background image
JBS S.A.
Financial
statements
and
Report
of
Independent auditors
As of September 30, 2012 and 2011
background image



Review report on the quarterly information - ITR


To
The Board of Directors and Shareholders of
JBS S.A.
São Paulo - SP


Introduction
We have reviewed the individual and consolidated interim financial information of JBS S.A.
("Company") contained within the Quarterly Information - ITR for the quarter ended on
September 30, 2012, which comprise the balance sheet on September 30, 2012 and the related
statements of operations, comprehensive income for the three and nine-month period then ended
and changes in equity and cash flows for the nine-month period then ended, including the notes
to these interim financial information.

Management is responsible for the preparation of the individual interim financial information in
accordance with Technical Pronouncement CPC 21 (R1) ­ Interim Financial Reporting and the
consolidated interim financial information in accordance with the CPC 21(R1) and with the
International Accounting Standard (IAS) 34 - Interim Financial Reporting, issued by the
International Accounting Standards Board (IASB), and for the presentation of these interim
financial information in accordance with the standards issued by the Brazilian Securities and
Exchange Commission (CVM) applicable to the Quarterly Information - ITR. Our responsibility
is to express a conclusion on this interim financial information based on our review.

Scope of the review
We conducted our review in accordance with Brazilian and International Standard on Review of
interim financial information (NBC TR 2410 and ISRE 2410 - Review of Interim Financial
Information Performed by the Independent Auditor of the Entity, respectively). A review of
interim information consists of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards
on Auditing and consequently does not enable us to obtain assurance that would become aware
of all significant matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.

Conclusion on the individual interim financial information
Based on our review, we are not aware of any fact that causes us to believe that the individual
interim financial information included in the quarterly information referred to above were not
prepared, in all material respects, in accordance with CPC 21 (R1) applicable to Quarterly
Information and presented in accordance with the standards issued by the Brazilian Securities
and Exchange Commission.
background image
Conclusion on the consolidated interim financial information
Based on our review, we are not aware of any fact that causes us to believe that the consolidated
interim financial information included in the quarterly information referred to above were not
prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to
Quarterly Information and presented in accordance with the standards issued by the Brazilian
Securities and Exchange Commission.

Other issues

Interim statement of value added
We have also reviewed the individual and consolidated interim statement of value added for the
nine-month period ended September 30, 2012, prepared under the responsibility of the
Company's management, whose disclosure in the interim financial statements is required in
accordance with the standards issued by the Brazilian Securities and Exchange Commission
(CVM) applicable to the preparation of the Quarterly Information and considered as
supplemental information by the international accounting standards (IFRS), which do not
require the disclosure of the Statement of Value Added. This statement was submitted to the
same review procedures previously described and based on our review, we are not aware of any
fact that would lead us to believe that they have not been
fairly stated, in all material respects, in
relation to the Individual and Consolidated interim financial information taken as a whole.

Review of the prior period amounts
KPMG Auditores Associados (merged by KPMG Auditores Independentes on December 2,
2011) reviewed the interim financial information for the tree and nine months periods ended
September 30, 2011, disclosed for comparative purposes, for which an unmodified review report
issued was dated November 10, 2011.


São Paulo, November 13, 2012


KPMG Auditores Independentes
CRC 2SP014428/O-6
Original report in Portuguese signed by
Moacyr Humberto Piacenti
Accountant CRC 1SP204757/O-9
background image
JBS S.A.
Balance sheets
(In thousands of Reais)
Note
September 30, 2012
December 31, 2011
September 30, 2012
December 31, 2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents
4
3,554,606
3,612,867
5,040,659
5,288,194
Trade accounts receivable, net
5
2,430,607
1,883,093
5,300,897
4,679,846
Inventories
6
1,948,854
1,544,261
5,489,591
5,405,705
Biological assets
7
-
-
895,509
209,543
Recoverable taxes
8
1,396,507
1,330,609
1,783,754
1,690,311
Prepaid expenses
12,985
8,148
142,157
131,033
Other current assets
206,743
256,225
514,958
526,649
TOTAL CURRENT ASSETS
9,550,302
8,635,203
19,167,525
17,931,281
NON-CURRENT ASSETS
Long-term assets
Credits with related parties
9
877,941
88,505
609,061
552,197
Biological assets
7
-
-
279,747
-
Recoverable taxes
8
546,532
562,027
572,432
626,126
Other non-current assets
198,096
104,207
628,429
389,947
Total long-term assets
1,622,569
754,739
2,089,669
1,568,270
Investments in subsidiaries and in associates
10
6,272,454
7,561,574
257,174
-
Property, plant and equipment, net
11
8,558,783
7,803,582
15,996,421
15,378,714
Intangible assets, net
12
9,530,805
9,531,506
11,713,874
12,532,619
TOTAL NON-CURRENT ASSETS
25,984,611
25,651,401
30,057,138
29,479,603
TOTAL ASSETS
35,534,913
34,286,604
49,224,663
47,410,884
The accompanying notes are an integral part of the financial statements
Company
Consolidated
2
background image
JBS S.A.
Balance sheets
(In thousands of Reais)
Note
September 30, 2012
December 31, 2011
September 30, 2012
December 31, 2011
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable
13
785,501
666,375
3,361,901
3,323,886
Loans and financings
14/15
4,865,817
4,574,702
5,512,434
5,339,433
Income taxes
17
-
-
9,013
211,528
Payroll, social charges and tax obligation
17
490,567
347,863
1,392,416
1,167,163
Payables related to facilities acquisitions
19
116,953
10,589
116,953
10,589
Other current liabilities
426,038
466,402
411,669
343,100
TOTAL CURRENT LIABILITIES
6,684,876
6,065,931
10,804,386
10,395,699
NON-CURRENT LIABILITIES
Loans and financings
14/15
7,183,001
7,095,193
14,772,102
13,532,761
Convertible debentures
16
1,276
1,283
1,276
1,283
Payroll, social charges and tax obligation
17
138,195
-
582,066
683,812
Payables related to facilities acquisitions
19
86,408
2,048
86,408
2,048
Deferred income taxes
20
584,035
289,798
961,425
678,372
Provision for lawsuits risk
18
147,894
140,975
202,997
251,560
Other non-current liabilities
15,423
27,554
290,468
266,161
TOTAL NON-CURRENT LIABILITIES
8,156,232
7,556,851
16,896,742
15,415,997
SHAREHOLDERS' EQUITY
21
Capital stock
21,506,247
21,506,247
21,506,247
21,506,247
Capital transaction
79,286
(10,212)
79,286
(10,212)
Capital reserve
211,879
985,944
211,879
985,944
Revaluation reserve
98,033
101,556
98,033
101,556
Profit reserves
1,440,799
1,440,799
1,440,799
1,440,799
Treasury shares
(776,526)
(610,550)
(776,526)
(610,550)
Valuation adjustments to shareholders' equity in subsidiaries
104,191
127,071
104,191
127,071
Accumulated translation adjustments in subsidiaries
(2,626,189)
(2,877,033)
(2,626,189)
(2,877,033)
Retained earnings
656,085
-
656,085
-
Attributable to controlling interest
20,693,805
20,663,822
20,693,805
20,663,822
Attributable to noncontrolling interest
-
-
829,730
935,366
TOTAL SHAREHOLDERS' EQUITY
20,693,805
20,663,822
21,523,535
21,599,188
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
35,534,913
34,286,604
49,224,663
47,410,884
The accompanying notes are an integral part of the financial statements
Company
Consolidated
3
background image
JBS S.A.
Statements of income for the nine months period ended September 30, 2012 and 2011
(In thousands of Reais)
Note
2012
2011
2012
2011
NET SALE REVENUE
22
11,586,835
9,756,574
53,845,988
44,862,304
Cost of goods sold
(8,485,260)
(7,494,124)
(47,597,435)
(40,060,245)
GROSS INCOME
3,101,575
2,262,450
6,248,553
4,802,059
OPERATING INCOME (EXPENSE)
General and administrative expenses
(596,607)
(439,368)
(1,462,783)
(1,247,814)
Selling expenses
(1,092,441)
(941,495)
(2,748,718)
(2,304,742)
Financial expense, net
25
(853,679)
(1,152,289)
(963,844)
(1,461,506)
Equity in earnings of subsidiaries
10
369,933
63,572
631
-
Other income (expenses), net
26
18,019
21,760
8,353
(10,253)
(2,154,775)
(2,447,820)
(5,166,361)
(5,024,315)
NET INCOME (LOSS) BEFORE TAXES
946,800
(185,370)
1,082,192
(222,256)
Current income taxes
20
1,813
2,087
(75,194)
(375,283)
Deferred income taxes
20
(296,051)
81,992
(306,308)
297,791
(294,238)
84,079
(381,502)
(77,492)
NET INCOME (LOSS) OF THE PERIOD
652,562
(101,291)
700,690
(299,748)
ATTRIBUTABLE TO:
Controlling interest
652,562
(101,291)
Noncontrolling interest
48,128
(198,457)
700,690
(299,748)
Net income (loss) basic per thousand shares - in reais
23
223.49
(38.28)
223.49
(38.28)
The accompanying notes are an integral part of the financial statements
Company
Consolidated
4
background image
JBS S.A.
Statements of income for the three months period ended September 30, 2012 and 2011
(In thousands of Reais)
Note
2012
2011
2012
2011
NET SALE REVENUE
22
4,274,902
3,327,232
19,366,617
15,567,759
Cost of goods sold
(3,135,692)
(2,536,025)
(16,889,422)
(13,873,600)
GROSS INCOME
1,139,210
791,207
2,477,195
1,694,159
OPERATING INCOME (EXPENSE)
General and administrative expenses
(213,880)
(151,449)
(516,136)
(442,832)
Selling expenses
(412,130)
(330,290)
(999,940)
(812,567)
Financial expense, net
25
(268,596)
(313,098)
(418,657)
(519,482)
Equity in earnings of subsidiaries
10
239,599
(82,353)
631
-
Other income (expenses), net
26
10,605
17,827
(1,510)
4,006
(644,402)
(859,363)
(1,935,612)
(1,770,875)
NET INCOME (LOSS) BEFORE TAXES
494,808
(68,156)
541,583
(76,716)
Current income taxes
20
604
653
(27,777)
(79,611)
Deferred income taxes
20
(128,413)
-
(127,193)
(26,375)
(127,809)
653
(154,970)
(105,986)
NET INCOME (LOSS) OF THE PERIOD
366,999
(67,503)
386,613
(182,702)
ATTRIBUTABLE TO:
Controlling interest
366,999
(67,503)
Noncontrolling interest
19,614
(115,199)
386,613
(182,702)
Net income (loss) basic per thousand shares - in reais
23
125.69
(22.75)
125.69
(22.75)
The accompanying notes are an integral part of the financial statements
Company
Consolidated
5
background image
JBS S.A.
Statement of comprehensive income for the nine months period ended September 30, 2012 and 2011
(In thousands of Reais)
2012
2011
2012
2011
Net income (loss) of the period
652,562
(101,291)
700,690
(299,748)
Other comprehensive income
Valuation adjustments to shareholders' equity in subsidiaries
(22,880)
(2,257)
(22,880)
(2,257)
Accumulated adjustment of conversion in subsidiaries
60,030
35,971
60,030
35,971
Exchange variation in subsidiaries
190,814
49,128
190,814
49,128
Total of comprehensive income
880,526
(18,449)
928,654
(216,906)
Total of comprehensive income attributable to:
Controlling interest
880,526
(18,449)
864,868
(73,297)
Noncontrolling interest
-
-
63,786
(143,609)
880,526
(18,449)
928,654
(216,906)
The accompanying notes are an integral part of the financial statements
Company
Consolidated
6
background image
JBS S.A.
Statement of comprehensive income for the three months period ended September 30, 2012 and 2011
(In thousands of Reais)
2012
2011
2012
2011
Net income (loss) of the period
366,999
(67,503)
386,613
(182,702)
Other comprehensive income
Valuation adjustments to shareholders' equity in subsidiaries
(4,390)
(1,351)
(4,390)
(1,351)
Accumulated adjustment of conversion in subsidiaries
30,410
50,124
30,410
50,124
Exchange variation in subsidiaries
40,245
467,243
40,245
467,243
Total of comprehensive income
433,264
448,513
452,878
333,314
Total of comprehensive income attributable to:
Controlling interest
433,264
448,513
432,286
123,150
Noncontrolling interest
-
-
20,592
210,164
433,264
448,513
452,878
333,314
The accompanying notes are an integral part of the financial statements
Company
Consolidated
7
background image
JBS S.A.
Statements of changes in shareholders' equity for the nine months period ended September 30, 2012 and 2011
(In thousands of Reais)
Valuation
adjustments to
Accumulated
Total
Capital
Capital
Capital
Revaluation
For
Retained
Noncontrolling
shareholders'
stock
transactions
reserve
reserve
Legal
expansion
Earnings
Total
interest
equity
BALANCE AS OF DECEMBER 31, 2010
18,046,067
(9,949)
985,944
106,814
7,768
1,503,478
(485,169)
(1,719)
(2,558,863)
-
17,594,371
1,100,478
18,694,849
Capital transaction
-
(12)
-
-
-
-
-
-
-
-
(12)
-
(12)
Treasury shares
-
-
(110,428)
-
-
-
-
-
-
-
(110,428)
-
(110,428)
Convertible debentures
3,460,180
-
-
-
-
-
-
-
-
-
3,460,180
-
3,460,180
Realization of revaluation reserve
-
-
-
(4,051)
-
-
-
-
-
4,051
-
-
-
Valuation adjustments in subsidiaries shareholders´ equity
-
-
-
-
-
-
-
(2,257)
-
-
(2,257)
-
(2,257)
Accumulated translation adjustments in subsidiaries shareholders' equity
-
-
-
-
-
-
-
-
35,971
-
35,971
-
35,971
Investments exchange rate variations, net
-
-
-
-
-
-
-
-
49,128
-
49,128
-
49,128
Loss of the period
-
-
-
-
-
-
-
-
-
(101,291)
(101,291)
(198,457)
(299,748)
Noncontrolling interest
-
-
-
-
-
-
-
-
-
-
-
84,509
84,509
BALANCE AS OF SEPTEMBER 30, 2011
21,506,247
(9,961)
875,516
102,763
7,768
1,503,478
(485,169)
(3,976)
(2,473,764)
(97,240)
20,925,662
986,530
21,912,192
BALANCE AS OF DECEMBER 31, 2011
21,506,247
(10,212)
985,944
101,556
7,768
1,433,031
(610,550)
127,071
(2,877,033)
-
20,663,822
935,366
21,599,188
Capital transactions
-
89,498
-
-
-
-
-
-
-
-
89,498
-
89,498
Purchase of treasury shares
-
-
-
-
-
-
(939,717)
-
-
-
(939,717)
-
(939,717)
Transaction costs
-
-
-
-
-
-
(324)
-
-
-
(324)
-
(324)
Cancellation of treasury shares
-
-
(774,065)
-
-
-
774,065
-
-
-
-
-
-
Realization of revaluation reserve
-
-
-
(3,523)
-
-
-
-
-
3,523
-
-
-
Valuation adjustments to shareholders equity in subsidiaries
-
-
-
-
-
-
-
(22,880)
-
-
(22,880)
-
(22,880)
Accumulated translation adjustments in subsidiaries
-
-
-
-
-
-
-
-
60,030
-
60,030
-
60,030
Investments exchange rate variations, net
-
-
-
-
-
-
-
-
190,814
-
190,814
-
190,814
Net income of the period
-
-
-
-
-
-
-
-
-
652,562
652,562
48,128
700,690
Noncontrolling interest
-
-
-
-
-
-
-
-
-
-
-
(153,764)
(153,764)
BALANCE AS OF SEPTEMBER 30, 2012
21,506,247
79,286
211,879
98,033
7,768
1,433,031
(776,526)
104,191
(2,626,189)
656,085
20,693,805
829,730
21,523,535
The accompanying notes are an integral part of the financial statements
Profit reserves
shareholders'
equity
translation
adjustments
Treasury
shares
8
background image
JBS S.A.
(In thousands of Reais)
2012
2011
2012
2011
Cash flow from operating activities
Net income (loss) of the period attributable to controlling interest
652,562
(101,291)
652,562
(101,291)
Adjustments to reconcile loss to cash provided on operating activities
. Depreciation and amortization
321,431
321,772
1,163,957
938,531
. Allowance for doubtful accounts
(2,632)
5,844
(2,910)
13,150
. Equity in earnings of subsidiaries
(369,933)
(63,572)
(631)
-
. Loss (gain) on assets sales
(9,578)
(16,187)
8,677
(5,157)
. Deferred income taxes
296,051
(81,992)
306,308
(297,791)
. Current and non-current financial charges
338,565
1,131,952
290,440
1,267,108
. Provision for lawsuits risk
6,919
4,462
8,011
10,273
. Impairment
-
-
8,112
-
1,233,385
1,200,988
2,434,526
1,824,823
Decrease (increase) in operating assets
Trade accounts receivable
(538,920)
2,920
(487,763)
(74,338)
Inventories
(404,593)
(377,364)
(723,045)
(660,611)
Recoverable taxes
21,472
(158,281)
(127,654)
(180,810)
Other current and non-current assets
(49,245)
(215,800)
(93,098)
(241,706)
Related party receivable
(559,614)
(260,795)
658
(74,162)
Biological assets
-
-
(366,294)
90,104
Increase (decrease) operating liabilities
Trade accounts payable
101,348
52,289
(51,807)
(266,783)
Other current and non-current liabilities
304,160
69,862
70,072
19,491
Noncontrolling interest
-
-
48,128
(198,457)
Valuation adjustments to shareholders' equity in subsidiaries
-
-
(27,344)
(225,285)
Net cash provided by operating activities
107,993
313,819
676,379
12,266
Cash flow from investing activities
Additions to property, plant and equipment and intangible assets
(842,372)
(423,812)
(1,145,614)
(947,151)
Net effect of Vigor deconsolidation
-
-
(211,856)
-
Decrease in investments in subsidiaries
888,902
793,673
2,067
-
Proceeds received from termination agreement of Inalca JBS
-
504,002
-
504,002
Net effect of working capital of acquired / merged company
-
718
(24,408)
(34,584)
Net cash provided by (used in) investing activities
46,530
874,581
(1,379,811)
(477,733)
Cash flow from financing activities
Proceeds from loans and financings
4,217,594
5,697,344
13,133,073
14,947,851
Payments of loans and financings
(4,428,019)
(6,334,199)
(12,770,072)
(12,981,374)
Payments of debentures
(7)
(1,874)
(7)
(1,874)
Capital transactions
-
(12)
(6,848)
(12)
Shares acquisition of own emission
(2,352)
(110,428)
(2,352)
(110,428)
Net cash provided by (used in) financing activities
(212,784)
(749,169)
353,794
1,854,163
Effect of exchange variation on cash and cash equivalents
-
-
102,103
117,744
Variance in cash and cash equivalents
(58,261)
439,231
(247,535)
1,506,440
Cash and cash equivalents at the beginning of the period
3,612,867
3,000,649
5,288,194
4,074,574
Cash and cash equivalents at the end of the period
3,554,606
3,439,880
5,040,659
5,581,014
The accompanying notes are an integral part of the financial statements
Statements of cash flows for the nine months period ended September 30, 2012 and 2011
Company
Consolidated
9
background image
JBS S.A.
(In thousands of Reais)
2012
2011
2012
2011
Revenue
Sales of goods and services
12,325,957
10,395,713
54,780,647
46,558,664
Other net income
25,631
25,912
32,334
75,691
Allowance for doubtful accounts
2,632
(5,844)
2,911
(13,150)
12,354,220
10,415,781
54,815,892
46,621,205
Goods
Cost of services and goods sold
(6,987,227)
(5,552,950)
(37,012,886)
(29,215,624)
Materials, energy, services from third parties and others
(1,795,377)
(1,665,671)
(7,870,128)
(9,253,121)
Losses/Recovery of amounts
-
-
-
(1,600)
(8,782,604)
(7,218,621)
(44,883,014)
(38,470,345)
Gross added value
3,571,616
3,197,160
9,932,878
8,150,860
Depreciation and Amortization
(321,431)
(321,772)
(1,163,957)
(938,531)
Net added value generated by the company
3,250,185
2,875,388
8,768,921
7,212,329
Net added value by transfer
Equity in earnings of subsidiaries
369,933
63,572
631
-
Financial income
798,103
1,943,201
1,365,806
2,458,909
Others
(661)
2,845
(5,505)
(15,085)
-
-
-
-
NET ADDED VALUE TOTAL TO DISTRIBUTION
4,417,560
4,885,006
10,129,853
9,656,153
Distribution of added value
Labor
Salaries
924,564
803,607
4,609,485
3,901,103
Benefits
109,401
132,351
998,802
658,792
FGTS (Brazilian Labor Social Charge)
47,208
60,313
56,794
66,716
1,081,173
996,271
5,665,081
4,626,611
Taxes and contribution
Federal
387,416
329,204
539,250
594,520
State
614,476
568,831
689,817
716,435
Municipal
12,549
1,854
13,920
2,656
1,014,441
899,889
1,242,987
1,313,611
Capital Remuneration from third parties
Interests
1,609,326
2,998,046
2,234,874
3,733,662
Rents
47,826
45,804
207,469
146,369
Others
12,232
46,287
78,752
135,648
1,669,384
3,090,137
2,521,095
4,015,679
Owned capital remuneration
Net income (loss) of the period attributable to controlling interest
652,562
(101,291)
652,562
(101,291)
Noncontrolling interest
-
-
48,128
(198,457)
652,562
(101,291)
700,690
(299,748)
ADDED VALUE TOTAL DISTRIBUTED
4,417,560
4,885,006
10,129,853
9,656,153
The accompanying notes are an integral part of the financial statements.
Company
Consolidated
Economic value added for the nine months period ended September 30, 2012 and 2011
10
background image
JBS S.A.
(Expressed in thousands of reais)
1
a) Activities in Brazil
In Company
In subsidiaries
b) Activities abroad
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
JBS S.A ( "JBS", the "Company") is a listed company in the "Novo Mercado" segment, based in the city of São Paulo, Brazil, which requires the highest level of
corporate governance in the Brazilian market and its shares are traded on the BM&F Bovespa S.A - Stock Exchange, Commodity and Forward.
The Company performs slaughter facility, cold storage of cattle meat, meat processing operations for the production of beef, by-products of meat and canned goods,
through forty-six industrial facilities based in the States of Acre, Bahia, Goiás, Minas Gerais, Maranhão, Mato Grosso do Sul, Mato Grosso, Pará, Rio de Janeiro,
Rondônia and São Paulo.
JBS Embalagens Metálicas Ltda (JBS Embalagens) produces metal packing in its plant based in the State of São Paulo, for the Company use.
The Company distributes its products through twelve distribution centers based in the States of Amazonas, Bahia, Minas Gerais, Pernambuco, Paraná, Rio de Janeiro,
Rio Grande do Sul, Santa Catarina, São Paulo and Distrito Federal.
JBS Confinamento Ltda. (JBS Confinamento) is based in Castilho and Guaiçara - State of São Paulo, Nazário and Aruanã - State of Goiás and Lucas do Rio Verde -
State of Mato Grosso, operates the activity of buying and reselling for fattening beef and providing services of fattening beef and third party cattle for slaughtering.
The Company and its subsidiaries develop the following operational activities:
Operating activities
Due the unfavorable scenario in the meat industry in Argentina since the year 2008, the Company has decided temporarily to discontinue its operations of the plants in
Colonia Caroya (Province of Córdoba), Consignaciones Rurales (Province of Buenos Aires) on the year 2010 and Venado Tuerto (Province of Santa Fé) on the year
ended 2011.
The indirect subsidiary Meat Snacks Partner do Brasil Ltda (Meat Snacks), a joint venture with shared control between the JBS´s subsidiary JBS Handels GMBH and
the third party company Jack Link Beef Jerky, is based in Santo Antônio da Posse, State of São Paulo, produces Beef Jerky purchasing fresh meat in the domestic
market and exports to the United States of America. As of March 2012, Meat Snacks opened a unit in the city of Lins, also in the State of São Paulo, in order to
expand its operations.
In JBS USA, Pilgrim's Pride - PPC based in Greeley, Colorado, United States of America is one of the largest chicken processing in the United States of America, with
operations in Mexico and Puerto Rico. Exporting commodities to over ninety countries, the main products are "in-natura", whole chilled or chilled parts. The main
customers are restaurant chains, food processors, distributors, supermarkets, wholesalers, distributors and other retail, and export to Eastern Europe (including
Russia), Far East (including China), Mexico and other world markets. Operates twenty nine processing chicken facilities, supported by thirty one feed mills, thirty seven
hatcheries, seventeen processing facilities and three pet food facilities in the United States and Mexico.
Cascavel Couros Ltda. (Cascavel), based in Cascavel, State of Ceará, whose activity is the production, distribution, import and export of leather and its derivatives. It
is specialized in the processing of cattle leather and products, engaged in producing leather on the stages of Wet Blue, Semi Finished and Finished. Cascavel buys
leather from slaughter facilities of JBS Group, selling especially to the foreign market to Europe, United States of America and China.
In the United States of America, JBS USA operates eight beef processing facilities, three pork processing facilities, one lamb slaughter facility services, one value-
added facility, and twelve feedlots. JBS USA operates ten processing facilities, three value added facilities and four feedlots in Australia.
In JBS USA, JBS Trading USA, Inc. also based in the United States of America distributes processed beef products mainly in U.S. market.
The Company has strong operations of leather tanning, most of its production intended to export in the segments of leather for furniture, automotive, footwear and
artifacts, in the stages of Wet Blue, Semi Finished and Finished. The structure is composed of fifteen industrial facilities based in the States of Espirito Santo, Goiás,
Minas Gerais, Mato Grosso, Mato Grosso do Sul, Pará, Rio Grande do Sul, Rondônia, São Paulo and Tocantins. JBS has one distribution center based in the State of
Mato Grosso do Sul.
Novaprom Food Ingredients Ltda. (Novaprom) based in Guaiçara, State of São Paulo, operates the exploration, production, distribution, export and import of food
products and ingredients. It is the pioneer in the production of natural collagen fiber and protein, collagen in its purest form, extracted from the suede and with the
minimum of 99% protein content, it is the largest company in the world in production and distribution of natural collagen fiber. Novaprom sells its products throughout
Brazil and exports to continents such as Europe, Latin America, Asia and Oceania.
JBS Argentina S.A. (JBS Argentina), an indirect wholly-owned subsidiary of the Company, based in Argentina, operates slaughter facilities and cold storage facilities
for the production of beef, canned goods, fat, pet food and beef products, and has six industrial facilities based in the provinces of Buenos Aires, Santa Fé and
Córdoba.
JBS USA divides its operation into three categories: Beef, operating the segment of bovine products, Pork, operating the segment of pork and lamb products and
Chicken, operating the segment of chicken acquired through the business combination of Pilgrim´s Pride (PPC).
Additionally, the Company operates in the segment of aluminum cans production, industrial waste management and plastic resin manufacturing; bar soap and soap
production for its own brands of cleaning and hygiene segment; production of biodiesel, glycerin, olein and fatty acid; purchase and sale of soybeans, tallow, palm oil,
caustic soda, stearin; industrialization and sale of tripe; own transport operations for retail sale, cattle for slaughter and export products. The Company also has stores
named "Beef Shopping" that sell meat and barbecue related items directly to consumers. With the merger of Biolins, the Company is also engaged in the production
and distribution of electric power, cogeneration and storage of hot water for heating.
JBS USA Holdings Inc. (JBS USA) and its subsidiaries process and prepare fresh, further processed and value-added beef, pork, chicken and lamb products for sale
to customers in the United States of America and in international markets.
JBS Aves Ltda. (JBS Aves), located in Montenegro, State of Rio Grande do Sul, explores the processing activity of chicken, developing of layer, breeder and broiler
chickens, their production and slaughter, until the industrialization of sub products and trade and export of them as well. JBS Aves operates four feed mills, three
chicken slaughterhouse, four plants of industrial products, six hatcheries and four sales branches.
11
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
- Write-off in Vigor investment:
Number of shares:
117,800,183
Share value in reais:
8.15
R$
Amount of investment written-off:
959,961
R$
- Exchange (Treasury Shares Receiving):
Number of shares:
117,800,183
Share value in reais:
7.96
R$
Amount of treasury shares:
937,689
R$
- Capital transaction calculation:
(22,272)
R$
c) Operating Relevant Event
In June 21, 2012, was performed the Voluntary Public Offering for the Acquisition of Common Shares Issued by JBS in Exchange for Common Shares Issued by Vigor
(Oferta Pública Voluntária de Aquisição de Ações Ordinárias de Emissão da JBS Mediante Permuta por Ações Ordinárias de Emissão da Vigor (the "Exchange
Offer").
In the auction were acquired by JBS S.A. 117,800,183 (one hundred seventeen million, eight thousand one hundred and eighty-three) common shares of its own
issuance through the exchange of common shares from Vigor, previously the holding.
Therefore, through the "Exchange Offer", the Company, that was previously the wholly owner of the Shares of Vigor, actually holds 21.32% of the total shares, giving
most of its stake, equivalent to 44.62% of the total shares of Vigor, to the FB Participações S.A., which is the holding of JBS S.A.
With this new corporate structure, the Company no longer consolidates its investment in Vigor Alimentos S.A., being treated as an investment in associates because
although the Company has an ownership percentage above 20%, which indicates significant influence, FB Participações S.A. started to manage and control operations
of Vigor, becoming the new parent Company.
This new corporate structure indicates that although the Company reduces its stake percentage and loses control on Vigor, the control is still kept in the same
economic Group, by FB Participações S.A., Company's holding, so the result of this transaction was registered under the line of capital transactions, so that was sold
an investment of R$ 959,961 in exchange of R$ 937,689 treasury shares, resulting in a capital transaction of (R$ 22,272), which the breakdown is the following:
Due to the fact that investment is not being consolidated on the financial statements for the nine months period ended on September 30, 2012, and has been
consolidated until the three months period ended on March 31, 2012, for comparative purposes, below is the "pro-forma" balance sheet for the comparative period of
December 31, 2011, allowing readers and users a better comparability.
The indirect subsidiary Frigorífico Canelones S.A (Frigorífico Canelones), based in Canelones, Uruguay, slaughters and processes "in natura" beef to export and for
local markets. Also sells meat cuts with bones, mainly to the local market.
The indirect subsidiary Egygate Distribution (Egygate), based in Egypt, is a wholesaler of food products.
The indirect subsidiary Misr Cold Centers and Storage (Misr Cold), based in Egypt, is a storage of meats that need to be frozen or chilled, but trades other food
products.
The indirect subsidiary Trump Asia Enterprises Limited (Trump), based in China, has a leather processing plant, whose activity consists of the process of leather
industrialization to be sold mainly for the local production of bags and shoes. It has three sales offices in Hong Kong, focused on the Asian market, and buys most of
its products from JBS Group and third party.
The indirect subsidiary Rigamonti Salumificio SpA (Rigamonti), based in Italy, consists of the leadership of the Italian market in production and sales of Bresaola
(bovine cured beef). It is part of its operation also the production and sales of beef jerky and flat cured pork belly (bacon), as well as the commercialization of cured
ham.
The JBS Leather Paraguay, based in Assunção, Paraguay, operate in the leather segment, buying fresh leather from the local market and producing and export to the
foreign market, on the stages of Wet Blue
JBS Italia s.r.l. (JBS Italia), based in the city of Arzignano, and its subsidiary JBS Matera (Matera), based in the city of Matera, both in Italy, operate in the leather
segment, buying leather from JBS Group and trading in domestic and European market, producing leather in Semi Finished and Finished stages.
The indirect subsidiary Toledo International NV (Toledo) based in Belgium, has basically trading operations for the European and African markets, selling cooked meat
and other products. Additionally, develops logistics operations, warehousing, customization and new products development.
In JBS USA, its subsidiary Sampco, Inc. (Sampco), based in Chicago, in the United States of America, imports processed meats primarily from South America for
resale to United States of America, Canada and the Caribbean. Sampco also imports other foods such as canned food, fruits and vegetables from other regions,
including the Far East, for sale in North America and Europe.
Global Beef Trading Sociedade Unipessoal Lda (Global Beef Trading), an indirect wholly-owned subsidiary of the Company, based in Ilha da Madeira, Portugal, sells
food products such as beef, lamb, chicken and pork. Global Beef Trading imports the products from Latin America and exports to several countries in Europe, Africa
and Asia.
The indirect subsidiary JBS Paraguay S.A (JBS Paraguay), based in Assunção, as well as in San Antonio, slaughters and processes chilled and frozen beef and raw
leather. Most of its production is destined to export to others subsidiaries of JBS Group. It is licensed to export to the European Union, Chile, Russia and other
markets.
Lesstor LLC is a warehouse based in Russia whose activity is the storage of its own and third parties products through rental agreements and storage services.
The indirect subsidiary JBS Leather Europe s.r.o. (JBS Leather) owns an administrative and business office located in the city of Prague, and a warehouse located in
the city of Borsov, all in the Czech Republic. The JBS Leather buys leather from JBS Group and trades finished leathers in the foreign markets focusing on Eastern
Europe, where Poland and Germany are the main consumer countries.
12
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
a) Balance sheets
Consolidated
"Pro-forma"
September 30, 2012
December 31, 2011
ASSETS
Cash and cash equivalents
5,040,659
4,966,514
Trade accounts receivable, net
5,300,897
4,551,746
Inventories
5,489,591
5,294,299
Biological assets
1,175,256
209,543
Recoverable taxes
2,356,186
2,204,589
Other current and non current assets
1,894,605
2,080,733
Investments in associates
257,174
330,427
Property, plant and equipment, net
15,996,421
14,956,655
Intangible assets, net
11,713,874
12,527,229
TOTAL ASSETS
49,224,663
47,121,735
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable
3,361,901
3,236,162
Loans and financings
20,284,536
18,545,772
Payroll, social charges, tax obligation and current and deferred income tax
2,944,920
2,391,245
Other current and non current liabilities
1,109,771
1,349,367
Shareholders' equity
21,523,535
21,599,189
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
49,224,663
47,121,735
b) Statements of income
2012
2011
"Pro-forma"
2012
2011
"Pro-forma"
Net sale revenue
53,845,988
44,537,769
19,366,617
15,243,224
Cost of goods sold
(47,597,435)
(39,812,012)
(16,889,422)
(13,625,367)
GROSS INCOME
6,248,553
4,725,757
2,477,195
1,617,857
General, administrative and selling expenses
(4,211,501)
(3,477,863)
(1,516,076)
(1,180,706)
Financial expense, net
(963,844)
(1,419,710)
(418,657)
(477,686)
Other income (expenses), net
8,353
(13,125)
(1,510)
1,134
Equity in earnings of subsidiaries
631
(25,795)
631
(25,795)
Income taxes
(381,502)
(89,012)
(154,970)
(117,506)
NET INCOME (LOSS) OF THE PERIOD
700,690
(299,748)
386,613
(182,702)
ATTRIBUTABLE TO:
Controlling interest
652,562
(101,291)
366,999
(67,503)
Noncontrolling interest
48,128
(198,457)
19,614
(115,199)
700,690
(299,748)
386,613
(182,702)
Net income (loss) before taxes
1,082,192
(210,736)
541,583
(65,196)
Financial expense, net
963,844
1,419,710
418,657
477,686
Depreciation and amortization
1,163,957
935,114
409,325
313,767
EBITDA
3,209,993
2,144,088
1,369,565
726,257
Equity in subsidiaries
(631)
25,795
(631)
25,795
Restructuring, reorganization and donation
19,827
25,911
8,111
25,911
Adjust on bargain purchase gain
-
95
-
-
Indemnity
10,238
6,647
1,753
976
ADJUSTED EBITDA
3,239,427
2,202,536
1,378,798
778,939
For comparability purposes, below is presented the "pro-forma" statements of income excluding the results of Vigor for the three months period ended on September
30, 2011, comparative with the same period of 2012, since the result of Vigor was consolidated only until the six months period ended on June 30, 2012.
Nine months period ended on
September 30,
Three months period ended on
September 30,
13
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
2
a. Declaration of conformity
Functional and presentation currency
3
Significant accounting practices
The approval of these consolidated financial statements was given at the Board of Directors' meeting held on November 13, 2012.
In the income statement revenue is net of taxes, returns, rebates and discounts, as well as of intercompany sales. On note 22 is presented net revenue reconciliation.
a) Statements of income
These financial statement includes:
The Company applied the accounting practices defined in Note 3 for the period presented, although it considers the terms of the CPC 21 R1 / IAS 34 - Interim
Financial Reporting , the Company is publishing the complete table of financial statements in its interim quarterly financial statements in accordance with the
requirements of the CPC 26 R1 / IAS 1 - Presentation of financial statements.
-The Company consolidated financial statements were prepared and in accordance with International Financing Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB), and also in accordance with pronouncements, interpretations and orientations of Brazilian Accounting Pronouncements
Committee ( Comitê de Pronunciamentos Contábeis) - CPC approved by resolutions of the Brazilian Federal Accounting Council (Conselho Federal de Contabilidade) -
CFC and requirements of the Brazilian Securities Commission - CVM.
Revenue and expenses are recorded on the accrual basis. Revenue is measured at the fair value of the payment received or receivable for sale of products and
services in the Company normal course of business and its subsidiaries.
These individual and consolidated financial statements are presented in Reais, which is the Company's functional currency. All financial information is presented in
thousands of reais.
Since there is no difference between the consolidated shareholders' equity and the consolidated profit/loss attributable to shareholders of Company, presented in the
consolidated financial statements prepared in accordance with IFRSs and the practices adopted in Brazil, and shareholders' equity and profit/loss of the Company,
presented in the individual financial statements prepared in accordance with accounting practices adopted in Brazil. Therefore, the Company has decided to present
individual and consolidated financial statements into a single set side by side.
Transitional Tax Regime (Regime Tributário Transitório - RTT) - The amounts presented in financial statements as of September 30, 2012 are considering the
adoption of the Tax Regime Transition (RTT) by the Company as allowed by Law n°11.941/09, which aims to maintain neutrality tax changes in the Brazilian corporate
law, introduced by Law n° 11.638/07 and by the Law n° 11.941/09.
Elaboration and presentation of consolidated financial statements
-The individual financial statements were prepared in accordance with accounting practices adopted in Brazil, in compliance with the Law of joint stock companies (Lei
das sociedades por ações - Leis das SA's), considering the amendments made by Brazilian Laws 11.638/07 and 11.941/09 and pronouncements, interpretations and
orientations of Brazilian Accounting Pronouncements Committee ( Comitê de Pronunciamentos Contábeis) - CPC approved by resolutions of the Brazilian Federal
Accounting Council (Conselho Federal de Contabilidade) - CFC, and requirements of the Brazilian Securities Commission - CVM.
The expenses are recorded on the accrual basis.
The main accounting practices used in the preparation of these consolidated financial statements, as described below, have been consistently applied over all the
reported periods, unless otherwise stated.
The financial statements of subsidiaries presented prior to the first time adoption of IFRS are adjusted to the policies adopted by the Group - International Financing
Reporting Standards (IFRS).Thus, the balance sheets of subsidiaries have been prepared with international accounting uniform policies and practices. Similarly, for the
new investments acquisitions after adoption of IFRS, IFRS 3 (R)/ CPC 15 R1 - Business Combinations is applied, which presents investment of fair value,
subsequently, evaluating its investments.
According to IAS 18/CPC 30 - Revenues, the Company recognizes revenue when, and only when:
(i) the amount of revenue can be measured reliably;
(ii) the entity has transferred to the buyer the significant risks and rewards incidental to ownership over the goods;
(iii) it is probable that the economic benefits will flow to the Company and its subsidiaries;
(iv) the entity neither maintains involvement in the Management of product sold at levels normally associated with ownership nor effective control of such cost of good
sold.
(v) expenses incurred or to be incurred related to the transaction, can be reliably measured.
The individual financial statements present the evaluation of investments in associates, subsidiaries and joint ventures by the equity method, according to Brazilian
legislation. Thereby the financial statements are not in accordance with the IFRS, which requires the evaluation of these investments in the individual company's
financial statements measured at their fair value or at cost.
14
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
According to IAS 31/CPC 19 R1- Interests in joint venture, Joint ventures are entities jointly controlled by the Company and one or more partners.
Investments in joint ventures are recognized under the proportionate consolidation method, from the date the joint control is acquired. Under this method, the
components of a joint venture's assets and liabilities, and income and expenses are added to the consolidated accounting positions proportionally to the their
participation in its capital as described in note 10.
In the process of applying the Company's accounting policies, Management made the following judgments which can eventually have a material impact on the amounts
recognized in the financial statements:
· impairment of non-financial assets;
· impairment of recoverable taxes;
· retirement benefits;
· measurement at fair value of items related to business combinations;
· fair value of financial instruments;
· provision for tax, civil and labor risks;
· impairment of financial assets;
· biological assets; and
· useful lives of property, plant and equipment.
The Company reviews its estimates and underlying assumptions used in its accounting estimates on a quarterly basis. Revisions to accounting estimates are
recognized in the financial statements in the period in which the estimates are revised.
e) Provision for adjustment to recoverable value
f) Inventories
c) Cash and cash equivalents
g) Biological assets
Cash and cash equivalents include cash balances, banks and financial investments with original maturities of three months or less from the date of the contract. Cash
equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value in accordance with IAS 7/CPC 03 R2 - Statement of Cash Flows. These applications are designed to satisfy the cash commitments of short-term (daily
management of financial resources of the Company and its subsidiaries) and not for investment or other purposes.
The registration of biological assets is done through the concept of market to market and cost, according to the criteria defined in the Note 7.
Exchange differences on foreign currency investments are recognized in shareholders' equity in the accumulated translation adjustments.
h) Investments in associates, subsidiaries and joint ventures
In accordance with IAS 28/CPC 18 - IAS 28 Investments in Associates, Associate is an entity over which an investee has significant influence, being the power to
participate in the financial and operating policy decisions of the investee (but not control or joint control).
In accordance with IAS 41/CPC 29 - Biological Assets, companies that operate with agricultural activities, such as grain crops, increased herd (of cattle feedlot
operations or livestock grazing), and various agriculture crops are required to mark to market these assets, which effect shall be recorded in the income statement of
the year.
In accordance with IAS 2/CPC 16 R1 - Inventories, the inventories are stated at the lower of the average cost of acquisition or production, and the net realizable value.
The cost of inventories is recognized in the income statement when inventories are sold.
In the individual financial statements of the Company, the investments in associates, subsidiaries and joint ventures are measured by the equity method.
Trade accounts receivable correspond to amounts owed by customers in the ordinary course of business of the Company. If the due date is equivalent to one year or
less, the account receivable is classified as current assets. Otherwise, the corresponding amount is classified as noncurrent assets.
b) Accounting estimates
Estimated losses with the adjustment to recoverable value of accounts receivable are calculated based on the analysis of the aging list, provisioning the items of long
standing, and considering the probable estimated losses, which the amount is considered sufficient by the Management to cover probable losses on accounts
receivable.
The expenses with the constitution of the provision for adjustment to recoverable value are recorded under the caption "Selling Expenses" in the individual and
consolidated statement of income. When no additional recoverability is expected, the allowance for adjustment to recoverable value is usually reversed against the
definitive write-off of the account receivable.
The evaluation of biological assets is done quarterly by the Company, and the gain or loss on change in fair value of biological assets is recognized in the income
statement in the period in which it occurs, in specific line as a reduction of gross revenue and cost of products sold.
Accounts receivable are initially recognized at fair value, subsequently measured at amortized cost, less any allowance to its recoverable value. In practice, they are
recognized at the invoiced amount, adjusted to its recoverable value.
d) Trade accounts receivable
The settlement of transactions involving these estimates may result in different amounts due to potential inaccuracies inherent in the process of its determination.
15
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Current taxes are computed based on taxable income at tax rates in effect, according to prevailing legislation.
An item is disposed when of there is no future economic benefits resulting from its continued use. Any gains or losses on sale or disposal of fixed assets are
determined by the difference between the amounts received against the book value and are recognized in the income statement.
Loans and financings are recognized at fair value upon receipt of the proceeds, net of transaction costs, when applicable, plus charges, interests and monetary and
exchange rate variation contractually defined, incurred until the end of each period, as shown in note 14.
Current taxes
Other current and noncurrent assets are stated at cost or realizable value including, if applicable, income earned through the balance sheet date.
m) Trade accounts payable
n) Loans and financings
Consist mostly of goodwill recorded in accordance with IAS 38/CPC 4 - Intangible assets by cost or formation, less amortization and any applicable losses due to
impairment. Amortization is recognized using straight-line method based on the useful lives of assets. The estimated useful lives and amortization method are reviewed
at the end of each financial year and the effect of any changes in estimated are accounted for prospectively.
Property, plant and equipment, intangible assets with defined useful life and other assets (current and noncurrent) are tested for impairment, if indications of potential
impairment exist. Intangible assets are tested for impairment when an indication of potential impairment exists or on an annual basis, regardless of whether or not
there is any indication of impairment, pursuant to IAS 38/CPC 4 - Intangible Assets.
The depreciation is recorded using the straight-line method over the estimated useful lives of the assets, so that the value of cost less its residual value after the useful
life is fully depreciated (except for land and construction in progress). The estimated useful lives, residual values and depreciation methods are reviewed at the end of
the financial statement date and the effect of any changes in estimates are accounted for prospectively.
Correspond to the amounts owed to suppliers in the ordinary course of business of the Company. If the payment period is equivalent to one year or less, suppliers are
classified as current. Otherwise, the corresponding amount is classified as noncurrent. When applicable, are added interest, monetary or exchange rate.
l) Other current and noncurrent assets
o) Income tax and social contribution
Impairment of tangible and intangible assets, excluding goodwill
If the recoverable amount of an asset is lower than its carrying value, the asset is reduced to its recoverable amount. The loss on the impairment is recognized
immediately in the statement of income and is reversed if there has been a change in the estimates used to determine the recoverable amount. When an impairment
loss is subsequently reversed, there is an increase in amount of the asset due to the revised estimate of its recoverable amount, but it does not exceed carrying
amount that would have been determined if no loss on the impairment had been recognized for the asset in prior years. Reversal of loss on the impairment is
recognized directly in the income statement.
j) Assets leased
Leases under which the Company assumes the risks and benefits of ownership are classified as financial leases. After initial recognition, the asset is in accordance
with the accounting policy applicable to the asset.
Other leases are operating leases and the leased assets are not recognized on the balance sheet of the Company, being recorded in the Statement of income as an
expense in accordance with the payments. The Company has only operating leases.
The recoverable amount is the higher amount between fair value less costs to sell and value in use. In evaluation of value in use, the estimated future cash flows are
discounted to present value by the discount rate before tax that reflects current market assessment of the time value of money and the specific risks to the asset.
k) Intangible assets
The items of property, plant and equipment are valued at historical cost of acquisition or construction, net of accumulated depreciation and losses on the accumulated
impairment.
The interest on loans that are directly attributable to fixed assets acquisition or construction of assets are capitalized as part of the costs of these assets. Borrowing
costs that are not directly related to specific assets (but related to more than one asset) are capitalized based on average interest rate on the balance of construction
in progress. These costs are amortized according to the estimated useful lives of the related assets.
i) Property, plant and equipment - PP&E
After each year end a review is made of the book value of tangible and intangible assets to determine whether there is some indication that those assets have suffered
any impairment. If such indication is indentified, the recoverable amount of the asset is estimated in order to measure the amount of such loss, if any.
Goodwill arising from business combination
Goodwill resulting from business combinations is stated at cost at the date of business combination, net of accumulated impairment.
Goodwill is annually subjected to impairment testing or more frequently when impairment indications are identified. If the recoverable amount of the cash-generating
unit is less than the carrying value, the impairment loss is recorded. Any impairment loss on the recoverable amount of goodwill is directly recognized in income
statement. The impairment loss is not reversed in subsequent periods.
At the sale of the corresponding cash-generating unit, the goodwill is included in the calculation of profit or loss on disposal.
16
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Functional and reporting currency
According to with IAS 33/CPC 41 - Earnings per share, the Company presents the basic and diluted earnings per share data for its common shares:
Basic: Calculated by dividing net income allocated to common shareholders of the Company by the weighted average number of common shares outstanding during
the period.
Diluted: Calculated by dividing net income attributable to common shareholders of the Company by the weighted average number of common shares outstanding
during the period, adjusted for the effects of all dilutive potential common shares, adjusted for own shares held.
The Company presents, when applicable, assets and liabilities at present value long-term assets and liabilities, according to CPC12- Present value adjustment. The
present value long-term assets and liabilities are adjusted to present value, but the adjustment on the short-term balances occurs only when the fact is considered
material in relation to the consolidated financial statements.
Deferred taxes
Deferred tax assets are recognized only in proportion to the expectation or likelihood that future taxable income will be available against which the temporary
differences, tax losses and tax credits can be used.
Current and noncurrent liabilities are stated at known or estimated amounts, including, if applicable, charges and monetary or exchange rate variations.
Transactions in foreign currencies are translated to the respective functional currencies of the Company entities at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The
foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective
interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period.
The items of the financial statements of the subsidiaries are measured using the currency of the primary economic environment in which the subsidiaries operate
("functional currency"), being translated to IFRS and Brazilian Real at the corresponding exchange rate of the reporting period for assets and liabilities, the historical
rate for equity and the average exchange rate of the period for the income statement, if applicable, and with the exchange rate effects recognized in comprehensive
income.
Consolidated financial statements include individual financial statements of the Company, its subsidiaries and joint controlled entities (proportionally consolidated).
Control is obtained when the Company has the power to control financial and operating policies of an entity so as to obtain benefits from its activities.
When necessary, the financial statements of subsidiaries are adjusted according to the accounting policies established by the Group. All transactions, balances,
income and expenses between Group companies are eliminated in the consolidated financial statements. Consolidated subsidiaries are detailed described on note 10.
According to IAS 37/CPC 25 -Provisions, Contingent Liabilities and Contingent Assets, contingent assets are recognized only when their realization is "virtually
certain", based on favorable final judicial decision. Contingent assets are disclosed where an inflow of economic benefits is probable.
Contingent liabilities are accrued when losses are probable and the amounts can be estimated reliably. Contingent liabilities classified as possible are only disclosed
and contingent liabilities classified as remote are neither accrued nor disclosed.
q) Current and noncurrent liabilities
Deferred income tax (deferred tax) is calculated on the temporary differences between the tax bases of assets and liabilities and their carrying amounts. Deferred tax is
determined using tax rates enacted and expected to be applied when the deferred tax assets are realized or when the income tax liability is settled.
w) Earning per share
u) Consolidation
The dividend distribution, when occurred, proposed by Management is equivalent to the mandatory minimum dividend of 25% and is recorded under the caption
"Declared Dividends" in liabilities since it is considered a legal obligation established by the Company's by laws. However, the amount of dividends higher than the
mandatory minimum dividend, declared after the period covered by the consolidated financial statements but before the date of authorization for release of the
consolidated financial statements, is recorded under the caption "Proposed Additional Dividends" in shareholders' equity, with a disclosure in the notes to the financial
statements.
p) Dividends
Deferred tax assets and liabilities are offset if there is a legal right to offset current tax assets and liabilities, and they are related to income taxes levied by the same
taxation authority on the same taxable entity.
The discount rate assumption relies on current market valuations as to time value of money and specific risks for each asset and liability.
In the present value calculation adjustment the Company considered the following assumptions: (i) the amount to be discounted; (ii) the dates of realization and
settlement; and (iii) the discount rate.
v) Foreign currency translation
The financial statements of the foreign subsidiaries are originally prepared in the currency of the country in which they are based and, subsequently, are converted into
IFRS and Brazilian reais using the exchange rate in effect at the balance sheet date for assets and liabilities, the historical exchange rate for changes in shareholders'
equity and the average exchange rate for the period for income and expenses when it is appropriate. Exchange gains and losses are recognized in shareholders'
equity under the caption "accumulated translation adjustments" in accordance with IAS 21/CPC 2 - The effects of changes in foreign exchange rates.
r) Noncontrolling interest
s) Contingent assets and liabilities
t) Adjustment of assets and liabilities to present value
According to IAS 1/CPC 26 R1, Presentation of financial statements, noncontrolling interests shall be presented in the consolidated financial statements within
shareholders' equity, with respective effects included in the statement of income.
17
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
· Financial assets at fair value through profit or loss
· Derivatives
z) Employee benefits
Defined Contribution Plans:
y) Business combinations
A defined contribution plan is a plan for post-employment benefits under which an entity pays fixed contributions into a separate entity (Provident Fund) and shall have
no legal or constructive obligation to pay additional amounts. Obligations for contributions to pension plans to defined contribution plans are recognized as expenses
for employee benefits in income in the periods during which services are rendered by employees. Prepaid contributions are recognized as an asset upon condition that
reimbursement of cash or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the
period in which the employee renders service are discounted to their present values.
The Company recognizes debt securities and subordinated debt on the date on which they originated. All other financial liabilities (including liabilities designated at fair
value recorded in income) are initially recognized on the trade date on which the Company becomes a party to the contractual provisions of the instrument. The
Company derecognizes a financial liability when its contractual obligations canceled or expired.
Loans and receivables are financial assets with fixed or estimated payment amounts that are not quoted in an active market. Such assets are initially recognized at fair
value plus any attributable transaction costs. After initial recognition, loans and receivables are measured at amortized cost using the effective interest method,
decreased by any loss on the impairment. The main assets of the Company classified in this category are "trade accounts receivables" and "related parties".
The fair value of derivative instruments is calculated by the treasury department, based on information of each contracted transaction and market information on the
dates of closure of the financial statements, such as interest rates and exchange rates.
The Company has the following non-derivative financial liabilities: loans, financing, trade accounts payable, debts with related parties and other payables.
Based on a risk management policy of the JBS Group, the Company and/its subsidiaries, contract financial derivatives instruments in order to minimize the risk of
losses due to the exposure to fluctuation in exchange rates, interest rates, commodities prices, credit risks and liquidity, which can affect the valuation of current and
noncurrent assets, future cash flow and profit.
x) Financial instruments
According to IFRS 3/CPC 15 R1 - Business Combination, business acquisitions are accounted for using the acquisition method at the acquisition date, which is the
date on which control is transferred to the Group . The consideration transferred in a business combination is measured at fair value, which is calculated by adding the
fair values of assets transferred, liabilities incurred on the acquisition date to the previous owners of the acquired shares issued in exchange for control of the acquired.
The acquisition-related costs are generally recognized in income when incurred.
· Held to maturity
The financial asset carrying value is reduced directly by the loss of the impairment for all financial assets, except accounts receivable in which the carrying value is
reduced by provision. Subsequent recoveries of amounts previously written off are credited to the provision. Changes in the carrying value of the provision are
recognized in statement of income.
If the initial accounting for a business combination is incomplete at the closing of the period in which the business combination has occurred, the recording of the
temporary values of items whose accounting is incomplete are made. These temporary figures are adjusted during the measurement period (which shall not exceed
one year from the date of acquisition), or additional assets and liabilities are recognized to reflect new information relating to facts and circumstances existing at the
acquisition date which, if known, would have affected the amounts recognized on that date.
Goodwill is measured as the excess of the sum of the consideration transferred, the recognized amount of noncontrolling interests in the acquired business plus the fair
value of the existing equity interest in the acquired less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed. If the
excess is negative, a bargain purchase gain is recognized immediately in income as a gain.
· Impairment of financial assets
Financial assets, except those designated at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Impairment
loss is recognized if, and only if there is any indication that an asset may be impaired as a result of one or more events that occurred after initial recognition, and had
an impact on the future cash flows estimated of this asset.
The Company and subsidiaries recognize and disclose financial instruments and derivatives according to IAS 39/CPC 38 - Financial Instruments: Recognition and
Measurement, IFRIC 9 - Assessment of embedded derivatives and IFRS 7/CPC 40 - Disclosure of Financial Instruments. The financial instruments are recognized
after the Company and its subsidiaries become a party to the contractual provisions at the instruments.
Financial asset are classified by its fair value on the financial report if it is classified as held for trading or designated as such upon initial recognition. Financial assets
are designated at fair value through profit or loss if the company manages such investments and makes purchase and sale decisions based on their fair values in
accordance with a documented risk management and investment strategy of the Company. Transaction costs, after initial recognition are recognized in income
statement as incurred. Financial assets recorded at fair value through profit or loss are measured at fair value and changes in fair value of these assets are recognized
in statement of income of the period. The financial instruments classified in this category are " Cash and cash equivalents" and "Derivatives payables".
· Loans and receivables
Subsequent measurement of financial instruments occurs at each balance sheet date, according to the rules for each category of financial assets and liabilities.
· Non derivative financial liabilities
In the case when the Company intends and is able to hold bonds to maturity, then such financial assets are classified as held to maturity. Investments held to maturity
are initially recognized at fair value plus any directly attributable transaction costs. After initial recognition, investments held to maturity are measured at amortized cost
using the effective interest method, decreased by any loss on the impairment. The Company has no financial instruments in this category.
18
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Defined benefit plans
A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operation that has been
disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon
disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the
comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year.
In accordance with CPC 9 (No correlation to IFRS) - Statement of Economic Value Added, the Company included in the financial statements, the Statement of Value
Added (EVA), and as additional information in the consolidated financial statements, because it is not a compulsory statement according to IFRS.
The Economic Value Added Statement, aims to demonstrate the value of the wealth generated by the Company and its subsidiaries, its distribution among the
elements that contributed to the generation of it, such as employees, lenders, shareholders, government and others, as well as the share of wealth not distributed.
· IFRS 12 Disclosures of Interests in Other Entities - IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other
entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 is effective for annual periods beginning on or after
January 1, 2013. Earlier application is permitted.
The discount rate is yield at the reporting date on funds that have maturity dates approximating the terms of the appropriate subsidiary's obligation and that are
denominated in the same currency in which benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit
method.
When the benefits of a plan are increased, the portion of the increased benefit relating to past service by employees is recognized in the straight-line method over the
average period until the benefits become vested. To the extent the benefits become vested immediately, the expense is recognized immediately in income.
· IFRS 9 Financial Instruments ­ Classification and measurement - It reflects the first phase of the IASB work on the replacement of IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 uses a simplified approach to determine whether a financial asset should be measured at amortized cost or fair value, based on
the manner in which an entity manages its financial instruments (business model) and the typical contractual cash flow of financial assets. The standard also requires
the adoption of only one method for determining losses in recoverable value of assets. The standard is effective for annual periods beginning on or after January 1,
2015.
af) New Pronouncements of IFRS, emissions, amendments and interpretations issued by IASB applicable to the consolidated financial statements
aa) Segment reporting
When the calculation results in a benefit for the indirect subsidiary, the asset to be recognized is limited to the total cost of any unrecognized past service and present
value of economic benefits available in the form of future refunds from the plan or reductions in future contributions to the plan . To calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply to any plan in indirect subsidiary. An economic benefit is available to the
indirect subsidiary if it is achievable during the life of the plan or the liquidation of the plan liabilities.
ad) Economic Value Added
· IFRS 10 Consolidated Financial Statements - IFRS 10 as issued establishes principles for the presentation and preparation of consolidated financial statements when
an entity controls one or more other entities. IFRS 10 replaces the consolidation requirements in SIC-12 Consolidation--Special Purpose Entities and IAS
27 Consolidated and Separate Financial Statements and is effective for annual periods beginning on or after January 1, 2013. Early application is permitted.
All actuarial gains and losses arising from defined benefit plans are accounted for in other comprehensive income.
According to IAS 1/CPC 26 R1 - Presentation of Financial Statements - The statement of comprehensive income is composed by the conversion rate of foreign
currency investments abroad and shareholders' equity valuation in investments.
Not effective yet :
A defined benefit plan is a plan for post-employment benefits other than defined contribution plan. The net liability with regard to pension plans of defined benefit is
calculated individually for each plan by estimating the amount of future benefit that employees earned in return for services rendered in the current period and prior
periods, that benefit is discounted to present value. Any past service costs not recognized and the fair values of any plan assets is deducted.
ac) Statement of comprehensive income
ab) Statements of Cash flow
New accounting pronouncements from the IASB and IFRIC interpretations have been published and / or reviewed and have the optional adoption in September 30,
2012. The Management assessed the impact of these new pronouncements and interpretations and does not anticipate that its adoption will lead to a significant impact
on the annual information of the Company and its subsidiaries in the year of initial application. The mains pronouncements and interpretations are presented as follows:
In accordance with IFRS 8/CPC 22 - Segment reporting - Segment reporting is presented consistently with the internal reports provided to the entity's chief operating
decision maker to make decisions about resources allocations, performance evaluation by segment and strategic decision making process.
ae) Discontinued operations
The statements of cash flows have been prepared by the indirect method in accordance with the instructions contained in IAS 7/CPC 3 - Statement of Cash Flows.
· IFRS 11 Joint Arrangements - IFRS 11 provides for a more realistic reflection of joint ventures by focusing on the rights and obligations of the arrangement, rather
than its legal form. The standard addresses inconsistencies in the reporting of joint ventures by requiring a single method to account for interests in jointly controlled
entities. IFRS 13 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities - Non-Monetary Contributions by Ventures, and is effective for
annual periods beginning on or after January 1, 2013. Earlier application is permitted.
19
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
- IFRS 7 ­ Financial instrument: Disclosures (annual periods beginning on or after July 1, 2011).
- IAS 1 ­ Presentation of Items of Other Comprehensive Income (annual periods beginning on or after July 1, 2012).
- IAS 12 ­ Deferred Tax: Recovery of Underlying Assets (annual periods beginning on or after January 1, 2012).
- IAS 19 ­ Employee benefits (annual periods beginning on or after January 1, 2013).
- IAS 27 ­ Consolidated and Separate Financial Statements (annual periods beginning on or after January 1, 2013).
4
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Cash and banks
1,915,408
1,483,479
2,530,559
2,247,919
CDB-DI (bank certificates of deposit)
1,585,621
1,928,422
1,709,636
2,155,037
Investment funds
-
494
746,887
554,523
LCA-DI (Agribusiness Letters of Credit)
-
200,472
-
330,715
National treasury bill - LFT
53,577
-
53,577
-
3,554,606
3,612,867
5,040,659
5,288,194
Investments funds - consolidated
5
Trade accounts receivable, net
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Current receivables
2,337,378
1,729,425
4,824,683
3,939,255
Overdue receivables:
From 1 to 30 days
84,713
120,142
375,332
569,126
From 31 to 60 days
6,527
23,297
35,109
91,406
From 61 to 90 days
3,753
20,755
14,185
44,389
Above 90 days
98,785
102,656
185,568
185,589
(100,549)
(113,182)
(133,980)
(149,919)
93,229
153,668
476,214
740,591
2,430,607
1,883,093
5,300,897
4,679,846
Company
CDB-DI (bank certificates of deposit) are held by financial institutions, with floating-rate and yield an average of 100% of the variation of the interbank deposit
certificate (Certificado de Depósito Interbancário - CDI).
Company
It is composed entirely of applications of the indirect subsidiary JBS Project Management GMBH (subsidiary of JBS Holding GMBH) in mutual investment funds
nonexclusive, whose applications are performed by JP Morgan as part of a cash management service.
Consolidated
Cash and cash equivalents
Cash, bank accounts and short-term investments are the items of the balance sheet presented in the statements of the cash flows as cash and cash equivalents, as
described below:
· IAS 32 - Financial instruments - Changes in the pronouncement aims to clarify the requirements for compensation of financial instruments. These changes shows
inconsistencies found in practice when applied the criteria for compensation in IAS 32 Financial Instruments: Presentation. The changes are effective for periods
beginning on / or after January 1, 2014. Anticipated application is permitted.
LCA-DI (Agribusiness Letters of Credit) are short term investment remunerated by a percentage of interbank deposit certificate (Certificado de Depósito Interbancário -
CDI) , with a nominative credit , originated by agribusiness receivable and issued exclusively by public or private banks. LCA is issued in a form in the chamber of
custodian and settlement (Câmara de Custódia e Liquidação - CETIP). These short term investments yield an average 100% of the variation of the interbank deposit
certificate - (Certificado de Depósito Interbancário - CDI).
National treasury bill (LFT) ­ Correspond to purchased bonds with financial institutions, whose conditions and characteristics are similar to the CDB's.
Other improvements :
The Brazilian Accounting Pronouncement Committee (CPC) has not yet issued these standards or amendments equivalent to the IFRS mentioned above. The
Company is currently evaluating the impact of such standards in its financial statements.
- IAS 28 - Investments in associates (annual periods beginning on or after January 1, 2013).
Allowance for doubtful accounts
Consolidated
· IFRS 13 Fair Value Measurement - IFRS 13 establishes new requirements on how to measure fair value and the related disclosures for IFRSs and others generally
accepted accounting principles. The standard is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted.
· IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine - IFRIC 20 is regarding the recognition of the production stripping costs as an assets; initial
measurement of the assets of removal activity, and subsequent measurement of the activity of the removal activity. Is effective for annual periods beginning on or after
January 1, 2013. Until the present moment the Company does not foresee any impact as a result of it.
20
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Initial balance
(113,182)
(109,497)
(149,919)
(142,074)
Additions
-
(10,020)
-
(16,390)
Exchange variation
-
-
3,028
225
Write-offs
12,633
6,335
12,911
8,320
Final balance
(100,549)
(113,182)
(133,980)
(149,919)
6
Inventories
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Finished products
1,588,211
1,161,418
3,926,598
3,332,844
Work in process
66,876
53,879
360,531
900,597
Raw materials
172,451
188,722
589,564
527,046
Warehouse spare parts - other inventories
121,316
140,242
612,898
645,218
1,948,854
1,544,261
5,489,591
5,405,705
7
Biological assets
September 30,
2012
December 31,
2011
Cattle
141,378
83,978
Hogs and Lamb
44,602
73,790
Chicken
707,215
49,489
Plants for harvest
2,314
2,286
895,509
209,543
September 30,
2012
December 31,
2011
279,747
-
279,747
-
Current
Noncurrent
209,543
-
2,359,222
-
(5,604)
(1,076)
20,067
35
583,112
334,457
(2,858,827)
(19,722)
529,200
203,672
56,482
5,799
4,815
-
(2,501)
-
-
(243,418)
895,509
279,747
Transfer of work-in-progress
Pursuant to IFRS 7/CPC 39 - Financial Instruments, below are the changes in the allowance for doubtful accounts:
Chicken
Consolidated
The Company's biological assets are composed of live animals segregated among the categories of cattle, hogs and lamb, and chicken, which detail is as follows:
Current biological assets:
Consolidated
Amortization
The noncurrent biological assets consist exclusively layer and breeder chicken that are intended for breeding. The lifespan of these breeding animals is approximately
67 weeks, and for this reason they are classified as noncurrent assets.
Consolidated
Changes in biological assets:
Amount on December 31, 2011
Born
Company
Death
Sale / lowering for slaughter
According to IAS 41 /CPC 29 - Biological Assets, companies that own agricultural and farming activities, such as grain crops, increased herd (cattle feeding operations
and livestock grazing), and various agriculture crops are subject to realize the value of their assets in order to determine the fair value thereof, based on the concept of
market value to "Mark to Market - MtM" at least quarterly or annually, recognizing the effects of these comments directly in the income of the year.
However, the standard shows that, for cases where there is no active market, one or more of the following alternatives for determining the fair value should be
adopted:
Exchange rate variation
Amount on September 30, 2012
The current biological assets consist mainly of animals, mostly of feedlots and maturity period for slaughtering, which remain in development for a period of 90 to 120
days, mainly cattle, and 30 to 35 days, for chicken, until they reach maturity and therefore sent for slaughter units. For this reason are classified as current assets.
Cost appropriating on plants for harvest
Non-Current biological assets:
Fair value (Mark to market)
Purchase
Consolidated
Domestic consumption on plants for harvest (feed)
Company
21
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
September 30, 2012
December 31, 2011
31,052
46,954
44,602
73,790
658,268
49,489
733,922
170,233
242,216
-
242,216
-
September 30, 2012
December 31, 2011
110,326
37,024
110,326
37,024
48,947
-
2,314
2,286
51,261
2,286
161,587
39,310
37,531
-
37,531
-
Chicken
Total noncurrent biological assets valued at cost
Noncurrent biological assets:
Chicken
COMPANIES IN BRAZIL
Biological assets valued at cost:
The operations relating to chicken activities in Brazil, are divided among broiler chicken for slaughtering (current) for production of fresh meat and / or industrialized
products, and layer and breeder chicken (noncurrent) that are intended for breeding. For both cases, by the fact there is no market price for these animals, the
Company has evaluated these biological assets based on a discounted cash flow method, not identifying material changes in relation to the absorption cost. Thereby,
the current assets, are maintained at cost, and the noncurrent assets besides being maintained at cost, are amortized according to the lifetime of the animals.
Total biological assets valued at cost
Below, details of the biological assets of the Company:
Current biological assets:
Current biological assets:
Biological assets valued at market:
Chicken
Total current biological assets
Noncurrent biological assets:
Hogs and Lamb
The operations relating to activities of cattle in Brazil are represented mainly by cattle in feedlot (intensive) and cattle on pasture (extensive), whose valuation at market
is reliably measured due to the existence of active markets.
Chicken
COMPANIES IN UNITED STATES OF AMERICA
Cattle
Plants for harvest
Cattle
Total biological assets valued at cost
The balances plants for harvest, consist of corn, soybeans and grass, which will be used in the preparation of ration for cattle. The Management chose to keep the
measurement of biological assets at their cost values, due to the immateriality of the balances, since the efforts needed to develop and measure these assets at their
fair values overcome the benefits expected by Management.
Although there is an assumption that the fair value of biological assets can be reliably measured, this assumption can be rejected, and the biological assets can be
measured at cost, as presented in the current biological assets of JBS USA and for the chicken of JBS Aves in Brazil, because in these cases the market should
determine the value of these assets, but it is not available and the alternatives to estimate them are clearly not reliable.
a) the market price of the most recent transaction, considering that no significant economic change had occurred between the date of the transaction and the closing of
the consolidated financial statements;
b) market price of similar assets with adjustments to reflect any difference;
c) industry standards, such as the value of orchard expressed by the value of standard packing for export, acres or hectares, and the value of cattle expressed per
kilogram of meat or arroba.
As mentioned on the assumption above, the current biological assets of JBS USA are not valued at market, adopting the procedures of recovery by absorption costing.
Cattle - A subsidiary of JBS USA in Australia keeps cattle in feedlot, there is no active market for cattle in feedlot between the period of 75-100 days, just over 180
days.
Hogs and Lamb - JBS USA keeps hogs and lambs in the feedlot system. For biological assets hogs and lamb, there is no active market, because there are few
competitors in the market.
Chicken ­ The PPC has breeding activity of broiler chicken for slaughtering (current) for production of fresh meat and / or industrialized products, and breeder chicken
(noncurrent) that are intended for breeding. For both cases, by the fact there is no market price for these animals, the Company has evaluated these biological assets
based on a discounted cash flow method, not identifying material changes in relation to the absorption cost. Thereby, the current assets, are maintained at cost, and
the noncurrent assets besides being maintained at cost, are amortized according to the lifetime of the animals.
22
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
8
Recoverable taxes
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Value-added tax on sales and services (ICMS / IVA / VAT / GST)
920,816
1,075,566
1,130,318
1,264,118
Excise tax - IPI
61,792
59,772
129,749
124,459
Social contribution on billings - PIS and COFINS
732,321
616,957
760,119
745,376
Withholding income tax - IRRF
177,146
90,826
243,468
96,840
Other
50,964
49,515
92,532
85,644
1,943,039
1,892,636
2,356,186
2,316,437
Current and Long-term:
Current
1,396,507
1,330,609
1,783,754
1,690,311
Noncurrent
546,532
562,027
572,432
626,126
1,943,039
1,892,636
2,356,186
2,316,437
Value-added tax on sales and services (ICMS / IVA / VAT/GST)
Social contribution on billings - PIS and COFINS
Withholding income tax - IRRF
9
Related parties transactions
September 30,
2012
December 31,
2011
COMPANY
Currency
Maturity
Mutual contracts
Mutual contracts
Direct subsidiaries
JBS Aves Ltda.
R$
Jun 01, 2013
248,665
53,207
JBS Confinamento Ltda.
R$
Apr 01, 2014
106,576
87,528
JBS Embalagens Metálicas Ltda.
R$
Aug 16, 2013
61,229
58,936
JBS USA, Inc
US$
Mar 25, 2014
305,024
(97,606)
JBS Slovakia Holdings s.r.o.
US$
Mar 12, 2013
(48,389) (43,284)
R$
-
69,861
-
Cascavel Couros Ltda
R$
Dec 31, 2012
14,811
29,300
Novaprom Food Ingredients Ltda
R$
Dec 31, 2012
14,461
12,115
Indirect subsidiaries
Beef Snacks Brasil Ind.Com. Ltda.
R$
Jan 24, 2013
100,757
96,761
Beef Snacks International BV
US$
Dec 31, 2012
4,946
4,371
JBS HU Ltd
US$
May 19, 2012
- (119,117)
JBS Paraguay
US$
Aug 24, 2014
- 6,294
877,941
88,505
CDI + 4%
4.5%
CDI
Libor + 5%
CDI + 6%
Libor + 2% to 3%
Libor + 2.5% to 3%
CDI + 12%
Annual rate
Company and JBS Embalagens recorded the monetary adjustment of their PIS, COFINS, IPI and IRPJ tax credits based on SELIC (Central Bank overnight rate), in
the amount of R$ 179,589. As of this amount the Company received R$ 28,986, and the remaining balance of R$ 150,603.
Refers basically to withholding income tax levied on short-term investments deductions and remittance of dividends to its subsidiary JBS USA, which can be offset
against income tax payable on profits.
JBS Holding International
Mutual contracts between related parties recorded on the balance sheet of the Company as receivables and debts with related parties:
12%
-
CDI + 12%
CDI + 1%
Recoverable ICMS refers to excess of credits derived from purchases of raw materials, packaging and other materials over tax charges due on domestic sales, since
exports are tax-exempted.
Annually, Company's management, supported by its legal counsel, evaluate the segregation between current and noncurrent of such ICMS credits according to their
attainment.
General comments
Refers to non-cumulative PIS and COFINS credits arising from purchases of raw materials, packaging and other materials used in the products sold in the foreign
market.
Company
The Company expects to recover the total amount of the tax credit, including the ICMS credits from other states (difference between the statutory rate for tax
bookkeeping and the effective rate for ICMS collection in the state of origin).
Consolidated
23
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
COMPANY
Trade accounts
receivable
Trade accounts
payable
Trade accounts
receivable
Trade accounts
payable
Direct subsidiaries
JBS Confinamento Ltda.
580
36,446
252
33,384
JBS Embalagens Metálicas Ltda.
-
-
- 94
JBS USA, Inc
7,230
-
13,521
-
JBS Itália SRL
24,479
-
7,268
-
Cascavel Couros Ltda
6,849
231
16,917
2,704
Novaprom Food Ingredients Ltda
1,418
205
1,661
681
Indirect subsidiaries
JBS Global (UK) Limited
41,570
158
32,149
4
JBS Argentina S.A.
-
958
- 2,017
Global Beef Trading SU Lda.
4,924
-
715
-
Austrália Meat
-
1,803
- 741
Toledo International NV
31,111
1
6,360
319
Weddel Limited
1,218
-
- -
Sampco Inc.
4,694
-
1,655
-
JBS Leather Europe
23,606
-
- -
Meat Snacks Partners do Brasil Ltda
3,949
1
- -
JBS Middle East
355
-
- -
Frigorífico Canelones S.A.
-
-
- 7
Rigamonti Salumificio Spa
-
21
10,334
19
Itaholb International
-
-
1,414
1,192
Wonder Best Holding Company
-
-
11,929
-
Trump Asia Enterprise Ltd
21,727
-
20,070
-
Trustful Leather
2,134
-
4,203
-
JBS Paraguay
-
1,031
24
-
Other related parties
S.A. Fabrica de Prod. Alimentícios Vigor
6,569
874
17,538
3,431
JBS Agropecuária Ltda.
49
4,810
178
2,984
Flora Produtos de Hig. Limp. S.A.
5,414
1
682
1
Flora Dist. Produtos de Hig. Limp. S.A.
18,805
230
18,439
190
206,681
46,770
165,309
47,768
September 30, 2012
December 31, 2011
Intercompany balances shown in the balance sheet of the Company and statement of operations are as follows:
24
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Financial
income
(expenses)
Purchases
Sales of
products
Financial income
(expenses)
Purchases
Sales of products
Direct subsidiaries
JBS Aves Ltda.
8,659
-
17,693
6,876
- -
JBS Confinamento Ltda.
10,351
128,101 2,323
18,264
252,064
4,243
JBS Embalagens Metálicas Ltda.
7,292
2,354 -
8,160
61,271
3,657
JBS USA, Inc
22,390
-
229,088
(51,786)
- 27,290
JBS Slovakia Holdings s.r.o.
(1,454)
-
-
(1,226)
- -
JBS Itália SRL
-
8,762 54,505
-
- 51,466
Cascavel Couros Ltda
1,583
11,258 109,962
(1,990)
5,672
166,209
Novaprom Food Ingredients Ltda
1,612
2,884 9,247
1,205
2,217
9,259
Indirect subsidiaries
JBS Global (UK) Limited
-
-
86,696
-
- 86,161
JBS Argentina S.A
-
8,440 -
-
7,990
-
The Tupman Thurlow Co.
-
-
-
-
- -
Global Beef Trading SU Lda.
-
426
37,374
-
- 110,594
Beef Snacks Brasil Ind.Com. Ltda.
6,256
-
-
9,880
- -
Beef Snacks International
345 -
-
300
- -
JBS HU Ltd
(868)
-
-
(4,780)
- -
Australia Meat
-
17,065 -
-
8,664
-
Toledo International BV
-
-
123,477
-
- 84,983
JBS Leather Europe
-
-
51,031
-
- 1,987
Meat Snacks Partners do Brasil Ltda
-
-
17,326
-
- -
Weddel Limited
-
-
14,225
-
- 8,341
Sampco Inc.
-
-
110,078
-
- 48,882
Frigorífico Canelones S.A.
-
6,317 -
-
5,898
-
Rigamonti Salumificio Spa
-
-
15,607
-
- 33,163
Wonder Best Holding Company
-
-
14,301
-
- 41,089
Trump Asia Enterprise Ltd
-
-
104,106
-
20
45,549
Trustful Leather
-
-
30,976
-
- 17,887
JBS Paraguay
180 32,096 8
146
- 12
Itaholb International
-
-
1,553
-
- 1,661
Other related parties
S.A. Fabrica de Prod. Alimentícios Vigor
-
7,897 104,331
(21,337)
121
81,210
JBS Agropecuária Ltda.
-
15,874 124
-
35,928
1,769
Flora Produtos de Hig. Limp. S.A.
-
246
51,833
-
- 43,090
Flora Dist. Produtos de Hig. Limp. S.A.
-
4
132,631
-
408
45,209
56,346
241,724 1,318,495
(36,288)
380,253
913,711
September 30, 2011
September 30, 2012
Details of transactions with related parties
JBS USA together with its subsidiaries, JBS USA, LLC and Swift Beef Company, guarantee, in an unsecured way, US$ 300 million of notes issued by the Company in
2016 as a result of commitment contained in the indenture governing such notes.
Among the transactions between related parties more representative, we emphasize the purchase of cattle for slaughter between the Company and it subsidiary JBS
Confinamento, related party JBS Agropecuária and Leather sales operation to the subsidiary Cascavel. Such transactions are made at regular price and market
conditions in their region because it takes the market prices applied with other suppliers (third parties not JBS Group). The number of cattle supplied by these related
parties is irrelevant comparing to the demanded volume by the Company.
No allowance for doubtful accounts or bad debts expenses relating to related-party transactions were recorded for the periods ended September 30, 2012 and
December 31, 2011.
On the mutual contracts are calculated exchange rate and interests, when applicable.
The unamortized balance at September 30, 2012 and December 31, 2011 was US$ 37.584 (R$ 76,318) and US$ 94.3 million (R$ 191,486) .
The main assets and liabilities balances, as well as the transactions that had impact on income statements related with related parties transactions, which
Management considers that were accomplished in the usual market conditions for similar types of operations.
Impacts of related party transactions on Income Statements of the Company:
Guarantees provided and / or received
Consolidated - Credits with related parties
The Company guarantees US Bonds operation of the subsidiary JBS USA in the amount of US$ 700 million with final maturity in 2014.
On December 23, 2010 the Company received an advance of its indirect subsidiary Sampco Inc in the amount of US$ 135.0 million (R$ 224,937) regarding a contract
for future sale of meat with expected delivery in up to three years. The advance is registered under the rubric of "other liabilities" in the financial statements of the
Company, and its being eliminated in the consolidation.
The consolidated balance of related parties, on the amount of R$ 609,061 as of September 30, 2012 (R$ 552,197 as of December 31, 2011), has the following
composition:
25
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
September 30,
2012
December 31,
2011
Beef Snacks do Brasil Ltda.
50,379
48,396
Beef Snacks International BV.
4,842
4,306
Jerky Snack Brands, Inc.
8,953
8,030
64,174
60,732
Members
September 30,
2012
December 31,
2011
Executive Board and Board of Directors
15
5,431
6,791
15
5,431
6,791
b) Companies partially consolidated
a) Not consolidated Companies
The alternate members of the Board of Directors are paid for each meeting of Council in attendance
J&F Oklahoma is still part in 2 commercial agreements with subsidiaries of the Company:
i) Cattle supply and feeding agreement with JBS Five Rivers, where it takes the responsibility for the cattle from J&F Oklahoma and collects the medicinal and adding
value costs, besides a daily fee of rent in line with market terms;
ii) Sales and purchase cattle agreement with JBS USA of at least 500,000 animals/year, starting from 2009 up to 2016.
JBS Five Rivers also guarantee in third degree, after warranty of the assets from J&F Oklahoma and its parent company, up to US$ 250 million in a line of credit of
J&F Oklahoma.
On June 2011, J&F Australia became party to a cattle purchase and sale agreement with JBS Australia. Under this agreement, J&F Australia agreed to sell to JBS
Australia, and JBS Australia has agreed to purchase from J&F Australia, at least 200,000 cattle during each year.
Company's management includes the Executive Board and the Board of Directors. The aggregate amount of compensation received by the members of Company's
management for the services provided in their respective areas of business in the period ended on September 30, 2012 and year ended on December 31, 2011 is the
following:
The Institutional Relations Executive Officer, Administrative and Control Director and Investor Relations Director are part of the employment contract regime CLT
(which is the Consolidation of Labor Laws), which follows all the legal prerogatives of payments and benefits. Not included any remuneration bonuses of the Company
or other corporate benefits to additional employees or that should be extended to their family.
In accordance with IAS 24(R)/CPC 05 R1 - Related parties, except for those described above, the other members of the Executive Board, and Management Board are
not part of any employment contract or any other contracts for additional business benefits such as post-employment benefits or other long-term benefits, termination
of work that does not conform to those requested by the CLT , where applicable, or payment based on shares.
The amount of R$ 64,174 (R$ 60,732 as of December 31, 2011 ) refers to credits of subsidiaries partially consolidated, as follows :
Remuneration of key management
The Company, by it subsidiary JBS USA, has to receive the amount of R$ 544,887 (R$ 491,465 as of December 31, 2011) regarding the credit line up to US$ 375
million, with market interests, between the indirect subsidiary JBS Five Rivers and J&F Oklahoma, subsidiaries of J&F Participações S.A., not consolidated, where J&F
Oklahoma uses this credit for adding value to cattle placed in the feedlot of JBS Five Rivers to be prepared for the slaughter.
26
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
10
Investments in associates, subsidiaries and joint ventures
September 30,
2012
December 31,
2011
Investments in subsidiaries and associates
5,585,123
5,995,157
Goodwill
687,331
1,566,417
6,272,454
7,561,574
Relevant information about subsidiaries in the period of September 30, 2012:
Participation
Total assets
Capital stock
Shareholders'
equity
Net revenue
Net income (loss)
JBS Embalagens Metálicas Ltda.
99.00%
84,043
2
18,812
1,713
(11,022)
JBS Global Investments S.A.
100.00%
6,915
148,234
6,915
-
309
JBS Holding Internacional S.A.
100.00%
526,035
1,108,467
206,975
503,507
(111,733)
JBS Global A/S (Dinamarca)
100.00%
300,544
525,843
83,671
479,896
7,241
JBS Aves Ltda
(1)
100.00%
410,767
55,173
1,542
353,858
(7,088)
JBS USA, Inc.
99.94%
16,900,753
2,034,415
2,980,685
39,782,781
277,326
JBS Confinamento Ltda.
100.00%
628,311
473,401
421,149
150,424
(9,374)
JBS Slovakia Holdings, s.r.o.
100.00%
135,924
171,345
81,147
81,554
11,579
JBS Italia S.R.L.
100.00%
90,152
21,104
21,981
99,355
425
CJSC Prodcontract
70.00%
3,337
1
(24,394)
26,168
(746)
LLC Lesstor
70.00%
38,447
10
38,306
1,373
(3,223)
JBS Middle East
100.00%
56
840
29
119
(472)
JBS Leather Paraguay
97.50%
42
18
23
662
4
JBS Holding GMBH
100.00%
2,168,131
513,368
1,146,679
1,169,724
160,713
Novaprom Foods e Ingredientes Ltda
60.00%
29,639
792
(3,619)
22,114
(1,084)
Cascavel Couros Ltda
100.00%
394,071
285,450
333,437
277,709
28,176
Vigor Alimentos S.A.
21.12% 1,828,987 1,191,378
1,217,442
978,732
23,978
December 31,
2011
Addition (disposal)
Exchange rate
variation (i)
Shareholders'
Equity (ii)
Income Statements
September 30,
2012
JBS Embalagens Metálicas Ltda.
29,536
-
-
-
(10,912)
18,624
JBS Global Investments S.A.
43,602
(36,490)
(506)
-
309
6,915
JBS Holding Internacional S.A.
320,912
-
-
(2,204)
(111,733)
206,975
JBS Global A/S (Denmark)
68,677
-
5,484
2,269
7,241
83,671
JBS Aves Ltda
(1)
(46,423)
55,053
-
-
(7,088)
1,542
JBS USA, Inc.
(2)
3,356,247
(919,065)
145,964
118,653
277,166
2,978,965
JBS Confinamento Ltda
.
424,523
6,000
-
-
(9,374)
421,149
JBS Slovakia Holdings, s.r.o.
(3)
184,829
(111,304)
(1,575)
(2,382)
11,579
81,147
JBS Italia S.R.L
11,312
8,930
1,314
-
425
21,981
CJSC Prodcontract
(15,492)
15,986
28
-
(522)
-
LLC Lesstor
26,203
-
2,867
-
(2,256)
26,814
JBS Middle East
44
459
(2)
-
(472)
29
JBS Leather Paraguay
16
-
2
-
4
22
JBS Holding GMBH
893,569
23,551
37,238
31,607
160,713
1,146,678
Novaprom Foods e Ingredientes Ltda
(1,521)
-
-
-
(650)
(2,171)
S.A.Fábrica de Produtos Alimentícios Vigor
(4)
330,427
(330,427)
-
-
-
-
Cascavel Couros Ltda
305,261
-
-
-
28,176
333,437
Vigor Alimentos S.A.
(5)
-
251,622
-
(21,775)
27,327
257,174
Subtotal
5,931,721
(1,035,685)
190,814
126,168
369,933
5,582,952
63,435
2,171
Total
5,995,157
5,585,123
(i) - As defined in CPC 2/IAS 21 - The effects of changes in foreign exchanges rates, refers to the exchange rate variation of foreign currency investments that are
accounted under the equity method, which was accounted directly to shareholders' equity of the Company on the line "Accumulated translation adjustments".
Goodwill: According to technical interpretation ICPC 09 - Individual Financial Statements, Separate Statements, Consolidated Statements and Application of Equity
Method, in the consolidated statements goodwill is recorded in the Intangible assets due to expected profitability of the acquired subsidiary, assets and liabilities are
consolidated in the Company. In the balance sheet of the Individual Statements, this goodwill is recorded in Investments, the same group of noncurrent assets,
because, for the Company it is part of its investment on subsidiary acquisition, not being its intangible assets (as stated above, the expectation of future earnings - the
genuine intangible - is the subsidiary).
In the Company the goodwill will be only goodwill of the Bertin merger and the other goodwill are allocated as investments.
For details of goodwill, see Note 12 - Intangible Assets.
Company
Associates:
Equity in subsidiaries
Provision for loss on investments
Controlled:
27
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Joint ventures (jointly controlled entities)
Interests in joint ventures include:
September 30,
2012
December 31,
2011
Beef Snacks International
50%
50%
Meat Snacks USA
(a)
50%
50%
Dan Vigor
50%
50%
ASSETS
Beef Snacks
International
Meat Snacks USA
Dan Vigor
(a)
Beef Snacks
International
Meat Snacks USA
Dan Vigor
(a)
Current
11,536
38,523
-
5,393
16,196
29,295
Non current
36,820
3,055
-
45,238
927
20,970
TOTAL ASSETS
48,356
41,578
-
50,631
17,123
50,265
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
5,873
15,973
-
24
4,165
10,409
Non current
131,240
313
-
130,289
-
3,484
Shareholder´s equity
(88,757)
25,292
-
(79,682)
12,958
36,373
48,356
41,578
-
50,631
17,123
50,265
STATEMENTS OF NET INCOME
Beef Snacks
International
Meat Snacks USA
Dan Vigor
(a)
Beef Snacks
International
Meat Snacks USA
Dan Vigor
(a)
Net sales revenue
-
65,572
43,534
-
20,641
57,673
Cost of goods sold
-
(57,098)
(31,005)
-
(14,790)
(42,113)
GROSS INCOME
-
8,474
12,529
-
5,851
15,560
(16)
(5,909)
(3,938)
(1,633)
(7,379)
(7,948)
Financial income, net
(5,200)
1,213
(97)
(7,893)
256
35
Other income expenses, net
-
-
(84)
-
8
(127)
-
(2,969)
(2,851)
-
-
(2,391)
(5,216)
809
5,559
(9,526)
(1,264)
5,129
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY
General and administrative expenses and
selling
According to CPC 19 R1 / IAS 31 - Joint ventures (jointly controlled entities), the condensed financial information of the joint ventures was consolidated under the
proportionate consolidation method, considering the joint control exercised under shareholders agreements. All the balances of the joint ventures assets and liabilities are
as follows:
Below is presented the breakdown of main additions and dispositions of investments during the period:
(1)
- JBS Aves Ltda. ­ Mouran Alimentos Ltda. had stopped its operations and was renamed to JBS Aves Ltda. on May 2, 2012 and started operating in the chicken
segment.
(5)
Vigor Alimentos - The Company has capitalized R$ 1,191,373 in Vigor Alimentos, by transferring the carrying amounts of investment (R$ 330,427) and goodwill (R$
860,946) in S.A. Fábrica de Produtos Alimentícios Vigor. Additionally, there was also the initial capital contribution in the amount R$5. In June 2012 the Company
reduced the value of investment in the Vigor due to the exchange for common shares proportionally to its stake in the amount of R$ 959,961, being part of such
amount the value (R$ 22,272) relating to the capital transaction.
September 30, 2012
Equity interests - %
(a)
As described in the operational context, the joint venture began operations in May 2011
Goodwill transferred to Vigor Alimentos, in the amount of R$ 860,946, results of a transaction under common control, occurred in January 17, 2012. On that date,
through this assignment, Vigor Alimentos became the shareholder of 100% of Vigor's capital, thus there has been no change in its ultimate control, as the Company
holds 100% of the capital of Vigor Alimentos, occurring only a corporate restructuring.
Goodwill on acquisition of Vigor was originated in November 2007, by the incorporated Bertin S.A. After the subsequent merger of Bertin by the Company in December
2009, goodwill accounted in the acquisition of Vigor was allocated among the various cash-generating units of the Company, having been assigned a value of R$
860,946 to the operations of Vigor.
December 31, 2011
(3)
- JBS Slovakia Holdings, s.r.o.- During year 2009, Company received remittances from its indirect subsidiary JBS HU Ltd, wholly owned subsidiary of JBS Slovakia,
being considered as mutual contracts, and at February 2012 such amounts were settled by a capital reduction on it subsidiary.
(4)
- S.A.Fábrica de Produtos Alimentícios Vigor ­ In January 2012, the Company reduced its direct investment in Vigor, by transferring such investment as a capital
increase in its direct subsidiary Vigor Alimentos.
Nine months period ended on September 30, 2012
(2)
- JBS USA, Inc. ­ On February 2012, the Company received from JBS USA the amount of R$ 917,337 as dividends.
(ii) - Refers to the reflex of valuation adjustments and exchange rate variation of foreign investments and capital transactions, accounted in valuation adjustments to
shareholders' equity in the subsidiaries, whose effect is being recognized when calculating the equity in subsidiaries, directly to shareholders' equity of the Company.
Nine months period ended on September 30, 2011
Current income taxes
NET INCOME (LOSS) OF THE PERIOD
28
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
STATEMENTS OF NET INCOME
Beef Snacks
International
Meat Snacks USA
Dan Vigor
(a)
Beef Snacks
International
Meat Snacks USA
Dan Vigor
(a)
Net sales revenue
-
25,765
-
-
18,683
21,268
Cost of goods sold
-
(19,924)
-
233
(13,428)
(15,555)
GROSS INCOME
-
5,841
-
233
5,255
5,713
3
(1,469)
-
(380)
(5,540)
(2,708)
Financial income, net
(2,002)
78
-
266
274
190
Other income expenses, net
-
-
-
-
8
(63)
-
(955)
-
-
-
(898)
(1,999)
3,495
-
119
(3)
2,234
11
Cost
Revaluation
Accumulated
depreciation
September 30, 2012
December 31, 2011
Buildings
2,801,624
116,616
(334,938)
2,583,302
2,557,025
Land
915,086
9,305
-
924,391
953,614
3,867,882
44,711
(821,024)
3,091,569
2,983,112
Facilities
812,009
21,737
(173,995)
659,751
641,365
181,250
706
(65,376)
116,580
139,685
Vehicles
391,134
75
(151,152)
240,057
183,941
806,206
-
-
806,206
238,236
Other
161,319
1,251
(25,643)
136,927
106,604
9,936,510
194,401
(1,572,128)
8,558,783
7,803,582
Cost
Revaluation
Accumulated
depreciation
September 30, 2012
December 31, 2011
Buildings
6,025,887
116,616
(726,019)
5,416,484
5,278,135
Land
2,313,426
9,305
(181,990)
2,140,741
2,270,694
8,528,610
44,711
(2,752,174)
5,821,147
5,684,510
Facilities
843,756
21,737
(190,031)
675,462
682,273
342,731
706
(131,413)
212,024
208,511
Vehicles
633,175
75
(323,569)
309,681
253,133
1,200,321
-
-
1,200,321
808,045
Other
265,300
1,251
(45,990)
220,561
193,413
20,153,206
194,401
(4,351,186)
15,996,421
15,378,714
Company
Consolidated
Buildings
2.89%
3.66%
Land
0.00%
1.71%
5.85%
8.18%
Facilities
5.08%
5.32%
12.50%
17.07%
Vehicles
10.24%
10.41%
Other
5.64%
6.05%
The joint venture Beef Snacks International has in its consolidated statements the subsidiaries Beef Snack and Jerky Snacks. The investment of the joint venture Beef
Snacks International is proportionally consolidated at JBS Global A/S, direct subsidiary, of the Company.
Machinery and equipment
Computer equipment
Current income taxes
Three months period ended on
September 30, 2011
General and administrative expenses and
selling
Net amount
Net amount
Machinery and equipment
Property, plant and equipment, net
Three months period ended on
September 30, 2012
(a)
The Investment in the joint venture Dan Vigor is proportionally consolidated in the Vigor. As mentioned in the note 1c), the Company consolidated only the results of
Vigor for the six months period ended on June 30, 2012, therefore the Company no longer consolidates proportionally the balance sheet accounts of the joint venture
Dan Vigor since that date.
Computer equipment
Consolidated
According to IAS 16/CPC 27 - Fixed Assets, on December 31, 2011 the Company made a review of the useful lives of fixed assets and no significant differences were
identified if compared to the useful lives adopted on the referred base date. For the purpose of disclosure and to provide additional information to readers, the
Company discloses the weighted average depreciation rates of assets that make up each group:
Construction in progress
Computer equipment
Average annual
depreciation rates as of September 30,
2012
Construction in progress
NET INCOME (LOSS) OF THE PERIOD
Company
The joint venture Meat Snacks USA has in its consolidated subsidiary the subsidiary Meat Snacks. The investment of the joint venture Meat Snacks USA is proportionally
consolidated at JBS Holding GMBH, direct subsidiary, of the Company.
Machinery and equipment
29
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Changes in property, plant and equipment
December 31, 2011
Additions net of
transferences
Disposals
Depreciation
September 30, 2012
Buildings
2,557,025
91,365
(1,752)
(63,336)
2,583,302
Land
953,614
1,645
(30,868)
-
924,391
2,983,112
297,369
(17,128)
(171,784)
3,091,569
Facilities
641,365
50,666
(541)
(31,739)
659,751
139,685
(4,998)
(1,044)
(17,063)
116,580
Vehicles
183,941
111,109
(24,954)
(30,039)
240,057
238,236
568,016
(46)
-
806,206
Other
106,604
33,967
(142)
(3,502)
136,927
7,803,582
1,149,139
(76,475)
(317,463)
8,558,783
Consolidated
December 31, 2011
Additions net of
transferences
Disposals
Depreciation
Exchange rate
variation
Vigor deconsolidation
September 30, 2012
Buildings
5,278,135
278,817
(15,975)
(168,742)
207,108
(162,859)
5,416,484
Land
2,270,694
36,155
(76,353)
(29,727)
72,200
(132,228)
2,140,741
Machinery and
equipment
5,684,510
608,683
(24,620)
(526,244)
186,866
(108,048)
5,821,147
Facilities
682,273
58,857
(1,540)
(34,527)
83
(29,684)
675,462
Computer
equipment
(1)
208,511
45,588
(1,660)
(43,968)
4,936
(1,383)
212,024
Vehicles
253,133
129,341
(28,239)
(49,443)
5,213
(324)
309,681
Construction in
progress
(2)
808,045
360,600
(13,348)
-
45,265
(241)
1,200,321
Other
193,413
43,338
(532)
(12,094)
2,530
(6,094)
220,561
15,378,714
1,561,379
(162,267)
(864,745)
524,201
(440,861)
15,996,421
Interest capitalization - Borrowing costs
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Construction in progress
762,757
199,441
1,124,224
762,645
(+) capitalized borrowing costs
43,449
38,795
76,097
45,400
806,206
238,236
1,200,321
808,045
The balance of construction in progress refers to investments for expansion, modernization and adaptation of meat-packing plants, aiming to maintain current and
obtain new certifications required by the market. When these assets are concluded and start operating, they will be transferred to a proper property, plant and
equipment account and then will be subject to depreciation.
Impairment test of assets
Company
Consolidated
The Company and its subsidiaries reviewed the useful lives of their property, plant and equipment. Significant differences were not found in comparison with the useful
lives adopted as of December 31, 2009. From January 1, 2010 new acquisitions are made with estimated useful lives, annually the useful lives are reviewed and when
applicable adjusted.
Company
(1)
- Construction in progress ­ The additions in the amount of R$ 568,016 in the Company and R$ 360,600 in the Consolidated include transaction costs in the amount
of R$ 12,135 and R$ 21,754, respectively, for the nine months period ended on September 30, 2012.
Part of the increase in construction in progress in the Company as reflected in the consolidated, is result of recent acquisitions of assets by the Company. The assets
are recorded as construction in progress and subsequently transferred to their account equity referred to, see note 19.
Construction in progress
(2)
Pursuant to IAS 23/CPC 20 R1 ­ Borrowing costs, the Company capitalized those borrowing costs directly attributable to the construction of qualifying assets, which
are exclusively represented by construction in progress. The borrowing costs allocated to the qualifying assets as of September 30, 2012 and December 31, 2011 are
shown below:
The depreciation expenses are booked under "Cost of goods sold" and "General and administrative expenses".
Machinery and equipment
Computer equipment
(1)
Until December 2007, revaluations were performed on property, plant and equipment items of several Company's plants, and offsetting entries were made to the
revaluation reserve account and the provision for deferred income and social contribution taxes. The method and assumption applied to estimate the fair value of the
assets were determined based on current market prices. As of September 30, 2012, the total amount of property, plant and equipment revaluation is R$ 194,401 which
the revaluation reserve is R$ 98,033 and the provision for income and social contribution taxes is R$ 45,929. For revalued property, plant and equipment, the
Company recorded accumulated depreciation of R$ 50,439.
(2)
- Computer equipment - Negative additions in the amount of R$ (4,998) are net of transfers to adjust classification in the amount of R$ 28,990, related to equipment
purchased in the second quarter of 2012 and were transferred to the category of machinery and equipment.
In compliance with the requirements of IAS 36/CPC 01 R1 - Presentation of financial statement, the Company performed the annual impairment test of the tangible and
intangible assets on December 31, 2011, which were estimated based on the values in use of its various cash-generating units using the discounted cash flows, and
showed that the estimated market value is higher than the net book value at the valuation date and, during the year there was no evidence of loss of value of individual
assets or group of relevant assets. Potential impacts of loss recover them are highlighted in the notes, where relevant. The assumptions of the annual test of recovery
are described in note 12.
30
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
12
Intangible assets, net
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Goodwill
9,069,926
9,069,926
10,345,856
11,189,867
Trademarks
452,575
452,575
686,413
665,005
Software
8,304
9,005
15,062
16,406
Water rights
-
-
65,988
60,840
Client portfolio
-
-
597,555
597,016
Other
-
-
3,000
3,485
9,530,805
9,531,506
11,713,874
12,532,619
Changes in intangible assets
Company
December 31, 2011
Additions
Amortization
(1)
September 30, 2012
Goodwill
9,069,926
-
- 9,069,926
Trademarks
452,575
-
- 452,575
Software
9,005
3,267
(3,968) 8,304
9,531,506
3,267
(3,968)
9,530,805
Consolidated
December 31, 2011
Additions
Disposals
Amortization
(1)
Exchange rate
variation
Vigor deconsolidation
September 30, 2012
Goodwill
11,189,867
-
(18,140)
-
36,533
(862,405) 10,345,856
Trademarks
665,005 -
-
(671)
25,271
(3,192) 686,413
Software
16,406 4,363
-
(5,371)
516
(851) 15,062
Water rights
60,840 -
-
(45) 5,193
- 65,988
Client portfolio
597,016 -
-
(48,935)
49,474
- 597,555
Other
3,485 -
-
(772)
287
- 3,000
12,532,619
4,363
(18,140)
(55,794)
117,274
(866,448)
11,713,874
Amortization expenses are recorded in the accounts of "Cost of goods sold" and "General and administrative expenses".
Detailing of the Goodwill
Company- Recorded as intangible
Company- Recorded as investment
Consolidated- Recorded as goodwill
JBS USA has goodwill of US$ 224.919 thousand, equivalent to R$ 456,721 as of September 30, 2012, arising mainly from the acquisition in 2008 of Smithfield beef,
Tasman and Five Rivers, based on the appreciation of the acquired assets.
(1)
- Refers to amortization of intangible assets with useful lives defined in business combinations.
Consolidated
In December 2009 the Company merged Bertin. The market value of this operation was ascertained based on an appraisal report prepared by a valuation company.
The fair value of share exchange between the companies amounted to R$ 11,987,963, generating goodwill of R$ 9,069,926. Pursuant to IFRS 3 (R)/CPC 15 R1 ­
Business combinations, in 2010 the purchase price was allocated to the respective asset accounts, based on the fair value of identifiable assets and liabilities.
In July 2007 the Company acquired a 100% interest in Swift Foods Company, currently known as JBS USA , with goodwill of R$ 906,481,based on expected future
earnings, which was being amortized over 5 years. Accumulated amortization until December 31, 2008 was R$ 248,655, showing a net carrying amount of R$ 657,826
as of September 30, 2012.
In April 2011 the Company acquired 70% interest in LLC Lesstor, with goodwill of R$ 13,461, based on expected future earnings of the acquired business.
Company
The Company through its acquired company Bertin, has other smaller representation of goodwill arising from companies acquisition based on expected future
profitability of R$ 16,044, which related the following investments:
i) Novaprom Foods Ingredients - R$ 12,000
ii) Phitoderm - R$ 4,044
Trademarks, the water right and goodwill have indefinite lives and their recoverable amounts are tested annually for impairment.
Goodwill: According to technical interpretation ICPC 09 - Individual Financial Statements, Separate Statements, Consolidated Statements and Application of Equity
Method, in the consolidated goodwill is recorded in the Intangible assets due to expected profitability of the acquired subsidiary, assets and liabilities are consolidated
with the Individual Statement. In the balance sheet of the Company, this goodwill is recorded on Investments, the same group of noncurrent assets, because, for the
Company it is part of its investment on subsidiary acquisition, not being its intangible assets (as stated above, the expectation of future earnings - the genuine
intangible - is the subsidiary).
In the company the intangible goodwill arising from the merger of Bertin, and the rest allocated to investments. Consolidated all goodwill re recorded as intangible.
The Company presents only the intangible goodwill arising from the merger of Bertin and the remaining amounts are allocated in investments.
31
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
13
Trade accounts payable
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Commodities - cattle
444,181
358,129
1,425,246
1,237,805
Materials and services
306,359
293,258
1,688,285
1,830,650
Finished products
34,961
14,988
248,370
255,431
785,501
666,375
3,361,901
3,323,886
· Sales Revenue - Revenues are projected from 2012 to 2021 considering the growth in volume of different products of Cash Generating Units.
Consolidated
In 2007, JBS Holding International S.A., through its subsidiaries JBS Argentina S.A. and JBS Mendoza S.A., acquired 100% of the capital stock of Consignaciones
Rurales S.A. and Argenvases S.A.I.C. and, in 2008, through the same subsidiaries, acquired 100% of the capital stock of Colcar S.A., with total goodwill of $ 14,110
thousand Argentinean pesos, equivalent to R$ 6,105 as of September 30, 2012. Goodwill is based upon expected future earnings of the acquired businesses.
JBS Global A/S has goodwill of 5,188 thousands of Euros, equivalent to R$ 13,545 as of September 30, 2012, arising from the acquisition of the Toledo Group , based
on the appreciation of the assets.
Consistent with the techniques of economic evaluation, assessment of the value in use is effected for a period of 10 years, and after, considering the perpetuity of the
premises in view of the indefinite business continuity capability. The Management judged appropriate to use the period of 10 years based on their past experience in
designing accurately projected cash flows. This understanding is in accordance with paragraph 35 of IAS 36/CPC 01 R1 (R) - Impairment of Assets.
In accordance with CVM decision No. 565, dated December 17, 2008, and CVM Decision No. 553, dated November 12, 2008, since January 1, 2009 the Company has
adopted the criteria of not amortize goodwill based upon expected future earnings, which is in line with IFRS 3 (R) /CPC 15 R1 - Business combination. Under these
CVM decisions and the IFRS, intangible assets with indefinite life can no longer be amortized.
Impairment test of goodwill
· Capital investment - Investment in capital goods were estimated considering the maintenance of existing infrastructure and expectations required to enable the supply
of products.
Company
Company tested the recovery of the goodwill using the concept of "value in use" through models of discounted cash flow, representing the group of tangible and
intangible assets used in the development and sale of products to its customers.
On January 2012, the Company transferred the goodwill through its merged company Bertin that acquired 99.06% of interest in S.A. Fabrica de Produtos Alimenticios
Vigor, in the amount of R$ 860,943, based on expected future earning, as a capital increase in it subsidiary Vigor Alimentos S.A., therefore the referred goodwill is not
part of the intangible based on the date of September 30, 2012.
Based on the annual test for impairment of the Company's intangible assets, prepared based on the projections made on the financial statements of December 31,
2011, growth prospects and then follow the projections and results of operations for the nine months period ended on September 30, 2012, there were no indications of
possible losses or losses, as the estimated market value is higher than the carrying amount at the valuation date.
The growth rates used to extrapolate the projections after the period of 10 years ranged from 3% to 4% at year in nominal values. The estimated future cash flows
were discounted using discount rates ranging from 8.9% to 10.6% at year, also in nominal values. The principal assumptions used in estimating the value in use are as
follows:
The Company's subsidiaries have other smaller representation of goodwill arising from companies acquisition, based on expected future profitability of R$ 112,228
which related the following investments:
i) JBS Holding Inc - R$ 21,822
ii) Misr Cold - R$ 23,147
iii) Rigamonti - R$ 60,406
iv) Wonder Best - R$ 1,998
v) IFPSA - R$ 4,855
The key assumptions were based on historical performance of the Company and reasonable macroeconomic assumptions reasoned basis on projections of the
financial market, documented and approved by management.
The process of determining the value in use involves the use of assumptions, judgments and estimates about cash flows, such as rates of revenue growth, costs and
expenses, estimates of investment, working capital and discount rates. The assumptions about growth projections, cash flow and future cash flows are based on
Management's best estimates, as well as comparable information from market, economic conditions that will exist during the economic life of the group of assets that
provides the generation of the cash flows. The future cash flows were discounted based on the representative rate of the cost of capital (WACC).
· Operating costs and expenses - The costs and expenses were projected accordance with historical performance of the Company and, with the historical growth in
revenues. In addition, we considered efficiency gains derived from business combinations of synergies and process improvements.
Goodwill and intangible assets with no estimated useful lives are tested for impairment at least once a year, in accordance with IFRS 3 (R)CPC 15 R1 ­ Business
combinations.
32
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
14
Loans and financings
Current liabilities
Type
September 30,
2012
December 31,
2011
Foreign currency
ACC - (advances on exchange contracts)
2,293,744
2,078,290
Prepayment
740,843
824,925
144-A
70,600
98,798
Credit note - Export
9,088
36,648
Resolution 63
-
10,859
3,114,275
3,049,520
National currency
FINAME
57,655
80,853
EXIM - export credit facility
134,997
225,926
BNDES automatic
59,969
153,456
BNDES automatic
6,124
6,308
Working capital- Brazilian Reais
83,457
257,186
Credit note - export
1,398,077
796,672
FCO - Middle West Fund
615
612
FNO - North Fund
4,322
4,150
CDC
6,306
-
Others
20
19
1,751,542
1,525,182
4,865,817
4,574,702
Noncurrent liabilities
Type
September 30,
2012
December 31,
2011
Foreign currency
Prepayment
661,833
894,849
144-A
3,124,160
2,895,159
Credit note - Export
8,612
15,912
3,794,605
3,805,920
National currency
FINAME
158,747
132,854
EXIM - export credit facility
-
83,333
BNDES automatic
5,136
33,755
BNDES automatic
265
4,329
Working capital- Brazilian Reais
2,451,274
1,842,188
Credit note - Export
747,448
1,171,540
FCO - Middle West Fund
200
650
FNO - North Fund
17,637
20,624
CDC
7,689
-
3,388,396
3,289,273
7,183,001
7,095,193
Breakdown:
Current liabilities
4,865,817
4,574,702
Noncurrent liabilities
7,183,001
7,095,193
12,048,818
11,669,895
Maturities of long-term debt are as follows:
2013
197,932
1,883,106
2014
1,692,426
1,163,976
2015
1,407,354
945,160
2016
1,886,386
1,394,493
2017
158,089
7,318
2018
1,836,698
1,697,233
2019
2,880
2,689
2020
1,046
1,045
2021
190
173
7,183,001
7,095,193
The Company disclosers below the operations in foreign and national currency, considering the functional currency of each subsidiary. National currency indicates
loans denominated in the same currency as functional currency.
Interest from 1.2% to 14% or 100% to 120% of CDI
Average annual rate of interest and commissions
Exchange variation + interest from 8.25% to 10.50%
Interest of 10.00%
Exchange variation + interest from 8.25% to 10.50%
Exchange variation + interest from 2.9 % to 5.20%
Interest of 10.00%
Currency basket BNDES + interest from 2% to 3.1%
Exchange variation + interest of 7.85%
Interest of 10.00%
Currency basket BNDES + interest from 2% to 3.1%
Exchange variation + Libor and interest from 1% to 6%
TJLP and interest from 1% to 8.5%
Exchange variation, Interest of 2.5% + Libor 6 months
Interest of 4% + 100% of CDI or 100% to 114.4% of CDI
TJLP and interest from 3.1% to 5.44%
TJLP and interest of 5.81%
Company
Exchange variation + interest of 7.85%
TJLP and interest from 2.11% to 6.82%
Interest of 4% + 100% of CDI or 100% to 114.4% of CDI
TJLP and interest from 1% to 8.5%
TJLP and interest from 2.11% to 6.82%
Average annual rate of interest and commissions
Company
Exchange variation + Libor and interest from 1% to 6%
TJLP and interest from 3.1% to 5.44%
TJLP and interest of 5.81%
Interest of 10.00%
Interest from 1.2% to 14% or 100% to 120% of CDI
33
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Current liabilities
Type
September 30,
2012
December 31,
2011
Foreign currency
ACC - (advances on exchange contracts)
2,449,220
2,216,128
Prepayment
750,065
836,276
144-A
70,600
104,919
Credit note - Import
24,832
7,110
Credit note - Export
9,088
36,648
PPC - México revolver
-
54
Tasman Government Loan
-
1,249
Resolution 63
-
10,859
3,303,805
3,213,243
National Currency
FINAME
57,824
81,037
FINAME
-
152
Installment note corp aircraft (payable notes)
13,912
1,726
JBS Mortgage
3,452
3,001
EXIM - export credit facility
134,997
225,926
EXIM - export credit facility
-
92,495
BNDES automatic
59,969
153,456
BNDES automatic
6,124
6,308
US revolver
520
2,339
JBS Term Loan
18,775
17,514
Five Rivers term loan
11,847
11,816
Senior note due 2014
66,096
23,318
17,264
-
Senior note due 2021
30,037
6,139
PPC - US Senior note 2018
21,987
2,257
508
1,780
45,648
42,931
PPC - US bonds
457
229
Plainwell Bond
3,927
3,554
Marshaltown
30
-
Working capital- Brazilian Reais
83,457
264,107
Working capital - US dollars
84,973
133,462
Working capital - EUROS
48,795
28,305
Credit note - Export
1,398,077
796,672
FCO - Middle West Fund
615
1,362
FNO - North Fund
4,322
4,150
Working capital - Egyptian pound
-
17,168
EGF
-
30,351
Credit note - Import
55,155
108,056
Finep
1,748
24
CDC
6,306
-
Others
31,807
66,555
2,208,629
2,126,190
5,512,434
5,339,433
Exchange variation + Interest of 2.5% + Libor 6 months
Exchange variation + Libor and interest from 1% to 6%
Average annual rate of interest and commissions
Libor or Prime + applicable rate
Consolidated
Exchange variation + interest from 2.9 % to 5.20%
Exchange variation + interest of 11.25%
Interest of 8.25%
Interest from 9% to 11.19%
Interest from 5.75% to 8.35%
Interest of 11.625%
Exchange variation + interest of 7.85%
Exchange variation + interest from 8.25% to 10.50%
TIIE+ interest of 2.25%, Overnight +4.5%
Libor and interest from 1.75%
TJLP and interest of 5.81%
Alternate Base Rate (ABR) or Eurodollar
TJLP and interest from 1% to 8.5%
TJLP and interest from 3.1% to 5.44%
Interest of 7.25%
Interest from 4.5% to 10%
Libor + 2.75% or Prime + 1.5%
Interest of 10.00%
Interest of 6.75%
Senior note due 2020
Currency basket + interest from 2% to 3.1%
Interest of 4.39%
Libor + Interest of 2% and commission of 0,1%
Interest from 7.625% to 9.25%
Interest from 4.75% to 9.00%
Interest of 2.34%
Interest from 10.00%
Interest of 4.44% ( LIBOR and interest of 2.80%)
PPC - US credit facility - term loans
Libor +interest from 1.10% to 3.20%
TJLP and interest from 2.11% to 6.82%
Euribor +interest from 0.15% to 1.75%
Interest of 4.5%
Exchange variation + Interest of 0% until 2013
PPC - US credit facility - revolving credit facility
Interest from 1.2% to 14% or 100% to 120% of CDI
Interest of 4% + 100% of CDI or 100% to 114.4% of CDI
Interest from 4.22% to 6.25%
Interest of 7.875%
34
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Noncurrent liabilities
Type
September 30,
2012
December 31,
2011
Foreign currency
Prepayment
661,833
894,849
144-A
3,124,160
3,082,739
Credit note - Export
8,612
15,912
Tasman Government Loan
-
22,851
3,794,605
4,016,351
National currency
FINAME
158,930
133,138
FINAME
-
1,172
Installment note corp aircraft (payable notes)
-
12,405
JBS Mortgage
31,822
31,812
EXIM - export credit facility
-
83,333
BNDES automatic
5,136
33,755
BNDES automatic
265
4,329
US revolver
54,002
50,450
JBS Term Loan
929,152
865,534
Five Rivers term loan
148,153
144,590
Senior note due 2014
1,386,429
1,265,417
1,385,129
-
Senior note due 2021
1,282,675
1,182,157
PPC - US Senior note due 2018
992,123
913,999
189,727
631,389
1,089,959
1,022,148
PPC - US bonds
7,913
7,310
Plainwell Bond
25,470
26,059
Marshaltown
19,435
17,891
Working capital- Brazilian Reais
2,451,274
1,842,188
Working capital - US dollars
27,999
32,187
Working capital - Euro
4,467
2,071
Credit Note - export
747,448
1,171,540
FCO - Middle West Fund
200
1,693
FNO - North Fund
17,637
20,624
Finep
9,264
11,680
CDC
7,689
-
Others
5,199
7,539
10,977,497
9,516,410
14,772,102
13,532,761
Breakdown:
Current liabilities
5,512,434
5,339,433
Noncurrent liabilities
14,772,102
13,532,761
20,284,536
18,872,194
Maturities of long-term debt are as follows:
2013
202,412
1,949,326
2014
4,392,756
4,136,914
2015
1,453,831
980,346
2016
2,081,321
1,572,683
2017
171,743
199,347
2018
3,743,090
3,449,587
2019
2,880
4,148
2020
1,405,007
1,936
2021
1,282,865
1,182,330
Maturities thereafter 2021
36,197
56,144
14,772,102
13,532,761
Libor or Prime + applicable rate
Interest of 2.34%
USBONDS - On April 27, 2009, the subsidiary JBS USA issued bonds in the amount of US$ 700 million, with a payment term of five years and coupon of 11.625% per
year, with a discount of US$ 48.7, which will be added to the loan over its useful live. The operation is guaranteed by the Company and its subsidiary JBS USA and the
subsidiaries of JBS USA.
Libor +interest from 1.10% to 3.20%
Interest from 4.75% to 9.00%
CDC ­ Working Capital Financing contract (Contrato de financiamento de capital de giro), credit facilities obtained from financial institutions by the Company, to
finance the truck fleet of the transport operation.
Interest of 8.25%
Alternate Base Rate (ABR) or Eurodollar
Interest of 7.25%
Interest of 11.625%
Consolidated
TJLP and interest from 3.1% to 5.44%
TJLP and interest from 2.11% to 6.82%
Interest of 10.00%
Exchange variation + Libor and interest from 1% to 6%
Libor and interest from 1.75%
Interest from 4.5% to 10%
Interest of 4% + 100% of CDI or 100% to 114.4% of CDI
PPC - US credit facility - term loans
Libor + 2.75% or Prime + 1.5%
Currency basket + interest from 2% to 3.1%
Senior note due 2020
Euribor + interest from 0.15% to 1.75%
Interest of 4.39%
Interest from 4.22% to 6.25%
PPC - US credit facility - revolving credit facility
Interest of 4.5%
ACC (advances on exchange contracts) are credit facilities obtained from financial institutions by the Company, its subsidiary JBS Argentina S.A., in the amount of
US$ 1,206,156 on September 30, 2012 (US$ 1,181,431 on December 31, 2011), to finance export transactions.
Interest of 7.875%
TJLP and interest from 1% to 8.5%
Exchange variation + interest from 8.25% to 10.50%
Average annual rate of interest and commissions
Interest from 5.75% to 8.35%
Interest of 10.00%
Interest from 1.2% to 14% or 100% to 120% of CDI
Exchange variation + interest of 7.85%
Exchange variation + Interest of 0% until 2013
TJLP and interest of 5.81%
Interest from 7.625% to 9.25%
35
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
15
Credit operations, guarantees and covenants
Additionally, according to Notes 2016, the Company will not be able, directly or indirectly, to declare or pay any dividends or make any distributions related to securities
issued by the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) there has been default in relation to the notes 2016; (ii) the
Company can incur in at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph
above; and (iii) the total value to be paid does not exceed 50% of the accrued net income in a certain year or when in a determined year where there is loss, the
payment value does not exceed US$30 million.
Bertin's Notes 2016 - Bertin S.A., an enterprise of which the Company is the successor through merger, issued Bertin's Notes 2016 at the principal amount of US$350
million in October 13, 2006 (under its former corporate name of Bertin Ltda.). The interest applicable to Bertin's Notes 2016 corresponds to 10.25% per annum, paid
semiannually on April 5 and October 5, beginning on April 5, 2007. The principal amount of the notes should be fully paid by October 5, 2016.
On December 14, 2009, Bertin successfully concluded a consent solicitation relating to the 2016 Bertin Notes. The consent solicitation (1) amended certain provisions
in the indenture governing the 2016 Bertin's Notes 2016 to conform the provisions to the indenture governing Notes 2016 and (2) amended the change of control
provisions to exclude the Bertin merger as an event that would trigger a change of control under the Bertin's 2016 Notes. The supplemental indenture implementing
these amendments to the Bertin's Notes 2016 was executed on December 22, 2009.
Guarantees: The indenture governing Notes 2016 requires that any significant subsidiary (as defined in the indenture governing the Notes 2016) guarantee all
obligations of the Company as stated in Notes 2016, subject to certain exceptions. Notes 2016 are guaranteed by JBS Hungary Holdings Kft (indirect wholly owned
subsidiary of the Company), by JBS USA Holdings, JBS USA, LLC and Swift Beef Company. Other subsidiaries of the Company may be required to guarantee the
Notes 2016 in the future.
144-A ­ It refers to three issues of 144-A notes: (i) Notes 2016 - JBS S.A. in the amount of US$ 300 million with an interest rate of 10.50% per annum; (ii) Notes 2016
of Bertin (an enterprise of which the Company is the sucessor through merger) in the amount of US$ 350 million with an interest rate of 10.25% per annum and (iii)
Notes 2018 - JBS S.A. in the amount of US$ 900 million with an interest rate of 8.25% per annum.
Again, as mentioned above, Notes 2016 establish restrictions to the Company and its subsidiaries in the execution of certain actions, such as: (i) paying dividends or
making any other payments of securities; (ii) paying debts or other obligations; (iii) obtaining loans or advances; or (iv) transferring its properties or assets. Despite that,
such payments can be made in certain cases, such as, (a) when there are certain obligations incurred before the issuance of the notes; (b) they are established in law;
(c) when the transfer of assets takes place in the normal course of business, or under clauses usually accepted in joint venture agreements executed by the
subsidiaries; or (d) when imposed by standard documents of BNDES (National Bank of Economic and Social Development).
FINAME / FINEM ­ Financing agreements with BNDES are secured by the assets subject matter of the financing.
ABL (Asset Based Loan) ­ On May 12, 2011 the subsidiary JBS USA, LLC entered into a credit agreement consisting of a term loan commitment of US$ 850 million,
with a payment term of 5 years and LIBOR + 1.75% per year.
Events of default: The indenture of Notes 2016 contains customary events of default. They include non-compliance with or violation of terms, restrictions and other
agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment within the grace
periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and certain events
related to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding at the time is
entitled to declare immediately payable the principal and accrued interest on the notes.
. incur additional debt, if the ratio net debt/EBITDA is higher than a determined index;
. incur liens;
. sell or dispose of assets;
. pay certain dividends and make other payments;
. permit restrictions on dividends and other restricted payments by its restricted subsidiaries;
. have certain transactions with related parties;
. Consolidate or enter into merger or transfer all assets to another company;
. execute lease transactions with repurchase option (sale/leaseback).
. change the control without making a purchase offer on Notes 2016.
As mentioned above, the terms and conditions for Notes 2016 include covenants. They restrict the Company and its subsidiaries, including JBS USA, to incur any
debts (subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt is
incurred is lower than 4.75/1.0.
On April 19, 2012 the Company announced that it was soliciting consents from holders of the Notes 2016 to amend the restricted payments covenant to permit
restricted payments to be made with the equity interests and/or assets of any non-essential subsidiaries of JBS S.A., provided that such restricted payments would not
exceed 2% of JBS S.A.'s total consolidated revenues. The consent solicitation expired on May 3, 2012 with the Company receiving the requisite consents to implement
the amendment.
Term Loan A - On July 14, 2011 the indirect subsidiary JBS Five Rivers obtained an US$ 85 million term loan with a payment term of 5 years and LIBOR + 2.75% per
year.
Term Loan B - On May 27, 2011 the subsidiary JBS USA, LLC entered into a credit agreement consisting of a term loan of US$ 475 million with a payment term of 7
years and LIBOR + 3% per year.
On September 30, 2012, the Company was in compliance with all covenants. The main credit operations, guarantees and covenants of the Company and its
subsidiaries are described below.
Notes 2016 - JBS S.A. - On August 4, 2006, the Company issued Notes 2016 maturing in 2016, in the principal amount of US$300 million. The interest rate applicable
to the notes is 10.50% per annum and interest is paid semiannually on February 4 and August 4, beginning on February 4, 2007. The principal amount of the notes
should be fully paid by August 4, 2016. Pursuant to the additional indenture dated January 31, 2007, JBS Finance Ltd became a co-issuer of Notes 2016.
36
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Guarantees: The indenture that governs Bertin's Notes 2016 requires that any "material subsidiary" (as defined in the indenture governing Bertin's Notes 2016) to
guarantee all obligations of the Company established in Bertin's Notes 2016. They are guaranteed by JBS Hungary Holdings Kft. (indirect wholly-owned subsidiary of
the Company). Other subsidiaries of the Company may be required to guarantee the Bertin's Notes 2016 in the future.
Covenants: The indenture of Bertin's Notes 2016 contains customary negative covenants that limit the Company's ability and the ability of its subsidiaries to, among
other things:
. incur additional debt if the net debt/EBITDA ratio is higher than a determined index;
. incur liens;
. pay dividends or make certain payments to shareholders;
. sell or dispose of assets;
. have certain transactions with related parties;
. dissolve, consolidate, merge or acquire the business or assets of other entities;
. execute lease transactions with repurchase option (sale/leaseback);
. change the company's control without making a purchase offer on Bertin's Notes 2016.
. in a general manner, limits dividends or other payments to shareholders by restricted subsidiaries.
Additionally, according to the notes, the Company can only, directly or indirectly, declare or pay any dividends or make any distributions related to securities issued by
the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) it is not in default in relation to the notes; (ii) the Company can incur in
at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph above; and (iii) the
total value to be paid does not exceed 50% of the accrued net income in a certain year or when in a determined year where there is loss, the payment value does not
exceed US$ 30 million.
Besides, Bertin's Notes 2016 restrict the Company and its subsidiaries from: (i) paying dividends or making any other payments of securities; (ii) paying debts or other
obligations; (iii) making loans or advances; or (iv) transferring its properties or assets. Despite that, such payments can be made in certain cases, such as, (a) when
there are certain obligations incurred before the issuance of the notes; (b) they are established in law; (c) when the transfer of assets takes place in the normal course
of the business, or under clauses usually accepted in joint venture agreements executed by the subsidiaries; (d) when imposed by standard documents of BNDES or
other international governmental agencies.
Events of default: The issuance instrument of Bertin's Notes 2016 contains customary events of default. They include non-compliance with or violation of terms,
restrictions and other agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment
within the grace periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and
certain events related to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding
at the time is entitled to declare immediately payable the principal and accrued interest on the notes.
As indicated above, the terms and conditions for Bertin's Notes 2016 include covenants that restrict the Company (as legal successor of Bertin) and the subsidiaries, to
incur any debts (subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt
is incurred is lower than 4.75/1.0.
On April 19, 2012 the Company announced that it was soliciting consents from holders of the Bertin's Notes 2016 to amend the restricted payments covenant to permit
restricted payments to be made with the equity interests and/or assets of any non-essential subsidiaries of JBS S.A., provided that such restricted payments would not
exceed 2% of JBS S.A.'s total consolidated revenues. The consent solicitation expired on May 3, 2012 with the Company receiving the requisite consents to implement
the amendment.
Notes 2018 - JBS S.A. - On July 29, 2010, JBS Finance II Ltd., a wholly-owned subsidiary of the Company, issued Notes 2018 maturing in 2018, at the principal
amount of US$700 million and on September 10, 2010, the company issued additional notes at the principal amount of US$200 million under the indenture of Notes
2018. The interest rate applicable to the notes is 8.25% per annum and are semiannually paid on January 29 and July 29 of each year, beginning January 29, 2011.
The principal amount of the Notes 2018 should be fully paid by January 29, 2018.
The Notes 2018 are guaranteed by JBS Hungary Holdings Kft. (indirect wholly-owned subsidiary of the Company) and by JBS S.A.
Covenants. The indenture of Notes 2018 contains customary negative covenants that limit the Company's ability and the ability of certain subsidiaries to, among other
things:
. incur additional debt if the net debt/EBITDA ratio is higher than a determined index;
. incur liens;
. pay dividends or make certain payments to shareholders;
. permit restrictions on dividends and other restricted payments by restricted subsidiaries
. sell or dispose of assets;
. have certain transactions with related parties;
. execute lease transactions with repurchase option (sale/leaseback);
. change the company's control without making a purchase offer on Notes 2018.
As mentioned above, the terms and conditions for Notes 2018 include covenants. They restrict the Company and its subsidiaries, including JBS USA, to incur any
debts (subject to certain permitted exceptions) unless the pro forma net debt / EBITDA ratio of the Company (as defined in the indenture) at the date the debt is
incurred is lower than 4.75/1.0.
Again, as mentioned above, Notes 2018 establish restrictions to the Company and its subsidiaries in the execution of certain actions, such as: (i) paying dividends or
making any other payments of securities; (ii) paying debts or other obligations; (iii) obtaining loans or advances; or (iv) transferring its properties or assets. Despite that,
such payments can be made in certain cases, such as, (a) when there are certain obligations incurred before the issuance of the notes; (b) they are established in law;
(c) when the transfer of assets takes place in the normal course of business, or under clauses usually accepted in joint venture agreements executed by the
subsidiaries; or (d) when imposed by standard documents of BNDES (National Bank of Economic and Social Development).
37
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Additionally, according to Notes 2018, the Company will not be able, directly or indirectly, to declare or pay any dividends or make any distributions related to securities
issued by the Company (except for debt instruments convertible or exchangeable for such amounts), if (i) there has been default in relation to the notes 2018; (ii) the
Company can incur at least US$ 1.00 of debt under the terms of the net debt/EBITDA ratio test established in the indenture of the notes mentioned in the paragraph
above; and (iii) the total value to be paid does not exceed 50% of the accrued net income in a certain year or when in a determined year where there is loss, reduced
100% of the loss.
Events of default: The indenture of Notes 2018 contains customary events of default. They include non-compliance with or violation of terms, restrictions and other
agreements contained in the mentioned instrument, besides default of other debt in case the effect leads to anticipated payment, lack of payment within the grace
periods applicable of other debt waived or extended, rendering of unfavorable sentences or court orders against the issuer or its subsidiaries, and certain events
related to bankruptcy and insolvency. If an event of default occurs, the trustee or holder of at least 25% of the principal amount of the notes outstanding at the time is
entitled to declare immediately payable the principal and accrued interest on the notes.
Credit facility to J&F Oklahoma ­ JBS Five Rivers is party to an agreement with J&F Oklahoma pursuant to which JBS Five Rivers has agreed to loan up to
US$200.0 million in revolving loans to J&F Oklahoma. The loans are used by J&F Oklahoma to acquire feeder animals which are placed in JBS Five Rivers' feed yards
for finishing. Borrowings accrue interest at a per annum rate of LIBOR plus 2.25% and interest is payable at least quarterly. On September 26, 2011, the facility was
amended to accrue interest at a per annum rate of LIBOR plus 2.75%. The interest rate at September 30, 2012 was 3.2%. The facility was amended on September
10, 2010 to mature on September 11, 2016. The facility was amended on June 14, 2011 to increase availability under the loan to $375.0 million. The interest rate at
September 30, 2012 was 3.2%. As of December 31, 2011 and September 30, 2012, outstanding borrowings were US$262.0 million and US$268.3 million, respectively.
Guarantee of J&F Oklahoma's revolving credit facility ­ On October 7, 2008, J&F Oklahoma entered into a US$600.0 million secured revolving credit facility. This
credit facility and the guarantee thereof are secured solely by the assets of J&F Oklahoma and the net assets of JBS Five Rivers. This credit facility is used to acquire
cattle which are then fed in the JBS Five Rivers' feed yards pursuant to the cattle supply and feeding agreement. The finished cattle are sold to JBS USA, LLC under
the cattle purchase and sale agreement. This facility was amended and restated on September 10, 2010 to provide availability up to US$800.0 million and to extend
maturity to September 23, 2014.
Variable interest entities ­ As of September 30, 2012, JBS USA Holdings holds variable interests in J&F Oklahoma, which is considered a variable interest entity.
Since the business purpose of J&F Oklahoma is the ownership of livestock and the risks and rewards of owning feeder and fat cattle accrue to J&F Oklahoma, JBS
USA Holdings has determined that it is a nonprimary beneficiary of J&F Oklahoma, although we have significant variable interests in the entity. Therefore, the results
of J&F Oklahoma are not consolidated in these consolidated financial statements. The JBS USA Holdings' significant variable interests are listed below and discussed
further above:
- JBS Five Rivers has agreed to provide up to US$375.0 million in loans to J&F Oklahoma;
- JBS Five Rivers' guarantee of up to US$250.0 million of J&F Oklahoma's borrowings under its revolving credit facility plus certain other obligations and costs, which
is secured by and limited to the net assets of JBS Five Rivers;
- JBS Five Rivers' rights and obligations under the annual incentive agreement; and
- JBS USA's rights and obligations under the cattle purchase and sale agreement.
JBS USA Holdings' maximum exposure to loss related to these variable interests is limited to the lesser of the net assets of JBS Five Rivers (including loans made to
J&F Oklahoma) or US$250.0 million plus certain other obligations and costs. Potential losses under the terms of the hotelling and cattle purchase and sale agreement
depend on future market conditions and cannot be quantified. On May 27, 2011, JBS USA contributed US$35.0 million to JBS Five Rivers. These funds were
contributed to fund working capital and general corporate purposes. As of September 30, 2012, the carrying value of JBS Five Rivers' net assets is US$451.8 million.
On June 14, 2011, J&F Oklahoma and JBS Five Rivers executed a third amended and restated credit agreement to increase the availability to US$1.0 billion and to
add J&F Australia as a borrower under the facility. The facility matures on June 14, 2015. On March 6, 2012 J&F Oklahoma and JBS Five Rivers executed an
amendment to the third amended and restated credit agreement to increase the availability up to US$1.2 billion. Borrowings under the facility bear interest at variable
rates based on applicable LIBOR plus 2.25%, or based on the prime rate plus 1%. The interest rate at September 30, 2012 was 2.49%. As of September 30, 2012, no
borrowings were used towards letters of credit and borrowing availability was US$73.0 million. As of December 31, 2011 and September 30, 2012, J&F Oklahoma had
US$915.2 million and $819.7 million, respectively, in outstanding borrowings on the facility.
The credit agreement is collateralized by accounts receivable and inventories of J&F Oklahoma and by certain fixed assets, accounts receivable and inventories of
JBS Five Rivers. Among other requirements, the facility requires J&F Oklahoma to maintain certain financial ratios, minimum levels of net worth and establish
limitations on certain types of payments, including dividends, investments and capital expenditures. In most instances, covenants consider the combined position and
results of J&F Oklahoma along with JBS Five Rivers. J&F Oklahoma's parent company has entered into a keep-well agreement whereby it will make contributions to
J&F Oklahoma if J&F Oklahoma is not in compliance with its financial covenants under this credit facility. If J&F Oklahoma defaults on its obligations under the credit
facility and such default is not cured by its parent under the keep-well agreement, JBS Five Rivers is obligated for up to US$250.0 million of guaranteed borrowings
plus certain other obligations and costs under this credit facility. J&F Oklahoma was in compliance with financial covenants under this credit facility as of September
30, 2012.
Description of Indebtedness of JBS USA
ANZ credit line -- On March 2, 2011, JBS Australia executed a A$35.0 million facility to assist with working capital requirements. The facility had an interest rate
equal to the Bank Bill Swap Bid Rate ("BBSY") plus a 2% margin. The facility was canceled on February 10, 2012.
Senior Secured Credit Facility -- On November 5, 2008, JBS USA entered into a senior secured revolving credit facility (the "Credit Agreement") that allowed
borrowings up to US$400.0 million. Up to US$75.0 million of the Credit Agreement was available for the issuance of letters of credit.
38
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
A$250 million revolving loan payable between JBS USA and JBS Australia ­ On May 4, 2010, JBS USA issued a long-term intercompany revolving promissory
note to JBS Australia for A$250.0 million with interest based on the three-month Bank Bill Swap Bid Rate ("BBSY") plus 3% and a maturity date of May 4, 2012 to fund
working capital needs and general corporate purposes. On November 9, 2010, the note was amended to increase the maximum amount of advances to A$350.0
million. On February 2, 2011, the note was amended to increase the maximum amount of advances to A$400.0 million. On July 6, 2011, the note was amended to
reduce the interest rate margin of 3% over the BBSY to 2%. On November 7, 2011, the note was amended to extend the maturity date to December 31, 2013 and to
make the interest rate margin on the note equal to the Revolver Bill Rate Spread as defined in the Revolving Facility in effect at the time an advance is made. The
interest rate margin in effect following this amendment is 1.75%. While these loans eliminate upon consolidation, the loans are denominated in AUD, but reported by
JBS USA in USD. Therefore, the loans generate foreign currency transaction gains or losses due to fluctuations in the period end AUD to USD exchange rate. The
average interest rate at September 30, 2012 was 5.5%.
On June 30, 2011, JBS USA and JBS Australia executed the Revolving Syndicated Facility Agreement ("Revolving Facility") to amend and restate the Credit
Agreement. The facility provides a maximum borrowing availability of $850.0 million available in three tranches of $625.0 million, $150.0 million and $75.0 million. The
facility matures on June 30, 2016. Up to $250.0 million of the Revolving Facility is available for the issuance of letters of credit. On January 26, 2012, JBS USA and
JBS Australia executed the first amendment to the Revolving Facility agreement primarily to include a US$35.0 million swing line sub-facility for JBS Australia which
allows JBS Australia to obtain same day funding under the Revolving Facility. Loans bear interest at applicable LIBOR rates or the prime rate plus applicable margins
that are based on utilization of the facility.
Availability: Availability under the Revolving Facility is subject to a borrowing base. The borrowing base is based on certain JBS USA wholly-owned subsidiaries'
assets as described below, with the exclusion of JBS Five Rivers. The borrowing base consists of percentages of eligible accounts receivable, inventory and supplies
less certain eligibility and availability reserves. As of September 30, 2012, there were US$87.8 million of outstanding letters of credit and borrowing availability of
US$699.0 million.
Security and Guarantees: Borrowings made by JBS USA under the Revolving Facility are guaranteed by JBS S.A., JBS Hungary Holdings Kft., JBS USA Holdings and
all domestic subsidiaries of JBS USA except JBS Five Rivers and certain immaterial subsidiaries. In addition, all material subsidiaries of JBS Australia guarantee JBS
Australia borrowings. Furthermore, the borrowings are collateralized by a first priority perfected lien and interest in accounts receivable, finished goods and supply
inventories.
Covenants: The Revolving Facility contains customary representations, warranties and a springing financial covenant that requires a minimum fixed charge coverage
ratio of not less than 1.00 to 1.00. This ratio is applicable if borrowing availability causes a covenant trigger period, which only occurs when borrowing availability falls
below the greater of 10% of the maximum borrowing amount or $72.0 million. The Revolving Syndicated Facility also contains negative covenants that may limit the
ability of JBS USA and certain of its subsidiaries to, among other things:
· incur certain additional indebtedness;
· create certain liens on property, revenue or assets;
· make certain loans or investments;
· sell or dispose of certain assets;
· pay certain dividends and other restricted payments;
· prepay or cancel certain indebtedness;
· dissolve, consolidate, merge or acquire the business or assets of other entities;
· enter into joint ventures other than certain permitted joint ventures or create certain other subsidiaries;
· enter into new lines of business;
· enter into certain transactions with affiliates and certain permitted joint ventures;
· agree to restrictions on the ability of the subsidiaries to make dividends;
· agree to enter into negative pledges in favor of any other creditor; and
· enter into certain sale/leaseback transactions.
Events of Default: The Revolving Facility also contains customary events of default, including failure to perform or observe terms, covenants or agreements included in
the Revolving Facility, payment of defaults on other indebtedness, defaults on other indebtedness if the effect is to permit acceleration, entry of unsatisfied judgments
or orders against a loan party or its subsidiaries, failure of any collateral document to create or maintain a priority lien and certain events related to bankruptcy and
insolvency or environmental matters. If an event of default occurs the lenders may, among other things, terminate their commitments, declare all outstanding
borrowings to be immediately due and payable together with accrued interest and fees and exercise remedies under the collateral documents relating to the Revolving
Facility. At September 30, 2012, JBS USA was in compliance with all covenants.
A$50 million revolving loan receivable from JBS Australia ­ On May 4, 2010, JBS USA Holdings issued an intercompany revolving promissory note to JBS
Australia for A$50.0 million with interest based on the three-month BBSY plus 3% to fund working capital needs and general corporate purposes. While these loans
eliminate upon consolidation, the loans are denominated in AUD, but reported by JBS USA Holdings in USD. Therefore, the loans generate foreign currency
transaction gains or losses due to fluctuations in the period end AUD to USD exchange rate. There were no outstanding borrowings at December 31, 2011. This note
matured on May 4, 2012.
Installment note payable ­ The installment note payable relates to JBS USA financing of a capital investment. The note bears interest at LIBOR plus a fixed margin
of 1.75% per annum with payments due on the first of each month. The note matures on August 1, 2013.
Unsecured credit facility ­ JBS Australia entered into an Australian dollar ("A$") denominated A$120.0 million unsecured credit facility on February 26, 2008 to fund
working capital needs and letter of credit requirements. This facility terminated on October 1, 2009; however, JBS Australia extended the letter of credit portion of the
facility. On May 5, 2010, the facility was revised to reflect current letters of credit requirements to a facility limit of A$1.9 million.
ANZ secured facilities ­ On March 7, 2011, JBS Australia replaced the unsecured credit facility with a secured facility which increased the standby letter of credit
limit to A$32.5 million and added a A$20.0 million money market facility, subject to an annual review. On April 27, 2012, the facility was amended, providing a A$5.0
million trade finance letter of credit limit and A$26.0 million standby letter of credit limit. On September 11, 2012, the facility was restated to provide for a A$55.0 million
trade finance loan facility limit and a A$26.0 million standby letter of credit limit, subject to annual review. At September 30, 2012, there were no outstanding
borrowings under the trade finance loan and the amount of outstanding letters of credit was US$27.2 million.
39
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
4.39% secured notes due 2019 ­ On December 20, 2010, JBS USA Holdings' wholly-owned subsidiaries JBS USA and JBS Plainwell, Inc. issued 4.39% notes due
2019 in an aggregate principal amount of US$16.0 million to finance the construction of a cold storage warehouse. Interest is payable quarterly beginning April 1, 2011.
Principal is payable quarterly beginning October 1, 2011.
Marshalltown NMTC ­ On March 10, 2011, Swift Pork entered into the Marshalltown NMTC transaction to finance construction of a distribution center. Swift Pork
borrowed US$9.8 million at 2.34% annual interest payable monthly for seven years. Of the total amount borrowed, US$7.2 million ("Loan A") was indirectly funded by
JBS USA through a leverage loan and is included in other assets within the Consolidated Balance Sheets. The remaining US$2.6 million ("Loan B") was funded by a
local community development entity. At the end of the seven year period there is an option to dissolve the transaction through a put option with an exercise price of
US$1 thousand or a call option with an exercise price which will be calculated at its fair market value. If the put or call option is not exercised then Loan A will begin to
amortize over the remaining 28 years with principal and interest due monthly and a balloon payment for the remaining principal due March 2046. Loan B will continue
to have interest only payments through 2046 at which time principal and interest are due.
Tasmanian government loan ­ On September 2, 2010, JBS Australia and JBS Southern Australia Pty. Ltd. entered into a secured facility which provides up to
A$12.0 million with the Tasmanian Government (Tasmania Development and Reserve, the "Department"), to fund a capital investment at JBS Australia's processing
plant located in King Island, Tasmania. Funding is available in three tranches of A$3.6 million, A$3.6 million and up to A$4.8 million. Loans are payable on the 22nd of
the month following the 15th anniversary of each tranche's initial drawdown. Funds were drawn on October 4, 2010, November 8, 2010 and May 17, 2011,
respectively.
Each loan is interest payment free for the initial three years, then bears interest at the Department's cost of funds for years four through nine and then bears interest at
the Department's variable commercial rate for years 10 through 15. Upon initial drawdown, interest expense is accrued monthly at the estimated average rate for the
life of the loan and is payable upon notice by the Department or in conjunction with the repayment of principal after the three year period. The debt is secured by
certain fixed assets at JBS Australia's processing plant located in Rockhampton, Queensland and is subject to standard debt covenants. Due to the closure of the King
Island Plant, this loan was terminated on September 7, 2012 and all interest and principal was paid in full.
US$ 20 million note to Sampco - On March 15, 2012 Sampco executed a U$20.0 million revolving promissory note with JBS USA Holdings with interest based on the
three-month LIBOR plus a margin of 3.0%. On May 22, 2012, the note was amended to increase the maximum amount available to US$50 million. Principal and
interest are payable upon demand by Sampco at any time on or after March 31, 2014. At September 30, 2012 the interest rate was 3.4%. The revolving promissory
note eliminates upon consolidation.
US$50 million revolving loan receivable from JBS USA ­ On April 19, 2010, JBS USA Holdings issued an intercompany revolving promissory note to JBS USA
with borrowing availability of up to US$50 million with interest based on the three-month LIBOR plus a fixed margin of 2.5% to fund working capital needs and general
corporate purposes. The note matured on March 31, 2012.
US$10 million loan receivable from Weddel Limited - On May 10, 2011, JBS USA Holdings executed a US$10.0 million related party revolving promissory note with
Weddell Limited ("Weddell"), a wholly-owned subsidiary of JBS USA Holdings, with interest based on the U.S. prime rate plus a margin of 2.0% and a maturity date of
May 10, 2012. The interest rate at September 30, 2012 was 5.3%. On May 8, 2012, the note was amended to extend the maturity date to March 31, 2013. This note
eliminate upon consolidation.
US$50 million loan receivable from JBS Five Rivers - On May 27, 2011, JBS USA issued a US$50.0 million intercompany loan to JBS Five Rivers with interest
based on the three-month LIBOR plus 2.25%. The loan matured on May 27, 2012. This note eliminates upon consolidation.
Corporate building loan assumption ­ In October 2010, JBS USA Holdings acquired its corporate headquarters in Greeley, Colorado. It paid US$9.2 million in cash
and assumed US$20.1 million in mortgage debt. The debt is comprised of two mortgages in the amounts of US$3.1 million and US$17.0 million. The mortgages accrue
interest at annual rates of 5.75% and 8.35%, respectively, and are repayable in monthly installments over 10 and 14 years, beginning November 1, 2010.
US$ 100 million note to JBS Five Rivers - On April 20, 2012, JBS USA Holdings executed a US$100.0 million intercompany revolving promissory note with JBS Five
Rivers with interest based on the three-month LIBOR plus a margin of 3% and a maturity date of April 20, 2013 to fund working capital needs and general corporate
purposes. There were no outstanding borrowings at September 30, 2012. This note eliminates upon consolidation.
Credit facility to Sampco ­ On April 1, 2010, JBS USA Holdings executed a US$60.0 million related party revolving promissory note with Sampco, Inc. ("Sampco"),
an indirect wholly-owned subsidiary of JBS S.A., with interest based on the three-month LIBOR plus a margin of 2.5% and a maturity date of March 31, 2012. On April
1, 2012, JBS USA Holdings and Sampco amended the related party revolving promissory note to increase the interest rate to the three-month LIBOR plus a 3% margin
and to extend the maturity date to March 31, 2014. This loan eliminates upon consolidation.
JBS USA letters of credit - On October 26, 2011 and November 4, 2011, JBS USA agreed to provide letters of credit in the amount of US$40.0 million and US$16.5
million, respectively to an insurance company serving PPC in order to allow that insurance company to return cash it held as collateral against potential workers
compensation, auto and general liability claims of PPC. In return for providing this letter of credit, PPC is reimbursing JBS USA for the cost PPC would have otherwise
incurred under its revolving credit agreement. During the nine months period ended September 30, 2012, JBS USA reduced interest expense, net by US$0.6 million
and US$1.8 million, respectively, as a result of the PPC reimbursement.
US$2.0 billion revolving intercompany note to JBS USA Holding - On June 2, 2011, JBS USA issued a US$2.0 billion revolving intercompany note to JBS USA
Holdings. The note bears interest at a variable per annum rate equal to LIBOR plus 3%. On January 25, 2012, JBS USA Holdings amended the revolving
intercompany note with JBS USA to increase the maximum amount available under the note to US$3.0 billion. Principal and accrued interest are due and payable upon
demand by JBS USA at any time on or after June 30, 2015. The interest rate at September 30, 2012 was 3.5%. The revolving intercompany note eliminates upon
consolidation.
PPC entered into the Subordinated Loan Agreement with JBS USA Holdings - On June 23, 2011, PPC entered into the Subordinated Loan Agreement (the
"Subordinated Loan Agreement") with JBS USA Holdings which provided an aggregate commitment of US$100.0 million. On June 23, 2011, JBS USA Holdings made
a term loan to PPC in the principal amount of US$50.0 million. In addition, JBS USA Holdings agreed to make an additional one-time term loan of US$50.0 million if
PPC's availability under the revolving loan commitment in the U.S. Credity Facility is less than US$200.0 million. The loan and accrued interest are eliminated upon
consolidation. In accordance with the PPC Rights Offering, on March 7, 2012, the commitments under the Subordinated Loan Agreement were terminated and
outstanding principal and accrued interest were paid in full.
40
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Events of default. The indenture also contains customary events of default, including failure to perform or observe terms, covenants or other agreements in the
indenture, defaults on other indebtedness if the effect is to permit acceleration, failure to make a payment on other indebtedness waived or extended within the
applicable grace period, entry of unsatisfied judgments or orders against the issuer or its subsidiaries and certain events related to bankruptcy and insolvency matters.
If an event of default occurs, the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding may declare such principal and
accrued interest on the notes to be immediately due and payable. At September 30, 2012, JBS USA and JBS USA Finance, Inc. were in compliance with all
covenants.
7.25% senior unsecured notes due 2021 - On May 27, 2011 JBS USA and JBS USA Finance, Inc. issued 7.25% notes due 2021 in an aggregate principal amount of
US$650.0 million primarily to make an intercompany loan to the JBS USA Holdings, for further transfer to JBS S.A. to fund the repayment of short and medium-term
debt of JBS S.A. These notes are guaranteed by JBS USA Holdings, JBS S.A., JBS Hungary Holdings Kft., and each of the US restricted subsidiaries that guarantee
the Revolving Facility (subject to certain exceptions). If certain conditions are met, the JBS S.A. may be released from their guarantees.
Interest on these notes accrues at a rate of 7.25% per annum and is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on
December 1, 2011. The principal amount of these notes is payable in full on June 1, 2021. The original issue discount of approximately US$11.3 million is being
accreted over the life of the notes. The covenants for this note contain customary negative covenants and customary events of default listed under the 11.625% senior
unsecured notes due 2014. At September 30, 2012, JBS USA was in compliance with all covenants.
On April 19, 2012 JBS USA announced that it was soliciting consents from holders of the 11.625% senior unsecured notes due 2014 to amend the restricted payments
covenant with respect to JBS S.A. to permit restricted payments to be made with the equity interests and/or assets of any non-essential subsidiaries of JBS S.A.,
provided that such restricted payments would not exceed 2% of JBS S.A.'s total consolidated revenues. The consent solicitation expired on May 3, 2012 with JBS USA
receiving the requisite consents to implement the amendment.
Covenants. The indenture for the 11.625% senior unsecured notes due 2014 contains customary negative covenants that limit JBS USA and its restricted
subsidiaries' ability to, among other things:
· incur additional indebtedness;
· incur liens;
· sell or dispose of assets;
· pay dividends or make certain payments to our shareholders;
· permit restrictions on dividends and other restricted payments by its restricted subsidiaries;
· enter into related party transactions;
· enter into sale/leaseback transactions; and
· undergo changes of control without making an offer to purchase the notes.
Credit facility to JBS USA Trading ­ On April 1, 2010, JBS USA Holdings executed a US$15.0 million related party revolving promissory note with JBS USA Trading,
Inc. ("JBS USA Trading"), an indirect wholly-owned subsidiary of JBS S.A., with interest based on the three-month LIBOR plus a margin of 2.5% and a maturity date of
March 31, 2012. The note was amended and restated on April 15, 2010 to increase the maximum borrowings to US$25.0 million. This loan eliminates upon
consolidation. During three months period ended March 31, 2012, the outstanding principal and accrued interest were paid in full.
Credit facility to Bertin USA ­ On April 15, 2010, JBS USA Holdings executed an US$11.0 million related party revolving promissory note with Bertin USA, with
interest based on the three-month LIBOR plus a margin of 2.5% and a maturity date of March 31, 2012. This loan eliminates upon consolidation. During three months
period ended March 31, 2012, the outstanding principal and accrued interest were paid in full.
US$475 million term loan due 2018 ­ On May 27, 2011, JBS USA entered into a credit agreement consisting of a term loan commitment of US$475.0 million
primarily to make an intercompany loan to JBS USA Holdings, for further transfer to JBS S.A. to fund the repayment of short and medium-term debt of JBS S.A. The
loan is guaranteed by JBS USA Holdings, JBS S.A., JBS Hungary Holdings Kft., and each of the U.S. restricted subsidiaries that guarantee the Revolving Facility
(subject to certain exceptions). Loans under this agreement may be either Alternate Base Rate ("ABR") loans or Eurodollar loans at the election of JBS USA.
11.625% senior unsecured notes due 2014 ­ On April 27, 2009, JBS USA Holdings' wholly-owned subsidiaries JBS USA and JBS USA Finance, Inc. issued
11.625% notes due 2014 in an aggregate principal amount of US$700.0 million. These notes are guaranteed by JBS USA Holdings, JBS S.A., JBS Hungary Holdings
Kft., and each of the US restricted subsidiaries that guarantee the Revolving Facility (subject to certain exceptions). If certain conditions are met, JBS S.A. may be
released from its guarantees. Interest on these notes accrues at a rate of 11.625% per annum and is payable semi-annually in arrears on May 1 and November 1 of
each year, beginning on November 1, 2009. The principal amount of these notes is payable in full on May 1, 2014. The original issue discount of approximately
US$48.7 million is being accreted over the life of the notes.
Interest on Eurodollar loans is payable at the end of the associated interest period while interest on ABR loans is payable the last day of each calendar quarter.
Commencing on September 30, 2011 and continuing until maturity, 0.25% of the initial principal amount of US$475.0 million will be payable on the last business day of
each calendar quarter. The outstanding principal is payable on May 25, 2018. The original issue discount of approximately US$2.4 million is being accreted over the life
of the loan. The covenants for this note contain customary negative covenants and customary events of default listed under the Revolving Facility. At September 30,
2012, JBS USA was in compliance with all covenants.
41
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
8.25% senior unsecured notes due 2020 ­ On January 30, 2012, JBS USA and JBS USA Finance, Inc. issued 8.25% notes due 2020 in an aggregate principal
amount of US$700.0 million. The proceeds were used (i) to make an intercompany loan to JBS USA Holdings, for further transfer to JBS S.A. to fund repayment of
short and medium-term debt of JBS S.A. and its subsidiaries and (ii) for general corporate purposes. These notes are guaranteed by JBS USA Holdings, JBS S.A.,
JBS Hungary Holdings Kft., and each of the U.S. restricted subsidiaries that guarantee the Revolving Facility (subject to certain exceptions). If certain conditions are
met, JBS S.A. may be released from its guarantees. Interest on these notes accrues at a rate of 8.25% per annum and is payable semi-annually in arrears on February
1 and August 1 of each year, beginning on August 1, 2012. The principal amount of these notes is payable in full on February 1, 2020. The original issue discount of
approximately US$10.0 million is being accreted over the life of the notes. The covenants for this note contain customary negative covenants and customary events of
default listed under the 11.625% senior unsecured notes due 2014. At September 30, 2012, JBS USA was in compliance with all covenants.
The US Credit Facility contains financial covenants and various other covenants that may adversely affect PPC's ability to, among other things, incur additional
indebtedness, incur liens, pay dividends or make certain restricted payments, consummate certain assets sales, enter into certain transactions with the Company and
PPC's other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of PPC's assets.
Description of Indebtedness of PPC
US Credit Facility ­ PPC and certain of its subsidiaries entered into a credit agreement (the "US Credit Facility"), formerly referred to as the Exit Credit Facility, with
Co Bank ACB, as administrative agent and collateral agent, and other lenders party thereto, which currently provides a US$700.0 million revolving credit facility and a
Term B facility ("Term B"). The US Credit Facility also includes an accordion feature that allows PPC, at any time, to increase the aggregate revolving loan commitment
by up to an additional US$100.0 million and to increase the aggregate Term B loans commitment by up to an additional US$400.0 million, in each case subject to the
satisfaction of certain conditions, including an aggregate cap on all commitments under the US Credit Facility of US$1.9 billion.
On January 13, 2011, PPC increased the amount of the revolving loan commitments under the US Credit Facility to US$700.0 million. On April 22, 2011, PPC
increased the amount of the sub-limit for swingline loans under the US Credit Facility to US$100.0 million. The revolving loan commitment and the Term B loans will
mature on December 28, 2014.
Subsequent to the end of each fiscal year, a portion of PPC's cash flow must be used to repay outstanding principal amounts under the Term B loans. In April 2011,
PPC paid approximately US$46.3 million of its excess cash flow from 2010 toward the outstanding principal under the Term B loans. PPC did not have excess cash
flow from 2011 to be applied toward the outstanding principal under the Term B loans. After giving effect to the 2010 prepayment and other prepayments, the Term B
loans must be repaid in 16 quarterly installments of approximately US$3.9 million beginning on April 15, 2011, with the final installment due on December 28, 2014.
The US Credit Facility also requires PPC to use the proceeds it receives from certain asset sales and specified debt or equity issuances and upon the occurrence of
other events to repay outstanding borrowings under the US Credit Facility. The cash proceeds received by PPC from the PPC Rights Offering were not required to be
a mandatory prepayment under the US Credit Facility. On September 30, 2012, a principal amount of US$563.0 million under the Term B loans commitments was
outstanding.
Actual borrowings by PPC under the revolving credit commitment component of the US Credit Facility are subject to a borrowing base, which is a formula based on
certain eligible inventory, eligible receivables and restricted cash under the control of CoBank ACB. As of September 30, 2012, there were US$24.6 million of
outstanding letters of credit and borrowing availability of US$573.6 million.
US$85 million term loan due 2016 ­ On June 14, 2011, JBS Five Rivers obtained an US$85.0 million term loan which has a maturity date of June 14, 2016.
Repayment of the term loan is required to be made in 20 quarterly installments in the amount of US$1.4 million on the last day of each calendar quarter, with the
remaining unpaid principal balance due upon maturity. Borrowings under the term loan bear interest at variable rates based on applicable LIBOR rates plus 2.75%, or
based on the prime rate plus 1.5%. The proceeds from the term loan were advanced to J&F Oklahoma Holdings, Inc. ("J&F Oklahoma") under the note receivable from
J&F Oklahoma. The term loan is secured by certain fixed assets, accounts receivable and inventories of JBS Five Rivers and accounts receivable and inventories of
J&F Oklahoma. J&F Oklahoma is a guarantor under the term loan agreement and while it is possible that J&F Oklahoma would be required to repay the outstanding
balance and certain other obligations and costs under the term loan as part of its guarantee, it is not probable at this time.
Covenants. The US$85.0 million term loan due 2016 contains customary negative covenants that limit JBS Five Rivers and its restricted subsidiaries' ability to, among
other things:
· incur certain additional indebtedness;
· create certain liens on property, revenue or assets;
· make certain loans or investments;
· sell or dispose of certain assets;
· pay certain dividends and other restricted payments;
· dissolve, consolidate, merge or acquire the business or assets of other entities;
· enter into new lines of business;
· enter into certain transactions with affiliates;
· issue, sell, assign, or otherwise dispose of certain equity interests;
· enter into certain hedging agreements;
· locate more than a certain number of owned cattle at locations not owned by JBS Five Rivers;
· enter into certain cattle feeding joint ventures that contain restrictions on pledges and transfers of rights under the joint venture agreement and
· make certain advances to customers above certain thresholds.
Events of default ­ The US$85.0 million term loan also contains customary events of default, including failure to perform or observe terms, covenants or agreements
included in the $85.0 million term loan agreement, payment of defaults on other indebtedness, defaults on other indebtedness if the effect is to permit acceleration,
entry of unsatisfied judgments or orders against a loan party or its subsidiaries, failure of any collateral document to create or maintain a priority lien, certain events
related to bankruptcy and insolvency, certain events related to the Employee Retirement Income Security Act of 1974 ("ERISA"), and failure to comply with the terms of
the Executive Succession Plan of J&F Oklahoma Holdings, Inc. If an event of default occurs the lenders may, among other things, terminate their commitments,
declare all outstanding borrowings to be immediately due and payable together with accrued interest and fees and exercise remedies under the collateral documents
relating to the US$85.0 million term loan. At September 30, 2012, JBS Five Rivers was in compliance with all covenants.
42
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
16
Convertible debentures
On July 14, 2011 was recognized the capital increase in the amount of R$ 3,477,568, reduced by spending with issuing debentures in the amount of R$ 17,388, with
net effect of R$ 3,460,180.
The Company had a payable of R$ 2,032 for the debenture holders who did not exercise the option of capitalizing on their debentures in the deadline for redemption.
On September 30, 2012 the Company has a remaining balance to be paid to the debenture holders in the amount of R$ 1,276, which will be paid during the year of
2012.
Debentures capitalization
The Mexico Credit Facility is secured by substantially all of the assets of PPC's Mexico subsidiaries.
Senior Unsecured Notes due 2018 - PPC's 2018 Notes - On December 15, 2010, PPC issued US$500.0 million of 7.875% Senior Notes due 2018 (the "PPC's 2018
Notes"). The PPC's 2018 Notes are unsecured obligations of PPC and guaranteed by one of PPC's subsidiaries. Interest is payable on December 15 and June 15 of
each year, commencing on June 15, 2011. The indenture governing the PPC's 2018 Notes contains various covenants that may adversely affect PPC's ability, among
other things, to incur additional indebtedness, incur liens, pay dividends or make certain restricted payments, consummate certain asset sales, enter into certain
transactions with the Company and PPC's other affiliates, merge, consolidate and/or sell or dispose of all or substantially all of its assets. PPC has subsequently
exchanged these notes for substantially identical notes that are registered under the Securities Act of 1933.
On June 23, 2011 and December 16, 2011, PPC entered into amendments to the US Credit Facility, which among other things (i) temporarily suspended the
requirement for PPC to comply with the fixed charge coverage ratio and senior secured leverage ratio financial covenants until September 24, 2012, (ii) modified the
fixed charge coverage ratio financial covenant so that when testing of this covenant resumes on September 24, 2012, PPC can calculate the fixed charge coverage
ratio based upon a specified number of fiscal quarters selected by PPC (iii) reduced the minimum allowable consolidated tangible net worth to the sum of US$450.0
million plus 50% of the cumulative net income (excluding any losses) of PPC from December 16, 2011 through such date of calculation and (iv) increased the
maximum allowable senior secured leverage ratio, determined for any period of four consecutive fiscal quarters ending on the last day of each fiscal quarter, to be
greater than 4.00 to 1.00 for periods calculated from September 24, 2012 and thereafter. PPC is currently in compliance with the modified consolidated tangible net
worth covenant.
All obligations under the US Credit Facility are unconditionally guaranteed by certain of PPC's subsidiaries and are secured by a first priority lien on (i) the accounts
receivable and inventories of PPC and both its domestic and Puerto Rico subsidiaries, (ii) 100% of the equity interests PPC's US and Puerto Rico subsidiaries and
65% of the equity interests in PPC's direct foreign subsidiaries, (iii) substantially all of the personal property and intangibles of the borrowers and guarantors under the
US Credit Facility and (iv) substantially all of the real estate and fixed assets of PPC and the guarantor subsidiaries under the US Credit Facility.
On May 17, 2011, the Board of Directors approved the capital increase, in accordance with the authorized limit, in the amount of R$ 3,479,600, by issuing up to
494,261,363 common shares, nominative, without par value and the price of R$ 7.04 (seven reais and four cents) each.
On June 3, 2011, at a General Meeting of Debenture holders, 99.94% of the holders approved the use of the credits of the debentures to the capitalization up to R$
3,479,600 through the private issuing of up to 494,261,363 new common shares at a price of R$ 7.04 (seven reais and four cents) each.
During the statutory period, noncontrolling shareholders exercised their preemptive rights to subscribe shares and subscribed 5,410 shares in the total amount of
R$38. BNDESPAR, main debenture holder, subscribed 493,967,305 shares in total amount of R$ 3,477,530 through the capitalization of credits of the Debentures
held.

On July 14, 2011, the capital increase approved by the Board of Directors was approved in the amount of R$ 3,477,568 through the issuance of 493,972,715 common
shares at a price of R$ 7.04 (seven reais and four cents).
Mexico Credit Facility - On October 19, 2011, Avícola Pilgrim's Pride de México, S. de R.L. de C.V. and certain subsidiaries, entered into an amended and restated
credit agreement (the "Mexico Credit Facility") with ING Bank (México), S.A. Institución de Banca Múltiple, ING Grupo Financeiro, as lender and ING Capital, LLC, as
administrative agent. The Mexico Credit Facility has a maturity date of September 25, 2014. Outstanding amounts under the Mexico Credit Facility bear interest at a
rate per annum equal to the TIIE Rate, as applicable, plus the Applicable Margin (as those terms are defined in the Mexico Credit Facility). As of September 30, 2012,
the revolving commitment has a principal amount of 557.4 million Mexican pesos, a US dollar-equivalent of US$49.2 million. There were no outstanding borrowings
under the Mexico Credit Facility at December 31, 2011 or September 30, 2012.
43
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
17
Income taxes, payroll, social charges and tax obligation
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Payroll and related social charges
185,525
150,414
417,196
333,678
Accrual for labor liabilities
168,750
99,463
1,036,847
900,978
Income taxes
-
-
9,013
211,528
Withholding income taxes
92
757
840
1,616
ICMS / VAT / GST tax payable
6,215
11,826
12,061
23,799
PIS / COFINS tax payable
397
348
447
521
Taxes in installments
184,936
-
185,683
271,762
Others
82,847
85,055
321,408
318,621
628,762
347,863
1,983,495
2,062,503
Breakdown:
Current liabilities
490,567
347,863
1,401,429
1,378,691
Noncurrent liabilities
138,195
-
582,066
683,812
628,762
347,863
1,983,495
2,062,503
18
Provision for lawsuits risk
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
Labor
51,831
47,646
70,520
71,004
Civil
8,316
6,863
39,055
36,284
Tax and Social Security
87,747
86,466
93,422
144,272
Total
147,894
140,975
202,997
251,560
Changes in provisions
December 31,
2011
Additions
Reversals
Exchange rate
variation
Vigor
deconsolidation
September 30,
2012
Company
140,975
6,919
-
-
-
147,894
Consolidated
251,560
8,011
(57,219)
3,512
(2,867)
202,997
Tax Proceedings
b) Social contributions -- Rural Workers' Assistance Fund (FUNRURAL)
Company
This matter was the subject of a decision favorable to the taxpayer, issued by the Supreme Court - STF for a company whose activity is similar to the activity of the
Company in the trials of Extraordinary Appeals number 363.852/MG and 596.177/RS. Currently, the Company is not obligated to make any rebate or payment. If a
discount is made for commercial reasons, the Company will deposit it in court and, fulfill a court order. Based on the opinion of legal advisors and based on case law in
favor of the Supreme Court in a similar case, management believes that its fundamentals will prevail and no provision was recorded for that contingency. The
probability of loss is considered remote.
The Tax Authority of the State of Goiás filed other administrative proceedings against the Company, due to interpretation divergences of the Law concerning the export
VAT credits. Based on the opinion of the Company's external legal counsel, the management of the Company believes the Company will prevail in most of these
proceedings, in the amount of R$ 660,969. The management believes, based on the advice of its legal counsel, that its arguments will prevail in these procedures,
which is the reason why no provision has been made. The probability of loss is considered remote.
Social Contributions ­ In January 2001, the INSS (Brazilian Social Security Institute) filed administrative proceedings (autos de infração) against the Company, seeking
to collect certain social security contributions (which are referred to as contributions to the Rural Workers' Assistance Fund - NOVO FUNRURAL) with the aggregate
amount of R$ 361,655.
Consolidated
Company
The Tax Authority of the State of São Paulo (Secretaria da Fazenda do Estado de São Paulo) filed several administrative proceedings against the Company, under
which the Tax Authority challenges the amount of the Company's ICMS tax credits arising from the purchase of cattle and meat transfer by the Company in other
Brazilian states. The Tax Authority of the State of São Paulo claims that the tax incentives should be approved by Confaz , and are known as a "Tax War". The Tax
Authority of the State of São Paulo does not recognize the Company's ICMS tax credits up to the amount of the ICMS tax guaranteed in such other states. The
Company estimates that the claims under these administrative proceedings amount to R$ 1,238,359 in the aggregate. In addition to presenting its defense in such
administrative proceedings, the Company has filed legal proceedings seeking the payment of damages from such other states if the Tax Authority of the State of São
Paulo prevails in these administrative proceedings.
a) ICMS - Value Added Tax (Imposto sobre Operações Relativas à Circulação de Mercadorias e sobre a Prestação de Serviços de Transporte Interestadual
e Intermunicipal e de Comunicação)
The Company and its subsidiaries are parties in several procedures arising in the regular course of business, for which provisions based on estimation of their legal
consultants were established. The main information related to these procedures on September 30, 2012 and December 31, 2011, areas follows:
Consolidated
The Management believes, based on the advice of its legal counsel, that its arguments will prevail in these procedures, which is the reason why no provision has been
made.
The Company has presented its defense in those administrative proceedings, informing that it does not collect the amount due to a favorable court ruling, considering
that there is no final decision of the writ of mandamus mentioned.
44
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
c) Other tax and social security procedures
Labor Proceedings
Civil Proceedings
a) Slaughter facility at Araputanga
b) Trademark Infringement
c) Other civil proceedings
Other proceedings
19
Debit with third parties for investment
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
116,953
10,589
116,953
10,589
86,408
2,048
86,408
2,048
203,361
12,637
203,361
12,637
In the defense, the amount of any damages under the lawsuit should be limited to a percentage of products sold by the Company under the trademark "Frigoara,"
pursuant to article 208 of the Intellectual Property Law. Almost all of the products manufactured by the Company were marketed under the trademark "Friboi." The
only product marketed by the Company under the trademark "Frigoara" was minced meat, in limited amounts. The expected loss on September 30, 2012, R$ 600, has
been provisioned.
Current
Noncurrent
In 2001, the Company (formerly known as Friboi Ltda.), entered into a purchase agreement for the acquisition of one slaughter facility located in the City of
Araputanga, State of Mato Grosso, from Frigorífico Araputanga S.A. ("Frigorífico Araputanga"). As a result of the payment of the purchase price by the Company and
the acknowledgement by Frigorífico Araputanga of compliance by the Company with its obligations under the purchase agreement, a public deed reflecting the transfer
of title of the slaughter facility from Frigorífico Araputanga to the Company was registered with the applicable real estate notary.
The Company is a Party in additional 711 tax and social security proceedings, in which the individual contingencies are not relevant for the Company's context. We
highlight that the ones with probable loss risk have contingencies for R$ 87,747 which are 100% provisioned.
As of September 30, 2012 the Company was party to 8,882 labor and accident proceedings, involving total value of R$ 1,075,901. Based on the opinion of the
Company's external legal counsel, the Company's management recorded a provision in the amount of R$ 51,831 for losses arising from such proceedings. Most of
these lawsuits were filed by former employees of the Company seeking overtime payments and payments relating to their exposure to health hazards.
Also due to the barrier in Araputanga / MT, the seller distributed in the City of Araputanga / MT, filed a lawsuit for improper use of trademark, under the premise of
Friboi Ltda. was using the mark Frigoara without its authorization.
The amounts of the claim were based upon a report presented by Frigorífico Araputanga to the trial court, which appraised the value of the trademark "Frigoara" at R$
315,000, seeking damages in the amount of R$ 26,938 and punitive damages in the amount of R$100,000. The Company presented its defense against this lawsuit
alleging that (i) the lawsuit should be analyzed and reviewed together with the lawsuit relating to the purchase of the slaughter facility from Frigorífico Araputanga by
the Company, (ii) the trademark "Frigoara" was used by the Company for a limited period of time, with the written consent and upon the request of Frigorífico
Araputanga (the use of the trademark by the Company was a requirement of SUDAM to consent to the registration of the public deed contemplating.
The Company is also part to other civil proceedings that in the evaluation of the Management and its legal advisers. The expected loss on September 30, 2012, R$
7,716, has been provisioned.
Following a determination of the judge of the trial court, the lawsuit was submitted to the review of the Federal Court of Cáceres on January 17, 2007. The judge of the
Federal Court of Cárceres determined that this lawsuit be joined with the lawsuit relating to the purchase of the slaughter facility by the Company from Frigorífico
Araputanga. The Federal Government will be notified to issue an opinion on the matter under discussion in this lawsuit. Based on the Company's legal counsel opinion
supported by precedents of the Federal Brazilian Supreme Court (Supremo Tribunal Federal) and the Brazilian Superior Court of Justice (Superior Tribunal de Justiça),
the Company's management believes that the Company will prevail in these proceedings.
As (i) Frigorífico Araputanga was a beneficiary of certain tax benefits granted by the Federal Government through an agency responsible for fostering the development
of the northern region of Brazil (Superintendência de Desenvolvimento da Amazônia ­ SUDAM) and (ii) the slaughter facility sold to the Company was granted by
Frigorífico Araputanga to SUDAM as collateral for these tax benefits the consent of SUDAM was required for the registration of the public deed with the applicable real
estate notary. In September 2004, Frigorífico Araputanga S.A. filed a lawsuit against the Company in a state court located in the City of Araputanga, State of Mato
Grosso, alleging that the Company breached the purchase agreement and seeking an injunction to prevent the Company from finalizing the transfer of the slaughter
facility and a declaratory judgment that the purchase agreement and the public deed registered with the real estate notary were null and void.
The parties are waiting for new appraisal. The first judicial expert appraisal was favorable to the company, that after evaluating the payments made by Agropecuária
Friboi, the appraisal concluded that the debt was already paid. The judicial appeal number 2006.01.00.024584-7 was judged favorably to the Company, when the
"TRF" Regional Federal Court declared valid the purchase title deeds of the property, object of discussion. Based on the Company's legal advisers' opinion and based
on Brazilian jurisprudence management of the Company believes that their arguments will prevail and no provision was registered. The probability of loss is considered
remote.
On September 30, 2012, the Company had other ongoing civil, labor and tax proceedings, on the approximately amounting of R$ 20,129 whose materialization,
according to the evaluation of legal advisors, it is possible to loss, but not probable, for which the Company's management does not consider necessary to set a
provision for possible loss, in line with the requirements of the IAS 37/CPC 25 - Provisions, Contingent Liabilities and Contingent Assets.
Company
The debts with third parties for investments, refers basically to acquisitions of assets and others industrial complexes located in the states of Minas Gerais, Mato
Grosso, Mato Grosso do Sul, Rondônia, Goiás and São Paulo.
Consolidated
45
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
20
Income taxes - Nominal and effective tax rate reconciliation
2012
2011
2012
2011
Income before income taxes
946,800
(185,370)
1,082,192
(222,256)
Income taxes
(321,912)
63,026
(367,945)
75,567
Adjust to demonstrate the effective rate
27,674
21,053
(13,557)
(153,059)
(294,238)
84,079
(381,502)
(77,492)
Effective rate
31.08%
45.36%
35.25%
-34.87%
2012
2011
2012
2011
Income before income taxes
494,808
(68,156)
541,583
(76,716)
Income taxes
(168,235)
23,173
(184,138)
26,083
Adjust to demonstrate the effective rate
40,426
(22,520)
29,168
(132,069)
(127,809)
653
(154,970)
(105,986)
Effective rate
25.83%
0.96%
28.61%
-138.15%
2012
2011
2012
2011
Current income taxes
1,813
2,087
(75,194)
(375,283)
Deferred income taxes
(296,051)
81,992
(306,308)
297,791
(294,238)
84,079
(381,502)
(77,492)
2012
2011
2012
2011
Current income taxes
604
653
(27,777)
(79,611)
Deferred income taxes
(128,413)
-
(127,193)
(26,375)
(127,809)
653
(154,970)
(105,986)
Composition of deferred income tax and social contribution
September 30,
2012
December 31,
2011
September 30,
2012
December 31,
2011
ASSETS
. On tax losses and temporary differences
415,595
356,459
1,652,877
1,148,817
LIABILITIES
. On revaluation reserve and temporary differences
999,630
646,257
2,614,302
1,827,189
Net
584,035
289,798
961,425
678,372
For the nine months period ended
on September 30,
For the nine months period ended on
September 30,
Consolidated
Company
Consolidated
For the three months period ended on
September 30,
Income (expense) of the deferred income taxes
For the nine months period ended on
September 30,
For the nine months period ended
on September 30,
Consolidated
Company
Consolidated
Company
Consolidated
For the three months period ended
on September 30,
Additions (write off), mostly result on equity subsidiaries (tax equivalents in
other countries)
For the three months period ended
on September 30,
For the three months period ended on
September 30,
Expectation of income (expense) of the income taxes - Combined nominal of
34%
Income (expense) of the deferred income taxes
Additions (write off), mostly result on equity subsidiaries (tax equivalents in
other countries)
Expectation of income (expense) of the income taxes - Combined nominal of
34%
Company
Income tax and social contribution are recorded based on taxable profit in accordance with the laws and applicable rates. Deferred Income tax and social contribution-
assets are recognized on temporary differences. Income tax and social contribution tax-liabilities were recorded on the revaluation reserves established by the
Company and on temporary differences (mainly goodwill amortization).
Company
Composition of expenses of income tax and social contribution presented income statements of the Company and Consolidated results for the three and nine months
period ended on September 30, 2012 and 2011.
46
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
Deferred income taxes
21
a) Capital Stock
b) Capital reserve
c) Profit reserves
Legal reserve
Reserve for expansion
d) Revaluation reserve
e) Dividends
f) Treasury shares
Quantity
R$ thousand
97,186,795
610,550
333,100
2,028
117,800,183
937,689
(117,800,183)
(774,065)
- 324
97,519,895
776,526
Consists of the remaining balance of the net income after the computation of legal reserve and dividend distribution. The purpose of this reserve is to provide funds to
investment in assets.
Shareholders' equity
Balance as of September 30, 2012
Computed based on 5% of the net income of the year.
Refers to revaluations on fixed assets prior to CPC/IFRS adoption. Revaluation reserve reflects the appraisal effected by the Company, net of tax effects that are
progressively offset against retained earnings to the same extent that the increase in value of the revalued property is realized through depreciation, disposal or
retirement.
On January 31, 2012 the Board of Directors of the Company, based on it by-law, approved the cancellation of 97,519,895 shares pursuant to Article 19, section XVI of
the Bylaws, without reduction of capital.
On June 21, 2012, was performed the Voluntary Public Tender Offer for the Acquisition of Common Shares Issued by JBS as previously mentioned, in Exchange for
Common Shares issued by Vigor Alimentos SA (Oferta Pública Voluntária de Aquisição de Ações Ordinárias de Emissão da JBS Mediante Permuta por Ações
Ordinárias de Emissão da Vigor) the "Exchange Offer". As a result of the Exchange Tender Offer, JBS SA acquired 117,800,183 shares of its own issue at a price of
R$ 7.96 per share. Additionally, JBS SA incurred transaction costs in the amount of $ 324.
Balance as of December 31, 2011
- When taxable temporary differences related to investments in subsidiaries, can be controlled and it is probable that the temporary differences will not be reversed in
the foreseeable future.
The Company may grant options to purchase shares to directors, employees or persons who will provide services, or the directors, employees or person providing
services companies under its control, excluding the preemptive rights of shareholders in issuing and exercise of stock options.
Mandatory dividends corresponds to not less than 25% of the adjusted net income of the year, according to law.
Composed of goodwill on issuance of shares, derivatives of the IPO in 2007.
Exchange Offer (Vigor)
On August 14, 2012, the Board of Directors, based on it by-law, approved the cancellation of 20,280,288 shares, pursuant to Article 19, section XVI of the Bylaws,
without reduction of capital, which were acquired by the Company under the "Exchange Offer", as provided in Section 5.17 of the Notice, in compliance with the
Brazilian Securities Commission - CVM Regulatory Rule 10 requirements.
Acquisition
Transaction Costs
The acquisition of the shares as a result of the Exchange Tender Offer, as well as transaction costs, were registered as an increase in treasury shares against the
investment that JBS SA had in Vigor, which described in detail following item (h) Capital Transactions.
- on the deductible temporary differences associated with investments in associates and in subsidiaries, when it is not probable that the temporary difference will
reverse in the foreseeable future and that taxable profit will be available for the temporary differences can be utilized.
- When the deferred tax liability arises from initial recognition of goodwill, or when the deferred tax asset or liability asset from the initial recognition of an asset or
liability in a transaction that is not a business combination and, on the transaction date, does not affect the accounting net income or taxable profit or fiscal loss, and
Deferred income taxes is generated by temporary differences at balance sheet date between the taxable basis of assets and liabilities and its accounting amounts.
Deferred taxes liability are recognized for all temporary tax differences, except:
The cancellation of treasury shares was recorded as a reduction in treasury against paid up reserve (capital reserve), by the average cost of treasury shares on the
date of cancellation.
The Company is authorized to increase its capital by an additional 1,376,634,735 ordinary nominative shares. According with the social statute the Board of Directors
shall determine the number, price, payment term and other conditions of the issuance of shares.
Below is presented the changes on treasury shares:
Cancellation
The Capital Stock on September 30, 2012 is represented by 2,943,644,008 ordinary shares, without nominal value. From this total, as described below in the letter f),
97,519,895 shares are held in treasury.
47
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
g) The Effects of Changes in Foreign Exchange Rates
h) Capital Transactions
- Write-off in Vigor investment:
Number of shares:
117,800,183
Share value in reais:
8.15
R$
Amount of investment written-off:
959,961
R$
- Exchange (Treasury Shares Receiving):
Number of shares:
117,800,183
Share value in reais:
7.96
R$
Amount of treasury shares:
937,689
R$
- Capital transaction calculation:
(22,272)
R$
22
Net revenue
2012
2011
2012
2011
Gross sale revenue
Products sales revenues
Domestic sales
8,719,814
7,592,331
42,384,044
34,935,803
Foreign sales
4,046,328
3,265,787
13,355,922
11,743,320
12,766,142
10,858,118
55,739,966
46,679,123
Sales deduction
Returns and discounts
(440,184)
(462,406)
(959,321)
(911,484)
Sales taxes
(739,123)
(639,138)
(934,657)
(905,335)
(1,179,307)
(1,101,544)
(1,893,978)
(1,816,819)
NET REVENUE
11,586,835
9,756,574
53,845,988
44,862,304
Company
For the nine months period ended
on September 30,
For the nine months period ended on
September 30,
As mentioned in the note 1c) by the "Exchange Offer", the Company that was previously the wholly owner of the Shares of Vigor, actually holds 21.32% of the total
shares, giving most of its stake, equivalent to 44.62% of the total shares of Vigor, to the FB Participações S.A., which is the holding of JBS S.A., and although the
Company reduces its stake percentage and loses control on Vigor, the control is still kept in the same economic Group, by FB Participações S.A., Company's holding,
so the result of this transaction was registered under the line of capital transactions, so that was sold an investment of R$ 959,961 in exchange of R$ 937,689 treasury
shares, resulting in a capital transaction of (R$ 22,272), which the breakdown is the following:
Consolidated
Significant operations during the six months period ended September 30, 2012:
The Company has registered in the nine months period ended on September 30, 2012 the amount of (R$ 7,070) for the increase of its stake in JBS Paraguay, through
its subsidiary JBS Holding GMBH and the amount of R$ 118,618 related to the increase of its stake in PPC, through its subsidiary JBS USA. After these stake
increase, the Company, through its subsidiary JBS Holding GmbH, is the wholly owner of JBS Paraguay, and through JBS USA, increased its stake from 68% to
75.3% in PPC.
According to IAS 27/CPC 36 R2 - Consolidated Financial Statements, the changes in the relative share of the parent over a subsidiary that do not result in loss of
control must be accounted as capital transactions (ie transactions with shareholders, as owners). Any difference between the amount by which the participation of
noncontrolling has been adjusted and the fair value of the amount received or paid must be recognized directly in equity attributable to owners of the parent.
Therefore, if the parent acquire additional shares or other equity instruments of an entity that already controls, it should consider this value to reduce its shareholder's
equity (individual and consolidated).
According to CPC 02 R2/IAS 21 -The Effects of Changes in Foreign Exchange Rates, basically records changes in foreign currency rates of the subsidiaries valued by
the equity method ( translation adjustments).
According to CPC 37 R1 / IFRS 1 - First Time Adoption of International Accounting Standards, under the term of the CPC 02 R2 before the date of initial adoption, the
adopting of IFRS for the first time should cancel the balances of exchange variation of investments recorded in equity (under the rubric of accumulated translation
adjustments) transferring it to retained earnings or loss( profits reserves) and divulge distribution policy applicable to such outstanding results. The Company does not
compute these adjustments to the distribution of profit.
48
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
2012
2011
2012
2011
Gross sale revenue
Products sales revenues
Domestic sales
3,041,377
2,623,080
14,834,676
12,300,548
Foreign sales
1,637,719
1,064,722
5,141,711
3,886,347
4,679,096
3,687,802
19,976,387
16,186,895
Sales deduction
Returns and discounts
(147,409)
(145,537)
(326,753)
(309,471)
Sales taxes
(256,785)
(215,033)
(283,017)
(309,665)
(404,194)
(360,570)
(609,770)
(619,136)
NET REVENUE
4,274,902
3,327,232
19,366,617
15,567,759
23
Earnings per share
Basic
2012
2011
Net profit (loss) attributable to shareholders - R$
652,562
(101,291)
Average of the shares in the period - thousands
2,970,146
2,732,129
Average of the shares in the Treasury - thousands
(50,288)
(85,781)
Average of shares circulating - thousands
2,919,858
2,646,348
Net profit (loss) per thousand shares - Basic - R$
223.49
(38.28)
2012
2011
Net profit (loss) attributable to shareholders - R$
366,999
(67,503)
Average of the shares in the period - thousands
2,970,146
3,061,444
Average of the shares in the Treasury - thousands
(50,288)
(94,110)
Average of shares circulating - thousands
2,919,858
2,967,334
Net profit (loss) per thousand shares - Basic - R$
125.69
(22.75)
Diluted
24
EBITDA reconciliation
2012
2011
2012
2011
Net profit (loss) before taxes
946,800
(185,370)
1,082,192
(222,256)
Financial expense, net
853,679
1,152,289
963,844
1,461,506
Depreciation and amortization
321,431
321,772
1,163,957
938,531
EBITDA
2,121,910
1,288,691
3,209,993
2,177,781
Equity in earnings of subsidiaries
(369,933)
(63,572)
(631)
-
Restructuring, reorganization and donation
-
-
19,827
25,911
Adjustment on bargain purchase gain
-
-
-
95
Indemnity
-
-
10,238
6,647
ADJUSTED EBITDA
1,751,977
1,225,119
3,239,427
2,210,434
Consolidated
Three months period ended on
September 30,
As required by the IAS 33/CPC 41 - Earnings per share, the following tables reconcile the net profit (loss) with the amounts used to calculate the basic per share.
Company
For the nine months period ended
on September 30,
For the nine months period ended on
September 30,
For the three months period ended on
September 30,
For the three months period ended
on September 30,
Nine months period ended on
September 30,
Consolidated
Company
The Company present below the EBITDA (Earnings before income taxes, interest, depreciation and amortization) reconciliation:
Consolidated
The basic net profit (loss) per share is calculated through the division of the profit attributable to the shareholders of the Company by the weighted average amount of
shares of the fiscal year, reduced by the shares in treasury.
The Company did not present the diluted profit per share as required in IAS 33/CPC 41 - Profit per share, due the fact it does not have potentially dilutive ordinary
shares since for the deferred income (note 29) through historical analysis and there is expectation that the advance were be honored by future delivery, does not
characterize potential dilutive shares.
Consolidated
49
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
2012
2011
2012
2011
Net profit (loss) before taxes
494,808
(68,156)
541,583
(76,716)
Financial expense, net
268,596
313,098
418,657
519,482
Depreciation and amortization
109,185
110,070
409,325
317,184
EBITDA
872,589
355,012
1,369,565
759,950
Equity in earnings of subsidiaries
(239,599)
82,353
(631)
-
Restructuring, reorganization and donation
-
-
8,111
25,911
Adjustment on bargain purchase gain
-
-
-
-
Indemnity
-
-
1,753
976
ADJUSTED EBITDA
632,990
437,365
1,378,798
786,837
25
Financial income (expense), net
2012
2011
2012
2011
(531,204)
(300,523)
(544,564)
(374,740)
183,480
(97,185)
488,766
(135,580)
(807,368)
(910,678)
(1,289,747)
(1,191,516)
343,868
228,998
476,477
336,226
(42,455)
(72,901)
(94,776)
(95,896)
(853,679)
(1,152,289)
(963,844)
(1,461,506)
2012
2011
2012
2011
(76,143)
(743,595)
(85,350)
(824,789)
(34,350)
640,346
(16,608)
654,201
(275,934)
(294,676)
(428,113)
(428,123)
122,330
107,017
127,133
110,754
(4,499)
(22,190)
(15,719)
(31,525)
(268,596)
(313,098)
(418,657)
(519,482)
26
Other income (expenses),
27
Transaction costs for the issuing of titles and securities
a) Initial Public Offering of shares - IPO (Follow on)
Consolidated
Results on derivatives
Results on derivatives
In accordance with the prerequisites under IAS 39/CPC 38 ­ Financial Instruments ­ Recognition and assessment, the costs related to the transactions in the issuing
of titles and securities must be accounted reducing the liabilities that they refer to.
Follows below, in detail, the operations which the Company incurred transaction costs, in other words, i.e., incurred costs directly attributable to the activities that are
necessary to effect these transactions, exclusively.
Company
Interest - Gain
Interest - Loss
Interest - Gain
Exchange rate variation
Interest - Loss
For the three months period ended on
September 30,
Exchange rate variation
Company
b) Exchange for Common Shares of Vigor Alimentos SA ("The Exchange Tender Offer")
Taxes, contribution, tariff and others
In June 2012, the Company incurred in transaction costs on the amount of R$ 324 related to the acquisition process of 117,800,183 shares of its own issue, which is
kept prominently in a reduction account of shareholders' equity, deducting any effects.
Consolidated
For the three months period ended on
September 30,
For the nine months period ended on
September 30,
Consolidated
Company
Taxes, contribution, tariff and others
Other income in the nine months period ended on September 30, 2012, in the consolidated, in the amount of R$ 8,353 relating mainly to:
i) JBS Argentina in the amount of R$ 6,919, related to the sale of the unit located in San José in the province of Entre Rios, assets sales and labor indemnity;
ii) JBS USA in the amount of (R$ 16,584) restructuring and reorganization costs;
iii) Other income in the amount of R$ 18,018 referring to basically net income in the sale of fixed assets and rental.
In the year end on December 31, 2010, the Company incurred in R$ 37,477 related to the transaction costs of the process of raising funds through the Public Offering,
which accounting is kept prominently in a reduction account of the shareholders' equity, deducting any effects.
For the three months period ended
on September 30,
For the three months period ended
on September 30,
For the nine months period ended
on September 30,
50
background image
JBS S.A.
(Expressed in thousands of reais)
Notes to the consolidated financial statements for the nine months period ended September 30, 2012 and 2011
c) Senior Notes Offering (Bonds)
28
Defined Benefit and Contribution Plans
JBS Plans
PPC Plans
d) Other Funding
In June 2012, the Company incurred in R$ 444 related to the transaction costs of the processes of funding credit note to export (NCE) in the amount of R$ 185,000,
which accounting is maintained in a reduction account of the loan. On September 30, 2012, because of the accumulated amortization of the balance based on the
payments period, the Company has a residual amount of R$ 370 of transaction cost related to debt that will continue to be amortized according to the period payment.
In June 2012, the Company incurred in R$ 6,000 related to the transaction costs of the processes of funding Working capital in the amount of R$ 1,000,000, which
accounting is maintained in a reduction account of the loan. On September 30, 2012, because of the accumulated amortization of the balance based on the payments
period, the Company has a residual amount of R$ 5,606 of transaction cost related to debt that will continue to be amortized according to the period payment.
One of JBS USA's facilities participates in a supplemental executive retirement plan. There were no expenses recognized by JBS USA for this plan during the three
and nine months period ended on September 30, 2011 and 2012.
Employees of JBS Australia do not participate in JBS USA's 401(k) Savings Plan. Under Australian law, JBS Australia contributes a percentage of employee
compensation to a Superannuation fund. This contribution approximates 9% of employee cash compensation as required under the Australian "Superannuation Act of
1997". As the funds are administered by a third party, once this contribution is made to the Superannuation fund, JBS Australia has no obligation for payments to
participants or oversight of the fund. JBS USA's expenses related to contributions to this fund totaled US$8.4 million (R$ 15,744) and US$23.8 million (R$ 38,873) for
the three and nine months period ended on September 30, 2011, respectively. JBS USA's expenses related to contributions to this fund totaled US$8.0 million (R$
15,360) and US$24.1 million (R$ 46,271) for the three and nine months period ended on September 30, 2012, resp