option plan were capitalised, as follows:
Date Amount
Additional paid-in capital Capitalisation of unsecured suppliers Dec/06 2,127
Additional paid-in capital Capitalisation of loan agreement Dec/07 5,220
Additional paid-in capital Share option plan Nov/08 135
Treasury shares Repurchase of shares Jun/09 (25)
7,457
16. NET REVENUE
31/12/2010 31/12/2009GROSS REVENUERvenue from goods soldDomestic market 44.413 43.698
44.413 43.698 SALE RETURNSReturns and rebates (1.944) (1.648) Taxes on sales (3.306) (3.712)
(5.250) (5.360)
NET REVENUE 39.163 38.338
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17. SELLING EXPENSES
Mostly represented by third party services, freight, salaries and wages, as shown below:
31/12/2010 31/12/2009
Personnel 1,513 1,357
Communication 77 108
Advertising 122 159
Travels and vehicles 411 385
Services provided by third parties 4,359 3,659
Allowance for doubtful accounts 384 759
Other selling expenses 320 218
7,186 6,645
18. GENERAL AND ADMINISTRATIVE EXPENSES
They are mainly made up by third-party professional services, salaries and wages, as shown below:
31/12/2010 31/12/2009
Personnel 933 922
Depreciation and amortisation 119 87
Telephone and electricity 123 144
Maintenance 232 297
Travels and vehicles 108 135
Third-party services 1,417 1,079
Advertising 99 83
Other administrative expenses 508 663
3,539 3,410
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19. FINANCIAL LOSSES, NET
Financial revenues 31/12/2010 31/12/2009
Exchange rate gains 1,609 -
Interest received 77 745
Discounts obtained 77 13
Financial investment revenues 147 165
Discount to present value 2,431 2,281
Other financial revenues 14 3
Total financial revenues 4,355 3,207
Interest on loans and financing (4,472) (4,148)
IOF (tax on financial transactions) (141) (182)
Discounts granted (191) (364)
Exchange rate losses (1,301) (418)
Share plan loss - -
Discount to present value (980) (457)
Interest and fine on taxes in arrears (419) (207)
Other financial expenses (1,090) (237)
Total financial expenses (8,594) (6,013)
Financial losses, net (4,239) (2,806)
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20. EXPENSES BY NATURE
Classification by nature 31/12/2010 31/12/2009
Depreciation and amortisation 840 859
Personnel 5.491 4.914
Raw materials and materials for use and consumption 29.451 31.825
Taxes 3.307 3.712
Earnings of third-party capital 4.472 4.148
Other expenses 5.933 4.821
49.494 50.279
Classification by function 31/12/2010 31/12/2009
Cost of goods sold 33.207 35.225
Selling expenses 7.186 6.645
General and administrative expenses 3.539 3.410
Net financial income 4.239 2.806
Other operating revenue and expenses 1.323 2.193
49.494 50.279
21. RELATED-PARTY TRANSACTIONS
Current liabilities
Trade accounts payable 31/12/2010 31/12/2009 01/01/2009
Quirios Produtos Químicos S.A. 1,134 2,310 499
Accounts payable 31/12/2010 31/12/2009 01/01/2009
Loan Agreement - Quirios Produtos Químicos S.A. 3,146 - -
Income for the years ended 31 December 2010, 2009 and 2008
Revenue 31/12/2010 31/12/2009 01/01/2009
Finished goods - Quirios Produtos Químicos S.A. 2,508 4,892 25
Costs 31/12/2010 31/12/2009 01/01/2009
Raw material - Quirios Produtos Químicos S.A. 1,410 3,256 6,421
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In the year ended 31 December 2010, Nutriplant purchased raw materials from Quirios (company belonging to our controlling companies) at market conditions in the amount of R$1,410 thousand, accounting for 3.4% of the Company’s total purchases in the period. Also, finished goods were sold to Quirios amounting to R$2.508 thousand at market conditions similar to those agreed with other clients.
The loan agreement entered into with that related party has no maturity date and it is restated at CDI + 1%. The amount of R$3,146 thousand is recorded in non-current liabilities.
22. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Company enters into financial instruments, which are fully recorded in its balance sheet. The Company uses financial instruments as a means of increasing the profitability of its net cash funds and raising funds for working capital purposes and implementing its investment plans.
Market value of financial instruments
The market values of cash and cash equivalents (cash, banks and financial investments), of the balance of trade accounts receivable and current liabilities approximate their carrying values due to the fact that the maturity date is close to the balance sheet date. The balance of financing is monetarily adjusted according to variable interest rates due to market conditions and therefore the debt balance at the balance sheet date approximates market value.
Risk Management
The Company has preventive and detecting controls which monitor its exposure to credit risks, market risks and risks related to its transactions.
Credit risk management
Exposure to credit risk may make the Company incur losses due to the difficulty in receiving amounts billed to customers. This risk is mitigated by applying analytical procedures to monitor trade accounts receivable, filing collection actions and interrupting the supply of new products. An allowance for doubtful accounts is set up in an amount deemed sufficient by the Company’s management to cover possible losses on the realisation of these receivables.
Market risk management
We are exposed to market risks resulting from our activities. These market risks, which are beyond our control, involve basically the possibility of fluctuations in interest, foreign exchange and inflation rates which may negatively affect the value of our financial assets or cash flows and future earnings. Market risk consists of possible losses resulting from negative changes in market rates and prices. This risk is mitigated by applying procedures to evaluate the exposure of assets and liabilities to market risk and therefore by entering into hedging contracts with top financial institutions, when necessary.
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23. SHARE OPTION PLAN (“PLAN”)
Nutriplant has a share option plan for the acquisition of shares by employees, aiming to retain executives and align their interests with those of shareholders. Managers, employees and individuals who provide services to the Company are eligible to take part in the plan. The plan is managed by the Board of Directors, which periodically creates share purchase programs, establishing its terms and the employees who will benefit therefrom, including the share price.
The plan’s option may be exercised within ninety (90) days after the date the year’s results are disclosed, or during the 90-day period after the date of disclosure of the results of the year immediately after the option is granted, if the Company’s Committee or Board of Directors so decide provided the other conditions of the plan are met.
The beneficiary is granted no rights on the maintenance of the contractual bond with the Company and will not interfere anyway with the Company's right to terminate the contract with the beneficiary at any time. In addition, the beneficiary will have none of the rights and privileges of the Company's shareholders, except those related to the Plan, with respect to the options which are the subject matter of the contract.
24. MANAGEMENT’S COMPENSATION
The total compensation of the Company’s directors consists of fixed and variable payments.
Fixed compensation includes wages, salaries and social security contributions. Variable compensation corresponds to performance bonuses according to Ebitda.
During 2010 and 2009 no compensation linked to post-employment benefits, termination benefits, other long-term benefits or share-based compensation were in place.
25. RECEIVABLES INVESTMENT FUND (FIDC)
Nutriplant’s Agroindustrial Receivables Investment Fund (“FIDC”) was set up on 9 September 2009 pursuant to CVM Instruction No. 356 of 17 December 2001 and registered with the 5th Registry of Deeds and Documents in the city of Rio de Janeiro, state of Rio de Janeiro. FIDC is managed by Oliveira Trust DTVM S.A. and its purpose is the acquisition of receivables from purchase and sale transactions relating to products manufactured and sold by the Company and paid in instalments. FIDC’s senior shares, in the total amount of R$14 million, will be fully paid in by Rabobank International S.A. Junior shares will be privately subscribed by the Company in a percentage corresponding to thirty-one percent (31%) of FIDC shareholders’ equity. Senior shares will bear 100% of the average daily rate of one-day interbank deposits, calculated and disclosed by CETIP S.A. Over-the-counter trade of Assets and Derivatives (“DI Rate”), plus 4.5% per year. The term of senior shares of the first series is thirty-six (36) months. The Company intends to negotiate its receivables with FIDC, provided they meet eligibility criteria established on the related regulation. As of 31 December 2010 FIDC’s position was R$2.6 million junior shares and R$4.2 million senior shares.
Nutriplant Indústria e Comércio S.A.
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26. INSURANCE COVER
On 20 April 2011, the Company renewed the insurance policy for liability cover for D&O’s directors with insurance company ACE and the insurance policy to cover property risks with insurance company Generali Seguros.
Amounts are considered sufficient by management to cover the risks involved.
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