UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of April, 2014.

Commission File Number 33-65728

 

CHEMICAL AND MINING COMPANY OF CHILE INC.

(Translation of registrant’s name into English)

 

El Trovador 4285, Santiago, Chile (562) 2425-2000

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F: x Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Santiago, Chile, April 03, 2014 – Sociedad Química y Minera de Chile S.A. (SQM), reports the translation of the financial statements that were filed with the Chilean Securities and Insurance Commission (Superintendencia de Valores y Seguros de Chile) for the year ended December 31, 2014.

 

SQM
Los Militares 4290
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended

December 31, 2013

 

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. AND SUBSIDIARIES

In Thousands of United States Dollars

 

 

This document includes:

 

-Report of Independent Register Public Accountings Firm
  
-Consolidated Classified Statements of Financial Position
  
-Consolidated Statements of Income by Function
  
-Consolidated Statements of Comprehensive Income
  
-Consolidated Statements of Cash Flows
  
-Statements of Changes in Equity
  
-Notes to the Consolidated Financial Statements

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
1
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Table of Contents – Consolidated Financial Statements

  

Note   Page
     
  Consolidated Classified Statements of Financial Position 8
  Consolidated Statements of Income by function 10
  Consolidated Statements of Comprehensive Income 12
  Consolidated Statements of Cash Flows 13
  Statements of Changes in Equity 15
     
  Notes  to the consolidated financial statements  
1 Identification and Activities of the Company and Subsidiaries  
  1.1   Historical background 18
  1.2   Main domicile where the Company performs its production activities 18
  1.3   Codes of main activities 18
  1.4   Description of the nature of operations and main activities 18
  1.5   Other background 20
     
2 Basis of presentation for the consolidated financial statements  
  2.1    Accounting period 22
  2.2    Financial statements 23
  2.3    Basis of measurement 23
  2.4    Accounting pronouncements 24
  2.5    Basis of consolidation 32
  2.6   Significant accounting judgments, estimates and assumptions 35
     
3 Significant accounting policies  
  3.1    Classification of balances as current and non-current 36
  3.2    Functional and presentation currency 36
  3.3    Foreign currency translation 36
  3.4    Subsidiaries 39
  3.5    Consolidated statement of cash flows 39
  3.6    Financial assets 39
  3.7    Financial liabilities 40
  3.8    Financial instruments at fair value through profit or loss 40
  3.9    Financial instruments offsetting 40
  3.10  Reclassification of financial instruments 41
  3.11  Derivative and hedging financial instruments 41
  3.12  Derecognition of financial instruments 43
  3.13  Derivative financial instruments 43
  3.14  Fair value measurements 43

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
2
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note   Page
     
  3.15  Leases 43
  3.16  Deferred acquisition costs from insurance contracts 44
  3.17  Trade and other receivables 44
  3.18  Inventory measurement 45
  3.19  Investments in associates and joint ventures 46
  3.20  Transactions with non-controlling interests 47
  3.21  Related party transactions 47
  3.22  Property, plant and equipment 47
  3.23  Depreciation of property, plant and equipment 49
  3.24  Intangible assets 49
  3.25  Intangible assets other than goodwill 50
  3.26  Research and development expenses 51
  3.27  Prospecting expenses 51
  3.28  Impairment of non-financial assets 53
  3.29  Minimum dividend 54
  3.30  Earnings per share 54
  3.31  Trade and other payables 54
  3.32  Interest-bearing borrowings 54
  3.33  Other provisions 55
  3.34  Obligations related to employee termination benefits and pension commitments 56
  3.35  Compensation plans 57
  3.36  Revenue recognition 57
  3.37  Finance income and finance costs 58
  3.38  Income tax and deferred taxes 59
  3.39  Segment reporting 60
  3.40  Environment 60
     
4 Financial risk management  
  4.1   Financial risk management policy 61
  4.2   Risk factors 62
  4.3   Risk measurement 65
     
5 Changes in estimates and accounting policies (consistent presentation)  
  5.1   Changes in accounting estimates 66
  5.2   Changes in accounting policies 66

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
3
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note   Page
     
6 Background of companies included in consolidation  
  6.1   Parent’s stand-alone assets and liabilities 67
  6.2   Parent entity 67
  6.3   Joint arrangements of controlling interest 67
  6.4   General information on consolidated subsidiaries 69
  6.5   Information attributable to non-controlling interests 72
  6.6   Information on consolidated subsidiaries 73
  6.7  Detail of transactions between consolidated companies 77
     
7 Cash and cash equivalents  
  7.1  Types of cash and cash equivalents 78
  7.2   Short-term investments, classified as cash equivalents 79
  7.3   Information on cash and cash equivalents by currency 79
  7.4   Amount of significant restricted (unavailable) cash balances 80
  7.5   Short-term deposits, classified as cash equivalents 81
     
8 Inventories 82
     
9 Related party: disclosures  
  9.1   Related party disclosures 83
  9.2   Relationship between the Parent and the entity 83
  9.3   Detailed identification of the relationship between the Parent and subsidiary 84
  9.4   Detail of related parties and related party transactions 86
  9.5   Trade receivables due from related parties, current 88
  9.6   Trade payables due to related parties, current 89
  9.7   Board of directors and senior management 90
  9.8   Key Management Personnel Compensation 92
     
10 Financial instruments  
  10.1   Types of other financial assets 93
  10.2   Trade and other receivables, current and non-current 93
  10.3   Hedging assets and liabilities 97
  10.4   Financial liabilities 99
  10.5   Trade and other payables 109
  10.6   Financial liabilities at fair value through profit or loss 109
  10.7   Financial asset and liability categories 110
  10.8   Fair value measurement of assets and liabilities 112
  10.9   Financial assets pledged as guarantee 113
  10.10 Estimated fair value of financial instruments and financial Derivatives 113
  10.11 Nature and scope of risks arising from financial instruments 115

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
4
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note   Page
     
11 Equity-accounted investees  
  11.1   Investments in associates recognized according to the equity method of accounting 116
  11.2   Assets, liabilities, revenue and expenses of associates 117
  11.3   Other information 118
     
12 Joint ventures  
  12.1   Policy for the accounting for equity accounted investment in joint ventures 119
  12.2   Disclosures of interest in joint ventures 119
  12.3   Investments in joint ventures accounted for using the equity method of accounting 120
  12.4   Assets, liabilities, revenue and expenses from joint ventures 122
  12.5   Other joint venture disclosures 123
     
13 Intangible assets and goodwill  
  13.1  Balances 124
  13.2  Disclosures on intangible assets and goodwill 124
     
14 Property, plant and equipment  
  14.1   Types of property, plant and equipment 128
  14.2   Reconciliation of changes in property, plant and equipment by type 130
  14.3   Detail of property, plant and equipment pledged as guarantee 132
  14.4   Additional information 132
  14.5   Impairment of assets 132
  14.6   Reclassifications 132
     
15 Employee benefits  
  15.1   Provisions for employee benefits 133
  15.2   Policies on defined benefit plans 134
  15.3   Other long-term benefits 135
  15.4   Post-employment benefit obligations 136
  15.5   Staff severance indemnities 138
     
16 Executive compensation plan 139
     
17 Disclosures on equity  
  17.1   Capital management 142
  17.2   Disclosures on preferred share capital 143
  17.3   Disclosures on reserves in equity 145
  17.4   Dividend policies 146
  17.5   Provisional dividends 147
       

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
5
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note   Page
     
18 Provisions and other non-financial liabilities  
  18.1   Types of provisions 149
  18.2   Description of other provisions 150
  18.3   Other non-financial liabilities, current 150
  18.4   Changes in provisions 151
  18.5   Detail of main types of provisions 153
     
19 Contingencies and restrictions  
  19.1   Lawsuits or other relevant events 154
  19.2   Restrictions to management or financial limits 159
  19.3   Commitments 160
  19.4   Restricted or pledged cash 160
  19.5   Securities obtained from third parties 161
  19.6   Indirect guarantees. 162
     
20 Revenue 164
     
21 Earnings per share 164
     
22 Borrowing costs 165
     
23 Effect of fluctuations on foreign currency exchange rates 166
     
24 Environment  
  24.1   Disclosures on disbursements related to the environment 167
  24.2   Detail of information on disbursements related to the environment 168
  24.3   Description of each project indicating whether these are in process or have been finished 181
     
25 Other current and non-current non-financial assets 186
     
26 Operating segments  
  26.1   Operating segments 187
  26.2   Operating segments disclosures 189
  26.3   Statement of comprehensive income classified by operating segments based on groups of products 191
  26.4   Revenue from transactions with other company operating segments 193

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
6
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note   Page
     
  26.5    Disclosures on geographical areas 194
  26.6    Disclosures on main customers 194
  26.7    Segments by geographical areas 195
  26.8    Property, plant and equipment classified by geographical areas 196
     
27 Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature  
  27.1   Revenue 197
  27.2   Cost of sales 197
  27.3   Other income 198
  27.4   Administrative expenses 198
  27.5   Other expenses by function 199
  27.6   Other income (expenses) 199
  27.7   Summary of expenses by nature 200
  27.8   Finance expenses 200
     
28 Income tax and deferred taxes  
  28.1   Current tax assets 201
  28.2   Current tax liabilities 202
  28.3   Tax earnings 202
  28.4   Income tax and deferred taxes 203
     
29 Disclosures on the effects of fluctuations in foreign currency exchange rates 214
     
30 Subsequent events  
  30.1   Authorization of the financial statements 219
  30.2   Disclosures on events occurring after the reporting date 219
  30.3   Detail of dividends declared after the reporting date 219

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
7
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION 

 

 

ASSETS

 

 

Note

 

   As of
December
31, 2013
ThUS$
   As of
December
31, 2012
ThUS$
 
             
Current assets               
Cash and cash equivalents   7.1    476,622    324,353 
Other current financial assets   10.1    460,173    316,103 
Other current non-financial assets   25    44,230    67,820 
Trade and other receivables, current   10.2    330,992    510,616 
Trade receivables due from related parties, current   9.5    128,026    101,372 
Current inventories   8    955,530    890,579 
Current tax assets   28.1    59,476    30,234 
Total current assets        2,455,049    2,241,077 
                
Non-current assets               
Other non-current financial assets   10.1    95    29,492 
Other non-current non-financial assets   25    36,505    23,339 
Trade receivables, non-current   10.2    1,282    1,311 
Investments in associates   11    51,075    50,955 
Investments in joint ventures   12    25,943    19,343 
Intangible assets other than goodwill   13.1    104,363    99,754 
Goodwill   13.1    38,388    38,388 
Property, plant and equipment   14.1    2,054,377    1,912,549 
Deferred tax assets   28.4    531    223 
Total non-current assets        2,312,559    2,175,354 
Total assets        4,767,608    4,416,431 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
8
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION, (continued)

 

 

Liabilities and Equity

 

 

Note

 

   As of
December
31, 2013
ThUS$
   As of
December 31,
2012
ThUS$
 
Liabilities               
Current liabilities               
Other current financial liabilities   10.4    401,426    152,843 
Trade and other payables, current   10.5    150,960    207,944 
Trade payables due to related parties, current   9.6    -    19 
Other current provisions   18.1    17,953    18,489 
Current tax liabilities   28.2    31,707    23,624 
Provisions for employee benefits, current   15.1    25,236    33,974 
Other current non-financial liabilities   18.3    95,353    172,200 
Total current liabilities        722,635    609,093 
                
Non-current liabilities               
Other non-current financial liabilities   10.4    1,417,390    1,446,194 
Other non-current provisions   18.1    8,633    7,357 
Deferred tax liabilities   28.4    154,295    125,445 
Provisions for employee benefits, non-current   15.1    32,414    40,896 
Total non-current liabilities        1,612,732    1,619,892 
Total liabilities        2,335,367    2,228,985 
                
Equity   17           
Share capital        477,386    477,386 
Retained earnings        1,909,725    1,676,169 
Other reserves        (10,491)   (20,772)
Equity attributable to owners of the Parent        2,376,620    2,132,783 
Non-controlling interests        55,621    54,663 
Total equity        2,432,241    2,187,446 
Total liabilities and equity        4,767,608    4,416,431 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
9
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION

 

 

       January to December 
   Note   2013   2012 
       ThUS$   ThUS$ 
             
Revenue   20    2,203,140    2,429,160 
Cost of sales   27.2    (1,481,690)   (1,400,567)
Gross profit        721,450    1,028,593 
                
Other income   27.3    96,716    12,702 
Administrative expenses   27.4    (105,189)   (106,442)
Other expenses by function   27.5    (49,397)   (34,628)
Other gains (losses)   27.6    (11,391)   683 
Profit (loss) from operating activities        652,189    900,908 
Finance income        12,696    29,068 
Finance costs   22    (58,608)   (54,095)
Share of profit of associates and joint ventures accounted for using the equity method        18,786    24,357 
Foreign currency translation differences   23    (11,954)   (26,787)
Profit (loss) before taxes        613,109    873,451 
Income tax expense, continuing operations   28.4    (138,539)   (216,082)
                
Profit (loss) from continuing operations        474,570    657,369 
                
Profit for the year        474,570    657,369 
Profit attributable to               
Owners of the Parent        467,113    649,167 
Non-controlling interests        7,457    8,202 
Profit for the year        474,570    657,369 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
10
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION (continued)

 

 

       January to December 
   Note   2013   2012 
       US$   US$ 
Earnings per share               
Common shares               
Basic earnings per share (US$ per share)   21    1,7748    2,4665 
                
Basic earnings per share (US$ per share) from continuing operations        1,7748    2,4665 
                
Diluted common shares               
Diluted earnings per share (US$ per share)   21    1,7748    2,4665 
                
Diluted earnings per share (US$ per share) from continuing operations        1,7748    2,4665 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
11
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

   January to December 
   2013   2012 
Statements of comprehensive income  ThUS$   ThUS$ 
         
Profit for the year   474,570    657,369 
Components of other comprehensive income before taxes and foreign currency translation differences          
Gain (loss) from foreign currency translation differences, before taxes   (3,559)   982 
Other comprehensive income before taxes and foreign currency translation differences   (3,559)   982 
Cash flow hedges          
(Gain) loss from cash flow hedges before taxes   15,778    (7,872)
Other comprehensive income before taxes and cash flow hedges   15,778    (7,872)
Other comprehensive income before taxes and actuarial gains (losses) from defined benefit plans   1,012    711 
Other miscellaneous reserves   -    - 
Other components of other comprehensive income before taxes   13,231    (6,179)
           
Income taxes associated with components of other comprehensive income          
Income taxes associated with cash flow hedges in other comprehensive income   (3,022)   1,580 
Income taxes associated with components of other comprehensive income   (3,022)   1,580 
           
Other comprehensive income   10,209    (4,599)
           
Total comprehensive income   484,779    652,770 
           
Comprehensive income attributable to          
Owners of the Parent   477,394    644,507 
Non-controlling interests   7,385    8,263 
Total comprehensive income   484,779    652,770 

  

The accompanying notes form an integral part of these consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
12
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Statements of cash flows  Note   12/31/2013   12/31/2012 
       ThUS$   ThUS$ 
Cash flows from (used in) operating activities               
                
Types of receipts from operating activities
               
                
Cash receipts from sales of goods and rendering of services       2,392,696    2,387,979 
Other cash receipts from operating activities        -    - 
                
Types of payments
               
Cash payments to suppliers for the provision of goods and services        (1,496,053)   (1,447,970)
Cash payments to and on behalf of employees        (48,033)   (44,429)
Other payments related to operating activities        (24,774)   (8,396)
Dividends received        16,423    15,126 
Interest paid        (87,018)   (59,509)
Interest received        12,696    24,368 
Reimbursed (paid) income taxes        (119,107)   (250,201)
Other incomes (outflows) of cash        4,883    33,238 
                
Net cash generated from (used in) operating activities        651,713    650,206 
                
Cash flows from (used in) investing activities               
Cash receipts from the loss of control of subsidiaries and other businesses        -    961 
Other cash payments made to acquire interests in joint ventures        (69)   (197)
Proceeds from the sale of property, plant and equipment        216    2,050 
Proceeds from sale of intangible assets        86,157    - 
Acquisition of property, plant and equipment        (386,495)   (449,984)
Cash advances and loans granted to third parties        528    (623)
Other incomes (outflows) of cash (*)        (187,722)   (115,092)
                
Net cash generated from (used in) investing activities        (487,385)   (562,885)

 

(*)Includes other cash receipts (payments), investments and redemptions of time deposits and other financial instruments, which do not qualify as cash and cash equivalents in accordance with IAS 7.7 as they have a maturity date greater than 90 days from their date of origin.

 

The accompanying notes form an integral part of these consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
13
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

 

   Note   12/31/2013   12/31/2012 
       ThUS$   ThUS$ 
Cash flows from (used in) financing activities            
                
Proceeds from  issue of capital instruments        -    - 
Proceeds from long-term borrowings       300,000    366,502 
Proceeds from short-term borrowings        160,000    - 
Total proceeds from borrowings        460,000    366,502 
Repayment of borrowings        (176,485)   (220,000)
Dividends paid        (279,668)   (334,762)
Other cash receipts (payments)        (6,132)   (9,437)
                
Net cash generated from (used in) financing activities        (2,285)   (197,697)
                
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate        162,043    (110,376)
                
Effects of exchange rate fluctuations on cash held        (9,774)   (10,263)
Net (decrease) increase in cash and cash equivalents        152,269    (120,639)
                
Cash and cash equivalents at beginning of period        324,353    444,992 
Cash and cash equivalents at end of period        476,622    324,353 

 

The accompanying notes form an integral part of these consolidated financial statements.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
14
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

STATEMENTS OF CHANGES IN EQUITY

 

 

2013  Share
capital
   Foreign
currency
translation
difference
reserves
   Cash flow
hedge
reserves
   Actuarial
gains
(losses)
from
defined
benefit
plans
   Other
miscellaneous
reserves
   Other
reserves
   Retained
earnings
   Equity
attributable
to owners of
the Parent
   Non-controlling
interests
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                         
Equity at beginning of the year   477,386    (330)   (16,522)   (2,243)   (1,677)   (20,772)   1,676,169    2,132,783    54,663    2,187,446 
                                                   
Restated opening balance of equity   477,386    (330)   (16,522)   (2,243)   (1,677)   (20,772)   1,676,169    2,132,783    54,663    2,187,446 
                                                   
Profit for the year   -    -    -    -    -    -    467,113    467,113    7,457    474,570 
                                                   
Other comprehensive income   -    (3,487)   12,756    1,012    -    10,281    -    10,281    (72)   10,209 
                                                   
Comprehensive income   -    (3,487)   12,756    1,012    -    10,281    467,113    477,394    7,385    484,779 
                                                   
Dividends   -    -    -    -    -    -    (233,557)   (233,557)   (6,427)   (239,984)
                                                   
Increase (decrease) in transfers and other changes   -    -    -    -    -    -    -    -    -    - 
                                                   
Increase (decrease) in equity   -    (3,487)   12,756    1,012    -    10,281    233,556    243,837    958    244,795 
                                                   
Equity As of December 31, 2013    477,386    (3,817)   (3,766)   (1,231)   (1,677)   (10,491)   1,909,725    2,376,620    55,621    2,432,241 

 

The accompanying notes form an integral part of these consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
15
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

STATEMENTS OF CHANGES IN EQUITY

 

 

2012  Share
capital
   Foreign
currency
translation
difference
reserves
   Cash flow
hedge
reserves
   Actuarial
gains
(losses)
from
defined
benefit
plans
   Other
miscellaneous
reserves
   Other
reserves
   Retained
earnings
   Equity
attributable
to owners of
the Parent
   Non-controlling
interests
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                         
Equity at beginning of the year   477,386    (1,251)   (10,230)   (2,954)   (1,677)   (16,112)   1,351,560    1,812,834    51,546    1,864,380 
                                                   
Restated opening balance of equity   477,386    (1,251)   (10,230)   (2,954)   (1,677)   (16,112)   1,351,560    1,812,834    51,546    1,864,380 
                                                   
Profit for the year                                 649,167    649,167    8,202    657,369 
                                                   
Other comprehensive income   -    921    (6,292)   711    -    (4,660)   -    (4,660)   61    (4,599)
                                                   
Comprehensive income   -    921    (6,292)   711    -    (4,660)   649,167    644,507    8,263    652,770 
                                                   
Dividends   -    -    -    -    -    -    (324,558)   (324,558)   (5,146)   (329,704)
                                                   
Increase (decrease) in transfers and other changes   -    -    -    -    -    -    -    -    -    - 
                                                   
Increase (decrease) in equity   -    921    (6,292)   711    -    (4,660)   324,609    319,949    3,117    323,066 
                                                   
Equity As of December 31, 2012   477,386    (330)   (16,522)   (2,243)   (1,677)   (20,772)   1,676,169    2,132,783    54,663    2,187,446 

 

The accompanying notes form an integral part of these consolidated financial statements.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
16
 

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Notes to the Consolidated Financial
Statements as of December 31, 2013

Sociedad Química y Minera de Chile S.A.

and Subsidiaries

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
17
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 1 – Identification and Activities of the Company and Subsidiaries

 

1.1Historical background

 

Sociedad Química y Minera de Chile S.A. "SQM" is an joint stock corporation organized under the laws of the Republic of Chile, Tax Identification No.93.007.000-9.

The Company was incorporated through a public deed dated June 17, 1968 by the notary public of Santiago MR. Sergio Rodríguez Garcés. Its existence was approved by Decree No. 1,164 of June 22, 1968 of the Ministry of Finance, and it was registered on June 29, 1968 in the Registry of Commerce of Santiago, on page 4,537 No. 1,992. SQM's headquarters are located at El Trovador 4285, Fl. 6, Las Condes, Santiago, Chile. The Company's telephone number is +56 2 2425-2000.

The Company is registered with the Securities Registry of the Chilean Superintendence of Securities and Insurance (SVS) under No. 0184 dated March 18. 1983 and is subject to the inspection of the SVS.

 

1.2Main domicile where the Company performs its production activities

 

The Company’s main domiciles are: Calle Dos Sur Sitio N° 5 - Antofagasta; Arturo Prat 1060 - Tocopilla; Edificio Administración s/n - María Elena; Edificio Administración s/n Pedro de Valdivia - María Elena, Anibal Pinto 3228 - Antofagasta, Kilómetro 1378 Ruta 5 Norte - Antofagasta, Planta Coya Sur s/n - María Elena, kilómetro 1760 Ruta 5 Norte - Pozo Almonte, Planta Cloruro de Potasio Salar de Atacama s/n - San Pedro de Atacama, Planta Sulfato de Potasio Salar de Atacama s/n – San Pedro de Atacama, Campamento Minsal s/n Planta CL, Potasio – San Pedro de Atacama, Ex Oficina Salitrera Iris S/N, Comuna de Pozo Almonte, Iquique..

 

1.3Codes of main activities

 

The codes of the main activities as established by the Chilean Superintendence of Securities and Insurance are as follows:

 

-1700 (Mining)
-2200 (Chemical products)
-1300 (Investment)

 

1.4Description of the nature of operations and main activities

 

Our products are mainly derived from mineral deposits found in northern Chile. We mine and process caliche ore and brine deposits. The caliche ore in northern Chile contains the largest known nitrate and iodine deposits in the world and is the world’s largest commercially exploited source of natural nitrates. The brine deposits of the Salar de Atacama, a salt-encrusted depression within the Atacama desert in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate and boron.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
18
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 1 – Identification and Activities of the Company and Subsidiaries (continued)

 

1.4Description of the nature of operations and main activities, continued

 

From our caliche ore deposits located in the north of Chile, we produce a wide range of nitrate-based products used for specialty plant nutrients and industrial applications, as well as iodine and iodine derivatives. At the Salar de Atacama, we extract brines rich in potassium, lithium, sulfate and boron in order to produce potassium chloride, potassium sulfate, lithium solutions, boric acid and bischofite (magnesium chloride). We produce lithium carbonate and lithium hydroxide at our plant near the city of Antofagasta, Chile, from the solutions brought from the Salar de Atacama. We market all of these products through an established worldwide distribution network.

 

We sell our products in over 100 countries worldwide through our global distribution network and generate our revenue mainly from abroad.

 

Our products are divided into six categories: specialty plant nutrition, iodine and its derivatives, lithium and its derivatives, industrial chemicals, potassium and other products and services, described as follows:

 

Specialty plant nutrition: SQM produces and sells four types of specialty plant nutrition in this line of business: potassium nitrate, sodium nitrate, sodium potassium nitrate, and specialty mixes. This business is characterized by maintaining close relations with its customers for which it has specialized staff who provide expert advisory services in best practices for fertilization according to each type of crop, soil and climate. Within this line of business, potassium derivative products and specialty potassium nitrate have had a leading role given their unique characteristcs that allow it, among other things, to ensure an improvement in post-crop life in addition to improving quality, flavor and fruit color. The potassium nitrate, which is sold in multiple forms and as a part of other specialty mixtures, is complemented by sodium nitrate, potassium sodium nitrate, and more than 200 fertilizer mixtures.

 

Iodine: The Company is a major producer of iodine a global level. Iodine is widely used in the pharmaceutical industry, technology and nutrition. Additionally, iodine is used as an X ray contrast media and as polarizing film for LCD displays.

 

Lithium: the Company’s lithium is mainly used for manufacturing rechargeable batteries for cell phones, cameras and notebooks. Through the manufacturing of lithium-based products, SQM provides significant materials to face great challenges such as the efficient use of energy and raw materials. Lithium is not only used for rechargeable batteries and in new technologies for electric cars, but is also used in industrial applications to lower melting temperature and to help save costs and energy.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
19
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 1 – Identification and Activities of the Company and Subsidiaries (continued)

 

1.4Description of the nature of operations and main activities, continued

 

Industrial Chemicals: Industrial chemicals are products used as supplies for a large number of production processes. SQM has participated in this line of business for years producing sodium nitrate, potassium nitrate, boric acid and potassium chloride. Industrial nitrates have become increasingly important over the last few years due to their use as storage means for thermal energy at solar energy plants, which are widely used in countries such as Spain and the United States as they look to decrease CO2 emissions

 

Potassium: Potassium is a primary essential macro-nutrient, that although does not form part of the plant’s structure, has a significant role in the development of its basic functions, ensuring the quality of a crop, increasing post-crop life, improving crop flavor, its vitamin content and its physical appearance. Within this business line, SQM also has potassium chlorate and potassium sulfate, both extracted from the salt layer located under the Salar de Atacama (the Atacama Saltpeter Deposit.)

 

Other products and services: This business line includes revenue from commodities, services, interests, royalties and dividends.

 

1.5Other background:

 

Staff

 

As of December 31, 2013 and December 31, 2012, staff was detailed as follows:

 

   12/31/2013   12/31/2012 
           
Permanent staff   4,792    5,643 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
20
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 1 – Identification and Activities of the Company and subsidiaries (continued)

 

1.5Other background, continued

 

Main shareholders

 

The table below establishes certain information about the beneficial property of Series A and Series B shares of SQM as of December 31, 2013 and December 31, 2012, in respect to each shareholder which has interest of more than 5% of outstanding Series A or B shares. The information below is taken from our records and reports controlled in the Central Securities Depository and reported to the Superintendence of Securities and Insurance (SVS) and the Chilean Stock Exchange, whose main shareholders are as follows:

  

Shareholder as of December 31, 2013  No. of Series A
with ownership
   % of Series A
shares
   No. of Series B
with ownership
   % of Series B
shares
   % of total
shares
 
The Bank of New York Mellon, ADRs   -    -    56,302,367    46.77%   21.39%
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,758,830    31.34%   6,971,799    5.79%   19.65%
Inversiones El Boldo Limitada   29,225,196    20.46%   18,028,676    14.98%   17.95%
Inversiones RAC Chile Limitada   19,200,242    13.44%   2,202,773    1.83%   8.13%
Potasios de Chile S.A.(*)   18,179,147    12.73%   -    -    6.91%
BTG Pactual Chile S.A. C de B   15,593,709    10.92%   797,393    0.66%   6.23%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banco Itau on behalf of foreign investors   20,950    0.01%   5,428,234    4.51%   2.07%
Banco de Chile on behalf of non-resident third parties   -    -    5,234,823    4.35%   1.99%
Inversiones La Esperanza Limitada   3,693,977    2.59%   -    -    1.40%

 

(*) Total Pampa Group 29.9%

 

Shareholder as of December 31, 2012  No. of Series A
with ownership
   % of Series A
shares
   No. of Series B
with ownership
   % of Series B
shares
   % of total
shares
 
Inversiones El Boldo Limitada   44,751,196    31.33%   17,571,676    14.60%   23.68%
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,558,830    31.20%   9,003,799    7.48%   20.35%
The Bank of New York   -    -    46,559,106    38.68%   17.69%
Inversiones RAC Chile Limitada   19,200,242    13.44%   2,699,773    2.24%   8.32%
Potasios de Chile S.A.(*)   17,919,147    12.55%   -    -    6.81%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banco Itau on behalf of investors   -    -    4,579,293    3.80%   1.74%
Inversiones La Esperanza Limitada   3,693,977    2.59%   -    -    1.40%
Banco Santander on behalf of foreign investors   -    -    3,238,105    2.69%   1.23%
Banco de Chile on behalf of non-resident third parties   -    -    3,082,612    2.56%   1.17%

 

(*) Total Pampa Group 30.50%

 

On December 31, 2013 the total number of shareholders had risen to 1,331.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
21
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation for the consolidated financial statements

 

2.1Accounting period

 

These consolidated financial statements cover the following periods

 

-Consolidated Statements of Financial Position for the years ended December 31, 2013 and December 31, 2012.

 

-Consolidated Statements of Changes in Equity for the years ended December 31, 2013 and 2012.

 

-Consolidated Statements of Comprehensive Income for the years between January 1and December 31, 2013 and 2012.

 

-Statements of Cash Flows –Direct method for the years ended December 31, 2013 and 2012.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
22
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.2Financial statements

 

The consolidated interim financial statements of Sociedad Química y Minera de Chile S.A. and Subsidiaries, have been prepared in accordance with International Financial Reporting Standards (hereinafter “IFRS”) and represent the full, explicit and unreserved application of the aforementioned international standards issued by the International Accounting Oversight Board (IASB).

 

These annual consolidated financial statements reflect fairly the Company’s equity and financial position and the results of its operations, changes in the statement of recognized revenue and expenses and cash flows, which have occurred during the periods then ended.

 

IFRS establish certain alternatives for their application. Those applied by the Company and its subsidiaries are included in detail in this Note.

 

The accounting policies used in the preparation of these consolidated annual and interim accounts comply with each IFRS in force at their date of presentation. Certain reclassifications have been made for comparative purposes.

 

2.3Basis of measurement

 

The interim consolidated financial statements have been prepared on the historical cost basis except for the following material items:

 

-inventories are recorded at the lower of cost and net realizable value;
-other current and non-current asset and financial liabilities at amortized cost;
-financial derivatives at fair value; and
-staff severance indemnities and pension commitments at actuarial value.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
23
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.4Accounting pronouncements

 

New accounting pronouncements.

 

a)The following standards, interpretations and amendments are mandatory for the first time for the annual periods beginning on January 1, 2013:

 

Standards and interpretations   Mandatory for
annual periods
beginning on
     
Revised IAS 19 Employee Benefits was adopted on January 1, 2013, with retrospective effect. The revision eliminates the use of the corridor method of accounting for actuarial gains and losses and the return on plan assets arising in connection with defined benefit plans and introduces changes to the way in which such plans are accounted for in income and other comprehensive income.   01/01/2013
     
IAS 27, “Separate Financial Statements”, now contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates only when an entity prepares separate financial statements.   01/01/2013
     
IFRS 10, “Consolidated Financial Statements”, which replaces parts of IAS 27, “Consolidated and Separate Financial Statements” and all of SIC-12, “Consolidation – Special Purpose Entities”, builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company.   01/01/2013
     

IFRS 11 ‘Joint Arrangements’

In May 2011, the IASB issued IFRS 11 ‘Joint Arrangements’, one of a suite of standards relating to interests in other entities and related disclosures. IFRS 11 establishes a principle that applies to the accounting for all joint arrangements, whereby parties to the arrangement account for their underlying contractual rights and obligations relating to the joint arrangement. IFRS 11 identifies two types of joint arrangements. A ‘joint venture’ is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A ‘joint operation’ is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Investments in joint ventures are accounted for using the equity method. Investments in joint operations are accounted for by recognizing the group’s assets, liabilities, revenue and expenses relating to the joint operation.

  01/01/2013

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
24
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation of the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Standards and interpretations   Mandatory for
annual periods
beginning on
     
IFRS 12 ‘Disclosures of Interests in Other Entities’ combines all the disclosure requirements for an entity’s interests in subsidiaries, joint arrangements, associates and structured entities into one comprehensive disclosure standard.   01/01/2013
     
IFRS 13 Fair Value Measurement was adopted on January 1, 2013, with prospective effect. The standard affects nearly all instances where assets and liabilities are currently recognised or disclosed at fair value, primarily by refining the measurement concept to reflect an asset or liability’s exit value. The standard also introduces certain additional considerations to the measurement process and additional disclosures.   01/01/2013

 

Amendments and improvements   Mandatory for
annual periods
beginning on
     

Revised IAS 1 Presentation of Financial Statements changes the presentation of items in the Consolidated Statement of Comprehensive Income to distinguish between those items of other comprehensive income that under other accounting standards may be reclassified to income in later periods and those that are not.

 

  07/01/2012
     
IAS 28, “Investments in Associates and Joint Ventures”, was amended as a consequence of the issuance of IFRS 11. In addition to prescribing the accounting for investment in associates, it now sets out the requirements for the application of the equity method when accounting for joint ventures. The application of the equity method has not changed as a result of this amendment.   01/01/2013
     
Revised IFRS 7 Financial Instruments: Disclosures introduces disclosures relating to the offsetting of certain financial assets and financial liabilities, principally derivative contracts and trade receivables and payables.   01/01/2013

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
25
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation of the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for
annual periods
beginning on
     

IFRS 10 “Consolidated Financial Statements”, NIIF 11 “Joint Arrangements” and IFRS 12 “Disclosure of Interests in Other Entities”

Clarifies the transitional provisions for IFRS 10 indicating changes should be applied on the first day of the annual period in which the standard is adopted. Therefore, it may be necessary to make amendments to comparative information presented in such a period, if the evaluation of control over investments differs from that recognized in accordance with IAS 27/SIC 12.

  01/01/2013
     

Improvements to International Financial Reporting Standards (2011)

Issued in May 2012.

 

IFRS 1 “First-time Adoption of International Financial Reporting Standards” – clarifies that an entity may apply IFRS 1 more than once under certain circumstances.

IFRS 1 “First-time Adoption of International Financial Reporting Standards” – clarifies that an entity may adopt IAS 23, "Borrowing Costs" on the transition date or from an earlier date.

IAS 1 “Presentation of Financial Statements” – clarifies the requirements for comparative information when an entity presents a third column in the balance sheet.

IFRS 1 “First-time Adoption of International Financial Reporting Standards” – clarifies that an entity adopting IFRS for the first time may present information in footnotes for all periods presented.

IAS 16 “Property, Plant and Equipment” – clarifies that spare-parts and service equipment should be classified as Property, Plant and Equipment as opposed to inventories when they meet the definition of Property, Plant and Equipment.

IAS 32 “Financial Instruments: Presentation” – clarifies the treatment of income tax related to distribution and transaction costs.

IAS 34 “Interim Financial Reporting” – clarifies the disclosure requirements of assets and liabilities by segments at interim periods, conforming to the same requirements applicable to annual financial statements.

  01/01/2013

 

The adoption of the standards, interpretations and amendments above had no significant impact on the Company’s consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
26
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation of the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

b)The new standards, interpretations and amendments issued not yet effective for the annual period 2013 which have not been early adopted are listed below.

 

Standards and interpretations   Mandatory for
annual periods
beginning on
     
IFRS 9 ‘Financial Instruments: Classification and Measurement’ introduces new requirements for classifying and measuring financial assets and financial liabilities and, when finalized, will address hedge accounting and impairment of financial assets. The effective date for IFRS 9 is not expected to be before 1 January 2017. The amendments to existing accounting standards that are effective from 1 January 2014, ‘Offsetting Financial Assets and Financial Liabilities’ (Amendments to IAS 32) and ‘Recoverable Amount Disclosures for Non-Financial Assets’ (Amendments to IAS 36).   Not yet determined
     
IFRIC 21 Levies, issued in May 2013, addresses the accounting for liabilities to pay levies that are within the scope of IAS 37 Provisions, contingent liabilities and contingent assets.   01/01/2014

 

Amendments and improvements   Mandatory for
annual periods
beginning on
     
The amendments to IAS 32 Financial Instruments: Presentation, issued in December 2011, clarify the requirements for offsetting financial assets and financial liabilities in the financial statements.   01/01/2014

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
27
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation of the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for
annual periods
beginning on
     

IAS 27 “Separate Financial Statements”; IFRS 10 “Consolidated Financial Statements” and IFRS 12 “Disclosure of Interests in Other entities”

Issued in October 2012, the IASB published “Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27)”, providing an exemption for the consolidation of subsidiaries under IFRS 10 Consolidated Financial Statements for entities meeting the definition for an “investment entity”, such as investment funds. The amendments require the use of fair value through profit or loss in conformity with IFRS 9 Financial Instruments in its consolidated and separate financial statements. The amendment also introduces new disclosure requirements relative to investment entities in IFRS 12 and IAS 27.

  01/01/2014
     

IAS 36 “Impairment of Assets”, when events or changes in market conditions indicate that tangible or intangible assets may be impaired, such assets are reviewed in detail to determine whether their carrying value is higher than their recoverable value (i.e. the higher of value in use and fair value less costs to sell), which could lead to recording an impairment loss.

Value in use is estimated by calculating the present value of the future cash flows expected to be derived from the asset. Fair value less costs to sell is based on the most reliable information available (such as market statistics and recent transactions).

  01/01/2014
     
IAS 39 “Financial Instruments: Recognition and Measurement” Issued in June 2013, under the amendments there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain criteria are met.  The amendments are effective for annual periods beginning on or after 1 January 2014, with earlier application being permitted. The amendments also include changes in contractual guarantee requirements, right of offset for trade receivables also payables, taxes and levies.   01/01/2014

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
28
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation of the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for
annual periods
beginning on
     
IFRS 9 "Financial Instruments" Issued in November 2013, amendments primarily include a substantial review of hedge accounting to allow entities to better reflect their risk management activities in the financial statements. This amendment also allows entities to early adopt  the requirement of recognizing changes in the fair value attributable to changes in the entity's credit risk in other comprehensive income (for financial liabilities that are recorded under the fair value option). Such an amendment may be applied without having to adopt the remainder of IFRS 9   Not yet determined
     

IAS 19 “Employee Benefits”

Issued in November 2013, this amendment applies to employee or third party contributions to defined benefit plans. The objective of this amendment is to simplify the accounting recognition of contributions that are independent of the number of years of employee service; i.e., employees’ contributions that are calculated in accordance with a fixed salary percentage. 

  07/01/2014
     

Improvements to Information Financial Reporting Standards (2012)

Issued in December 2013.

 

IFRS 2 “Share-based Payment” – clarifies the definition of “vesting conditions and “market conditions” and defines separately “performance conditions” and “service conditions.” Such an amendment should be applied prospectively on share-based payment transactions whose grant date is July 1, 2014 or after. Early adoption is permitted.

 

IFRS 3, "Business Combinations" - Clarifies that the obligation to pay contingent consideration in the form of a financial instrument is classified as a financial liability or equity, on the basis of the definitions in IAS 32, "Financial Instruments: Presentation." The standard was additionally amended to clarify that all non equity contingent consideration, both financial and non-financial, be measured at fair value at each reporting date through profit or loss. Consequently, there are also changes to IFRS 9, IAS 37 and IAS 39.The amendment is applicable prospectively for business combinations with an acquisition date on or after July 1, 2014. Early adoption is permitted provided that amendments of IFRS 9 and IAS 37 also issued as part of the 2012 improvement plan are applied.

  07/01/2014

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
29
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation of the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for
annual periods
beginning on
     

IFRS 8 “Operating Segments” – The standard is amended to include the requirement to disclose the judgments made by management in the aggregation of operating segments. This includes a description of segments that have been aggregated and economic indicators that have been assessed in the determination that aggregated segments share similar economic characteristics. The standard was additionally modified to require a reconciliation of assets of each segment to total assets of an entity, when assets are reported by segment. Early adoption is permitted.

 

IFRS 13 "Fair Value Measurement” – When IFRS 13 was applied, paragraphs B5.4.12 of IFRS 9 and AG79 of IAS 39 were eliminated. This raised a doubt as to whether entities no longer had the ability to measure short-term receivables and payables at their nominal amounts if the effect was not significant. IASB has modified the basis of the conclusions of IFRS 13 to clarify that it did not intend to eliminate the ability to measure short-term receivables and payables at nominal amounts in such cases.

 

IAS 16, "Property, Plant and Equipment" and IAS 38 "Intangible Assets" – Both standards are amended to clarify the treatment of the gross carrying amount and accumulated depreciation when an entity uses the revaluation model. In such cases the carrying amount of the asset is adjusted to the revalued amount and the division of such revaluation between the gross carrying amount and accumulated depreciation is treated as follows: 1) either adjusting the gross carrying amount in a manner consistent with the revaluation of the carrying amount and accumulated depreciation is adjusted to equal the difference between the gross carrying amount and carrying amount after taking into consideration any accumulated impairment losses; or 2) accumulated depreciation is eliminated against the gross carrying amount of the asset. Early adoption is permitted.

  07/01/2014
     
IAS 24 "Related Party Disclosures" – The standard is modified to include, as a related party, an entity that provides key management personnel services to the reporting entity or the Parent of the reporting entity (“the managing entity”). The reporting entity is not obliged to disclose the compensation paid to the managing entity´s employees or managers, but is required to disclose amounts charged to the reporting entity by the managing entity for key management personnel services rendered. Early adoption is permitted.   07/01/2014

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
30
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation of the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for
annual periods
beginning on
     

Improvements to Information Financial Reporting Standards (2013)

Issued in December 2013.

 

IFRS 1 “First-time Adoption of International Financial Reporting Standards” – clarifies that when a new version of a standard is not yet mandatory but is available for early adoption, a first-time adopter of IFRS may opt to apply the older version of the standard, provided that the same standard is applied to all periods presented.

 

IFRS 3 “Business Combinations” – the standard is modified to clarify that IFRS 3 is not applicable to the accounting recognition of the formation of a new joint arrangement under IFRS 11. This amendment also clarifies that only the scope exemption is applied to the financial statements of the joint arrangement.

 

IFRS 13 “Fair Value Measurement” – clarifies that the portfolio exception in IFRS 13, that allows an entity to measure the fair value of a group of financial assets and financial liabilities at their net amount applies to all contracts (including non-financial contracts) within the scope of IAS 39 or IFRS 9.

The amendment is mandatory for annual periods beginning on or after July 1, 2014. An entity must apply the amendments prospectively from the start of the first annual period in which this standard is applied.

 

IAS 40 “Investment Property” – the standard is modified to clarify that IAS 40 and IFRS 3 are not mutually exclusive. IAS 40 provides a guide to distinguish between investment property and properties occupied by their owners. In preparing the financial information, the application guide to IFRS 3 should be considered to determine whether the acquisition of investment property is or is a business combination. This amendment is applicable for annual periods beginning on or after July 1, 2014, but can be applied to individual acquisitions of investment property prior to such date if and only if the information required to apply the amendment is available.

  07/01/2014

 

The adoption of the standards, amendments and interpretations described above are under evaluation and are not expected to have a significant impact on the Consolidated Financial Statements of the Company.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
31
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

  

2.5Basis of consolidation

 

(a)Subsidiaries

 

Relates to all the entities over which Sociedad Química y Minera de Chile S.A. has the ability to manage financial and operating activities, which in general is accompanied by share holdings greater than half the voting rights. Subsidiaries are included in consolidation from the date on which control of the Company is transferred and are excluded from consolidation on the date on which such control ceases. Subsidiaries apply the same accounting policies of their Parent.

  

To account for the acquisition, the Company uses the acquisition method. Under this method the acquisition cost is the fair value of assets delivered, equity securities issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingencies assumed in a business combination are measured initially at fair value at the acquisition date. For each business combination, the Company will measure non-controlling interest of the acquired either at fair value or as a proportional share of net identifiable assets of the acquiree.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
32
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5Basis of consolidation, continued

 

Companies included in consolidation:

 

            Ownership interest 
      Country of     12/31/2013   12/31/2012 
TAX ID No.  Foreign subsidiaries  origin  Functional currency  Direct   Indirect   Total   Total 
Foreign  Nitratos Naturais Do Chile Ltda.  Brazil  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Nitrate Corporation Of Chile Ltd.  United Kingdom  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM North America Corp.  USA  US$   40.0000    60.0000    100.0000    100.0000 
Foreign  SQM Europe N.V.  Belgium  US$   0.8600    99.1400    100.0000    100.0000 
Foreign  Soquimich S.R.L. Argentina  Argentina  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Soquimich European Holding B.V.  Netherlands  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Corporation N.V.  Dutch Antilles  US$   0.0002    99.9998    100.0000    100.0000 
Foreign  SQI Corporation N.V.  Dutch Antilles  US$   0.0159    99.9841    100.0000    100.0000 
Foreign  SQM Comercial De México S.A. de C.V.  Mexico  US$   0.0013    99.9987    100.0000    100.0000 
Foreign  North American Trading Company  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Administración Y Servicios Santiago S.A. de C.V.  Mexico  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Peru S.A.  Peru  US$   0.9800    99.0200    100.0000    100.0000 
Foreign  SQM Ecuador S.A.  Ecuador  US$   0.0040    99.9960    100.0000    100.0000 
Foreign  SQM Nitratos Mexico S.A. de C.V.  Mexico  US$   0.0000    51.0000    51.0000    51.0000 
Foreign  SQMC Holding Corporation L.L.P.  USA.  US$   0.1000    99.9000    100.0000    100.0000 
Foreign  SQM Investment Corporation N.V.  Dutch Antilles  US$   1.0000    99.0000    100.0000    100.0000 
Foreign  SQM Brasil Limitada  Brazil  US$   2.7900    97.2100    100.0000    100.0000 
Foreign  SQM France S.A.  France  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Japan Co. Ltd.  Japan  US$   1.0000    99.0000    100.0000    100.0000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  US$   1.6700    98.3300    100.0000    100.0000 
Foreign  SQM Oceania Pty Limited  Australia  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Rs Agro-Chemical Trading Corporation A.V.V.  Aruba  US$   98.3333    1.6667    100.0000    100.0000 
Foreign  SQM Indonesia S.A.  Indonesia  US$   0.0000    80.0000    80.0000    80.0000 
Foreign  SQM Virginia L.L.C.  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Italia SRL  Italy  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Comercial Caimán Internacional S.A.  Panama  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Africa Pty.  South Africa  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Lithium Specialties LLC  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Iberian S.A.  Spain  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Iodine Minera B.V. (c)  Netherlands  US$   0.0000    0.0000    0.0000    100.0000 
Foreign  SQM Agro India Pvt.Ltd.  India  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Beijing Commercial Co. Ltd.  China  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Thailand Limited (b)  Thailand  US$   0.0000    99.996    99.996    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
33
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5Basis of consolidation, continued

 

Companies included in consolidation:

 

            Ownership interest 
      Country of     12/31/2013   12/31/2012 
TAX ID No.  Domestic subsidiaries  origin  Functional currency  Direct   Indirect   Total   Total 
96.801.610-5  Comercial Hydro  S.A.  Chile  US$   0.0000    60.6383    60.6383    60.6383 
96.651.060-9  SQM Potasio S.A.  Chile  US$   99.9999    0.0000    99.9999    99.9999 
96.592.190-7  SQM Nitratos S.A.  Chile  US$   99.9999    0.0001    100.0000    100.0000 
96.592.180-K  Ajay SQM Chile S.A.  Chile  US$   51.0000    0.0000    51.0000    51.0000 
86.630.200-6  SQMC Internacional  Ltda.  Chile  Ch$   0.0000    60.6381    60.6381    60.6381 
79.947.100-0  SQM Industrial S.A.  Chile  US$   99.0470    0.9530    100.0000    100.0000 
79.906.120-1  Isapre Norte Grande Ltda.  Chile  Ch$   1.0000    99.0000    100.0000    100.0000 
79.876.080-7  Almacenes y Depósitos Ltda.  Chile  Ch$   1.0000    99.0000    100.0000    100.0000 
79.770.780-5  Servicios Integrales de Tránsitos y Transferencias S.A.  Chile  US$   0.0003    99.9997    100.0000    100.0000 
79.768.170-9  Soquimich Comercial S.A.  Chile  US$   0.0000    60.6383    60.6383    60.6383 
79.626.800-K  SQM Salar S.A.  Chile  US$   18.1800    81.8200    100.0000    100.0000 
78.053.910-0  Proinsa Ltda.  Chile  Ch$   0.0000    60.5800    60.5800    60.5800 
76.534.490-5  Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  Chile  Ch$   0.0000    100.0000    100.0000    100.0000 
76.425.380-9  Exploraciones Mineras S.A.  Chile  US$   0.2691    99.7309    100.0000    100.0000 
76.064.419-6  Comercial Agrorama Ltda.(a)  Chile  Ch$   0.0000    42.4468    42.4468    42.4468 
76.145.229-0  Agrorama S.A.  Chile  Ch$   0.0000    60.6377    60.6377    60.6377 
76.359.919-1  Orcoma Estudios SPA (d)  Chile  US$   100.0000    -    100.0000    - 
76.360.575-2  Orcoma SPA ( e)  Chile  US$   100.0000    -    100.0000    - 

 

(a)Comercial Agrorama Ltda. was consolidated given that the Company has control through the subsidiary Soquimich Comercial S.A.

 

(b)During the first half of 2013 Soquimich European Holdings BV purchased shares of SQM Thailand Limited, acquiring 99.996% of this company.

 

(c)During the first half of the year, Iodine Minera was absorbed into Soquimich European Holdings.

 

(d)On December 31, 2013, the subsidiary Orcoma Estudios SPA was incorporated into the Company with Sociedad Quimica y Minera de Chile S.A. making a capital contribution of US$ 1,500, acquiring 100% ownership.

 

(e)On December 31, 2013, the subsidiary Orcoma SPA, was incorporated into the Company with Sociedad Quimica y Minera de Chile S.A. making a capital contribution of US$ 2,358, acquiring 100% ownership.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
34
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 2 - Basis of presentation for the consolidated financial statements (continued)

 

2.5Basis of consolidation, continued

 

Subsidiaries are consolidated using the line-by-line method adding the items that represent assets, liabilities, revenues and expenses of similar content and eliminating those related to intragroup transactions.

 

Profit or loss of dependent companies acquired or disposed of during the year are included in consolidated profit or loss accounts from the effective date of acquisition or up to the effective date of disposal, as applicable.

 

Non-controlling interest represents the equity of a subsidiary not directly or indirectly attributable to the Parent.

 

2.6Significant accounting judgments, estimates and assumptions

  

Management of Sociedad Química y Minera de Chile S.A. and its subsidiaries is responsible for the information contained in these consolidated financial statements, which expressly indicate that all the principles and criteria included in IFRSs as issued by the International Accounting Standard Board (IASB) have been applied in full.

 

In preparing the consolidated financial statements of Sociedad Química y Minera de Chile S.A. and its subsidiaries Management has made judgments and estimates to quantify certain assets, liabilities, revenues, expenses and commitments included therein. Basically, these estimates refer to:

 

-The useful lives of property, plant and equipment and intangible assets and their residual value;
-Impairment losses of certain assets, including trade receivables;
-Assumptions used in calculating the actuarial amount of pension-related and severance indemnity payment benefit commitments;
-Provisions for commitments assumed with third parties and contingent liabilities;
-Provisions on the basis of technical studies that cover the different variables affecting products in stock (density, humidity, among others), and allowance for slow-moving spare-parts in stock;
-Future cost for closure of mining sites;
-The determination of the fair value of certain financial assets and derivative instruments;
-The determination and assignment of fair values in business combinations.

 

Despite the fact that these estimates have been made on the basis of the best information available on the date of preparation of these consolidated financial statements, certain events may occur in the future and oblige their amendment (upwards or downwards) over the next few years, which would be made prospectively, recognizing the effects of the change in estimates in the related future consolidated financial statements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
35
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies

 

3.1Classification of balances as current and non-current

 

In the attached consolidated statement of financial position, balances are classified in consideration of their remaining maturity; i.e., those maturing on a date equal to or less than twelve months are classified as current and those with maturity dates exceeding the aforementioned period are classified as non-current.

 

The exception to the foregoing relates to deferred taxes, which are classified as non-current, regardless of their maturity.

 

3.2Functional and presentation currency

  

The Company’s interim consolidated financial statements are presented in United States dollars (“U.S. dollars” or “US$”), which is the Company’s functional and presentation currency and is the currency of the main economic environment in which it operates.

 

Consequently, the term foreign currency is defined as any currency other than U.S. dollar.

 

The consolidated financial statements are presented in thousands of United States dollars without decimals.

 

3.3Foreign currency translation

 

(a)Domestic entities:

 

Assets and liabilities denominated in Chilean pesos and other currencies other than the functional currency (U.S. dollar) as of December 31, 2013 and December 31, 2012 have been translated to U.S. dollars at the exchange rates effective at those dates. The corresponding Chilean pesos were converted at Ch$524.61 per US$1.00 as of December 31, 2013, and Ch$479.96 per US$1.00 as of December 31, 2012.

 

The values of the UF (a Chilean peso-denominated, inflation-indexed monetary unit) used to convert the UF denominated assets and liabilities as of December 31, 2013 amounted to Ch$23,309.56 (US$44.43), and as of December 31, 2012 amounted to Ch$22,840.75 (US$47.59).

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
36
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.3Foreign currency translation, continued

 

(b)Foreign entities:

 

The conversion of the financial statements of foreign companies with functional currency other than U.S. dollars is performed as follows:

 

-Assets and liabilities using the exchange rate effective on the closing date of the consolidated financial statements.
-Statement of income account items using the average exchange rate for the year.
-Equity accounts are stated at the historical exchange rate effective at acquisition date.

 

Foreign currency translation differences which arise from the conversion of financial statements are recorded in the account “Foreign currency translation differences" within equity.

 

The exchange rates used to translate the monetary assets and liabilities expressed in foreign currency at the closing date of each period in respect to the U.S. dollar are detailed as follows:

 

   12/31/2013   12/31/2012 
   US$   US$ 
         
Brazilian real   2.34    2.04 
New Peruvian sol   2.75    2.75 
Argentine peso   6.48    4.92 
Japanese yen   105.39    86.58 
Euro   0.73    0.76 
Mexican peso   13.07    12.99 
Australian dollar   1.12    1.05 
Pound Sterling   0.61    0.62 
South African rand   10.56    8.47 
Ecuadorian dollar   1.00    1.00 
Chilean peso   524.61    479.96 
UF   44.43    47.59 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
37
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

  

3.3Foreign currency translation, continued

 

(c)Transactions and balances

 

Non-monetary transactions in currencies other than the functional currency (U.S. dollar) (foreign currencies) are translated to the respective functional currencies of Group 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. All differences are recorded in the statement of income except for all monetary items that provide effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income on the disposal of the investment; at the time they are recognized in the statement of income. Charges and credits attributable to foreign currency translation differences on those hedge monetary items are also recognized in other comprehensive income.

 

Non-monetary assets and liabilities that are measured using historical cost in a foreign currency are retranslated to the functional currency at the historical exchange rate of the transaction. Non-monetary items that are measured based on fair value in a foreign currency are translated using the exchange rate at the date at which the fair value is determined.

  

(d)Group entities

 

The revenue and expenses, assets and liabilities of all entities that have a functional currency other than the presentation currency are converted to the presentation currency as follows

 

-Assets and liabilities are converted at the closing exchange rate effective on the reporting date.
-Revenues and expenses of each profit or loss account are converted at monthly average exchange rates.
-All resulting foreign currency translation gains and losses are recognized as a separate component in translation reserves.

 

In consolidation, foreign currency differences arising from the translation of a net investment in foreign entities are recorded in equity (other reserves). At the date of disposal, such foreign currency translation differences are recognized in the statement of income as part of the loss or gain from the sale.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
38
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.4Subsidiaries

 

SQM S.A. establishes as a basis the control exercised in subsidiaries in order to determine their share in the consolidated financial statements. Control consists of the Company’s ability to exercise power in the subsidiary, exposure or right, to variable performance from its share in the investee and the ability to use its power on the investee to have an influence over the investor’s performance.

 

The Company prepares the consolidated financial statements using consistent accounting policies for the entire Group, the consolidation of a subsidiary commences when the Company has control over the subsidiary and stops when control ceases.

 

3.5Consolidated statement of cash flows

 

Cash equivalents correspond to highly-liquid short-term investments that are easily convertible into known amounts of cash are subject to insignificant risk of changes in their value and mature in less than three months from the date of acquisition of the instrument.

 

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash and cash equivalents as defined above.

 

The statement of cash flows includes movements in cash performed during the year determined using the direct method.

 

3.6Financial assets

 

Management determines the classification of its financial assets at the time of initial recognition, on the basis of the business model, for the management of financial assets and the characteristics of contractual cash flows from the financial assets. In accordance with IFRS 9, financial assets are measured initially at fair value plus transaction costs that may have been incurred and are directly attributable to the acquisition of the financial asset. Subsequently, financial assets are measured at amortized cost or fair value.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
39
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.6Financial assets, continued

 

The Company assesses at each reporting date, whether there is objective evidence that an asset or group of assets is impaired. An asset or group of financial assets is impaired if and only if, there is evidence of impairment as a result or one or more events occurring after the initial recognition of the asset or group of assets. For the recognition of impairment, the loss event has to have an impact on the estimate of future cash flows from the asset or groups of financial assets.

 

3.7Financial liabilities

 

Management determines the classification of its financial liabilities at the time of initial recognition. As established in IFRS 9, financial liabilities at the time of initial recognition are measured at fair value, less transaction costs that may have been incurred and are directly attributable to the issue of the financial liability. Subsequently, these are measured at amortized cost using the effective interest method. For financial liabilities that have been initially recognized at fair value through profit or loss, these will be measured subsequently at fair value.

 

3.8Financial instruments at fair value through profit or loss

 

Management will irreversibly determine, at the time of initial recognition, the designation of a financial instrument at fair value through profit or loss, if by doing so eliminates or significantly reduces a measurement or recognition inconsistency, that would otherwise arise from the measurement of assets or liabilities or from the recognition of the gains and losses from them on different bases.

 

3.9Financial instrument offsetting

 

The Company offsets an asset and liability if and only if it has at the time the legal right to offset the amounts recognized and has the intent of settling for the net amount or of realizing the asset and settling the liability simultaneously.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
40
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.10Reclassification of financial instruments

 

At the time at which the Company changes its business model for managing financial assets, it will reclassify the financial assets affected by the new business model.

 

In the case of financial liabilities these will not be able to be reclassified.

 

3.11Derivative and hedging financial instruments

 

Derivatives are recognized initially at fair value as of the date at which the derivatives contract is signed and subsequently they are valued at fair value. The method for recognizing the resulting loss or gain depends on whether the derivative has been specified as an accounting hedge instrument and if so, it depends on the type of hedging, which may be as follows:

 

(a) Fair value hedge of assets and liabilities recognized (fair value hedges);

 

(b) Hedging of a single risk associated with an asset or liability recognized or a highly possible foreseen transaction (cash flow hedge);

 

At the beginning of the transaction, the Company documents the relationship existing between hedging instruments and those items hedged, as well as their objectives for risk management purposes and the strategy to conduct different hedging operations.

 

The Company also documents its evaluation both at the beginning and the end of each period of whether derivatives used in hedging transactions are highly effective to offset changes in the fair value or in cash flows of hedged items.

 

The fair value of derivative instruments used for hedging purposes is shown in Note 10.3 (hedging assets and liabilities). Changes in the cash flow hedge reserve are classified as a non-current asset or liability if the remaining expiration period of the hedged item is more than 12 months and as a current asset or liability if the remaining expiration period of the entry is less than 12 months.

 

Investing derivatives are classified as a current asset or liability, and the change in their fair value is recognized directly in profit or loss.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
41
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.11Derivative and hedging financial instruments, continued

 

(a)Fair value hedge

 

The change in the fair value of a derivative is recognized with a debit or credit to profit or loss, as applicable. The change in the fair value of the hedged entry attributable to hedged risk is recognized as part of the carrying value of the hedged entry and is also recognized with a debit or credit to profit or loss.

 

For fair value hedges related to items recorded at amortized cost, the adjustment of the fair value is amortized against profit or loss during the period through maturity. Any adjustment to the carrying value of a hedged financial instrument for which the effective rate is used is amortized with a debit or credit to profit or loss at its fair value attributable to the risk being covered.

 

If the hedged entry is derecognized, the fair value not amortized is immediately recognized with a debit or credit to profit or loss.

 

(b)Cash flow hedges

 

The effective portion of gains or losses from the hedge instrument is initially recognized with a debit or credit to other comprehensive income, whereas any ineffective portion is immediately recognized with a debit or credit to profit or loss, as applicable.

 

The amounts moved to equity are transferred to profit or loss when the hedged transaction affects profit or loss, as when the hedged interest income or expense is recognized when a projected sale occurs. When the hedged entry is the cost of a non-financial asset or liability, amounts taken to other reserves are transferred to the initial carrying value of the non-financial asset or liability.

 

Should the expected transaction or firm commitment no longer be expected to occur, the amounts previously recognized in equity are transferred to profit or loss. If a hedge instrument expires, is sold, finished, and exercised without any replacement, or if a rollover is performed or if its designation as a hedge is revoked, the amounts previously recognized in other reserves are maintained in equity until the expected transaction or commitment occurs.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
42
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.12Derecognition of financial instruments

 

In accordance with IFRS 9, the Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in all the risks and rewards of ownership of the financial asset have been substantially transferred; and the control of the financial assets has not been retained.

 

The Company derecognizes a financial liability when its contractual obligations or a part of these are discharged, paying to the creditor or the main liability associated has been legally eradicated.

 

3.13Derivative financial instruments

 

The Company maintains derivative financial instruments to hedge its risk in foreign currency. Derivative financial instruments are recognized initially at fair value; attributable transaction costs are recognized when incurred. Subsequent to initial recognition, changes in fair value of such derivatives are recognized in profit or loss as part of gains and losses.

 

The Company permanently assesses the existence of embedded derivatives both in its contracts and financial instruments. As of December 31, 2013 and 2012, there are no embedded derivatives.

 

3.14Fair value measurements

 

At the initial recognition, the Company measures its assets and liabilities at fair value plus or minus transaction costs incurred that are directly attributable to the acquisition of a financial asset or issuance of a financial liability.

 

3.15Leases

 

(a)Lease - Finance lease

 

Leases are classified as finance leases when the Company holds substantially all the risks and rewards derived from the ownership of the asset. Finance leases are capitalized at the beginning of the lease at the lower of the fair value of the leased asset or the present value of minimum lease payments.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
43
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.15Lease, continued

 

Each lease payment is distributed between the liability and the interest expenses to obtain ongoing interest on the pending balance of the debt. The respective lease obligations, net of interest expense, are included in other non-current liabilities. The interest element of finance cost is debited in the consolidated statement of income during the lease period so that a regular ongoing interest rate is obtained on the remaining balance of the liability for each year. The asset acquired through a finance lease is subject to depreciation over the lower of its useful life or the life of the agreement.

 

(b)Lease – Operating lease

 

Leases in which the lesser holds a significant part of the risks and rewards derived from the ownership are classified as operating leases. Operating lease payments (net of any financial incentive received from the lesser) are debited to the statement of income or capitalized (as applicable) on a straight-line basis over the lease period.

 

3.16Deferred acquisition costs from insurance contracts

 

Acquisition costs from insurance contracts are classified as prepayments and correspond to insurance contracts in force, recognized using the straight-line method and on an accrual basis, and are recognized under Other non-financial assets.

 

These are recognized in expenses in proportion to the period of time they cover, regardless of the related payment dates.

 

3.17Trade and other receivables

 

Trade and other receivables relate to non-derivative financial assets with fixed and determinable payments and are not listed in any active market. These arise from sales operations involving the products and/or services which the Company provides directly to its customers

 

These assets are initially recognized at their fair value and subsequently at amortized cost according to the effective interest rate method less a provision for impairment loss. An allowance for impairment loss is established for trade receivables when there is objective evidence that the Company will not be able to collect all the amounts which are owed to it according to the original terms of receivables.

 

Implicit interest in installment sales is recognized as interest income when interest is accrued over the term of the operation.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
44
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.18Inventory measurement

 

The Company recognizes inventories at the lower of cost and net realizable value. The cost price of finished products and products in progress includes direct costs of materials and; as applicable, labor costs, indirect costs incurred to transform raw materials into finished products and general expenses incurred in carrying inventories to their current location and conditions. The method used to determine the cost of inventories is weighted average cost.

 

Commercial discounts, rebates obtained and other similar entries are deducted in the determination of the acquisition price.

 

The net realizable value represents the estimate of the sales price less all estimated finishing costs and costs which will be incurred in marketing, sales and distribution processes.

 

The Company conducts an evaluation of the net realizable value of inventories at the end of each year recording an estimated charge to income when these are overstated. When the circumstances, which previously caused the rebate have ceased to exist, or when there is clear evidence of an increase in the net realizable value due to a change in the economic circumstances or prices of main raw materials, the estimate made previously is modified.

 

The valuation of obsolete, impaired or slow-moving products relates to their net estimated net realizable value.

 

Provisions for the Company's inventories have been made based on a technical study which covers the different variables which affect products in stock (density, humidity, among others.)

 

Raw materials, supplies and materials are recorded at the lower of acquisition cost or market value. Acquisition cost is calculated according to the average price method.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
45
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.19Investments in associates and joint ventures

 

Interests in companies over which joint control is exercised (joint venture) or where an entity has significant influence (associates), are recognized using the equity method of accounting. Significant influence is presumed to exist when interest greater than 20% is held in the capital of an issuer.

 

Under this method, the investment is recognized in the statement of financial position at cost plus changes subsequent to the acquisition based on the proportional share in the equity of the associate, using for such purposes, the interest percentage in the ownership of the associate. The associated goodwill acquired is included in the carrying amount of the investment and is not amortized. The debit or credit to profit or loss reflects the proportional share in the profit or loss of the associate.

 

Unrealized gains for transactions with affiliates or associates are eliminated based on the percentage of interest in the entity owned by the company. Unrealized losses are also eliminated, except in the case that the transaction provides evidence of impairment loss of the transferred asset.

 

Changes in the equity of associates are recognized based on the proportional amounts with a debit or credit to “Other reserves” and classified based on their origin.

 

Reporting dates of the associate and the Company and related policies are similar for equivalent transactions and events under similar circumstances.

 

In the event that the significant influence is lost or the investment is sold or is held as available for sale, the equity method is discontinued suspending the recognition of proportional share of profit or loss.

 

If the resulting amount according to the equity method is negative, the share of profit or loss is reflected at zero value in the consolidated financial statements, unless a commitment exists by the Company to reinstate the Company’s equity position, in which case the related provision for risks and expenses is recorded.

 

Dividends received by these companies are recorded by reducing the equity value and the proportional share of profit or loss recognized in conformity with the share of equity are included in the consolidated profit or loss accounts in the caption “Equity share of profit (loss) of associates and joint ventures that are accounted for using the equity method of accounting”.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
46
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 – Significant accounting policies (continued)

  

3.20Transactions with non-controlling interests

 

Non-controlling interests are recorded in the consolidated statement of financial position within equity separate from equity attributable to the owners of the Parent.

 

3.21Related party transactions

 

Transactions between the Company and its subsidiaries are part of the Company’s normal operations within its scope of business activities. Conditions for such transactions are those normally effective for those types of operations in regard to terms and market prices. Also, these transactions have been eliminated in consolidation. Expiration conditions for each case vary by virtue of the originating transaction.

 

3.22Property, plant and equipment

 

Tangible property, plant and equipment assets are stated at acquisition cost, net of the related accumulated depreciation, amortization and impairment losses that they might have experienced.

 

In addition to the price paid for the acquisition of tangible property, plant and equipment, the Company has considered the following concepts as part of the acquisition cost, as applicable:

 

1.    Accrued interest expenses during the construction period which are directly attributable to the acquisition, construction or production of qualifying assets, which are those that require a substantial period prior to being ready for use. The interest rate used is that related to the project’s specific financing or, should this not exist, the average financing rate of the investor company.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
47
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 – Significant accounting policies (continued)

 

3.22Property, plant equipment, continued

 

2.   The future costs that the Company will have to incur related to the closure of its facilities at the end of their useful life are included at the present value of disbursements expected to be required to settle the obligation.

 

Construction-in-progress is transferred to property, plant and equipment in operation once the assets are available for use and the related depreciation and amortization begins on that date.

 

Extension, modernization or improvement costs that represent an increase in productivity, ability or efficiency or an extension of the useful lives of property, plant and equipment are capitalized as a higher cost of the related assets. All the remaining maintenance, preservation and repair expenses are charged to expense as incurred.

 

The replacement of full assets which increase the asset’s useful life or its economic capacity, are recorded as a higher value of property, plant and equipment with the related derecognition of replaced or renewed elements.

 

Based on the impairment analysis conducted by the Company’s management it has been concluded that the carrying value of assets does not exceed the net recoverable value of such assets.

  

Gains or losses which are generated from the sale or disposal of property, plant and equipment are recognized as income (or loss) in the period and calculated as the difference between the asset’s sales value and its net carrying value.

  

Costs derived from daily maintenance of property, plant and equipment are recognized as incurred.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
48
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.23Depreciation of property, plant and equipment

 

Property, plant and equipment are depreciated through the straight-line distribution of cost over the estimated technical useful life of the asset which is the period in which the Company expects to use the asset. When components of one item of property, plant and equipment have different useful lives, they are recorded as separate assets. Useful lives are reviewed on an annual basis.

 

The useful lives used for the depreciation and amortization of assets included in property, plant and equipment are presented below.

 

Types of property, plant and equipment  Minimum
life or rate
   Maximum
life or rate
 
         
Buildings   3    60 
Plant and equipment   3    35 
Information technology equipment   3    10 
Fixtures and fittings   3    35 
Motor vehicles   5    10 
Other property, plant and equipment   2    30 

 

3.24Intangible assets

 

Intangible assets mainly relate to goodwill acquired, water rights, trademarks, and rights of way related to electric lines, development expenses, and computer software licenses.

 

(a)Goodwill acquired

 

Goodwill acquired represents the excess in acquisition cost on the fair value of the Company's ownership of the net identifiable assets of the subsidiary on the acquisition date. Goodwill acquired related to acquisitions of subsidiaries is included in goodwill, which is subject to impairment tests every time consolidated financial statements are issued and is stated at cost less accumulated impairment losses. Gains and losses related to the sale of an entity include the carrying value of goodwill related to the entity sold.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
49
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

  

3.24Intangible assets, continued

 

This intangible asset is assigned to cash-generating units with the purpose of testing impairment losses. It is allocated based on cash-generating units expected to obtain benefits from the business combination from which the aforementioned goodwill acquired arose.

 

3.25Intangible assets other than goodwill

 

(a)Water rights

 

Water rights acquired by the Company relate to water from natural sources and are recorded at acquisition cost. Given that these assets represent legal rights granted to the Company for a given period, these are not amortized. However, they are submitted for annual evaluations of deterioration. .

 

(b)Right of way for electric lines

 

As required for the operation of industrial plants, the Company has paid rights of way in order to install wires for the different electric lines in third party land. These rights are presented under Intangible assets. Amounts paid are capitalized at the date of the agreement and charged to income according to the duration of the contract.

 

(c)Computer software

 

Licenses for IT programs acquired are capitalized based on costs that have been incurred to acquire them and prepare them to use the specific program. These costs are amortized over their estimated useful lives.

 

Expenses related to the development or maintenance of IT programs are recognized as an expense as and when incurred. Costs directly related to the production of unique and identifiable IT programs controlled by the Group and which will probably generate economic benefits that are higher than costs during more than a year, are recognized as intangible assets. Direct costs include expenses incurred for employees who develop IT programs and an adequate percentage of general expenses.

 

The costs of development for IT programs recognized as assets are amortized over their estimated useful lives.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
50
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.25Intangible assets other than goodwill, continued

 

(d)Mining property and concession right

 

The Company holds mining property and concession rights from the Chilean Government. Property rights are usually obtained with no initial cost (other than the payment of mining patents and minor recording expenses) and upon obtaining rights on these concessions, these are retained by the Company while annual patents are paid. Such patents, which are paid annually, are recorded as prepaid assets and amortized over the following twelve months. Amounts attributable to mining concessions acquired from third parties that are not from the Chilean Government are recorded at acquisition cost within intangible assets.

 

No impairment of intangible assets exists as of December 31, 2013 and December 31, 2012.

 

3.26Research and development expenses

 

Research and development expenses are charged to profit or loss in the period in which the disbursement was made.

 

3.27Prospecting expenses

 

The Company has mining property and concession rights from the Chilean Government and acquired from third parties other than the Chilean Government, intended for the exploitation of caliche ore and saltpeter deposits and also the exploration of this type of deposits.

Upon obtaining these rights, the Company initially records disbursements directly associated with the exploration and evaluation of deposits (associated with small deposits with trading feasibility) as asset at cost. Such disbursements include the following concepts:

 

-Disbursements for geological reconnaissance evaluation
-Disbursements for drilling
-Disbursements for drilling work and sampling
-Disbursements for activities related to technical assessment and trading feasibility of drilling work
-And any disbursement directly related to specific projects where its objective is finding mining resources.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
51
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.27Prospecting expenses, continued

 

Subsequently, the Company distinguishes exploration and evaluation projects according to the economic feasibility of the mineral extracted in the area or exploration, among those that finally will deliver future benefits to the Company (profitable projects) and those projects for which it is not probable that economic benefit will flow to the Company in the future (i.e., when the mine site has low ore grade and its exploitation is not economically profitable).

 

If technical studies determine that the ore grade is not economically suitable for exploitation, the asset is recorded directly as an expense. Otherwise, it is kept in other non-current assets, reclassifying the portion related to the area to be exploited in the year in the entry inventories, and this amount is amortized as production cost on the basis of estimated tons to be extracted.

 

The technical reasons for this classification are due to the fact that this is an identifiable non-monetary asset that is owned to be used in the production of our processes as a main raw material.

 

Paragraph17 of IFRS 6 establishes that an asset for exploitation and evaluation should be classified as such when it loses the technical feasibility and trading feasibility for extraction and therefore, must be impaired. For this reason and because our disbursements correspond to reserves, a trading feasibility and are used as a main raw material in our production processes, these are presented as inventories that will be exploited within the commercial year and the remainder as development expenses for small deposits and prospecting expenses in the centry Other non-current assets.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
52
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.28Impairment of non-financial assets

 

Assets subject to depreciation and amortization are subject to impairment testing, provided that an event or change in the circumstances indicates that the amounts in the accounting records may not be recoverable. An impairment loss is recognized for the excess of the book value of the asset over its recoverable amount.

 

The recoverable amount of an asset is the higher between the fair value of an asset or cash generating unit (“CGU”) less costs of sales and its value in use, and is determined for an individual asset unless the asset does not generate any cash inflows that are clearly independent from other assets or groups of assets.

 

When the carrying value of an asset exceeds its recoverable amount, the asset is considered an impaired asset and is reduced to its net recoverable amount.

 

In evaluating value in use, estimated future cash flows are discounted using a discount rate before taxes which reflects current market evaluation on the time value of money and specific asset risks.

 

An appropriate valuation model is used to determine the fair value less selling costs. These calculations are confirmed by valuation multiples, quoted share prices for subsidiaries quoted publicly or other available fair value indicators.

 

Impairment losses from continuing operations are recognized with a debit to profit or loss in the categories of expenses associated with the impaired asset function, except for properties reevaluated previously where the revaluation was taken to equity. In this case impairment is also recognized with a debit to equity up to the amount of any previous revaluation.

 

As of December 31, 2013, as explained in Note 14 the Company has made an allowance account for impairment losses, As of December 31, 2012, the Company was unaware of any indication of impairment with respect to its assets.

  

For assets other than acquired goodwill, an annual evaluation is conducted of whether there exists impairment loss indicators recognized previously that might have already ceased to exist or decreased. The recoverable amount is estimated if such indicators exist. An impairment loss previously recognized is reversed only if there have been changes in estimates used to determine the asset’s recoverable amount from the last time in which an impairment loss was recognized. If this is the case, the carrying value of the asset is increased to its recoverable amount. This increased amount cannot exceed the carrying value that would have been determined net of depreciation if an asset impairment loss would have not been recognized in prior years. This reversal is recognized with a credit to profit or loss unless an asset is recorded at the revalued amount. Should this be the case, the reversal is treated as an increase in revaluation.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
53
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.29Minimum dividend

 

As required by the Shareholders’ Corporations Act, unless decided otherwise by a unanimous vote by the shareholders of outstanding and paid shares, a public company must distribute dividends as agreed by the shareholders at the General Shareholders’ Meeting held each year with a minimum of 30% of its profit for the year ended December 31, 2013, except when the Company records unabsorbed losses from prior years.

 

However, the Company defines as policy the distribution of 50% of its profit for the year ended December 31, 2013.

 

3.30Earnings per share

 

The net basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary owners of the parent by the weighted average number of ordinary shares outstanding during the year.

 

The Company has not conducted any type of operation of potential dilutive effect that assumes diluted earnings per share other than the basic earnings per share.

  

3.31Trade and other payables

 

Trade and other payables are measured at fair value plus all costs associated with the transaction. Subsequently, these are carried at amortized cost using the effective interest rate method.

 

3.32Interest-bearing borrowings

 

At initial recognition interest-bearing borrowings are measured at fair value. Subsequently, they are measured at amortized cost using the effective interest rate method. Amortized cost is calculated considering any premium or discount from the acquisition and includes costs of transactions which are an integral part of the effective interest rate.

 

These are recorded as non-current when their expiration period exceeds twelve months and as current when the term is lower than such term. Interest expense is calculated in the year in which they are accrued following a financial criterion.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
54
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.33Other provisions

 

Provisions are recognized when:

 

-The Company has a present obligation as the result of a past event.

 

-It is more likely than not that certain resources must be used, including benefits, to settle the obligation.

 

-A reliable estimate can be made of the amount of the obligation.

 

In the event that the provision or a portion of it is reimbursed, the reimbursement is recognized as a separate asset solely if there is certainty of income.

 

In the consolidated statement of income, the expense for any provision is presented net of any reimbursement.

 

Should the effect of the time value of money be significant, provisions are discounted using a discount rate before taxes that reflects the liability’s specific risks. When a discount rate is used, the increase in the provision over time is recognized as a finance cost.

 

The Company’s policy is to maintain provisions to cover risks and expenses based on a better estimate to deal with possible or certain and quantifiable responsibilities from current litigation, compensations or obligations, pending expenses for which the amount has not yet been determined, collaterals and other similar guarantees for which the Company is responsible. These are recorded at the time the responsibility or the obligation that determines the compensation or payment is generated.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
55
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

  

3.34Obligations related to employee termination benefits and pension commitments

 

Obligations with the Company’s employees are in accordance with the established in the collective bargaining agreements in force formalized through collective employment agreements and individual employment contracts, except for the United States that is regulated in accordance with employment plans in force up to 2002.

 

These obligations are valued using actuarial calculations, according to the projected unit credit method which considers such assumptions as the mortality rate, employee turnover, interest rates, retirement dates, effects related to increases in employees salaries, as well as the effects on variations in services derived from variations in the inflation rate. This considering criteria in force contained in IAS 19 revised.

 

Actuarial gains and losses that may be generated by variations in defined pre-established obligations are directly recorded in profit or loss for the year and not within Other comprehensive income due to their insignificant amount.

 

Actuarial losses and gains have their origin in departures between the estimate and the actual behavior of actuarial assumptions or in the reformulation of established actuarial assumptions.

 

The discount rate used by the Company for calculating the obligation was 6% for the periods ended December 31, 2013 and December 31, 2012.

 

The Company’s subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation using a net salary progressive rate net of adjustments for inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 6.5% interest rate for 2013 and 2012. The net balance of this obligation is presented under the non-current provisions for employee benefits.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
56
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

  

3.35Compensation plans

 

Compensation plans implemented through benefits in share-based payments settled in cash, which have been provided, are recognized in the financial statements at their fair value, in accordance with International Financial Reporting Standard No. 2 "Share-based Payments.” Changes in the fair value of options granted are recognized with a debit to payroll on a straight-line basis during the period between the date on which these options are granted and the payment date. (See Note No.16).

 

3.36Revenue recognition

 

Revenue includes the fair value of considerations received or receivable for the sale of goods and services during performance of the Company's activities. Revenue is presented net of value added tax, estimated returns, rebates and discounts and after the elimination of sales among subsidiaries.

 

Revenue is recognized when its amount can be stated reliably, when it is possible that the future economic rewards will flow to the entity and when the specific conditions for each type of activity related revenue are complied with, as follows:

 

(a)Sale of goods

 

Sales of goods are recognized when the Company has delivered products to the customer, and there is no obligation pending compliance that could affect the acceptance of products by the customer. The delivery does not occur until products have been shipped to the customer or collected by customers, and when the related risks of obsolescence and loss have been transferred to the customer and the customer has accepted products in accordance with the conditions established in the sale, the acceptance period has ended or there is objective evidence that those criteria required for acceptance have been met.

 

Sales are recognized in consideration of the price set in the sales agreement, net of volume discounts and estimated returns at the date of the sale. Volume discounts are evaluated in consideration of annual foreseen purchases and in accordance with the criteria defined in agreements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
57
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

 

3.36Revenue recognition, continued

 

(b)Sales of services

 

Revenue associated with the rendering of services is recognized considering the degree of completion of the service as of the date of presentation of the consolidated classified statement of financial position, provided that the result from the transaction can be estimated reliably.

 

(c)Interest income

 

Interest income is recognized when interest is accrued in consideration of the principal pending payment using the effective interest rate method.

 

(d)Income from dividends

 

Income from dividends is recognized when the right to receive the payment is established.

 

3.37Finance income and finance costs

 

Finance income is mainly composed of interest income in financial instruments such as time deposits and mutual fund deposits. Interest income is recognized in profit or loss at amortized cost, using the effective interest rate method.

 

Finance costs are mainly composed of interest expense in bank borrowings, interest on bonds issued and interest capitalized for borrowing costs for the acquisition, construction or production or qualifying assets.

Borrowing costs and bonds issued are recognized in profit or loss using the effective interest rate method.

 

Finance costs accrued during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets using the effective interest rate related to the project’s specific financing; if none exists, the average financing rate of the subsidiary that makes the investment is used.

 

Borrowing and financing costs that are directly attributable to the acquisition, construction or production of an asset are capitalized as part of that asset’s cost.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
58
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

  

3.38Income tax and deferred taxes

 

Corporate income tax for the year is determined as the sum of current taxes from the different consolidated companies.

 

Current taxes are based on the application of the various types of taxes attributable to taxable income for the year.

 

Differences between the book value of assets and liabilities and their tax basis generate the balance of deferred tax assets or liabilities, which are calculated using the tax rates expected to be applicable when the assets and liabilities are realized.

 

In conformity with current Chilean tax regulations, the provision for corporate income tax and taxes on mining activity is recognized on an accrual basis, presenting the net balances of accumulated monthly tax provisional payments for the fiscal period and associated credits. The balances of these accounts are presented in current taxes receivable or current taxes payable, as applicable.

 

Tax on companies and variations in deferred tax assets or liabilities that are not the result of business combinations are recorded in statement of income accounts or equity accounts in the consolidated statement of financial position, based on the origin of the gains or losses which have generated them.

 

At each reporting period, the carrying amount of deferred tax assets has been reviewed and reduced to the extent there will not be sufficient taxable income to allow the recovery of all or part of the deferred tax assets. Likewise, as of the date of the consolidated financial statements, deferred tax assets that are not recognized are evaluated and recognized in a way that it is likely that future taxable income will allow for the recovery of the deferred tax asset.

 

With respect to deductible temporary differences associated with investments in subsidiaries, associated companies and interest in joint ventures, deferred tax assets are recognized solely provided that it is more likely than not that the temporary differences will be reversed in the near future and that there will be taxable income with which they may be used.

 

The deferred income tax related to entries directly recognized in equity is recognized with an effect on equity and not with an effect on profit or loss.

 

Deferred tax assets and liabilities are offset if there is a legal right to offset tax assets against tax liabilities and if the deferred tax is related to the same tax entity and tax authority.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
59
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 3 - Significant accounting policies (continued)

  

3.39Segment reporting

 

IFRS 8 requires that companies adopt a “management approach” to disclose information on the operations generated by its operating segments. In general, this is the information that management uses internally for the evaluation of segment performance and to make the decision on how to allocate resources for this purpose.

 

An operating segment is a group of assets and operations responsible for providing products or services subject to risks and performance different from those of other business segments. A geographical segment is responsible for providing products or services in a given economic environment subject to risks and performance different from those of other segments that operate in other economic environments.

 

For assets and liabilities the allocation to each segment is not possible given that these are associated with more than one segment, except for depreciation, amortization and impairment of assets, which are directly allocated to the applicable segments, in accordance with the criteria established in the costing process for product inventories.

 

The following operating segments have been identified by the Company:

 

-Specialty plant nutrients
-Industrial chemicals
-Iodine and derivatives
-Lithium and derivatives
-Potassium
-Other products and services

 

3.40Environment

 

In general, the Company follows the criteria of considering amounts spent on environmental protection and improvement as environmental expenses. However, the cost of facilities, machinery and equipment used for the same purpose are considered property, plant and equipment, depending on the case.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
60
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 4 - Financial risk management

 

4.1Financial risk management policy

 

The Financial Risk Management Policy of the Company is oriented towards safeguarding the stability and sustainability of Sociedad Química y Minera de Chile S.A. and Subsidiaries in relation to all such relevant components of financial uncertainty.

 

The operations of the Company are subject to certain financial risk factors that may affect the financial position or results of the same. Among these risks, the most relevant are market risk, liquidity risk, currency risk, bad debt risk, and interest rate risk.

 

There may be additional risks that are currently unknown to us or other known risks that we currently believe are not significant, which could also affect the commercial operations, the business, the financial position or the results of the Company.

 

The financial risk management structure includes identifying, determining, analyzing, quantifying, measuring and controlling these events. The Management, in particular the Finance Management, is responsible for constantly assessing the financial risk. The Company uses derivatives to cover a significant portion of these risks.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
61
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 4 - Financial risk management (continued)

 

4.2Risk factors

 

4.2.1Market risk

 

Market risks are those uncertainties associated with fluctuations in market variables that affect the assets and liabilities of the Company, such as:

 

a)Country risk: The economic position of the countries where the Company has a presence may affect its financial position. For example, the sales carried out in emerging markets expose SQM to risks related to economic conditions and trends in those countries. On the other hand, inventories may also be affected by the economic situation of these countries and/ or the global economy, amongst other probable economic impacts.

 

b)Price volatility risk: The prices of the products of the Company are affected by the fluctuations of international prices of fertilizers and chemical products and changes in productive capacities or market demand, all of which might affect the Company’s business, financial condition and operational results.

 

c)Commodity Price risk: The Company is exposed to changes in the prices of raw materials and energy which may have an impact on its production costs, thus giving rise to instability in the results.

 

Currently, the Company has a direct annual expense close to US$140 million on account of petrol, gas and equivalents and close to US$54 million on account of electricity.

 

Variations of 10% in the prices of energy the Company required to operate, may involve in the short-term movements in costs of approximately US$17 million.

  

As expressed in the Company’s annual report, the markets in which the Company operates are unpredictable, are exposed to significant variations in supply and demand, and have volatile prices. Additionally, the supply of certain fertilizers or chemical products, including certain products which the Company trades, vary mainly depending on the production of the top producers and their respective business strategies. Therefore, the Company cannot predict with certainty changes in demand, the responses of the competition, and the fluctuations in the final price of its products. These factors can lead to significant impacts on sale volumes of its products, the financial situation of the Company and its share price.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
62
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 4 - Financial risk management (continued)

 

4.2.1Market risk, continued

 

d)Quality standards: In those markets where we operate, customers might impose quality standards for our products and/or governments could enact more stringent for the distribution and/or use of our products. As a result, we would not be able to sell our products if we were not able to meet those new standards. In addition, our production costs might increase to meet the new standards. Not being able to sell our products in one or more markets or to significant customers might significantly affect our business, financial position or the results of our operations.

 

4.2.2Doubtful accounts risk

 

A contraction of the global economy and the potentially negative effects on the financial position of our clients may extend the receivables collection time for SQM, increasing the bad debt exposure. While measures have been taken in order to minimize risk, the global economy may trigger losses that could have a material adverse effect on the business, financial position or the results of the Company’s operations.

 

To mitigate these risks, SQM actively controls debt collection and uses measures such as, loan insurance, letters of credit, and prepayments as a part of trade receivables.

 

4.2.3Currency risk

 

As a result of its influence in determining price level, of its relationship with sales costs and due to the fact that a significant part of the business of the Company is carried out in that in United States Dollars, this is the functional currency of the Company. However, the global business activities of the Company create exposure to the foreign exchange fluctuations of several currencies with respect to the US dollar. Therefore, SQM has hedge contracts to mitigate the exposure generated by its main mismatches (assets net of liabilities) in currencies other than the US dollar against the foreign exchange fluctuation. Those contracts are periodically updated depending upon the mismatch amount to be covered in these currencies. Occasionally and subject to the Board of Directors’ approval, the Company insures cash flows from certain items in currencies other than U.S. dollar in the short term.

 

A significant portion of the costs of the Company, particularly payroll, is related to the Chilean peso. Therefore, an increase or decrease in the exchange rate against the dollar would affect the net income of SQM. Approximately US$ 470 million cost of the Company is related to the Chilean peso. A significant part of the effect of this obligation in the statement of financial position is covered by operations of derivative instruments that hedge the mismatch of balance in this currency.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
63
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 4 - Financial risk management (continued)

 

4.2.3Currency risk, continued

 

As of December 31, 2012, the Company had derivative instruments classified as hedges against currency and interest rate associated with all the obligations for denominated bonds both in Chilean pesos and UF, with a fair value of US$ 100.6 million. As of December 31, 2013, this value amounts to US$ 23.6 million, both in favor of SQM.

 

As of December 31, 2013, the Chilean peso to US dollar Exchange rate was Ch$ 524.61 per US$1.00, and as of December 31, 2012 it was Ch$ 479.96 per US$ 1.00.

 

4.2.4Interest rate risk

 

Interest rate fluctuations, due to the uncertain future behavior of markets, may have a material impact on the financial results of the Company.

 

The Company has short and long-term debts valued at LIBOR plus a spread. The Company is partially exposed to fluctuations of said rate, as SQM currently holds hedging derivative instruments to hedge a portion of its liabilities subject to the LIBOR rate fluctuations.

 

As of December 31, 2013, approximately 16% of the Company’s financial obligations are valued at LIBOR; therefore significant increases in the rate may impact its financial position. A 100 base point variation in this rate may trigger variations in the financial expenses close to US$ 1 million. Notwithstanding, this effect is significantly counterbalanced by the returns of the Company’s investments that also relate to LIBOR.

 

In addition, as of December 31, 2013, the Company's financial debt is mainly in the long-term, with 21% with maturities of less than 12 months which decreases the exposure to changes in the interest rates.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
64
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 4 - Financial risk management (continued)

 

4.2.5Liquidity risk

 

Liquidity risk is related to the fund requirements to comply with payment obligations. The object of the Company is to keep financial flexibility by loosely balancing the fund requirements and the flows from the regular business conduct, bank loans, public bonds, short term investments, and negotiable instruments, amongst others.

 

The company has an important capital expenditure program which is subject to change over time.

 

On the other hand, world financial markets go through contraction and expansion periods that are not foreseeable in the long-term and may affect SQM’s access to financial resources. These factors may have a material adverse impact on the business, financial position, and results of operations of the Company.

 

SQM constantly monitors obligations and investments to ensure they match, taking care of the obligations and investments maturities from a conservative perspective as part of its financial risk management strategy. As of December 31, 2013, the Company had non-committed and available bank credit lines for working capital for a total of approximately US$555 million.

 

The position in other cash and cash equivalents generated by the Company is invested in highly liquid mutual funds which have an AAA risk rating.

 

4.3Risk measurement

 

The Company has methods to measure the effectiveness and efficiency of financial risk hedging strategies, both prospectively and retrospectively. Those methods are consistent with the risk management profile of the Group.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
65
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 5 - Changes in accounting estimates and policies (consistent presentation)

 

5.1Changes in accounting estimates

 

There are no changes in accounting estimates as of the closing date of the consolidated financial statements.

 

5.2Changes in accounting policies

 

As of December 31, 2013, the Company’s consolidated financial statements present no changes in accounting policies or estimates compared to the prior period.

 

The consolidated classified statements of financial position as of December 31, 2013 and December 31, 2012 and the statements of comprehensive income, equity and cash flows for the periods ended December 31, 2013 and December 31, 2012, have been prepared in accordance with IFRS, and accounting principles and criteria have been applied consistently.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
66
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation

 

6.1 Parent’s stand-alone assets and liabilities

 

   12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Assets   4,269,749    3,908,259 
Liabilities   (1,893,129)   (1,775,476)
Assets (liabilities)   2,376,620    2,132,783 

  

6.2Parent entity

 

As provided in the Company’s by-laws, no shareholder can hold more than 32% of the Company’s voting right shares and therefore there is no controlling entity.

 

6.3Joint arrangements of controlling interest

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Limitada, collectively the Pampa Group, are the owners of a number of shares that are equivalent to 29.9% as of December 31, 2013 of the current total amount of shares issued, subscribed and fully-paid of the Company. In addition, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A. and La Esperanza Delaware Corporation, collectively the Kowa Group, are the owners of a number of shares equivalent to 2.09% of the total amount of issued, subscribed and fully-paid shares of SQM S.A.

 

The Pampa Group and the Kowa Group have informed SQM S.A., the Chilean SVS and the relevant stock exchanges in Chile and abroad that they are not and have never been related parties. In addition, this is regardless of the fact that both Groups on December 21, 2006 have entered into a Joint Action Agreement (JAA) related to those shares. Consequently, the Pampa Group, by itself, does not concentrate more than 32% of the voting right capital of SQM S.A., and the Kowa Group does not concentrate by itself more than 32% of the voting right capital of SQM S.A.

 

Likewise, the Joint Action Agreement has not transformed the Pampa and Kowa Groups into related parties between them. The Joint Action Agreement has only transformed the current controller of SQM S.A., composed of the Pampa Group, and the Kowa Group into related parties of SQM S.A.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
67
 

  

Notes to the Consolidated Financial Statements as of December 31, 2013

 

6.3 Joint arrangements of controlling interest, continued

 

Detail of effective concentration

 

Tax ID No.  Name  Ownership
interest %
 
96.511.530-7  Sociedad de Inversiones Pampa Calichera S.A.   19.65 
96.863.960-9  Inversiones Global Mining (Chile) Limitada   3.34 
76.165.311-5  Potasios de Chile S.A.   6.91 
Total Pampa Group      29.90 
         
79,798,650-k  Inversiones la Esperanza (Chile)  Ltda.   1.40 
59.046.730-8  Kowa Co Ltd.   0.30 
96.518.570-4  Kochi S.A.   0.30 
59.023.690-k  La Esperanza Delaware Corporation   0.09 
Total Kowa Group      2.09 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
68
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4General information on consolidated subsidiaries

 

As of December 31, 2013 and December 31, 2012 the general information of the companies over which the Company exercises control and significant influence is as follows:

 

          Country of     Ownership interest 
Subsidiary  Tax ID  Address  incorporation  Functional currency  Direct   Indirect   Total 
                         
SQM Nitratos S.A.  96.592.190-7  El Trovador 4285 Las Condes  Chile  US$   99.9999    0.0001    100.0000 
Proinsa Ltda.  78.053.910-0  El Trovador 4285 Las Condes  Chile  Ch$   -    60.5800    60.5800 
SQMC Internacional Ltda.  86.630.200-6  El Trovador 4285 Las Condes  Chile  Ch$   -    60.6382    60.6382 
SQM Potasio S.A.  96.651.060-9  El Trovador 4285 Las Condes  Chile  US$   99.9999    -    99.9999 
Serv. Integrales de Tránsito y Transf. S.A.  79.770.780-5  Arturo Prat 1060, Tocopilla  Chile  US$   0.0003    99.9997    100.0000 
Isapre Norte Grande Ltda.  79.906.120-1  Anibal Pinto 3228, Antofagasta  Chile  Ch$   1.0000    99.0000    100.0000 
Ajay SQM Chile S.A.  96.592.180-K  Av. Pdte. Eduardo Frei 4900, Santiago  Chile  US$   51.0000    -    51.0000 
Almacenes y Depósitos Ltda.  79.876.080-7  El Trovador 4285 Las Condes  Chile  Ch$   1.0000    99.0000    100.0000 
SQM Salar S.A.  79.626.800-K  El Trovador 4285 Las Condes  Chile  US$   18.1800    81.8200    100.0000 
SQM Industrial S.A.  79.947.100-0  El Trovador 4285 Las Condes  Chile  US$   99.0470    0.9530    100.0000 
Exploraciones Mineras S.A.  76.425.380-9  Los Militares 4290 Las Condes  Chile  US$   0.2691    99.7309    100.0000 
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  76.534.490-5  Anibal Pinto 3228, Antofagasta  Chile  Ch$   -    100.0000    100.0000 
Soquimich Comercial S.A.  79.768.170-9  El Trovador 4285 Las Condes  Chile  US$   -    60.6383    60.6383 
Comercial Agrorama Ltda.  76.064.419-6  El Trovador 4285 Las Condes  Chile  Ch$   -    42.4468    42.4468 
Comercial Hydro S.A.  96.801.610-5  El Trovador 4285 Las Condes  Chile  Ch$   -    60.6383    60.6383 
Agrorama S.A.  76.145.229-0  El Trovador 4285 Las Condes  Chile  Ch$   -    60.6377    60.6377 
Orcoma Estudios SPA  76.359.919-1  Apoquindo 3721 Of.131 Las Condes  Chile  US$   100.0000    -    100.0000 
Orcoma SPA  76.360.575-2  Apoquindo 3721 Of.131 Las Condes  Chile  US$   100.0000    -    100.0000 
SQM North America Corp.  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States  US$   40.0000    60.0000    100.0000 
RS Agro Chemical.Trading Corporation A.V.V.  Foreign  Caya Ernesto O. Petronia 17, Orangestad  Aruba  US$   98.3333    1.6667    100.0000 
Nitratos Naturais do Chile Ltda.  Foreign  Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo  Brazil  US$   -    100.0000    100.0000 
Nitrate Corporation of Chile Ltd.  Foreign  1 More London Place London SE1 2AF  United Kingdom  US$   -    100.0000    100.0000 
SQM Corporation N.V.  Foreign  Pietermaai 123, P.O. Box 897, Willemstad, Curacao  Dutch Antilles  US$   0.0002    99.9998    100.0000 
SQM Peru S.A.  Foreign  Avenida Camino Real N° 348 of. 702, San Isidro, Lima  Peru  US$   0.9800    99.0200    100.0000 
SQM Ecuador S.A.  Foreign  Av. José Orrantia y Av. Juan Tanca Marengo Edificio Executive Center Piso 2 Oficina 211  Ecuador  US$   0.0040    99.9960    100.0000 
SQM Brasil Ltda.  Foreign  Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo  Brazil  US$   1.0900    98.9100    100.0000 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
69
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4General information on consolidated subsidiaries

 

         Country of     Ownership interest 
Subsidiary  Tax ID  Address  incorporation  Functional currency  Direct   Indirect   Total 
                         
SQI Corporation N.V.  Foreign  Pietermaai 123, P.O. Box 897, Willemstad, Curacao  Dutch Antilles  US$   0.0159    99.9841    100.0000 
SQMC Holding Corporation L.L.P.  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta  United States  US$   0.1000    99.9000    100.0000 
SQM Japan Co. Ltd.  Foreign  From 1st Bldg 207, 5-3-10 Minami- Aoyama, Minato-ku, Tokyo  Japan  US$   1.0000    99.0000    100.0000 
SQM Europe N.V.  Foreign  Sint Pietersvliet 7 bus 8, 2000. Antwerp  Belgium  US$   0.5800    99.4200    100.0000 
SQM Italia SRL  Foreign  Via A. Meucci, 5 500 15 Grassina Firenze  Italy  US$   -    100.0000    100.0000 
SQM Indonesia S.A.  Foreign  Perumahan Bumi Dirgantara Permai, Jl Suryadarma Blok Aw No 15 Rt 01/09 17436 Jatisari Pondok Gede  Indonesia  US$   -    80.0000    80.0000 
North American Trading Company  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States  US$   -    100.0000    100.0000 
SQM Virginia LLC  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States  US$   -    100.0000    100.0000 
SQM Comercial de México S.A. de C.V.  Foreign  Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco  Mexico  US$   0.0013    99.9987    100.0000 
SQM Investment Corporation N.V.  Foreign  Pietermaai 123, P.O. Box 897, Willemstad, Curacao  Dutch Antilles  US$   1.0000    99.0000    100.0000 
Royal Seed Trading Corporation A.V.V.  Foreign  Caya Ernesto O. Petronia 17, Orangestad  Aruba  US$   1.6700    98.3300    100.0000 
SQM Lithium Specialties LLP  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States  US$   -    100.0000    100.0000 
Soquimich SRL Argentina  Foreign  Espejo 65 Oficina 6 – 5500 Mendoza  Argentina  US$   -    100.0000    100.0000 
Comercial Caimán Internacional S.A.  Foreign  Edificio Plaza Bancomer  Calle 50  Panama  US$   -    100.0000    100.0000 
SQM France S.A.  Foreign  ZAC des Pommiers  27930   FAUVILLE  France  US$   -    100.0000    100.0000 
Administración y Servicios Santiago S.A. de C.V.  Foreign  Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco  Mexico  US$   -    100.0000    100.0000 
SQM Nitratos México S.A. de C.V.  Foreign  Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco  Mexico  US$   -    100.0000    100.0000 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
70
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 -Background of companies included in consolidation (continued)

 

6.4General information on consolidated subsidiaries

 

         Country of      Ownership interest 
Subsidiary  Tax ID  Address  incorporation  Functional currency  Direct   Indirect   Total 
                         
Soquimich European Holding B.V.  Foreign  Loacalellikade 1 Parnassustoren 1076 AZ Amsterdan  Netherlands  US$   -    100.0000    100.0000 
SQM Iberian S.A  Foreign  Provenza 251 Principal 1a CP 08008, Barcelona  Spain  US$   -    100.0000    100.0000 
Iodine Minera B.V. (a)  Foreign  Loacalellikade 1 Parnassustoren 1076 AZ Amsterdan  Netherlands  US$   -    100.0000    100.0000 
SQM Africa Pty Ltd.  Foreign  Tramore House, 3 Wterford Office Park, Waterford Drive, 2191 Fourways, Johannesburg  South Africa  US$   -    100.0000    100.0000 
SQM Oceania Pty Ltd.  Foreign  Level 9, 50 Park Street, Sydney NSW 2000, Sydney  Australia  US$   -    100.0000    100.0000 
SQM  Agro India Pvt. Ltd.  Foreign  C 30 Chiragh Enclave New Dehli, 110048  India  US$   -    100.0000    100.0000 
SQM Beijing Commercial Co. Ltd.  Foreign  Room 1001C, CBD International Mansion N 16 Yong An Dong Li, Jian Wai Ave Beijing 100022, P.R.  China  US$   -    100.0000    100.0000 
SQM Thailand Limited  Foreign  Unit 2962, Level 29, N° 388, Exchange Tower Sukhumvit Road, Klongtoey Bangkok  Thailand  US$   -    99.996    99.996 

 

(a)During the first half of 2013, Iodine Minera was absorbed by Soquimich European Holding B.V.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
71
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 -Background of companies included in consolidation (continued)

 

6.5Information attributable to non-controlling interests

 

Subsidiary  % of interests in
the ownership held
by non-controlling
interests
   Profit (loss) attributable to non-
controlling interests
   Equity, non-controlling interests   Dividends paid to non-controlling
interests
 
       12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012 
       ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
Proinsa Ltda.   0.1%   -    -    -    -    -    - 
SQM Potasio S.A.   0.0000001%   -    -    -    -    -    - 
Ajay SQM Chile S.A.   49%   (3,389)   (4,890)   8,806    9,817    4,400    1,764 
SQM Indonesia S.A.   20%   -    -    16    -    -    - 
SQM Nitratos México S.A. de C.V.   0%   -    -    -    5    -    - 
Soquimich Comercial S.A.   39.3616784%   (4,051)   (3,367)   46,448    44,476    2,026    - 
Comercial Agrorama Ltda.   30%   (18)   56    351    364    -    - 
Agrorama S.A.   0.001%   -    -    -    -    -    - 
SQM (Thailand) Limited   0.004%   -    -    -    -    -    - 
Total        (7,458)   (8,201)   55,621    54,662    6,426    1,764 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
72
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6Information on consolidated subsidiaries

 

12/31/2013
   Assets   Liabilities           Comprehensive 
Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   income (loss) 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                    
SQM Nitratos S.A.   490,084    124,966    525,924    15,545    184,487    18,434    18,434 
Proinsa Ltda.   200    1    -    -    -    (2)   (2)
SQMC Internacional Ltda.   266    -    -    -    -    (1)   (1)
SQM Potasio S.A.   109,408    1,049,628    3,411    15,749    2,052    184,948    185,458 
Serv. Integrales de Tránsito y Transf. S.A.   348,685    86,935    389,980    8,423    50,135    6,149    6,149 
Isapre Norte Grande Ltda   916    829    924    192    4,192    28    334 
Ajay SQM Chile S.A.   22,720    1,232    5,226    755    67,413    6,916    6,916 
Almacenes y Depósitos Ltda.   362    50    1    -    -    (11)   (40)
SQM Salar S.A.   678,215    1,000,954    453,864    216,110    792,109    206,745    206,679 
SQM Industrial S.A.   1,110,303    820,831    872,216    79,021    925,167    64,602    61,547 
Exploraciones Mineras S.A.   477    31,537    4,765    -    -    (312)   (312)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   762    243    322    556    2,276    31    46 
Soquimich Comercial S.A.   143,515    22,582    47,121    973    214,350    10,291    10,162 
Comercial Agrorama Ltda.   15,450    2,148    16,314    114    16,009    61    62 
Comercial Hydro S.A.   8,302    134    124    72    109    370    370 
Agrorama S.A.   15,722    568    16,074    36    16,122    37    37 
Orcoma SpA   2    2,356    -    -    -    -    - 
Orcoma Estudio SpA   2    -    -    -    -    -    - 
SQM North América Corp.   214,359    17,058    197,077    1,781    365,691    (4,763)   (3,751)
RS Agro Chemical Trading  Corporation A.V.V.   5,204    -    -    -    -    (9)   (9)
Nitratos Naturais do Chile Ltda.   3    254    4,695    -    -    278    278 
Nitrate Corporation of Chile Ltd.   5,076    -    -    -    -    -    - 
SQM Corporation N.V.   669    93,936    3,725    -    -    10,441    7,377 
SQM Perú S.A.   578    1    1,190    -    1    (191)   (191)
SQM Ecuador S.A.   10,644    81    10,533    42    25,475    (1,224)   (1,224)
SQM Brasil Ltda.   680    40    851    -    802    88    88 
SQI Corporation N.V.   -    19    62    -    -    (1)   (2)
SQMC Holding Corporation L.L.P.   11,978    16,394    1,000    -    -    5,267    5,267 
SQM Japan Co. Ltd.   1,948    263    234    494    2,468    (283)   (283)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
73
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6Information on consolidated subsidiaries, continued

 

12/31/2013
   Assets   Liabilities           Comprehensive 
Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   income (loss) 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                    
SQM Europe N.V.   316,396    383    280,092    -    677,497    1,608    1,608 
SQM Italia SRL   1,421    -    18    -    -    -    - 
SQM Indonesia S.A.   4    -    (76)   -    -    -    - 
North American Trading Company   160    145    39    -    -    (1)   (1)
SQM Virginia LLC   14,828    14,374    14,828    -    -    (1)   (1)
SQM Comercial de México S.A. de C.V.   88,252    1,427    61,534    -    178,180    4,724    4,724 
SQM Investment Corporation N.V.   62,496    282    36,805    851    50    1,097    1,097 
Royal Seed Trading Corporation A.V.V.   240,231    442    83,606    170,000    -    (2,537)   (1,904)
SQM Lithium Specialties LLP   15,781    3    1,264    -    -    (1)   (1)
Soquimich SRL Argentina   414    -    218    -    -    (49)   (49)
Comercial Caimán Internacional S.A.   271    -    1,122    -    -    (38)   (38)
SQM France S.A.   345    6    114    -    -    -    - 
Administración y Servicios Santiago S.A. de C.V.   153    -    795    127    3,243    (7)   (7)
SQM Nitratos México S.A. de C.V.   26    4    23    4    186    (7)   (7)
Soquimich European Holding B.V.   79,966    96,670    93,496    987    -    8,849    5,785 
SQM Iberian S.A   101,299    70    101,757    -    166,087    66    66 
SQM Africa Pty Ltd.   55,635    729    47,932    -    109,968    1,611    1,611 
SQM Oceanía Pty Ltd.   4,251    -    811    -    3,542    51    51 
SQM  Agro India Pvt. Ltd.   7    -    2    -    -    (2)   (2)
SQM Beijing Commercial Co. Ltd.   2,415    80    301    -    9,915    (1,164)   (1,164)
SQM Thailand Limited   7,052    36    4,510    -    4,379    (787)   (787)
Total   4,187,933    3,387,691    3,284,824    511,832    3,821,905    521,301    514,370 

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
74
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6Information on consolidated subsidiaries, continued

 

   12/31/2012   12/31/2012 
   Assets   Liabilities           Comprehensive 
Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   income (loss) 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
SQM Nitratos S.A.   610,140    125,407    519,148    15,721    366,936    148,768    148,768 
Proinsa Ltda.   220    1    -    -    -    -    10 
SQMC Internacional Ltda.   292    -    -    -    -    2    15 
SQM Potasio S.A.   19,134    1,130,587    1,013    13,293    10,172    259,578    259,578 
Serv. Integrales de Tránsito y Transf. S.A.   272,955    84,635    319,214    7,308    47,861    4,330    4,330 
Isapre Norte Grande Ltda.   786    742    672    201    4,517    263    297 
Ajay SQM Chile S.A.   25,125    1,137    5,454    772    64,806    9,980    9,980 
Almacenes y Depósitos Ltda.   398    54    1    -    -    (11)   35 
SQM Salar S.A.   700,153    911,055    315,982    148,687    933,061    318,275    318,404 
SQM Industrial S.A.   1,273,599    714,896    997,339    73,112    1,027,856    93,488    93,329 
Exploraciones Mineras S.A.   469    31,475    4,383    -    -    (236)   (236)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   890    148    362    540    320    17    26 
Soquimich Comercial S.A.   167,089    19,373    72,651    819    239,909    8,555    8,555 
Comercial Agrorama Ltda.   15,515    1,693    15,868    128    14,842    (185)   (135)
Comercial Hydro S.A.   7,882    218    135    95    110    430    430 
Agrorama S.A.   14,086    164    14,039    54    11,886    47    47 
SQM North America Corp.   303,666    16,070    281,313    2,190    441,315    23,736    23,736 
RS Agro Chemical Trading Corporation A.V.V.   5,214    -    -    -    -    (10)   (10)
Nitratos Naturais do Chile Ltda.   8    282    5,005    -    -    (284)   (284)
Nitrate Corporation of Chile Ltd.   5,076    -    -    -    -    -    - 
SQM Corporation N.V.   669    86,348    3,724    -    -    (3,314)   (3,314)
SQM Peru S.A.   867    37    1,215    -    321    (165)   (165)
SQM Ecuador S.A.   19,321    99    18,029    35    23,753    244    244 
SQM Brasil Ltda.   672    51    942    -    965    78    78 
SQI Corporation N.V.   -    17    43    -    -    (8)   (8)
SQMC Holding Corporation L.L.P.   5,685    18,912    1,657    -    -    2,422    2,422 

 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
75
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6Information on consolidated subsidiaries, continued

 

   12/31/2012   12/31/2012 
   Assets   Liabilities         Comprehensive 
Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   income (loss) 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
SQM Japan Co. Ltd.   2,190    286    166    544    2,476    (125)   (125)
SQM Europe N.V.   391,321    269    356,718    -    853,143    (14,928)   (14,928)
SQM Italia SRL   1,360    -    17    -    -    -    28 
SQM Indonesia S.A.   5    -    1    -    -    -    - 
North American Trading Company   160    145    39    -    -    -    - 
SQM Virginia LLC   14,829    14,375    14,829    -    -    -    - 
SQM Comercial de México S.A. de C.V.   77,811    1,280    55,509    163    172,412    3,254    3,254 
SQM Investment Corporation N.V.   63,933    331    39,426    813    4,551    743    743 
Royal Seed Trading Corporation A.V.V.   241,921    786    13,736    240,000    -    (2,435)   (2,435)
SQM Lithium Specialties LLP   15,782    3    1,264    -    -    -    - 
Soquimich SRL Argentina   422    -    176    -    -    (39)   (39)
Comercial Caimán Internacional S.A.   333    -    1,147    -    -    (58)   (58)
SQM France S.A.   345    6    114    -    -    -    - 
Administración y Servicios Santiago S.A. de C.V.   50    -    683    128    2,457    127    127 
SQM Nitratos México S.A. de C.V.   29    4    19    4    153    -    - 
Soquimich European Holding B.V.   70,432    108,680    102,950    -    -    (4,932)   (4,171)
SQM Iberian S.A   81,420    9    81,883    -    169,202    (2,136)   (2,136)
Iodine Minera B.V.   16,929    -    1    -    2,792    3,708    3,708 
SQM Africa Pty Ltd.   97,915    212    91,369    -    97,974    (2,921)   (2,921)
SQM Oceania Pty Ltd.   5,621    -    1,613    -    4,669    755    755 
SQM  Agro India Pvt. Ltd.   17    -    11    -    -    (38)   (38)
SQM Beijing Commercial Co. Ltd.   3,512    123    1,779    -    12,674    1,621    1,621 
Total   4,536,248    3,269,910    3,341,639    504,607    4,511,133    848,596    849,517 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
76
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 6 - Background of companies included in consolidation (continued)

 

6.7Detail of transactions between consolidated companies

 

a)Transactions carried out in 2013

 

On December 31, 2013, the subsidiary Orcoma Estudios SPA was incorporated into the Company with Sociedad Quimica y Minera de Chile S.A. making a capital contribution of US$ 1,500, acquiring 100% ownership.

 

On December 31, 2013, the subsidiary Orcoma SPA, was incorporated into the Company with Sociedad Quimica y Minera de Chile S.A. making a capital contribution of US$ 2,358, acquiring 100% ownership.

On March 25, 2013, SQM Industrial S.A. increased by ThUS$ 1,500 the capital of its subsidiary SQM Beijing Commercial Co. Ltd.

 

During the first half of the year Iodine Minera was absorbed into Soquimich European Holdings.

 

During the first half of 2013 Soquimich European Holdings B.V. purchased shares of SQM Thailand Limited, acquiring 99.996% of this company.

 

Transactions conducted in 2012

 

On November 30, 2012, SQM S.A. transferred and made a capital contribution of the 99% of the ownership interest in Minera Nueva Victoria Limitada to SQM Potasio S.A.; therefore, SQM Potasio S.A. obtains 100% of the ownership. As a result of the above, Minera Nueva Victoria Limitada merged into SQM Potasio S.A., which generates the dissolution of Minera Nueva Victoria Limitada.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
77
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 7 - Cash and cash equivalents

 

7.1Types of cash and cash equivalents

 

As of December 31, 2013 and December 31, 2012, cash and cash equivalents are detailed as follows:

 

   12/31/2013   12/31/2012 
a)     Cash  ThUS$   ThUS$ 
         
Cash on hand   119    90 
Cash in banks   29,671    41,541 
Other demand deposits   3,625    833 
Total cash   33,415    42,464 

 

   12/31/2013   12/31/2012 
b)     Cash equivalents  ThUS$   ThUS$ 
         
Short-term deposits, classified as cash equivalents   158,208    139,943 
Short-term investments, classified as cash equivalents   284,999    141,946 
Total cash equivalents   443,207    281,889 
           
Total cash and cash equivalents   476,622    324,353 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
78
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 7 -Cash and cash equivalents (continued)

 

7.2Short-term investments, classified as cash equivalents

 

As of December 31, 2013 and December 31, 2012, short-term investments, classified as cash and cash equivalents relate to mutual funds (investment liquidity funds) for investments in:

 

Institution  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Legg Mason - Western Asset Institutional Cash Reserves   95,941    47,408 
BlackRock - Institutional US Dollar Liquidity Fund   94,726    47,490 
JP Morgan US dollar Liquidity Fund Institutional   94,332    47,048 
Total   284,999    141,946 

 

Short-term investments are highly liquid mutual funds that are basically invested in short-term fixed rate notes classifies as cash equivalents in the U.S. market.

 

7.3Information on cash and cash equivalents by currency

 

As of December 31, 2013 and December 31, 2012, information on cash and cash equivalents by currency is detailed as follows:

 

   12/31/2013   12/31/2012 
Original currency  ThUS$   ThUS$ 
Chilean Peso (*)   25,391    76,712 
U.S. dollar   430,263    234,181 
Euro   9,230    3,601 
Mexican Peso   429    720 
South African Rand   7,229    7,421 
Japanese Yen   1,435    1,369 
Peruvian Sol   2    75 
Brazilian Real   73    20 
Chinese Yuan   384    181 
Indonesian Rupiah   4    5 
Indian rupee   7    - 
Thai baht   2,161    - 
Pound sterling   14    68 
Total   476,622    324,353 

 

(*) The Company maintains financial derivative policies which allow dollarizing these term deposits in Chilean pesos.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
79
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 7 -Cash and cash equivalents (continued)

 

7.4Amount of significant restricted (unavailable) cash balances

 

Cash on hand and in current bank accounts are available resources, and their carrying value is equal to their fair value.

 

As of December 31, 2013 and December 31, 2012, the Company has no significant cash balances with any type of restriction.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
80
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 7 -Cash and cash equivalents (continued)

 

7.5 Short-term deposits, classified as cash equivalents

 

The detail at the end of each period is as follows:

 

Receiver of the deposit  Type of deposit  Original Currency  Interest rate   Placement date  Expiration date  Principal
ThUS$
   Interest accrued
to-date
ThUS$
   31/12/2013
ThUS$
   31/12/2012
ThUS$
 
Banco BBVA Chile  Fixed term  US$   0.50   12/20/2013  01/09/2014   10,000    2    10,002    - 
Banco BBVA Chile  Fixed term  US$   -   12/20/2013  01/09/2014   10,000    2    10,002    - 
Banco BBVA Chile  Fixed term  US$   -   12/20/2013  01/09/2014   10,000    2    10,002    - 
Banco Crédito e Inversiones  Fixed term  US$   0.40   12/16/2013  01/16/2014   20,000    3    20,003    37,725 
Banco Crédito e Inversiones  Fixed term  US$   0.48   12/16/2013  02/06/2014   20,000    4    20,004    - 
Banco Crédito e Inversiones  Fixed term  US$   0.50   10/17/2013  01/03/2014   10,093    10    10,103    - 
Banco Crédito e Inversiones  Fixed term  US$   0.58   12/16/2013  03/11/2014   20,000    5    20,005    - 
Banco Crédito e Inversiones  Fixed term  Ch$   0.37   12/30/2013  01/13/2014   4,384    -    4,384    - 
Banco Crédito e Inversiones  Fixed term  Ch$   0.38   12/27/2013  01/09/2014   4,193    2    4,195    - 
Banco Santander - Santiago  Fixed term  US$   0.48   12/09/2013  01/23/2014   20,314    6    20,320    36,946 
Banco Santander - Santiago  Fixed term  US$   0.52   12/04/2013  01/03/2014   10,104    4    10,108    - 
Banco Santander - Santiago  Fixed term  Ch$   0.43   10/21/2013  01/03/2014   14,352    148    14,500    - 
IDBI Bank  Fixed term  Indian rupee   -   12/31/2013  03/31/2014   2    -    2    2 
Citibank New York  Overnight  US$   0.01   12/31/2013  01/02/2014   444    -    444    51,770 
Citibank New York  Overnight  US$   0.01   12/31/2013  01/02/2014   640    -    640    - 
Citibank New York  Overnight  US$   0.01   12/31/2013  01/02/2014   1,301    -    1,301    - 
ABN Amro Bank  Fixed term  Euro   -   12/31/2013  01/31/2014   2,193    -    2,193    - 
Banco Security  Fixed term  US$   -   -  -   -    -    -    3,501 
Corpbanca  Demand deposit  US$   -   -  -   -    -    -    9,999 
                                      
Total                    158,020    188    158,208    139,943 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
81
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 8 -Inventories

 

The composition of inventory at each period-end is as follows:

 

Type of inventory  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Raw material reserves   8,552    8,675 
Supplies for production reserves   42,366    37,919 
Products-in-progress reserves   400,824    405,382 
Finished product reserves   503,788    438,603 
Total   955,530    890,579 

 

Inventory reserves recognized as of December 31, 2013 amount to ThUS$97,248, and ThUS$72,687 as of December 31, 2012. Inventory reserves have been made based on a technical study that covers the different variables affecting products in stock (density, humidity, among others). Additionally, reserves are recognized if goods are sold cheaper than the related cost, and for differences that arise from inventory counts.

 

As of December 31, 2013, the sum registered as cost of sale related to inventory in the statement of income amounts to ThUS$1,314,276 and to ThUS$1,093,075 as of December 31, 2012.

 

The breakdown of inventory reserves is detailed as follows:

 

Type of inventory  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Raw material reserves   93    93 
Supplies for production reserves   500    500 
Products-in-progress reserves   65,768    46,635 
Finished product reserves   30,887    25,459 
           
Total   97,248    72,687 

 

The Company has not delivered inventory as collateral for the periods indicated above.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
82
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 -Related party disclosures

 

9.1Related party disclosures

 

Balances pending at period-end are not guaranteed, accrue no interest and are settled in cash. No guarantees have been delivered or received for trade and other receivables due from related parties or trade and other payables due to related parties. For the period ended December 31, 2013, the Company has not recorded any impairment in accounts receivable related to amounts owed by related parties. This evaluation is conducted every year through an examination of the financial position of the related party in the market in which it operates.

 

9.2Relationships between the parent and the entity

 

According to the Company’s by-laws, no shareholder can own more than 32% of the Company’s voting right shares.

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Ltda., collectively the Pampa Group, are the owners of a number of shares that are equivalent to 29.9% as of December 31, 2013 of the current total amount of shares issued, subscribed and fully-paid of the Company. In addition, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A. and La Esperanza Delaware Corporation, collectively the Kowa Group, are the owners of a number of shares equivalent to 2.09% of the total amount of shares of SQM S.A. issued, subscribed and fully-paid.

 

The Pampa Group and the Kowa Group have informed SQM S.A., the Chilean SVS and the relevant stock exchanges in Chile and abroad that they are not and have never been related parties between them. In addition, this is regardless of the fact that both Groups on December 21, 2006 have entered into a Joint Action Agreement (JAA) related to those shares. Consequently, the Pampa Group, by itself, does not concentrate more than 32% of the voting right capital of SQM S.A., and the Kowa Group does not concentrate by itself more than 32% of the voting right capital of SQM S.A.

 

Likewise, the Joint Action Agreement has not transformed the Pampa and Kowa Groups into related parties between them. The Joint Action Agreement has only transformed the current controller of SQM S.A., composed of the Pampa Group, and the Kowa Group into related parties of SQM S.A.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
83
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 -Related party disclosures (continued)

 

9.2Relationship between the Parent and the entity

 

Detail of effective concentration

 

Tax ID No.  Name  Ownership
interest %
 
96.511.530-7  Sociedad de Inversiones Pampa Calichera S.A.   19.65 
96.863.960-9  Inversiones Global Mining (Chile) Ltda.   3.34 
76.165.311-5  Potasios de Chile S.A.   6.91 
Total Pampa Group      29.90 
         
79,798,650-k  Inversiones la Esperanza (Chile) Ltda.   1.40 
59.046.730-8  Kowa Co Ltd.   0.30 
96.518.570-4  Kochi S.A.   0.30 
59.023.690-k  La Esperanza Delaware Corporation   0.09 
Total Kowa Group      2.09 

 

9.3Detailed identification of the link between the Parent and subsidiary

 

As of December 31, 2013 and December 31, 2012, the detail of entities that are a related parties of the SQM S.A: Group is as follows:

 

Tax ID No.  Name  Country of origin  Functional currency  Nature
Foreign  Nitratos Naturais Do Chile Ltda.  Brazil  US$  Subsidiary
Foreign  Nitrate Corporation Of Chile Ltd.  United Kingdom  US$  Subsidiary
Foreign  SQM North America Corp.  United States  US$  Subsidiary
Foreign  SQM Europe N.V.  Belgium  US$  Subsidiary
Foreign  Soquimich S.R.L. Argentina  Argentina  US$  Subsidiary
Foreign  Soquimich European Holding B.V.  The Netherlands  US$  Subsidiary
Foreign  SQM Corporation N.V.  Dutch Antilles  US$  Subsidiary
Foreign  SQI Corporation N.V.  Dutch Antilles  US$  Subsidiary
Foreign  SQM Comercial De México S.A. de C.V.  Mexico  US$  Subsidiary
Foreign  North American Trading Company  United States  US$  Subsidiary
Foreign  Administración y Servicios Santiago S.A. de C.V.  Mexico  US$  Subsidiary
Foreign  SQM Peru S.A.  Peru  US$  Subsidiary
Foreign  SQM Ecuador S.A.  Ecuador  US$  Subsidiary
Foreign  SQM Nitratos Mexico S.A. de C.V.  Mexico  US$  Subsidiary
Foreign  SQMC Holding Corporation L.L.P.  United States  US$  Subsidiary
Foreign  SQM Investment Corporation N.V.  Dutch Antilles  US$  Subsidiary
Foreign  SQM Brasil Limitada  Brazil  US$  Subsidiary
Foreign  SQM France S.A.  France  US$  Subsidiary
Foreign  SQM Japan Co.  Ltd.  Japan  US$  Subsidiary
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  US$  Subsidiary
Foreign  SQM Oceania Pty Limited  Australia  US$  Subsidiary
Foreign  Rs Agro-Chemical Trading Corporation A.V.V.  Aruba  US$  Subsidiary
Foreign  SQM Indonesia S.A.  Indonesia  US$  Subsidiary
Foreign  SQM Virginia L.L.C.  United States  US$  Subsidiary
Foreign  SQM Italia SRL  Italy  US$  Subsidiary
Foreign  Comercial Caiman Internacional S.A.  Panamá  US$  Subsidiary
Foreign  SQM Africa Pty. Ltd.  South Africa  US$  Subsidiary
Foreign  SQM Lithium Specialties LLC  United States  US$  Subsidiary
Foreign  SQM Iberian S.A.  Spain  US$  Subsidiary
Foreign  Iodine Minera B.V. (a)  The Netherlands  US$  Subsidiary
Foreign  SQM Agro India Pvt. Ltd.  India  US$  Subsidiary
Foreign  SQM Beijing Commercial Co. Ltd.  China  US$  Subsidiary
Foreign  SQM Thailand Limited (b)  Thailand  US$  Subsidiary

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
84
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 -Related party disclosures (continued)

 

9.3Detailed identification of the link between the Parent and subsidiary, continued

 

As of December 31, 2013 and December 31, 2012, the detail of entities that are a related parties of the SQM S.A: Group is as follows:

 

Tax ID No.  Name  Country of origin  Functional currency  Nature
96.801.610-5  Comercial Hydro S.A.  Chile  Chilean peso  Subsidiary
96.651.060-9  SQM Potasio S.A.  Chile  US$  Subsidiary
96.592.190-7  SQM Nitratos S.A.  Chile  US$  Subsidiary
96.592.180-K  Ajay SQM Chile S.A.  Chile  US$  Subsidiary
86.630.200-6  SQMC Internacional Ltda.  Chile  Chilean peso  Subsidiary
79.947.100-0  SQM Industrial S.A.  Chile  US$  Subsidiary
79.906.120-1  Isapre Norte Grande Ltda.  Chile  Chilean peso  Subsidiary
79.876.080-7  Almacenes y Depósitos Ltda.  Chile  Chilean peso  Subsidiary
79.770.780-5  Servicios Integrales de Tránsitos y Transferencias S.A.  Chile  US$  Subsidiary
79.768.170-9  Soquimich Comercial S.A.  Chile  US$  Subsidiary
79.626.800-K  SQM Salar S.A.  Chile  US$  Subsidiary
78.053.910-0  Proinsa Ltda.  Chile  Chilean peso  Subsidiary
76.534.490-5  Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  Chile  Chilean peso  Subsidiary
76.425.380-9  Exploraciones Mineras S.A.  Chile  US$  Subsidiary
76.064.419-6  Comercial Agrorama Ltda.  Chile  Chilean peso  Subsidiary
76.145.229-0  Agrorama S.A.  Chile  Chilean peso  Subsidiary
76.359.919-1  Orcoma Estudios SPA (c )  Chile  US$  Subsidiary
76.360.575-2  Orcoma SPA ( d )  Chile  US$  Subsidiary
77.557.430-5  Sales de Magnesio Ltda.  Chile  Chilean peso  Associate
Foreign  Abu Dhabi Fertilizer Industries WWL  United Arab Emirates  Arab Emirates dirham  Associate
Foreign  Doktor Tarsa Tarim Sanayi AS  Turkey  Turkish lira  Associate
Foreign  Ajay North America  United States  US$  Associate
Foreign  Ajay Europe SARL  France  Euro  Associate
Foreign  SQM Eastmed Turkey  Turkey  Euro  Associate
Foreign  Charlee SQM Thailand Co. Ltd.  Thailand  Thai baht  Associate
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  China  US$  Joint venture
Foreign  Coromandel SQM  India  Indian rupee  Joint venture
Foreign  SQM Vitas Fzco.  Arab Emirates  Arab Emirates dirham  Joint venture
Foreign  SQM Star Qingdao Crop Nutrition Co., Ltd.  China  US$  Joint venture
Foreign  SQM Vitas Spain  Spain  Euro  Joint venture
Foreign  SQM Vitas Holland  Dutch Antilles  Euro  Joint venture
Foreign  SQM Vitas Plantacote B.V  Dutch Antilles  Euro  Joint venture
Foreign  Kowa Company Ltd.  Japan  US$  Other related parties
96.511.530-7  Sociedad de Inversiones Pampa Calichera  Chile  US$  Other related parties
96.529.340-k  Norte Grande S.A.  Chile  Chilean peso  Other related parties
79.049.778-9  Callegari Agricola S.A.  Chile  Chilean peso  Other related parties
Foreign  Coromandel Internacional  India  Indian rupee  Other related parties
Foreign  Vitas Roullier SAS  France  Euro  Other related parties
Foreign  SQM Vitas Brasil Agroindustria  Brazil  US$  Joint control or significant influence
Foreign  SQM Vitas Peru S.A.C.  Peru  US$  Joint control or significant influence
Foreign  SQM Vitas Southern Africa Pty.  South Africa  US$  Joint control or significant influence

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
85
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 -Related party disclosures (continued)

 

9.3Detailed identification of the link between the Parent and subsidiary, continued

 

(a)During the first half of 2013 Iodine Minera S.A. was absorbed into Soquimich European Holdings B.V.

 

(b)During the first half of 2013 Soquimich European Holdings B.V. purchased shares of SQM Thailand Limited, acquiring 99.996% of the company.

 

(c)On December 31, 2013, the subsidiary Orcoma Estudios SPA was incorporated into the Company with Sociedad Quimica y Minera de Chile S.A. making a capital contribution of US$ 1,500, acquiring 100% ownership.

 

(d)On December 31, 2013, the subsidiary Orcoma SPA, was incorporated into the Company with Sociedad Quimica y Minera de Chile S.A. making a capital contribution of US$ 2,358, acquiring 100% ownership.

 

9.4Detail of related parties and related party transactions

 

Transactions between the Parent and its subsidiaries are part of the Company's common transactions. Their conditions are those customary for this type of transactions in respect of terms and market prices. In addition, these have been eliminated in consolidation and are not detailed in this note.

 

Maturity terms for each case vary by virtue of the transaction giving rise to them.

 

As of December 31, 2013 and December 31, 2012, there are no allowances for doubtful accounts related to balances pending of transactions with related parties as there is no impairment in them.

 

As of December 31, 2013 and December 31, 2012, the detail of transactions with related parties is as follows:

 

Tax ID No.  Company  Nature  Country of
origin
  Transaction  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Foreign  Doktor Tarsa Tarim Sanayi As  Associate  Turkey  Sale of products   13,844    9,587 
Foreign  Doktor Tarsa Tarim Sanayi As  Associate  Turkey  Other Transactions   740    - 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Sale of products   35,884    37,232 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Dividends   5,093    3,564 
Foreign  Ajay North America LLC.  Associate  United States  Sale of products   40,605    42,081 
Foreign  Ajay North America LLC.  Associate  United States  Dividends   10,437    10,175 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  Sale of products   7,908    6,285 
Foreign  Charlee SQM Thailand Co.Ltd.  Associate  Thailand  Sale of products   5,669    10,203 
77.557.430-5  Sales de Magnesio Ltda.  Associate  Chile  Sale of products   1,186    1,472 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
86
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 -Related party disclosures (continued)

 

9.4Detail of related parties and transactions with related parties, continued

 

Tax ID No.  Company  Nature  Country of
origin
  Transaction  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
77.557.430-5  Sales de Magnesio Ltda.  Associate  Chile  Dividends   892    1,052 
96.529.340-k  Norte Grande S.A.  Other related parties  Chile  Sale of services   140    - 
Foreign  Kowa Company Ltd.  Other related parties  Japan  Sale of products   77,176    123,581 
Foreign  SQM Vitas Brasil Agroindustria  Joint control or significant influence  Brazil  Sale of products   52,901    40,518 
Foreign  SQM Vitas Peru S.A.C.  Joint control or significant influence  Peru  Sale of products   21,255    26,123 
Foreign  SQM Vitas Southern Africa Pty.  Joint control or significant influence  South Africa  Sale of products   17,908    10,930 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Sale of products   289    120 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Sale of services   98    - 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Joint venture  China  Sale of products   56,254    - 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Joint venture  China  Sale of services   282    62 
Foreign  Coromandel SQM  Joint venture  India  Sale of products   5,242    2,300 
Foreign  SQM Star Qingdao Crop Nutrition Co., Ltd.  Joint venture  China  Sale of services   148    - 
Foreign  SQM Vitas Spain  Joint venture  Spain  Sale of products   1,624    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
87
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 -Related party disclosures (continued)

 

9.5Trade receivables due from related parties, current:

 

Tax ID No.  Company  Nature  Country of origin  Currency  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
77.557.430-5  Sales de Magnesio Ltda.  Associate  Chile  Ch$   147    303 
Foreign  Charlee SQM Thailand Co. Ltd.  Associate  Thailand  US$   331    6,098 
Foreign  Doktor Tarsa Tarim Sanayi AS  Associate  Turkey  US$   11    - 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Euro   4,974    4,775 
Foreign  Ajay North America LLC.  Associate  United States  US$   4,166    4,633 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  Arab Emirates dirham   2,958    1,805 
Foreign  Kowa Company Ltd.  Other related parties  Japan  US$   22,960    29,929 
96.511.530-7  Soc.de Inversiones Pampa Calichera  Other related parties  Chile  US$   8    8 
Foreign  SQM  Star Qingdao Crop Nutrition Co., Ltd  Joint venture  China  US$   -    27 
Foreign  SQM Vitas Brasil Agroindustria  Joint venture  Brazil  US$   18,205    27,903 
Foreign  SQM Vitas Peru S.A.C.  Joint venture  Peru  US$   17,840    18,143 
Foreign  SQM Vitas Southern Africa PTY  Joint venture  South Africa  US$   4,553    1,478 
Foreign  Coromandel SQM  Joint venture  India  Indian rupee   2,271    756 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Joint venture  China  US$   47,910    4,000 
79.049.778-9  Callegari Agrícola S.A.  Other related parties  Chile  Ch$   363    844 
Foreign  Coromandel Internacional  Other related parties  India  Indian rupee   -    670 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Arab Emirates dirham   436    - 
Foreign  SQM Vitas Spain  Joint venture  Spain  Euro   760    - 
Foreign  SQM Vitas Plantacote B.V  Joint venture  Dutch Antilles  Euro   133    - 
Total to-date               128,026    101,372 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
88
 

  

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 - Related party disclosures (continued)

 

9.6Trade payables due to related parties, current:

 

               12/31/2013   12/31/2012 
Tax ID No.  Company  Nature  Country of origin  Currency  ThUS$   ThUS$ 
Foreign  SQM Vitas Fzco.  Joint ventures  United Arab Emirates  Arab Emirates dirham   -    19 
Total as of to-date               -    19 

 

SQM

Los Militares 4290

Las Condes, Santiago, Chile

Tel: (56 2) 425 2000

www.sqm.com

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
89
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 - Related party disclosures (continued)

 

9.7Board of Directors and Senior Management

 

1)Board of directors

 

The Company is managed by a Board of Directors which is composed of eight regular directors who are elected for a three-year period. The present Board of Directors was elected by the shareholders at the Ordinary Shareholders' Meeting of April 25, 2013.

 

As of December 31, 2013, the Company has an Audit Committee made up of three members of the Board of Directors. This Committee performs those duties provided in Article 50 bis of Law No. 18,046 on Shareholders Company, the Shareholders’ Corporations Act.

 

During the periods covered by these financial statements, there are no pending balances receivable and payable between the Company, its directors or members of Senior Management other than those related to remuneration, fee allowances and profit-sharing. In addition, there were no transactions conducted between the Company, its directors or members of Senior Management.

 

2)Directors’ Compensation

 

2.1.1 Board of Directors

 

Directors’ compensation is detailed as follows:

 

a)A payment of a monthly fixed gross amount of UF 300 in favor of the Chairman of the Company’s Board of Directors and UF 50 in favor of the seven remaining board members regardless of their attendance at Board meetings or the number of meetings attended during the respective month.

 

b)A payment in domestic currency in favor of the Chairman of the Company’s Board of Directors consisting of a variable and gross amount equivalent to 0.35% of profit for the period effectively earned by the Company during fiscal year 2013.

 

c)A payment in domestic currency in favor of each Company’s directors excluding the Chairman of the Board, consisting of a variable and gross amount equivalent to 0.04% of profit for the period effectively earned by the Company during fiscal years 2013.
SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
90
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 - Related party disclosures (continued)

 

9.7Board of Directors and Senior Management, continued

 

d)The fixed and variable amounts indicated above will not be subject to any charge between them, and those expressed as a percentage will be paid immediately after the shareholders at the respective Annual General Shareholders’ Meeting of the Company approve the statement of financial position (balance sheet), the financial statements, the annual report, the report by the account inspectors and the report of external auditors for the fiscal years ending December 31, 2013.

 

e)Therefore, the remunerations and profit sharing paid to members of the Board of Directors and Audit Committee during 2013 amount to ThUS$4,827 (ThUS$ 3,973 as of December 31, 2012).

 

2.1.2 Audit Committee

 

The remuneration of Directors Committee is composed of:

 

a)A payment of a monthly, fixed and gross amount of UF 17 in favor of each of the three Directors who are a part of the Company’s Audit Committee regardless of the number of meetings conducted during the respective month.

 

b)A payment in domestic currency and in favor of each of the three Directors of a variable and gross amount equivalent to 0.013% of the Company’s profit for the period effectively earned by the Company during fiscal years 2013.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
91
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 9 - Related party disclosures (continued)

 

9.7Board of Directors and Senior Management, continued

 

3)No guarantees have been constituted in favor of the directors.

 

4)Senior management compensation

 

As of December 31, 2013, the global compensation paid to the 117 main executives amounts to ThUS$24,150 (ThUS$32,888 as of December 31, 2012). This includes monthly fixed salary and variable performance bonuses.

 

The Company has a bonuses intermediate and bi-intermediate plan for compliance target and level of individual contribution to the Company’s profit or loss. These benefits are structured in a minimum and maximum of gross remunerations which are paid once a year or every two years.

 

5)Additionally, the Company has retention bonuses for the Company’s executives. The amount of these bonuses is linked to the price of the Company’s share and is payable in cash between 2012 and 2016 (See Note 16).

 

6)No guarantees have been constituted in favor of the Company’s management.

 

7)The Company’s Managers and Directors do not receive or have not received any benefit during the period ended December 31, 2013 and the year ended December 31, 2012 or compensation for the concept of pensions, life insurance, paid time off, profit sharing, incentives, or benefits due to disability other than those mentioned in the preceding points.

 

8)In accordance with IAS 24, we should report that the Company's Director Mr. Wolf Von Appen B. is member of the Ultramar Group. During the period ended December 31, 2013, the amount of operations with this Group is approximately ThUS$16,850 (ThUS$22,577 as of December 31, 2012).

 

9.8Key management personnel compensation

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
           
Key management personnel compensation   24,150    32,888 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
92
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments

 

Financial assets in conformity with IAS 39 are detailed as follows:

 

10.1Types of other financial assets

 

   12/31/2013   12/31/2012 
Description of other financial assets  ThUS$   ThUS$ 
           
Other current financial assets (1)   431,883    244,161 
Derivatives (2)   3,283    680 
Hedging assets, current   25,007    71,262 
Total other current financial assets   460,173    316,103 
           
Other non-current financial assets   95    107 
Hedging assets, non-current   -    29,385 
Total other non-current financial assets   95    29,492 

 

(1)Relates to term deposits with maturities exceeding 90 days and less than 360 days from the investment date.

 

(2)Relate to forwards and options that were not classified as hedging instruments (see detail in Note 10.3).

 

Detail of other current financial assets

 

Institution  12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
Banco Santander   131,534    41,691 
BBVA   80,206    31,579 
Banco de Crédito e Inversiones   79,530    82,145 
Banco de Chile   42,095    42,992 
Corpbanca   61,244    10,499 
Banco Scotiabank   -    25,141 
Banco Itaú   30,207    10,114 
Banco Security   7,067    - 
Total   431,883    244,161 

 

10.2Trade and other receivables, current and non-current

 

   12/31/2013   12/31/2012 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Trade receivables   314,151    -    314,151    490,770    -    490,770 
Prepayments   12,127    -    12,127    14,046    -    14,046 
Other receivables   4,714    1,282    5,996    5,800    1,311    7,111 
Total trade and other receivables   330,992    1,282    332,274    510,616    1,311    511,927 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
93
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments, (continued)

 

10.2Trade and other receivables, continued

 

   12/31/2013   12/31/2012 
   Assets
before
allowances
   Allowance
for doubtful
trade
receivables
   Assets for
trade
receivables,
net
   Assets
before
allowances
   Allowance
for doubtful
trade
receivables
   Assets for
trade
receivables,
net
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Receivables related to credit operations, current   330,052    (15,901)   314,151    507,562    (16,792)   490,770 
                               
Trade receivables, current   330,052    (15,901)   314,151    507,562    (16,792)   490,770 
                               
Prepayments, current   14,927    (2,800)   12,127    14,046    -    14,046 
Other receivables, current   6,663    (1,949)   4,714    7,801    (2,001)   5,800 
                               
Current trade and other receivables   351,642    (20,650)   330,992    529,409    (18,793)   510,616 
                               
Other receivables, non-current   1,282    -    1,282    1,311    -    1,311 
                               
Non-current receivables   1,282    -    1,282    1,311    -    1,311 
                               
Total trade and other receivables   352,924    (20,650)   332,274    530,720    (18,793)   511,927 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
94
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments (continued)

 

10.2Trade and other receivables, continued

 

Portfolio stratification, continued

 

The Company’s policy is to require guarantees (such as letters of credit, guarantee clauses and others) and/or maintaining insurance policies for certain accounts as deemed necessary by management.

 

Unsecured portfolio

 

As of December 31, 2013 and December 31, 2012, the detail of the unsecuritized portfolio is as follows:

 

12/31/2013
   Not overdue   1 - 30 days   31 - 60 days   61 - 90
days
   91 - 120
days
   121 - 150
days
   151 - 180
days
   181 - 210
days
   211 - 250
days
   Over 250
days
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Number of customers, portfolio under no renegotiated terms   3,175    1,055    515    395    332    304    303    294    312    1,817    8,502 
Portfolio under no renegotiated terms   269,970    29,722    4,144    432    572    210    1,138    118    8,955    8,371    323,632 
Number of customers under renegotiated terms portfolio   42    8    2    2    3    1    5    6    12    113    194 
                                                        
Portfolio under renegotiated terms, gross   2,964    79    15    69    42    13    87    85    447    2,619    6,420 
                                                        
Total gross portfolio   272,934    29,801    4,159    501    614    223    1,225    203    9,402    10,990    330,052 

 

12/31/2012
   Not overdue   1 - 30 days   31 - 60 days   61 - 90
days
   91 - 120
days
   121 - 150
days
   151 - 180
days
   181 - 210
days
   211 - 250
days
   Over 250
days
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Number of customers, portfolio under no renegotiated terms   2,591    2,228    539    400    367    303    319    268    301    33,380    40,696 
Portfolio under no renegotiated terms   408,390    20,030    1,216    46,079    38    56    332    9,816    469    11,466    497,892 
Number of customers under renegotiated terms portfolio   75    13    6    9    -    5    6    11    10    210    345 
                                                        
Portfolio under renegotiated terms, gross   4,166    91    43    189    -    73    63    324    325    4,396    9,670 
                                                        
Total gross portfolio   412,556    20,121    1,259    46,268    38    129    395    10,140    794    15,862    507,562 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
95
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments, (continued)

 

10.2Trade and other receivables, continued

 

The detail of allowances is as follows:

 

Allowance and write-offs  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Allowance for portfolio under no renegotiated terms   16,711    14,627 
Allowance for portfolio with renegotiated terms   4,459    5,564 
Write-offs for the period   (520)   (1,398)
Total   20,650    18,793 

 

a)Credit risk concentration

 

Credit risk concentrations with respect to trade receivables are reduced due to the great number of entities included in the Company’s client database and their distribution throughout the world.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
96
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments (continued)

 

10.3Hedging assets and liabilities

 

The balance represents derivative instruments measured at fair value which have been classified as hedges against exchange and interest rate risks related to the total obligations relating to bonds of the Company in Chilean pesos and UF (and the exchange risk in Chilean pesos of the Company’s investment plans). As of December 31, 2013, the face value of cash flows in Cross Currency Swap contracts agreed upon in US dollars amounted to ThUS$555,303 and as of December 31, 2012 such contracts amounted to ThUS$515,156.

 

 

Hedging assets  Derivative
instruments
(CCS)
   Effect on profit or
loss for the period
Derivative
instruments
   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                     
December 31, 2013   23,602    (45,312)   (3,307)   661    (2,646)
                          
December 31, 2012   100,647    49,853    (18,419)   3,684    (14,735)

 

 

Hedging liabilities  Derivative
instruments
(IRS)
   Effect on profit or
loss for the period
Derivative
instruments
   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                     
December 31, 2013   1,339    (93)   (1,153)   -    (1,153)
                          
December 31, 2012   1,879    27    (1,786)   -    (1,786)

 

The balances in the effect on profit or loss column consider the interim effects of the contracts in force as of December 31, 2013 and December 31, 2012.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
97
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.3Hedging assets and liabilities, continued

 

Derivative contract maturities are detailed as follows:

 

Series  Contract amount 
ThUS$
   Currency  Maturity date
C   66,710   UF  12/01/2026
G   33,673   Chilean peso  01/05/2014
H   191,638   UF  01/05/2018
I   56,041   UF  04/01/2014
J   92,440   Chilean peso  04/01/2014
M   46,463   UF  02/01/2017
O   68,338   UF  02/01/2017

 

The Company uses cross currency swap derivative instruments to hedge the possible financial risk associated with the volatility of the exchange rate associated with Chilean pesos and UF. The objective is to hedge against the exchange rate financial risks associated with bonds payable. Hedges are documented and tested to measure their effectiveness.

 

Based on a comparison of critical terms, hedging is highly effective, given that the hedged amount is consistent with obligations maintained for bonds denominated in Chilean pesos and UF. Likewise, hedging contracts are denominated in the same currencies and have the same expiration dates of bond principal and interest payments.

 

Hedge Accounting

 

The Company classifies derivative instruments as hedging, that may include derivatives or embedded derivatives either as fair value hedge derivative instruments, cash flow hedge derivative instruments, or hedge derivative instruments for net investment in a business abroad.

 

a) Fair value hedge

 

Changes in fair values of derivative instruments classified as fair value hedge derivative instruments are accounted for in gains and losses immediately along with any change in the fair value of the hedged item that is attributable to the risk being hedged.

 

The Company documents the relationship between hedge instruments and the hedged item along with the objectives of its risk management and strategy to carry out different hedging transactions. In addition, upon commencement of the period hedged and then on a quarterly basis the Company documents whether hedge instruments have been efficient and met the objective of hedging market fluctuations for the purpose of which we use the effectiveness test. A hedge instrument is deemed effective if the effectiveness test result is between 80% to 120%.

 

The hedge instruments are classified as effective or not effective on the basis of the effectiveness test results. To date, hedges are classified as effective on the basis of the effectiveness tests. This note includes the detail of fair values of derivatives classified as hedging instruments.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
98
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.3Hedging assets and liabilities, continued

 

b) Cash flow hedges

 

Cash flow hedges cover exposure to the cash flow variations attributable to a risk associated with a specific transaction that is very likely to be executed, that may have material effects on the results of the Company.

 

10.4Financial liabilities

 

Other current and non-current financial liabilities

 

As of December 31, 2013 and December 31, 2012, the detail is as follows:

 

   12/31/2013    12/31/2012 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Bank borrowings   171,347    309,489    480,836    122,373    379,119    501,492 
Obligations with the public   227,652    1,106,496    1,334,148    20,135    1,067,075    1,087,210 
Derivatives   1,088    -    1,088    8,456    -    8,456 
Hedging liabilities   1,339    1,405    2,744    1,879    -    1,879 
Total   401,426    1,417,390    1,818,816    152,843    1,446,194    1,599,037 

 

Current and non-current borrowings

 

As of December 31, 2013 and December 31, 2012, the detail is as follows:

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
         
Long-term borrowings   309,489    379,119 
           
Short-term borrowings   100,135    120,921 
Current portion of long-term borrowings   71,212    1,452 
Short-term loans and current portion of long-term borrowings   171,347    122,373 
Total borrowings assumed   480,836    501,492 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
99
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

a)Bank loans, current:

 

As of December 31, 2013 and December 31, 2012, the detail of this caption is as follows:

 

      Currency             12/31/2013 
                  or             Up to 90   Current maturities     
Debtor  Creditor  adjustment     Effective   Nominal   days   91 days to 1   Total 
Tax ID No.  Subsidiary  Country  Tax ID No.  Financial institution  Country  Index  Repayment  Rate   Rate   ThUS$   year ThUS$   ThUS$ 
                                          
93.007.000-9  SQM.S.A.  Chile  97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   0.65%   0.65%   3    20,000    20,003 
93.007.000-9  SQM.S.A.  Chile  97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   0.47%   0.47%   7    20,000    20,007 
93.007.000-9  SQM S.A.  Chile  Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.10%   2.39%   1,012    -    1,012 
79.626.800-K  SQM Salar S.A.  Chile  97.030.000-7  Banco Estado  Chile  US$  Upon maturity   0.61%   0.61%   20,033    -    20,033 
79.626.800-K  SQM Salar S.A.  Chile  97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   0.59%   0.59%   11    20,000    20,011 
79.947.100-0  SQM Industrial S.A.  Chile  97.030.000-7  Banco Estado  Chile  US$  Upon maturity   0.75%   0.75%   -    20,081    20,081 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Bank of America  United States  US$  Upon maturity   1.75%   1.27%   -    120    120 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Export Development Canada  Canada  US$  Upon maturity   1.69%   1.30%   -    10,014    10,014 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.35%   1.24%   189    50,000    50,189 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.73%   1.41%   -    139    139 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  The Bank of Tokyo-Mitsubishi UFJ, Lda. (New York)  United States  US$  Upon maturity   1.37%   1.01%   -    10,108    10,108 
                                   21,255    150,462    171,717 
Borrowing costs                               (26)   (344)   (370)
Total                                  21,229    150,118    171,347 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
100
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

      Currency             12/31/2012 
                  or             Up to 90   Current maturities      
Debtor  Creditor  adjustment     Effective   Nominal   days   91 days to 1   Total 
Tax ID No.  Subsidiary  Country  Tax ID No.  Financial institution  Country  Index  Repayment  rate   rate   ThUS$   year ThUS$   ThUS$ 
                                          
93.007.000-9  SQM.S.A.  Chile  97.030.000-7  Banco Estado  Chile  US$  Upon maturity   1.70%   1.70%   -    20,175    20,175 
93.007.000-9  SQM.S.A.  Chile  97.030.000-7  Banco Estado  Chile  US$  Upon maturity   1.09%   1.09%   -    20,017    20,017 
93.007.000-9  SQM S.A.  Chile  Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.01%   2.69%   1,139    -    1,139 
79.626.800-K  SQM Salar S.A.  Chile  97.032.000-8  Banco BBVA Chile  Chile  US$  Upon maturity   1.90%   1.90%   -    20,243    20,243 
79.626.800-K  SQM Salar S.A.  Chile  97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   1.03%   1.03%   20,153    -    20,153 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Bank of America  United States  US$  Upon maturity   1.83%   1.52%   -    141    141 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Export Development Canada  Canada  US$  Upon maturity   1.81%   1.46%   -    20    20 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.60%   1.54%   -    235    235 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.92%   1.62%   -    164    164 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  The Bank of Tokyo-Mitsubishi UFJ, Lda. (New York)  United States  US$  Upon maturity   1.49%   1.26%   -    140    140 
79.947.100-0  SQM Industrial S.A.  Chile  97.030.000-7  Banco Estado  Chile  US$  Upon maturity   1.64%   1.64%   -    20,172    20,172 
79.947.100-0  SQM Industrial S.A.  Chile  97.018.000-1  Scotiabank Sud Americano  Chile  US$  Upon maturity   1.04%   1.04%   20,162    -    20,162 
Total                                  41,454    81,307    122,761 
Borrowing costs                               (26)   (362)   (388)
Total                                  41,428    80,945    122,373 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
101
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments (continued)

 

10.4Financial liabilities, continued

 

b)Unsecured obligations, current:

 

As of December 31, 2013 and December 31, 2012, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows:

 

Bonds

 

         Number of        Currency             12/31/2013
Current maturities
 
         registration or        or  Periodicity          Up to 90   91 days to     
Debtor  ID of the        adjustment  Payment of     Effective   Nominal   days   1 year   Total 
Tax ID No.  Subsidiary  Country  instrument  Series  Maturity date  index  Interest  Repayment  rate   rate   ThUS$   ThUS$   ThUS$ 
                                             
93.007.000-9  SQM S.A  Chile  -  ThUS$200,000  04/15/2014  US$  Semiannual  Upon maturity   6.32%   6.13%   -    2,586    2,586 
93.007.000-9  SQM S.A  Chile  -  ThUS$250,000  04/21/2014  US$  Semiannual  Upon maturity   5.70%   5.50%   -    2,674    2,674 
93.007.000-9  SQM S.A  Chile  -  ThUS$300,000  04/03/2014  US$  Semiannual  Upon maturity   3.87%   3.63%   -    2,658    2,658 
93.007.000-9  SQM S.A  Chile  446  C  06/01/2014  UF  Semiannual  Semiannual   4.44%   4.00%   -    6,951    6,951 
93.007.000-9  SQM S.A  Chile  563  G  01/05/2014  $  Semiannual  Upon maturity   7.50%   7.00%   41,377    -    41,377 
93.007.000-9  SQM S.A  Chile  564  H  01/05/2014  UF  Semiannual  Semiannual   5.10%   4.90%   4,207    -    4,207 
93.007.000-9  SQM S.A  Chile  563  I  04/01/2014  UF  Semiannual  Upon maturity   3.35%   3.00%   -    67,144    67,144 
93.007.000-9  SQM S.A  Chile  563  J  04/01/2014  $  Semiannual  Upon maturity   6.23%   5.50%   -    100,466    100,466 
93.007.000-9  SQM S.A  Chile  700  M  02/01/2014  UF  Semiannual  Upon maturity   3.62%   3.30%   606    -    606 
93.007.000-9  SQM S.A  Chile  699  O  02/01/2014  UF  Semiannual  Upon maturity   3.95%   3.80%   1,045    -    1,045 
         Total                            47,235    182,479    229,714 
         Bond issuance costs                         (335)   (1,727)   (2,062)
         Total                            46,900    180,752    227,652 

 

Effective rates of bonds in Chilean pesos and UF are expressed and calculated in U.S. dollars based on the flows agreed in Cross Currency Swap Agreements.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
102
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments (continued)

 

10.4Financial liabilities, continued

 

         Number of        Currency                12/31/2012
Current maturities
 
         registration or     Maturity date  or  Periodicity          Up to 90   91 days to     
Debtor  ID of the     Payment of  adjustment  Payment of     Effective   Nominal   days   1 year   Total 
Tax ID No.  Subsidiary  Country  instrument  Series  interest  index  Interest  Repayment  rate   rate   ThUS$   ThUS$   ThUS$ 
                                             
93.007.000-9  SQM S.A  Chile  -  ThUS$200,000  4/15/2013  US$  Semiannual  Upon expiration   6.32%   6.13%   -    2,577    2,577 
93.007.000-9  SQM S.A  Chile  -  ThUS$250,000  4/21/2013  US$  Semiannual  Upon expiration   5.70%   5.50%   -    2,667    2,667 
93.007.000-9  SQM S.A  Chile  446  C  6/1/2013  UF  Semiannual  Semiannual   4.44%   4.00%   -    7,464    7,464 
93.007.000-9  SQM S.A  Chile  563  G  7/5/2013  Ch$  Semiannual  Upon expiration   7.50%   7.00%   1,465    -    1,465 
93.007.000-9  SQM S.A  Chile  564  H  7/5/2013  UF  Semiannual  Semiannual   5.10%   4.90%   4,484    -    4,484 
93.007.000-9  SQM S.A  Chile  563  I  4/1/2013  UF  Semiannual  Upon expiration   3.35%   3.00%   -    532    532 
93.007.000-9  SQM S.A  Chile  563  J  4/1/2013  Ch$  Semiannual  Upon expiration   6.23%   5.50%   -    1,470    1,470 
93.007.000-9  SQM S.A  Chile  700  M  8/1/2013  UF  Semiannual  Upon expiration   3.62%   3.30%   644    -    644 
93.007.000-9  SQM S.A  Chile  699  O  8/1/2013  UF  Semiannual  Upon expiration   3.95%   3.80%   1,110    -    1,110 
         Total                            7,703    14,710    22,413 
         Bond issuance costs                         (473)   (1,805)   (2,278)
         Total                            7,230    12,905    20,135 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
103
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments (continued)

 

10.4Financial liabilities, continued

 

c)Types of interest-bearing borrowings, non-current

 

Non-current interest-bearing borrowings as of December 31, 2013 and December 31, 2012 are detailed as follows:

 

                  Currency             12/31/2013
Years to maturity
     
                  or             Over 1 years   Over 3   Over 5     
Debtor  Creditor  adjustment     Effective   Nominal   to 3   to 5   Years   Total 
Tax ID No.  Subsidiary  Country  Tax ID No.  Financial institution  Country  Index  Repayment  rate   rate   ThUS$   ThUS$   ThUS$   ThUS$ 
                                              
93.007.000-9  SQM S.A.  Chile  Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.10%   2.39%   -    140,000    -    140,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.35%   1.41%   50,000    -    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Bank of America  United States  US$  Upon maturity   1.75%   1.27%   40,000    -    -    40,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Export Development Canada  Canada  US$  Upon maturity   1.69%   1.30%   40,000    -    -    40,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  The Bank of Tokyo-Mitsubishi UFJ, Ltd (New York)  United States  US$  Upon maturity   1.37%   1.01%   40,000    -    -    40,000 
Total                                  170,000    140,000    -    310,000 
   Borrowings costs                            (441)   (70)   -    (511)
Total                                  169,559    139,930    -    309,489 

 

                  Currency             12/31/2012
Years to maturity
     
                  or             Over 1 years   Over 3   Over 5     
Debtor  Creditor  adjustment     Effective   Nominal   to 3   to 5   Years   Total 
Tax ID No.  Subsidiary  Country  Tax ID No.  Financial institution  Country  Index  Repayment  rate   rate   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                    
93.007.000-9  SQM S.A.  Chile  Foreign  Banco Estado NY Branch  United States  US$  Upon maturity   3.01%   2.69%   -    140,000    -    140,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.60%   1.54%   50,000    -    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Scotiabank & Trust (Cayman) Ltd.  Cayman Islands  US$  Upon maturity   1.92%   1.62%   50,000    -    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Bank of America  United States  US$  Upon maturity   1.83%   1.52%   -    40,000    -    40,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  Export Development Canada  Canada  US$  Upon maturity   1.81%   1.46%   -    50,000    -    50,000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  Foreign  The Bank of Tokyo-Mitsubishi UFJ, Ltd (New York)  United States  US$  Upon maturity   1.49%   1.26%   -    50,000    -    50,000 
Total                                  100,000    280,000    -    380,000 
   Borrowings costs                            (235)   (646)   -    (881)
Total                                  99,765    279,354    -    379,119 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
104
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 – Financial instruments (continued)

 

10.4Financial liabilities, continued

 

d) Non-current unsecured interest-bearing bonds

 

The breakdown of non-current unsecured interest-bearing bonds as of December 31, 2013 and December 31, 2012 is detailed as follows:

 

                                           12/31/2013 
                                       Over 1   Current maturities 
          Number of          Currency or  Periodicity        years   Over 3   Over 5     
Debtor  registration or ID          adjustment  Payment of      Effective   Nominal   to 3   to 5   years   Total 
Tax ID No.  Subsidiary    Country   of the instrument   Series   Maturity date  index  interest   Repayment   rate   rate   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
93.007.000-9  SQM S.A   Chile    -    ThUS$200,000   04/15/2016  US$   Semiannual   Upon maturity   6.32%   6.13%   200,000    -    -    200,000 
93.007.000-9  SQM S.A   Chile    -    ThUS$250,000   04/21/2020  US$   Semiannual   Upon maturity   5.70%   5.50%   -    -    250,000    250,000 
93.007.000-9  SQM S.A   Chile    -    ThUS$300,000   04/03/2023  US$   Semiannual   Upon maturity   3.87%   3.63%   -    -    300,000    300,000 
93.007.000-9  SQM S.A   Chile    446    C   12/01/2026  UF   Semiannual   Semiannual   4.44%   4.00%   13,328    13,328    53,322    79,978 
93.007.000-9  SQM S.A   Chile    564    H   01/05/2030  UF   Semiannual   Semiannual   5.10%   4.90%   -    -    177,729    177,729 
93.007.000-9  SQM S.A   Chile    700    M   02/01/2017  UF   Semiannual   Upon maturity   3.62%   3.30%   -    44,432    -    44,432 
93.007.000-9  SQM S.A   Chile    699    O   02/01/2033  UF   Semiannual   Upon maturity   3.95%   3.80%   -    -    66,648    66,648 
            Total                                 213,328    57,760    847,699    1,118,787 
            Bond issuance costs                            (737)   (593)   (10,961)   (12,291)
            Total                                 212,591    57,167    836,738    1,106,496 

 

                                           12/31/2012 
                                       Over 1   Current maturities 
          Number of          Currency or  Periodicity        years   Over 3   Over 5     
Debtor  registration or ID          adjustment  Payment of      Effective   Nominal   to 3   to 5   years   Total 
Tax ID No.  Subsidiary    Country   of the instrument     Series   Maturity date  index  interest   Repayment   rate    rate   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
93.007.000-9  SQM S.A   Chile    -    ThUS$200,000   04/15/2016  US$   Semiannual   Upon maturity   6.32%   6.13%   -    200,000    -    200,000 
93.007.000-9  SQM S.A   Chile    -    ThUS$250,000   04/21/2020  US$   Semiannual   Upon maturity   5.70%   5.50%   -    -    250,000    250,000 
93.007.000-9  SQM S.A   Chile    446    C   12/01/2026  UF   Semiannual   Semiannual   4.44%   4.00%   14,280    14,280    64,260    92,820 
93.007.000-9  SQM S.A   Chile    564    H   01/05/2030  UF   Semiannual   Semiannual   7.5%   4.90%   -    -    190,401    190,401 
93.007.000-9  SQM S.A   Chile    563    G   01/05/2014  Ch$   Semiannual   Upon maturity   5.10%   7.00%   43,764    -    -    43,764 
93.007.000-9  SQM S.A   Chile    563    I   04/01/2014  UF   Semiannual   Upon maturity   3.35%   3.00%   71,400    -    -    71,400 
93.007.000-9  SQM S.A   Chile    563    J   04/01/2014  Ch$   Semiannual   Upon maturity   6.23%   5.50%   108,368    -    -    108,368 
93.007.000-9  SQM S.A   Chile    700    M   02/01/2017  UF   Semiannual   Upon maturity   3.62%   3.30%   -    47,600    -    47,600 
93.007.000-9  SQM S.A   Chile    699    O   02/01/2033  UF   Semiannual   Upon maturity   3.95%   3.80%   -    -    71,400    71,400 
            Total                                 237,812    261,880    576,061    1,075,753 
            Bond issuance costs                            (631)   (1,420)   (6,627)   (8,678)
            Total                                 237,181    260,460    569,434    1,067,075 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
105
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

e)Additional information

 

Bonds

  

On the 31st of December 2013 and the 31st of December 2012, short term bonds of MUS$ 227,652 and MUS$ 20,135 respectively were classified as short-term, consisting of the current portion due plus accrued interest to date, excluding bond issue costs. The non-current portion consisted of MUS$1,106,496 on the 31st December 2013 and MUS$1,067,075 on the 31st December 2012, corresponding to the issuance of series C bonds, Single series bonds (ThUS$ 200), series G bonds, series H bonds, series I bonds, series J bonds, second issue single series bonds (ThUS$ 250), series M bonds, series O bonds and third issue single series bonds (ThUS$ 300), excluding debt issue costs.

 

As of December 31, 2013 and December 31, 2012, the details of each issuance are as follows

 

Series “C” bonds

 

On January 24, 2006, the Company issusd Series C bonds for UF 3,000,000 (ThUS$101,918) at an annual rate of 4.00%.

 

As of December 31, 2013 and December 31, 2012, the Company has made the following payments with a charge to the Series C bonds:

 

Payments made  12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
Principal   6,780    6,858 
Interest payment   3,694    4,004 

 

Single series first issue ThUS$200,000

 

On April 5, 2006, the Company issued Single Series bonds for ThUS$200,000 at an annual rate of 6.125% under "Rule 144 and regulation S of the U.S. Securities Act of 1933."

 

As of December 31, 2013 and December 31, 2012, the Company has made the following payments with a charge to the Single Series bonds:

 

Payments made  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Payments of interest   12,250    12,250 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
106
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

Series “G” and “H” bonds

 

On January, 13, 2009, the Company issued two bond series in the domestic market. Series H for UF 4,000,000 (ThUS$139,216) at an annual interest rate of 4.9% at a term of 21 years with payment of principal beginning in 2019 and Series G for ThCh$ 21,000,000 (ThUS$34,146), which was issued at a term of 5 years with a single payment at the maturity of the term and an annual interest rate of 7%.

 

As of December 31, 2013 and December 31, 2012, the Company has made the following payments with a charge to the Series G and H bonds:

 

Payments made  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Payments of interest, Series G bonds   2,962    2,845 
Payments of interest, Series H bonds   9,062    8,565 

 

Series “J” and “I” bonds

 

On May 8, 2009, the Company placed two bond series in the domestic market. Series J for ThCh$52,000,000 (ThUS$92,456) which was issued at a term of 5 years with single payment at the expiration date of the term and annual interest rate of 5.5% and Series I for UF 1,500,000 (ThUS$56,051) which was issued at a term of 5 years with single payment at the maturity of the term and annual interest rate of 3.00%.

 

As of December 31, 2013 and December 31, 2012, the Company has made the following payments with a charge to the Series J and I bonds:

 

Payments made  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Payment of interest, Series J bonds   5,790    5,879 
Payment of interest, Series I bonds   2,106    2,100 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
107
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.4Financial liabilities, continued

 

Single series bonds, second issue ThUS$250,000

 

On April 21, 2010, the Company informed the Chilean Superintendence of Securities and Insurance of its issuance in international markets of an unsecured bond of ThUS$250,000 with a maturity of 10 years beginning on the aforementioned date with annual an interest rate of 5.5% for the purpose of refinancing long-term liabilities.

 

As of December 31, 2013 and December 31, 2012, the detail of payments charged to the line of single series bonds, second issue is as follows:

 

Payments made  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Interest payment   13,750    13,750 

 

Series “M” and “O” bonds

 

On April 4, 2012, the Company issued two bond series in the domestic market. Series M for UF 1,000,000 (ThUS$46,601) was issued at a term of 5 years with a single payment at the maturity of the term and an annual interest rate of 3.3%, and Series O for UF 1,500,000 (ThUS$69,901) was issued at a term of 21 years with a single payment at the maturity of the term and an annual interest rate of 3.80%

 

As of December 31, 2013, and December 31, 2012 the Company has made the following payments with a charge to the Series M and O bonds:

 

Payments made  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Payment of interest, Series M bonds   1,522    765 
Payment of interest, Series O bonds   2,626    1,320 

 

Single series bonds, third issue ThUS$300,000

 

On April 3, 2013, the Company issued in the United States a non-guaranteed bond with a value of US$ 300 million. The bond is for a 10 year term with an annual coupon rate of 3.625% and an annual yield of 3.716%. This rate equates to a difference of 180 basis points to comparable US Treasury bonds. The funds raised will be used to refinance long term liabilities and finance general corporate objectives.

 

As of December 31, 2013, and December 31, 2012 the Company has made the following payments with a charge to the Single series bonds:

 

Payments made  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Payment of interest   5,438    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
108
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.5Trade and other payables

 

   12/31/2013   12/31/2012 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Accounts payable   150,322    -    150,322    207,429    -    207,429 
Deferred income   -    -    -    -    -    - 
Retained  (or accrued)   638    -    638    515    -    515 
Total   150,960    -    150,960    207,944    -    207,944 

 

Purchase commitments held by the Company are recognized as liabilities when the goods and services are received by the Company. As of December 31, 2013, the Company has purchase orders amounting to ThUS$29,395 (ThUS$127,484 as of December 31, 2012).

 

10.6Financial liabilities at fair value through profit or loss

 

This balance relates to derivative instruments measured at their fair value, which has generated balances against the Company. The detail of this type of instrument is as follows:

 

Financial liabilities at fair value through profit or loss  12/31/2013   Effect on profit
or loss as of
12/31/2013
   12/31/2012   Effect on profit
or loss as of
12/31/2012
 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Current                    
Derivative instruments (forward)   423    5,100    5,612    (4,559)
Derivative instruments (options)   665    1,827    2,492    (1,456)
Derivative instruments (IRS)   1,339    251    2,231    (240)
    2,427    7,178    10,335    (6,255)

 

Balances in the column effect on profit or loss consider the annual effects of agreements which were in force as of December 31, 2013.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
109
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.7Financial asset and liability categories

 

a)Financial Assets

 

   12/31/2013   12/31/2012 
   Current   Non-current   Total   Current   Non-current   Total 
Description of financial assets  Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
 
                         
Financial assets measured at amortized cost   431,883    -    431,883    244,161    -    244,161 
Investments held-to-maturity measured at amortized cost   -    95    95    -    107    107 
Loans and receivables measured at amortized cost   330,992    1,282    332,274    510,616    1,311    511,927 
Total financial assets measured at amortized cost   762,875    1,377    764,252    754,777    1,418    756,195 
                               
Financial assets at fair value through profit or loss   3,283    -    3,283    680    -    680 
Financial assets at fair value through other comprehensive income   25,007    -    25,007    71,261    29,385    100,646 
Total financial assets at fair value   28,290    -    28,290    71,941    29,385    101,326 
Total financial assets   791,165    1,377    792,542    826,718    30,803    857,521 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
110
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.7Financial asset and liability categories (continued)

 

b)Financial liabilities

 

   12/31/2013   12/31/2012 
   Current   Non-current   Total   Current   Non-current   Total 
Description of financial liabilities  Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
   Amount
ThUS$
 
                         
Financial liabilities at fair value through profit or loss   2,427    1,405    3,832    10,335    -    10,335 
Financial liabilities at fair value through profit or loss   2,427    1,405    3,832    10,335    -    10,335 
                               
Financial liabilities measured at amortized cost   549,959    1,415,985    1,965,944    350,452    1,446,194    1,796,646 
Total financial liabilities measured at amortized cost   549,959    1,415,985    1,965,944    350,452    1,446,194    1,796,646 
Total financial liabilities   552,386    1,417,390    1,969,776    360,787    1,446,194    1,806,981 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
111
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.8Fair Value Measurement of Assets and Liabilities

 

Financial assets and liabilities measured at fair value consist of Options and Forwards hedging the mismatch in the balance sheet and cash flows, Cross Currency Swaps (CCS) to hedge bonds against issued in local currency ($/UF), and Interest Rate Swaps (IRS) to hedge against LIBOR rate debt issued.

The value of the Company’s assets and liabilities recognised by CCS contracts is calculated as the difference between the present value of discounted cash flows of the asset (pesos/UF) and liability (USD) parts of the derivative. In the case of the IRS, the asset value recognised is calculated as the difference between the discounted cash flows of the asset (variable rate) and liability (fixed rate) parts of the derivative. Forwards: Are calculated as the difference between the strike price of the contract and the spot price plus the forwards points at the date of the contract. Options: The value recognised is calculated using the Black-Scholes method.

 

In the case of CCS, the entry data used for the valuation models are UF, peso, and basis swap rates. In the case of fair value calculations for IRS, the FRA (Forward Rate Agreement) rate and ICVS 23 Curve (Bloomberg: cash/deposits rates, futures, swaps). In the case of forwards, the forwards curve for the currency in question is used. Finally, with options, the spot price, risk-free rate and volatility of exchange rate are used, all in accordance with the currencies used in each valuation. The financial information used as entry data for the Company’s valuation models is obtained from Bloomberg, the well-known financial software company. Conversely, the fair value provided by the counterparties of derivatives contracts is used only as a control and not for valuation.

 

The effects on profit or loss of movements in these amounts may be recognized within Finance costs, foreign currency translation gain (loss) or cash flow hedges in the statement of comprehensive income, depending on each particular case.

 

The fair value measurement of debt is only performed to determine the actual market value of guaranteed and non-guaranteed long-term obligations; bonds denominated in local currency ($/UF) and foreign currency (USD), credits denominated in foreign currency (USD).

 

The value of the Company’s reported liabilities is calculated as the present value of discounted cash flows at market rates at the time of valuation, taking into account the maturity date and exchange rate. The entry data used for the model includes the UF and peso rates, which are obtained using Bloomberg, the well-known financial software company and the ‘Asociación de Bancos e Instituciones Financieras’ (ABIF) (Association of Banks and Financial Institutions’).

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
112
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.9Financial assets pledged as guarantee

 

On November 4, 2004, Isapre Norte Grande maintains a guarantee equivalent to the total amount owed to its members and healthcare providers, which is managed and maintained by Banco de Chile.

 

As of December 31, 2013 and December 31, 2012, assets pledged as guarantees are as follows:

 

Restricted cash  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Isapre Norte Grande Ltda.   708    571 
Total   708    571 

 

10.10Estimated fair value of financial instruments and financial derivatives

 

As required by IFRS 7, the following information is presented for the disclosure of the estimated fair value of financial assets and liabilities.

 

Although inputs represent Management's best estimate, they are subjective and involve significant estimates related to the current economic and market conditions, as well as risk features.

 

Methodologies and assumptions used depend on the risk terms and characteristics of instruments and include the following as a summary:

 

-Cash equivalent approximates fair value due to the short-term maturities of these instruments.
-Other current financial liabilities are considered at fair value equal to their carrying values.
-For interest-bearing liabilities with original maturity of more than a year, fair values are calculated at discounting contractual cash flows at their original current market with similar terms.
-For forward and swap contracts, fair value is determined using quoted market prices of financial instruments with similar characteristics.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
113
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.10Estimated fair value of financial instruments and financial derivatives, continued

 

The detail of the Company’s instruments at carrying value and estimated fair value is as follows:

 

   12/31/2013   12/31/2012 
   Carrying
value
   Fair
value
   Carrying
value
   Fair
value
 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Cash and cash equivalents   476,622    476,622    324,353    324,353 
Current trade and other receivables   330,992    330,992    510,616    510,616 
Other financial assets, current:                    
- Time deposits   431,883    431,883    244,161    244,161 
- Derivative instruments   3,283    3,283    680    680 
- Current hedging assets   25,007    25,007    71,262    71,262 
Total other current financial assets   460,173    460,173    316,103    316,103 
Non-Current Trade Receivables   1,282    1,282    1,311    1,311 
Other non-current financial assets:   95    95    107    107 
Non-current hedging assets   -    -    29,385    29,385 
Other non-current financial assets:   1,377    1,377    30,308    30,308 
Other financial liabilities, current:                    
- Bank loans   171,347    171,347    122,373    122,373 
- Derivative instruments   1,088    1,088    8,456    8,456 
- Hedging liabilities   1,339    1,339    1,879    1,879 
- Unsecured obligations   227,652    227,652    20,135    20,135 
Other financial liabilities, current   401,426    401,426    152,843    152,843 
Current and non-current accounts payable   150,960    150,960    207,944    207,944 
Other non-current financial liabilities:                    
- Bank loans   309,489    324,246    379,119    401,465 
- Unsecured obligations   1,106,496    1,077,049    1,067,075    1,137,363 
- Non-current hedging liabilities   1,405    1,405    -    - 
Other non-current financial liabilities:   1,417,390    1,402,700    1,446,194    1,538,828 

 

Fair value hierarchy

 

Fair value hierarchies are as follows:

 

-Level 1: When only quoted (unadjusted) prices have been used in active markets.
-Level 2: When in a phase in the valuation process, variables other than prices quoted in Level 1 have been used, which are directly observable in markets.
-Level 3: When in a phase in the valuation process, variables which are not based in observable market data have been used.

 

The valuation techniques used to determine the fair value of our hedging instruments are those indicated in level 2.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
114
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 10 - Financial instruments (continued)

 

10.11Nature and scope of risks arising from financing instruments

 

As indicated in paragraphs 33 to 42 of IFRS 7 the disclosure of information associated with the nature and scope of risks arising from financial instruments is presented in Note 4 - Financial Risk Management.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
115
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 11 – Equity-accounted investees

 

11.1Investments in Associated companies recognized according to the equity method of accounting

 

As of December 31, 2013 and December 31, 2012, in accordance with criteria established in Note 2.6 and Note 3.19, investment in associated companies recognized according to the equity method of accounting and joint ventures are as follows:

 

Associated Companies  Equity-accounted investees   Share on profit (loss) of associated
companies and joint ventures
accounted for using the equity
method
   Share on other comprehensive
income of associated companies
and joint ventures accounted for
using the equity method, net of tax
   Share on total other
comprehensive income of
associated companies and joint
ventures accounted for using the
equity method
 
   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$         
                                 
Sales de Magnesio Ltda.   1,649    1,656    1,005    1,088    -    -    1,005    1,088 
Abu Dhabi Fertilizer Industries WWL   11,453    9,890    1,596    1,628    -    -    1,596    1,628 
Doktor Tarsa Tarim Sanayi AS   15,193    15,346    2,192    4,134    -    -    2,192    4,134 
Ajay North America   13,125    15,357    7,919    10,927    -    -    7,919    10,927 
Ajay Europe SARL   7,924    8,495    3,825    6,295    -    -    3,825    6,295 
SQM Eastmed Turkey   142    85    132    -    -    -    132    - 
Charlee SQM Thailand Co. Ltd.   1,589    126    237    32    -    -    237    32 
Total   51,075    50,955    16,906    24,104    -    -    16,906    24,104 

 

   Description of the nature of the     Country of  Share of
ownership in
associated
   Dividends received 
Associate  relationship  Domicile  incorporation  companies   12/31/2013   12/31/2012 
                ThUS$   ThUS$ 
                      
Sales de Magnesio Ltda.  Commercialization of magnesium salts.  El Trovador 4285, Las Condes  Chile   50%   892    1,052 
Abu Dhabi Fertilizer Industries WWL  Distribution and commercialization of specialty plant nutrients in the Middle East.  PO Box 71871, Abu Dhabi  United Arab Emirates   50%   -    - 
Doktor Tarsa Tarim Sanayi AS  Distribution and commercialization of specialty plant nutrients in Turkey.  Organize Sanayi Bolgesi, Ikinci Kisim, 22 cadde TR07100 Antalya  Turkey   50%   -    - 
Ajay North America  Production and commercialization of iodine derivatives.  1400 Industry RD Power Springs GA 30129  United States   49%   10,437    10,628 
Ajay Europe SARL  Production and commercialization of iodine derivatives.  Z.I. du Grand Verger BP 227 53602 Evron Cedex  France   50%   5,093    3,446 
SQM Eastmed Turkey  Production and commercialization of specialty products.  Organize Sanayi Bolgesi, Ikinci Kisim, 22 cadde TR07100 Antalya  Turkey   50%   -    - 
Charlee SQM Thailand Co. Ltd.  Distribution and commercialization of specialty plant nutrients.  31 Soi 138 (Meesuk) LLapdrawrd, Bangkapi, 10240 Bangkok  Thailand   40%   -    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
116
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 11 – Equity-accounted investees (continued)

 

11.2Assets, liabilities, revenue and expenses of associated companies

 

   12/31/2013   12/31/2013 
   Assets   Liabilities       Gain (loss)
from
   Other    
   Current   Non-
current
   Current   Non-
current
   Revenue   continuing
operations
   comprehensive
income
   Comprehensive
income
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                 
Sales de Magnesio Ltda.   4,519    309    1,512    18    14,370    2,009    -    2,009 
Abu Dhabi Fertilizer Industries WWL   26,645    2,321    6,059    -    44,689    3,192    -    3,192 
Doktor Tarsa Tarim Sanayi AS   67,603    6,563    37,696    6,082    73,905    4,385    -    4,385 
Ajay North America   23,728    9,289    6,230    -    72,297    16,161    -    16,161 
Ajay Europe SARL   22,247    2,370    8,770    -    67,361    7,649    -    7,649 
SQM Eastmed Turkey   149    305    169    -    139    265    -    265 
Charlee SQM Thailand Co. Ltd.   6,104    572    2,706    -    19,179    593    -    593 
Total   150,995    21,729    63,142    6,100    291,940    34,254    -    34,254 

 

   12/31/2012   12/31/2012 
   Assets   Liabilities       Gain (loss)
from
   Other     
   Current   Non-
current
   Current   Non-
current
   Revenue   continuing
operations
   comprehensive
income
   Comprehensive
income
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                 
Sales de Magnesio Ltda.   4,662    364    1,713    -    14,259    2,177    -    2,177 
Abu Dhabi Fertilizer Industries WWL   21,885    2,187    4,291    -    42,899    3,255    -    3,255 
Doktor Tarsa Tarim Sanayi AS   67,345    7,982    36,332    8,304    77,839    8,267    -    8,267 
Ajay North America   28,914    8,719    6,292    -    83,340    22,300    -    22,300 
Ajay Europe SARL   27,587    2,091    12,688    -    84,203    12,591    -    12,591 
SQM Eastmed Turkey   16    412    258    -    -    -    -    - 
Charlee SQM Thailand Co. Ltd.   12,898    462    13,048    -    13,536    81    -    81 
Total   163,307    22,217    74,622    8,304    316,076    48,671    -    48,671 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
117
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 11 – Investment in Associated companies (continued)

 

11.3Other information

 

The Company has no participation in unrecognized losses in investments in associated companies.

 

The Company presents no investments not accounted for according to the equity method of accounting.

 

The equity method was applied to the Statement of Financial Position as of December 31, 2013 and December 31, 2012.

 

The basis of preparation of the financial information of associates corresponds to the amounts included in the financial statements in conformity with the entity’s IFRS.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
118
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 12 - Joint Ventures

 

12.1Policy for the accounting for equity accounted investment in joint ventures

 

The method for the recognition of joint ventures is that in which participation is initially recorded at cost and subsequently adjusted considering changes after the acquisition in the portion of the entity’s net assets of the entity which correspond to the investor. Profit or loss for the period of the investor will collect the portion which belongs to it in the results of the controlled entity as a whole

 

12.2Disclosures of interest in joint ventures

 

a)Operations conducted in 2013

 

As of December 31, there are no changes in the composition of the interest in joint ventures.

 

b)Operations conducted in 2012

 

On March 2012, the Company Coromandel SQM increased its capital by ThUS$394. This Company has an ownership of 50% in Soquimich European Holding B.V.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
119
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 12 - Joint Ventures (continued)

 

12.3Investment in joint ventures accounted for under the equity method of accounting:

 

          Country of   Share of interest   Dividends received 
Joint venture  Description of the nature of the relationship  Domicile  incorporation  in ownership   12/31/2013   12/31/2012 
                ThUS$   ThUS$ 
Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Production and distribution of soluble fertilizers.  Huangjing Road, Dawan Town, Qingbaijiang District, Chengdu Municipality, Sichuan Province  China   50%   -    - 
Coromandel SQM  Production and distribution of potassium nitrate.  1-2-10,  Sardar Patel Road, Secunderabad – 500003 Andhra Pradesh  India   50%   -    - 
SQM Vitas Fzco.  Production and commercialization of specialty plant and animal nutrition and industrial hygiene.  Jebel ALI Free Zone P.O. Box 18222, Dubai  United Arab Emirates   50%   -    - 
SQM Star Qingdao Crop Nutrition Co., Ltd.  Production and distribution of nutrient plant solutions with specialties NPK soluble  Longquan Town, Jimo City, Qingdao Municipality, Shangdong Province  China   50%   -    - 
SQM Vitas Brazil Agroindustria  Production and commercialization of specialty plant and animal nutrition and industrial hygiene.  Via Cndeias, Km. 01 Sem Numero, Lote 4, Bairro Cia Norte, Candeias, Bahia.  Brazil   49.99%   -    - 
SQM Vitas Peru S.A.C  Production and commercialization of specialty plant and animal nutrition and industrial hygiene  Av. Juan de Arona 187, Torre B, Oficina 301-II, San Isidro, Lima  Peru   50%   -    - 
SQM Vitas Southern Africa Pty  Production and commercialization of specialty plant and animal nutrition and industrial hygiene  33 Waterford Office Park Waterford Drive Fourways, 2055 South Africa  South Africa   50%   -    - 
SQM Vitas Spain  Production and commercialization of specialty plant nutrition  C/Manuel Echeverria Manzana 2 Muelle de la Cab ( Puerto Real )  Spain   50%   -    - 
SQM Vitas Holland  Without information  Herikerbergweg 238, 1101 CM Amsterdam Zuidoost  Dutch Antilles   50%   -    - 
SQM Vitas Plantacote B.V.  Production and commercialization of controlled-released fertilizers  Herikerbergweg 238, 1101 CM Amsterdam Zuidoost  Dutch Antilles   50%   -    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
120
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 12 - Joint Ventures (continued)

 

12.3Investment in joint ventures accounted for under the equity method of accounting:

 

Joint Venture  Equity-accounted investees   Share on profit (loss) of
associates and joint ventures
accounted for using the equity
method
   Share on other comprehensive
income of associates and joint
ventures accounted for using the
equity method, net of tax
   Share on total other
comprehensive income of
associates and joint ventures
accounted for using the equity
method
 
   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$         
                                 
Sichuan SQM Migao Chemical Fertilizers Co Ltda.   11,504    10,428    255    287    13    -    267    287 
Coromandel SQM   801    683    90    184    -    (87)   89    98 
SQM Vitas Fzco.   12,762    7,153    1,807    (266)   (339)   (159)   1,467    (425)
SQM Star Qingdao Crop Nutrition Co., Ltd.   1,475    1,079    396    48    -    -    395    48 
SQM Vitas Holland   (599)   -    -    -    -    -    (667)   - 
    25,943    19,343    2,548    253    (326)   (246)   1,551    8 

 

The following companies are subsidiaries of SQM Vitas Fzco.

 

   Equity-accounted investees   Share on profit (loss) of
associates and joint ventures
accounted for using the equity
method
   Share on other comprehensive
income of associates and joint
ventures accounted for using the
equity method, net of tax
   Share on total other
comprehensive income of
associates and joint ventures
accounted for using the equity
method
 
   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM Vitas Brazil   4,747    2,799    2,538    (621)   -    (306)   1,152    (927)
SQM Vitas Peru   4,314    2,525    (224)   (28)   -    (26)   93    (54)
SQM Vitas Southern Africa   1,096    506    55    (238)   -    14    102    (224)
SQM Vitas Spain   -    248    -    -    -    -    (177)   - 
SQM Vitas Plantacote B.V.   -    -    -    -    -    -    (385)   - 
Total   10,157    6,078    2,369    (887)   -    (318)   785    (1,205)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
121
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 12 - Joint Ventures (continued)

 

12.4Assets, liabilities, revenue and expenses from Joint Ventures:

 

12/31/2013
   Assets   Liabilities       Gain (loss)       
   Current   Non-
current
   Current   Non-
current
   Revenue   from
continuing
operations
   Other
comprehensive
income
   Comprehensive
income
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                 
Sichuan SQM Migao Chemical Fertilizers Co Ltda.   68,241    9,414    54,650    -    41,744    509    26    535 
Coromandel SQM   4,545    1,158    4,037    63    7,842    179    -    179 
SQM Vitas Fzco,   12,790    13,772    1,039    -    18,779    3,614    (679)   2,935 
SQM  Star Qingdao Crop Nutrition Co. Ltda.   3,570    228    838    10    7,649    791    -    791 
SQM Vitas Brazil   31,243    7,158    25,615    8,039    87,927    2,305    -    2,305 
SQM Vitas Peru   21,481    1,722    18,890    -    35,267    185    -    185 
SQM Vitas Southern Africa   5,164    829    4,896    -    21,234    204    -    204 
SQM Vitas Spain   1,318    949    2,492    -    1,854    (355)   -    (355)
SQM Vitas Holland   95    -    316    977    -    (1,335)   -    (1,335)
SQM Vitas Plantacote B.V.   1,323    6,548    8,623    -    2,157    (770)   -    (770)
Total   149,770    41,778    121,396    9,089    224,453    5,327    (653)   4,674 

 

   12/31/2012   12/31/2012     
   Assets   Liabilities       Gain (loss)       
   Current   Non-
current
   Current   Non-
current
   Revenue   from
continuing
operations
   Other
comprehensive
income
   Comprehensive
income
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                 
Sichuan SQM Migao Chemical Fertilizers Co Ltda.   21,843    9,984    6,899    4,072    29,980    573    -    573 
Coromandel SQM   4,388    1,397    4,419    -    5,633    369    (174)   195 
SQM Vitas Fzco.   4,568    10,522    785    -    19,643    (532)   (318)   (850)
SQM  Star Qingdao Crop Nutrition Co., Ltd.   1,986    304    132    -    5,028    95    -    95 
SQM Vitas Brazil   36,874    6,865    32,331    8,609    53,955    (621)   (306)   (927)
SQM Vitas Peru   23,308    1,512    20,149    2,145    32,376    (28)   (26)   (54)
SQM Vitas Southern Africa   2,730    101    2,325    -    12,850    (238)   14    (224)
SQM Vitas Spain   -    -    -    -    -    -    -    - 
Total   95,697    30,685    67,040    14,826    159,465    (382)   (810)   (1,192)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
122
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 12 - Joint Ventures (continued)

 

12.5Other Joint Venture disclosures:

 

   Cash and cash equivalents   Other current financial
liabilities
   Other non-current financial
liabilities
 
   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Sichuan SQM Migao Chemical Fertilizers Co Ltda.   8,049    485    7,660    -    -    - 
Coromandel SQM   197    248    880    1,289    -    - 
SQM Vitas Fzco.   10,605    7,977    -    -    -    - 
SQM  Star Qingdao Crop Nutrition Co., Ltd.   1,988    524    -    -    -    - 
SQM Vitas Brazil   854    549    -    66    8,600    8,039 
SQM Vitas Peru   1,166    286    -    -    -    - 
SQM Vitas Southern Africa   351    179    -    -    -    - 
SQM Vitas Spain   310    -    -    -         - 
SQM Vitas Holland   26    -    -    -    -    - 
SQM Vitas Plantacote B.V.   109    -    5,567    -    -    - 
Total   23,655    10,248    14,107    1,355    8,600    8,039 

 

   Depreciation and amortization
expense
   Interest expense   Income tax expense, continuing
operations
 
   12/31/2013   12/31/2012   12/31/2013   12/31/2012   12/31/2013   12/31/2012 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Sichuan SQM Migao Chemical Fertilizers Co Ltda.   (549)   (702)   (813)   -    (12)   (97)
Coromandel SQM   (2)   (91)   (87)   (75)   (92)   (56)
SQM Vitas Fzco.   (1,001)   (982)   (16)   (15)   -    - 
SQM  Star Qingdao Crop Nutrition Co., Ltd.   (71)   (74)   -    -    (242)   (27)
SQM Vitas Brazil   (328)   (247)   (931)   (463)   -    - 
SQM Vitas Peru   (82)   (32)   (445)   (102)   91    - 
SQM Vitas Southern Africa   (67)   (29)   (104)   (37)   -    - 
SQM Vitas Spain   -    -    (14)   -    -    - 
SQM Vitas Holland   -         (2)        -      
SQM Vitas Plantacote B.V.   -    -    (176)   -    -      
Total   (2,100)   (2,157)   (2,588)   (692)   (255)   (180)

 

The basis of preparation of the financial information of joint ventures corresponds to the amounts included in the financial statements in conformity with the entity’s IFRS.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
123
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 13 - Intangible assets and goodwill

 

13.1Balances

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
         
Intangible assets other than goodwill   104,363    99,754 
Goodwill   38,388    38,388 
           
Total   142,751    138,142 

 

13.2Disclosures on intangible assets and goodwill

 

Intangible assets relate to goodwill, water rights, trademarks, industrial patents, rights of way, software, and mining claims which correspond to exploitation rights acquired from third-parties.

 

Balances and movements in the main classes of intangible assets as of December 31, 2013 and December 31, 2012 are detailed as follows:

 

      12/31/2013 
Intangible assets and goodwill  Useful life  Gross
amount
ThUS$
   Accumulated
Amortization
ThUS$
   Net Value
ThUS$
 
                
Trademarks  Finite   3,821    (3,821)   - 
Software  Finite   5,342    (3,146)   2,196 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Finite   1,576    (882)   694 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Indefinite   97,392    -    97,392 
Other intangible assets  Indefinite   4,081    -    4,081 
Intangible assets other than goodwill      112,212    (7,849)   104,363 
                   
Goodwill  Indefinite   38,388    -    38,388 
                   
Total intangible assets and goodwill      150,600    (7,849)   142,751 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
124
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 13 - Intangible assets and goodwill (continued)

 

13.2Disclosures on intangible assets and goodwill, continued

 

 

      12/31/2012 
Intangible assets and goodwill  Useful life  Gross
amount
ThUS$
   Accumulated
Amortization
ThUS$
   Net Value
ThUS$
 
                
Trademarks  Finite   3,821    (3,821)   - 
Software  Finite   3,765    (2,115)   1,650 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Finite   1,198    (820)   378 
Intellectual property rights, patents and other industrial property rights, service and exploitation rights  Indefinite   96,366    -    96,366 
Other intangible assets  Indefinite   1,360    -    1,360 
Intangible assets other than goodwill      106,510    (6,756)   99,754 
                   
Goodwill  Indefinite   38,388    -    38,388 
                   
Total intangible assets and goodwill      144,898    (6,756)   138,142 

 

a)Estimated useful lives or amortization rates used for finite identifiable intangible assets

 

Finite useful life, measures the lifetime or the number of productive units or other similar which constitute its useful life.

 

The estimated useful life for software is 3 years for other finite useful life assets, the period in which they are amortized relate to periods defined by contracts or rights which generate them.

 

Intellectual property rights, patents and other industrial property rights, service and exploitation rights, mainly relate to water rights and have a finite useful life when they are subjected to a fixed term contract and indefinite otherwise.

 

b)Method used to express the amortization of identifiable intangible assets (life or rate)

 

The method used to express the amortization is useful life, and in the case of mining claims, estimated tons to be extracted.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
125
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 13 - Intangible assets and goodwill (continued)

 

13.2Disclosures on intangible assets and goodwill, continued

 

c)Minimum and maximum amortization lives or rates of intangible assets:

 

Estimated useful lives or amortization rate   Minimum life or rate   Maximum life or rate
         
Intellectual property rights, patents and other industrial property
rights, service and exploitation rights
  Indefinite   Indefinite
         
Intangible assets other than goodwill   Indefinite   Indefinite
         
Intellectual property rights, patents and other industrial property
rights, service and exploitation rights
  1 year   16 years
         
Trademarks   1 year   5 years
         
Software   2 years   3 years

 

d)Information to be disclosed on assets generated internally

 

The Company has no intangible assets generated internally.

 

e)Other information to disclose on intangible assets

 

SQM has property rights and mining concessions from the Chilean Government, intended for the exploration and exploitation of saltpeter and brine. Such rights, have had no initial cost other than registration costs, which are insignificant.

 

Also, SQM has acquired from third-parties other than the Chilean Government, mining concessions, which have been recognized at acquisition cost, which are amortized as the corresponding area is exploited based on the tons estimated to be extracted.

 

Expenses prior to obtaining the mining concessions are recognized in profit or loss for the year as incurred.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
126
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 13 - Intangible assets and goodwill (continued)

 

13.2Disclosures on intangible assets and goodwill, continued

 

f)Movements in identifiable intangible assets as of December 31, 2013:

 

Movements in identifiable intangible assets  Trademarks
Net
ThUS$
   Software
Net
ThUS$
   Intellectual property rights,
patents and other industrial
property rights, service and
exploitation right, rights of
way, Net
ThUS$
   Intellectual property rights,
patents and other industrial
property rights, service and
exploitation right, rights of
way, Net
ThUS$
   Other
intangible
assets, Net
ThUS$
   Goodwill,
Net
ThUS$
   Identifiable
intangible
assets, Net 
ThUS$
 
                             
Opening balance   -    1,650    378    96,366    1,360    38,388    138,142 
Additions        1,577    377    3,394    2,721    -    8,069 
Amortization        (1,019)   (61)   (12)   -    -    (1,092)
Other increases (decreases)        (12)   -    (2,356)   -    -    (2,368)
                                    
Final balance   -    2,196    694    97,392    4,081    38,388    142,751 

 

g)Movements in identifiable intangible assets as of December 31, 2012:

 

Movements in identifiable intangible assets  Trademarks
Net
ThUS$
   Software
Net
ThUS$
   Intellectual property rights,
patents and other industrial
property rights, service and
exploitation right, rights of
way, Net
ThUS$
   Intellectual property rights,
patents and other industrial
property rights, service and
exploitation right, rights of
way, Net
ThUS$
   Other
intangible
assets, Net
ThUS$
   Goodwill,
Net
ThUS$
   Identifiable
intangible
assets, Net 
ThUS$
 
                             
Opening balance   -    1,938    440    1,542    396    38,605    42,921 
Additions        501    -    19,080    964    -    20,545 
Amortization        (789)   (62)   -    -    -    (851)
Other increases (decreases)        -    -    75,744    -    (217)   75,527 
                                    
Final balance   -    1,650    378    96,366    1,360    38,388    138,142 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
127
 

 

   Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 14 - Property, plant and equipment

 

As of December 31, 2013 and December 31, 2012, the detail of property, plant and equipment is as follows:

 

14.1Types of property, plant and equipment

 

Description of types of property, plant and equipment  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Property, plant and equipment, net          
           
Land   33,812    33,320 
Buildings   190,529    169,731 
Machinery   465,327    438,331 
Transport equipment   105,979    88,954 
Furniture and fixtures   9,534    6,736 
Office equipment   6,062    5,249 
Constructions in progress   415,740    423,184 
Other property, plant and equipment (1)   827,394    747,044 
Total   2,054,377    1,912,549 
           
Property, plant and equipment, gross          
           
Land   33,812    33,320 
Buildings   364,695    329,397 
Machinery   1,179,860    1,065,641 
Transport equipment   263,268    224,462 
Furniture and fixtures   27,575    22,667 
Office equipment   39,142    36,215 
Constructions in progress   415,740    423,184 
Other property, plant and equipment   1,506,708    1,336,991 
Total   3,830,800    3,471,877 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
128
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

  

Note 14 - Property, plant and equipment (continued)

 

14.1Types of property, plant and equipment, continued

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
Accumulated depreciation and value impairment of property, plant and equipment, total          
Accumulated depreciation and value impairment of buildings   174,166    159,666 
Accumulated depreciation and value impairment of machinery   714,533    627,310 
Accumulated depreciation and value impairment of transport equipment   157,289    135,508 
Accumulated depreciation and value impairment of furniture and fixtures   18,041    15,931 
Accumulated depreciation and value impairment of office equipment   33,080    30,966 
Accumulated depreciation and value impairment of other property, plant and equipment   679,314    589,947 
Total   1,776,423    1,559,328 

 

(1)The detail of other property, plant and equipment is as follows:

 

Other property, plant and equipment, net  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Conveyor belt   53,783    52,582 
Tank (TK)   25,781    26,810 
Geomembrane / liner   169,255    143,585 
Electric facilities   21,889    29,725 
Lights   28,748    23,945 
Other constructions   62,390    59,230 
Piping   22,499    23,952 
Pool   181,844    180,348 
Well (water)   39,963    20,737 
Pipes / HD lines   101,886    78,244 
Railroad track   21,628    21,719 
Other property, plant and equipment   97,728    86,167 
Total   827,394    747,044 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
129
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 14 - Property, plant and equipment (continued)

 

14.2Reconciliation of changes in property, plant and equipment by type as of December 31, 2013 and December 31, 2012:

 

Reconciliation entries of changes in
property, plant and equipment by type
as of December 31, 2013
  Land   Buildings,
net
   Machinery,
net
   Transport
equipment,
net
   Furniture and
fixtures, net
   Office
equipment,
net
   Constructions
in progress
   Other
property,
plant and
equipment,
net
   Property, plant
and equipment,
net
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                     
Opening balance   33,320    169,731    438,331    88,954    6,736    5,249    423,184    747,044    1,912,549 
                                              
Changes                                             
Additions   778    47    2,100    3    60    845    416,471    3,327    423,631 
Divestitures   -    (14)   (49)   (35)   -    -    (5,045)   (24)   (5,167)
Depreciation expense   -    (14,520)   (87,989)   (21,787)   (2,112)   (2,055)   -    (88,358)   (216,821)
Increase(decrease) in foreign currency exchange   (36)   (12)   (12)   (15)   -    (36)   -    (86)   (197)
Reclassification   -    35,700    115,281    38,845    4,874    2,156    (366,516)   169,660    - 
Other increases (decreases) (*)   (250)   (403)   (2,335)   14    (24)   (97)   (52,354)   (4,169)   (59,618)
                                              
Total changes   492    20,798    26,996    17,025    2,798    813    (7,444)   80,350    141,828 
                                              
Final balance   33,812    190,529    465,327    105,979    9,534    6,062    415,740    827,394    2,054,377 

 

(*) The net balance of Other increases (decreases) corresponds to: 1) investment plan expenses which are charged to profit or loss (forming part of cost of sales and other expenses per function, as appropriate), 2) the variation representing the purchase and use of materials and spare parts and 3) projects corresponding mainly to exploration expenditures and stain development.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
130
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 14 - Property, plant and equipment (continued)

 

14.2Reconciliation of changes in property, plant and equipment by type as of December 31, 2013 and December 31, 2012, continued:

 

Reconciliation entries of changes in
property, plant and equipment by
type as of December 31, 2012
  Land  Buildings,
net
  Machinery,
net
  Transport
equipment,
net
  Furniture and
fixtures, net
  Office
equipment, net
  Constructions
in progress
  Other
property,
plant and
equipment,
net
  Property,
plant and
equipment,
net
   ThUS$  ThUS$  ThUS$  ThUS$  ThUS$  ThUS$  ThUS$  ThUS$  ThUS$
                            
Opening balance   33,252    146,532    424,460    82,822    5,015    5,312    297,996    683,913    1,679,302 
                                              
Changes                                             
Additions   36    —      1,092    34    70    323    443,349    972    445,876 
Divestitures   —      —      (115)   —      (67)   (12)   (2,936)   (78)   (3,208)
Depreciation expense   —      (14,800)   (79,534)   (18,400)   (1,858)   (1,857)   —      (79,709)   (196,158)
Increase(decrease) in foreign currency exchange   32    (1)   5    15    —      (13)   —      67    105 
Reclassification   —      37,916    92,441    24,535    3,576    1,478    (287,291)   127,345    —   
Other increases (decreases) (*)   —      84    (18)   (52)   —      18    (27,934)   14,534    (13,368)
                                              
Total changes   68    23,199    13,871    6,132    1,721    (63)   125,188    63,131    233,247 
                                              
Final balance   33,320    169,731    438,331    88,954    6,736    5,249    423,184    747,044    1,912,549 

 

(*) The net balance of Other increases (decreases) corresponds to: 1) investment plan expenses which are charged to profit or loss (forming part of cost of sales and other expenses per function, as appropriate), 2) the variation representing the purchase and use of materials and spare parts and 3) projects corresponding mainly to exploration expenditures and stain development.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
131
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 14 - Property, plant and equipment (continued)

 

14.3Detail of property, plant and equipment pledged as guarantee

 

There are no restrictions over title or guarantees for the compliance with obligations which affect property, plant and equipment.

 

14.4Additional information

  

Interest capitalized in construction-in-progress:

 

The amount capitalized for this concept amounted to ThUS$17,232 as of December 31, 2013 and ThUS$ 14,153 as of December 31, 2012.

 

Financing costs are not capitalized for periods which exceed the normal term of acquisition, construction or installation of the asset, such as the case of delays, interruptions or temporary suspension of the project due to technical, financial or other issues, which prevent the asset from being maintained in good conditions for its use.

 

14.5Impairment of assets

 

As stated in Note 3.22, the recoverable amount of property, plant and equipment is measured whenever there is an indication that the asset may be impaired. As of December 31, 2013, certain assets have suffered impairment for which a provision has been recognized for an amount of ThUS$10,085. As of December 31, 2012, no impairment adjustments were generated.

 

14.6Reclassifications

 

For comparative purposes, ThUS$75,740 were reclassified from property, plant and equipment (land) to the intangible assets, corresponding to mining concessions that SQM has acquired from third-parties, which have been registered at acquisition cost, and amortized as the corresponding area is exploited based on the tons estimated to be extracted.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
132
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 15 - Employee benefits

 

15.1Provisions for employee benefits

 

Classes of benefits and expenses by employee  12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
Current        
Profit sharing and bonuses   25,236    33,974 
Total   25,236    33,974 
           
Non-current          
Profit sharing and bonuses   277    6,056 
Severance indemnity payments   32,137    34,431 
Pension Plan   -    409 
Total   32,414    40,896 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
133
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 15 Employee benefits (continued)

 

15.2Policies on defined benefit plan

 

This policy is applied to all benefits received for services provided by the Company's employees.

 

Short-term benefits for active employees are represented by salaries, social welfare benefits, paid time-off, sickness leaves and other leaves, profit sharing and incentives and non-monetary benefits; e.g., healthcare service, housing, subsidized or free goods or services. These will be paid in a term which does not exceed twelve months.

 

The Company only provides compensation and benefits to active employees, with the exemption of SQM North America which applies the definitions under 15.4 below.

 

SQM maintains incentive programs for its employees based on the personal performance, the Company’s performance and other short-term, mid-term and long-term indicators.

 

For each incentive bonus delivered to the Company’s employees, there will be a disbursement in the first quarter of the following year and this will be calculated based on Profit for the period at the end of each period applying a factor obtained subsequent to the employee appraisal process.

 

Employee benefits include retention bonuses for the Company’s executives, which are linked to the Company’s share price and are paid in cash. The short-term portion is presented as a provision for current employee benefits and the long-term portion as non-current.

 

The bonus provided to the Company’s directors is calculated based on Profit for the period at each year-end and will consider the application of a percentage factor.

 

The benefit related to vacations (short-term benefits to employees, current), which is provided in the Labor Code indicates that employees with more than a year of service will be entitled to annual holidays for a period not lower than fifteen paid business days. The Company provides the benefit of two additional vacation days.

 

Staff severance indemnities are agreed and payable based on the last salary for each year of service for the Company or with certain maximum limits in respect to the number of years to be considered or in respect to monetary terms. In general, this benefit is payable when the employee or worker ceases to provide his/her services to the Company and the right for its collection can be acquired because of different causes, as indicated in the respective agreements; e.g., retirement, dismissal, voluntary retirement, incapacity or disability, death, etc.

 

Law No. 19,728 published on May 14, 2001 which became effective on October 1, 2002 required “Compulsory Unemployment Insurance” in favor of all depending employees regulated by the Chilean Labor Code. Article 5 of this law provided the financing of this insurance through monthly contribution payments by both the employee and the employer.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
134
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 15 - Employee benefits (continued)

 

15.3Other long-term benefits

 

The other long-term benefits relate to staff severance indemnities and are recorded at their actuarial value.

 

Staff severance indemnities at actuarial value  12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
Staff severance indemnities, Chile   31,470    33,731 
Other obligations in companies elsewhere   667    700 
Total other non-current liabilities   32,137    34,431 
           
SQM North America’s pensions plan   -    409 
Total post-employment obligations   -    409 

 

Staff severance indemnities have been calculated under the actuarial assessment method of the Company’s obligations with respect to staff severance indemnities, which relate to defined benefit plans which consist of days of remuneration per year served at the time of retirement under conditions agreed in the respective agreements established between the Company and its employees.

 

Under this benefit plan, the Company retains the obligation for the payment of staff severance indemnities related to retirements without establishing a separate fund with specific assets, which is referred to as not funded. The discount interest rate of expected flows to be used was 6%.

 

Benefit payment conditions

 

The staff severance indemnity benefit relates to remuneration days for year worked for the Company with no limit of salary or years of service for the Company, when employees cease to work for the Company due to turnover or death. In this case, the maximum age for men is 65 years and 60 years old for women, which are the usual ages for retirement due to achieving the senior citizen age according to the Chilean pensions system provided in Decree Law 3.500 of 1980.

 

Methodology

 

The determination of the obligation for benefits under IAS 19, Projected Benefit Obligation (PBO) is described as follows:

 

To determine the Company's total liability, we used a mathematical simulation model which was programmed using a computer and which processed the situation of each employee on an individual basis.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
135
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 15 - Employee benefits (continued)

 

15.3Other long-term benefits, continued

 

This model considered months as discrete time; i.e., the Company determined the age of each person and his/her salary on a monthly basis according to the growth rate. Thus, information on each person was simulated from the beginning of the life of his/her employment contract or when he/she started earning benefits up to the month in which it reaches the normal retirement age, generating in each period the possible retirement according to the Company’s turnover rate and the mortality rate according to the age reached. When he/she reaches the retirement age, the employee finishes his/her service for the Company and receives indemnity related to retirement due to old age.

 

The following methodology to determine the accrual for all the employees included in agreements has considered turnover rates and the mortality rate RV-2010 established by the Chilean Superintendence of Securities and Insurance to calculate pension-related life insurance reserves in Chile according to the Accumulated Benefit Valuation or Accrued Cost of Benefit Method. This methodology is established in IAS 19 on Retirement Benefit Costs.

 

15.4Post-employment benefit obligations

 

Our subsidiary SQM North America, has established with its employees a pension plan until 2002 called “SQM North America Retirement Income Plan”, of which an obligation is calculated measuring the expected future forecasted staff severance indemnity obligation using a net salary gradual rate of restatements for inflation, mortality and turnover assumptions discounting the resulting amounts at present value using the interest rate defined by the authorities.

 

Since 2003, SQM North America has offered to its employees benefits related to pension plans based on the 401-K system, which do not generate obligations for the Company.

 

The table below shows the plan financing status and the amounts recognized in the consolidated Statement of Financial Position.

 

Reconciliation table  2013   2012 
   ThUS$   ThUS$ 
    Variation in the benefit obligation:          
Benefit obligation at January 1   6,482    6,620 
Service cost   1    1 
Interest cost   412    406 
Actuarial gain (loss)   387    (236)
Benefits paid   (360)   (309)
Benefit obligation at December 31   6,922    6,482 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
136
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 15 - Employee benefits (continued)

 

15.4Other long-term benefits, continued

 

   2013   2012 
   ThUS$   ThUS$ 
Variation in plan assets:          
Fair value of plan assets as of January 1   6,073    5,206 
Employer contributions   453    436 
Actual return (loss) on plan assets   1,743    740 
Benefits paid   (360)   (309)
Fair value of plan assets as of December 31   7,909    6,073 
           
Financing status   987    (409)
Items not yet recognized as net periodical pension and healthcare cost elements:          
Net actuarial loss at the beginning of the period   (2,243)   (2,954)
Amortization during the period   109    131 
 Net profit or loss expected to occur during the period   903    580 
Adjustment to recognize a minimum pension and healthcare obligation   (1,231)   (2,243)

 

As of December 31, 2013 and 2012, the net periodical pension and healthcare expense comprised the following elements.

.

   2013   2012 
Reconciliation  ThUS$   ThUS$ 
         
Cost of benefits from services obtained during the period   2    2 
Interest cost on benefit obligation   412    406 
Actual return on plan assets   1,743    739 
Amortization for prior period losses   109    131 
Net loss during the period   (1,290)   (344)
Net periodic provisional expense   69    142 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
137
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 15 - Employee benefits (continued)

 

15.5Staff severance indemnities

 

As of December 31, 2013 and December 31, 2012, severance indemnities calculated at the actuarial value are as follows:

 

   2013
ThUS$
   2012
ThUS$
 
Opening balance   (34,431)   (28,188)
Current cost of service   (107)   (8,087)
Interest cost   (2,248)   (1,037)
Actuarial gain/loss   (127)   40 
Exchange rate difference   2,946    (2,237)
Benefits paid during the year   1,830    5,078 
Balance   (32,137)   (34,431)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
138
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 15 - Employee benefits (continued)

 

15.5Staff severance indemnities, continued

 

The liability recorded for staff severance indemnity is valued using the actuarial value method, using the following actuarial assumptions:

 

   12/31/2013   12/31/2012     
             
Mortality rate   RV - 2012    RV - 2011      
Actual annual interest rate   6%   6%     
Voluntary retirement rotation rate:               
Men   0.96%   0.9%   annual 
Women   1.36%   1.53%   annual 
Salary increase   3.0%   3.0%   annual 
Retirement age:               
Men   65    65    years 
Women   60    60    years 

 

Note 16 - Executive compensation plan

 

The Company has established two compensation plans to motivate the Company’s executives and encourage them to stay in the Company, by granting payments based on the change in price of SQM’s shares.

 

1)Shares

 

Liquidated in cash, executives are able to exercise their rights until 2016.

  

Characteristics of the plan

 

This compensation plan is related to the company performance through the price of the Series B SQM share(Santiago Stock Exchange).

 

Participants in this plan

 

This compensation plan includes 10 executives of the Company who are entitled to this benefit, provided that they stay with the Company during the dates these options are executed. The dates for exercising the options will be the first 7 calendar days of May following the fiscal year.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
139
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 16 - Executive compensation plan (continued)

 

Compensation

 

The compensation for each executive is the difference between the average prices of the share during April of each year compared to the base price established by Company’s management. The base price fixed by the Company for this compensation plan amounts to US$ 50 per share. The Company reserves the right to exchange that benefit by shares or share options.

 

The movement of the options in effect for the period, the average prices for the fiscal year of the options and the average contractual life of the options in effect as of December 31, 2013 and December 31, 2012 are the following:

 

Movement for the period  2013   2012 
In effect as of January 1   2,200,500    2,340,000 
Granted during the fiscal year   45,000    103,500 
Redundant workers   (187,500)   (103,500)
Exercised during the fiscal year   -    (139,500)
Changes in benefit plan   (522,000)   - 
In circulation as of December 31, 2013   1,536,000    2,200,500 
Average contractual life   28 months    40 months 
Executives   10    40 

 

The amounts accrued by the plan, as of December 31, 2013 and December 31, 2012, amount to:

 

Effect on profit or loss  2013
ThUS$
   2012
ThUS$
 
Effect on profit or loss   8,200    (3,142)

 

2)Average Share Price Spread

 

Plan characteristics

 

This compensation plan is also related to the Company’s performance through the SQM Series B share price (Santiago Stock Exchange).

 

Plan participants

 

This compensation plan includes 30 Company’s executives, who obtain this benefit, provided they remain in the Company at the payment dates. The payments dates, if any, will be the first of January 2016, 2017 and 2018.

 

Compensation

 

The compensation for each executive is the difference between the average share price during each of the months of December 2015, December 2016 and December 2017, respectively, in its equivalent in US dollars and the reference prices, with the latter being the value between US$28 and the average weighted price of the trading of SQM Series B shares in the Santiago Stock Exchange during December 2014. The difference cannot exceed US$15.00 and will be multiplied by 5,000. If the amount calculated is negative or zero, no bonus will be paid during that period, but in such case, the bonus payable in the following period to the employee, will be equal to the product of multiplying the difference by 10,000. If the value was negative or zero in December 2015 and also in December 2016, for calculating the bond of December 2017, the differential will be multiplied by 15,000.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
140
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

The movement of the options in effect for the period, the average prices for the fiscal year of the options and the average contractual life of the options in effect as of December 31, 2013 and December 31, 2012 are the following:

 

Movement for the period  2013   2012 
In effect as of January 1   -    - 
Granted during the fiscal year   450,000    - 
In circulation as of December 31, 2013   450,000    - 
Average weighted contractual life   48 months    - 
Executives   30    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
141
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 17 - Disclosures on equity

 

The detail and movements in the funds of equity accounts are shown in the consolidated statement of changes in equity.

 

17.1Capital management

 

The main object of capital management relative to the administration of the Company’s financial debt and equity is to ensure the regular conduct of operations and business continuity in the long term, with the constant intention of maintaining an adequate level of liquidity and in compliance with the financial safeguards established in the debt contracts in force. Within this framework, decisions are made in order to maximize the value of SQM.

 

Capital management must comply with, others things, the limits considered in the Financing Policy approved Board of Directors, which establish a maximum consolidated debt level of 1.5 times the debt/equity. This limit can be exceeded only if the Company’s management has a written and previously granted authorization issued at the Extraordinary Shareholders’ Meeting.

 

In addition, capital management must comply with the external capital requirements imposed (or covenants) in its financial obligations, which regulate the debt level at 1.4 times, in its more strict level.

 

In conjunction with the level of indebtedness, it is also important for the Company to maintain a comfortable profile of maturities for its financial obligations, to oversee the relation between its short-term financial obligations and the long-term maturities, and the relation they have with the Company’s asset distribution. Consequently, the Company has maintained a liquidity level of 2,8 times during the last periods.

 

The Company’s management controls capital management based on the following ratios:

 

CAPITAL
MANAGEMENT
  12/31/2013   12/31/2012   Description (1)  Calculation (1)
Net Financial Debt MUS$   882,020    929,197   Financial Debt – Financial Resources  Other current Financial Liabilities + Other Non-Current Financial Liabilities – Cash and Cash Equivalents – Other Current Financial Assets – Hedging Assets, non-current
Liquidity   3.40    3.69   Current Asset divided by Current Liability  Total Current Assets / Total Current Liabilities
Net Debt / Capitalization   0.27    0.30   Net Financial Debt divided by Total Equity  Net financial debt / ( Net financial debt + Total Equity)
ROE   19.5%   30.1%  Income divided by Total Equity  Total Income / Equity (UH 12 months)
ROA   16.4%   25.1%  EBITDA – Depreciation divided by Net Total Assets of financial resources less  related parties investments  (Gross Income – Administrative Expenses)/ (Total Assets – Cash and Cash Equivalents – Other Current Financial Assets  Other Non-Current Financial Assets – Equity-accounted Investees) (UH 12 months)
Indebtedness   0.96    1.02   Total Liability on Equity  Total Liabilities / Total Equity

 

          (1) Assumes the absolute value of the accounting records

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
142
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 17 - Disclosures on equity (continued)

 

17.1Capital management, continued

 

The Company’s capital requirements change depending on variables such as: work capital requirements, new investment financing and dividends, among others. The Company manages its capital structure and makes adjustments on the basis of the predominant economic conditions so as to mitigate the risks associated with adverse market conditions and to take advantage of the opportunities there may be to improve the liquidity position.

 

There have been no changes in the capital management objectives or policy within the years reported in this document. No breaches of external requirements of capital imposed (or covenants) have been recorded.

 

17.2Disclosures on preferred share capital

 

Issued share capital is divided into 263,196,524 fully paid and subscribed shares with no par value composed of 142,819,552 Series "A" shares and 120,376,972 Series “B” shares, where both series are preferred shares.

 

The preferential voting rights for each series are detailed as follows:

 

Series “A”:

 

If the election of the Company’s President results in a tie vote, the Company's directors may vote once again, without the vote of the director elected by the Series B shareholders.

 

Series “B”:

 

1)          A general or extraordinary shareholders' meeting may be called at the request of shareholders representing 5% of the Company's Series B shares.

 

2)          An extraordinary meeting of the Board of Directors may be called with or without the agreement of the Company's President, at the request of the director elected by Series B shareholders.

 

As of December 31, 2013 and December 31, 2012, the Group does not maintain shares in the parent either directly or through its companies in which it has investments.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
143
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 17 - Disclosures on equity (continued)

 

17.2Disclosures on preferred share capital, continued

 

Detail of types of capital in preference shares:

 

Type of capital in preferred shares  12/31/2013   12/31/2012 
Description of type of capital in preferred shares  Series A   Series B   Series A   Series B 
Number of authorized shares   142,819,552    120,376,972    142,819,552    120,376,972 
Number of fully subscribed and paid shares   142,819,552    120,376,972    142,819,552    120,376,972 
Number of subscribed, partially paid shares   -    -    -    - 
Par value of shares in US$   0.9435    2.8464    0.9435    2.8464 
Increase (decrease) in the number of current shares   -    -    -    - 
Number of current shares   142,819,552    120,376,972    142,819,552    120,376,972 
Number of shares owned by the entity or its subsidiaries or associates   -    -    -    - 
Number of shares whose issuance is reserved due to the existence of options or agreements to dispose shares   -    -    -    - 
Capital amount in shares ThUS$   134,750    342,636    134,750    342,636 
Amount of premium issuance ThUS$   -    -    -    - 
Amount of reserves ThUS$   -    -    -    - 
Total number of subscribed shares, total   142,819,552    120,376,972    142,819,552    120,376,972 

 

As of December 31, 2013 and December 31, 2012, the Company has not placed any new issuances of shares on the market.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
144
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 17 - Disclosures on equity (continued)

 

17.3Disclosures on reserves in equity

 

As of December 31, 2013 and 2012, this caption comprises the following:

 

   12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Reserve for currency exchange conversion   (3,817)   (330)
Reserve for cash flow hedges   (3,766)   (16,522)
Reserve for actuarial gains or losses in defined benefit plans   (1,231)   (2,243)
Other reserves   (1,677)   (1,677)
           
Total other reserves   (10,491)   (20,772)

 

Reserves for currency exchange conversion

 

This balance reflects retained earnings for changes in the exchange rate, when converting financial statements of subsidiaries whose functional currency is from each company’s origin country and the presentation currency is the US dollar.

 

Reserve for cash flow hedges

 

The Company maintains as hedge instruments, financial derivatives related to obligations with the public issued in Unidades de Fomento and Chilean pesos. Changes from the fair value of derivatives designated and classified as hedges are recognized under this classification.

 

Reserve for actuarial gains or losses in defined benefit plans

 

Our subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation of IAS using a net salary progressive rate net of adjustments to inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 6.5% interest rate for 2013 and 2012.

 

Other reserves

 

Corresponds to the acquisition of the subsidiary SQM Iberian S.A., which was already under ownership of the Company at the acquisition date (IAS 27 R).

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
145
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 17 - Disclosures on equity (continued)

 

17.4Dividend policies

 

As required by Article 79 of the Chilean Companies Act, unless otherwise decided by unanimous vote of the holders of issued and subscribed shares, we must distribute a cash dividend in an amount equal to at least 30% of our consolidated Profit for the period for year ended as of December 31, unless and except to the extent that it has a deficit in retained earnings (losses not absorbed in prior years).

 

The Company’s dividend policy for 2013 is as follows:

 

-Distribution and payment in favor of each shareholder of a final dividend which will be equivalent to 50% of Profit for the period obtained in 2013.

 

-Distribution and payment, if possible during 2013, of a provisional dividend which will be recorded against the aforementioned final dividend. This provisional dividend will be paid probably during the last quarter of 2013 and its amount could not exceed 50% of the retained earnings for distribution obtained during 2013, which are reflected in the Company’s financial statements as of September 31, 2013.

 

-The distribution and payment by the Company of the remaining balance of the final dividend related to Profit for the period for the 2013 commercial year in up to two installments, which will have to be effectively paid and distributed prior to June 30, 2014.

 

-An amount equivalent to the remaining 50% of the Company’s Profit for the period for 2013 will be retained and used for the financing of operations of one or more of the Company’s investment projects with no prejudice of the possible future capitalization of the entirety or a portion of this.

 

-The Board of Directors does not consider the payment of any additional and interim dividends.

 

-The Board of Directors considers it necessary to indicate that the aforementioned Dividends Policy correspond to the intention or expectation of the Board regarding this matter. Consequently, the enforcement of such Policy Dividends is necessarily conditioned to net incomes finally obtained, to the results indicating the Company’s regular forecasts or the existence of certain conditions that could affect them. Notwithstanding the above and to the extent that such policy dividend does not suffer a significant change, SQM S.A. will timely communicate its shareholders on this matter.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
146
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 17 - Disclosures on equity (continued)

 

17.5Provisional dividends

 

On November 19, 2013, the Board of Directors of Sociedad Química y Minera de Chile S.A, agreed to pay and distribute to the Company’s shareholders, stating from December 12, 2013, a provisional dividend of US$0.75609 per share, equivalent, approximately, to ThUS$199,000 or 49.9% of the net distributable profit for the commercial year 2013, accumulated at September 30 of such year. The above is also charged against income of said commercial year, in favor of the Shareholders who appeared registered in SQM’s Shareholders Registry by the 5th working day prior to December 12, and in its equivalent in Chilean pesos according to the value of the “Observed dollar” or “USA dollar” that appears published in the Official Gazette on December 6, 2013.

On April 25th, 2013, at the 38th ordinary shareholders’ meeting, a definitive dividend payment of US$1.23323 per share was approved, based on the net profit earned during the commercial year 2012. US$0.94986 per share that was already paid as provisional dividend should be discounted from the abovementioned dividend, and the balance, amounting to US$0.28337 per share will be paid and distributed in favor of the Shareholders who appeared registered in SQM’s Shareholders Registry by the 5th working day prior to the day in which the dividend will be paid. The mentioned amount, if corresponds, will be paid in its equivalent in Chilean pesos according to the value of the “Observed dollar” or “USA dollar” that appears published in the Official Gazette on April 25, 2013.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
147
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 17 - Disclosures on equity (continued)

 

17.5Provisional dividends, continued

 

Dividends presented deducted from equity are:

 

   12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Dividends attributable to owners of the parent   203,401    253,438 
Dividends payable   36,583    76,267 
Total   239,984    329,705 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
148
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 18 -Provisions and other non-financial liabilities

 

18.1Types of provisions

 

   12/31/2013   12/31/2012 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Provision for legal complaints (*)   8,567    3,000    11,567    5,567    3,000    8,567 
Restructuring   -    -    -    -    -    - 
Provision for dismantling, restoration and rehabilitation cost   -    5,633    5,633    -    4,357    4,357 
Other provisions   9,386    -    9,386    12,922    -    12,922 
Total   17,953    8,633    26,586    18,489    7,357    25,846 

 

(*) Provisions for legal complaints relate to legal expenses for lawsuits whose resolution are pending, and correspond to funds estimated necessary to make the disbursement of expenses incurred for this purpose. This provision relates mainly to the litigation of its subsidiary located in Brazil and United States (see note 19.1) and other litigations.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
149
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 18 -Provisions and other non-financial liabilities (continued)

 

18.2Description of other provisions

 

Description of other provisions  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Current provisions, other short-term provisions          
Provision for tax loss in fiscal litigation   1,401    1,606 
Royalties, agreement with CORFO (the Chilean Economic Development Agency)   4,782    7,712 
Fine to Brazil   2,500    2,500 
Miscellaneous provisions   703    1,104 
Total   9,386    12,922 
Other long-term provisions          
Mine closure   5,633    4,357 
Total   5,633    4,357 

 

18.3Other non-financial liabilities, current

 

Description of other liabilities  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Tax withholdings   12,334    11,887 
VAT payable   2,531    16,481 
Guarantees received   1,000    872 
Accrual for dividend   36,583    76,267 
Monthly tax provisional payments   6,601    22,073 
Deferred income   13,475    16,291 
Withholdings from employees and salaries payable   4,087    7,546 
Accrued vacations   18,652    20,710 
Other current liabilities   90    73 
Total   95,353    172,200 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
150
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 18 -Provisions and other non-financial liabilities (continued)

 

18.4Changes in provisions as of 12/31/2013

 

Description of items that gave rise to
variations
  Guarantee   Restructuring   Legal complaints   Onerous
contracts
   Provision for
dismantling,
restoration and
rehabilitation cost
   Other
provisions
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
Total provisions, initial balance   -    -    8,567    -    4,357    12,922    25,846 
                                    
Changes in provisions:                                   
                                    
Additional provisions   -    -    3,000    -    1,276    12,608    16,884 
                                    
Provision used   -    -    -    -    -    (15,943)   (15,943)
Increase(decrease) in foreign currency exchange   -    -    -    -    -    (201)   (201)
                                    
Total provisions, final balance   -    -    11,567    -    5,633    9,386    26,586 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
151
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 18 -Provisions and other non-financial liabilities (continued)

 

18.4Changes in provisions as of 12/31/2012

 

Description of items that gave rise to
variations
  Guarantee   Restructuring   Legal complaints   Onerous
contracts
   Provision for
dismantling,
restoration and
rehabilitation cost
   Other
provisions
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
Total provisions, initial balance   -    -    7,571    -    3,724    14,237    25,532 
                                    
Changes in provisions:                                   
                                    
Additional provisions   -    -    1,000    -    633    8,863    10,496 
                                    
Provision used   -    -    (4)   -    -    (10,061)   (10,065)
Increase (decrease) in foreign currency exchange   -    -    -    -    -    (117)   (117)
                                    
Total provisions, final balance   -    -    8,567    -    4,357    12,922    25,846 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
152
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 18 -Provisions and other non-financial liabilities (continued)

 

18.5Detail of main types of provisions

 

Legal expenses: This provision depends on the pending resolution of a legal lawsuit, to pay the expenses associated to and incurred during such lawsuit (incurred mainly in Brazil and U.S.A.).

 

Tax accrual in tax litigation: This accrual relates to lawsuits pending resolution related to taxes in Brazil for two of our subsidiaries, SQM Brazil and NNC.

 

CORFO (Economic Development Agency) Royalties agreement: Relates to the commercialization of mining properties that SQM Salar S.A. pays the Economic Development Agency for on a quarterly basis. The amount of the lease payable is calculated based on sales of products extracted from the Atacama Saltpeter deposit.

 

The settlement of the aforementioned amounts is performed on a quarterly basis.

 

To date, the Company and its subsidiaries have no significant uncertainties about the timing and amount of any class of provision.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
153
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions

 

According to note 18.1 the Company has only registered a provision for those lawsuits in which the probability to lose is “more likely than not”. The Company is party to lawsuits and other relevant legal actions that are detailed as follows:

 

19.1Lawsuits and other relevant events

 

1. Plaintiff : JB Comércio de Fertilizantes and Defensivos Agrícolas Ltda. (JB)
  Defendant : Nitratos Naturais do Chile Ltda. (NNC)
  Date : December 1995
  Court : MM 1ª, Vara Civel de Comarca de Barueri, Brazil.
  Reason : Compensation claim filed by JB against NNC for having appointed a distributor in a territory of Brazil for which JB had an exclusive contract.
  Status : Lower court ruling against Nitratos Naturais do Chile Ltda. and recourse of appeal pending resolution.
  Nominal value : ThUS$ 1,800
       
2. Plaintiff : Nancy Erika Urra Muñoz
  Defendants : Fresia Flores Zamorano, Duratec-Vinilit S.A. and SQM S.A. and their  insurers
  Date : December 2008
  Court : 1st Civil Court of Santiago  
  Reason : Labor Accident
  Status : Evidence
  Nominal value : ThUS$550

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
154
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.1Lawsuits and other relevant events, continued

 

3. Plaintiff : City of Pomona, California USA
  Defendant : SQM North America Corporation
  Date : December 2010
  Court : United States District Court Central District of California
  Reason : Payment of expenses and other amounts related to the treatment of groundwater to allow for consumption by removing the existing perchlorate in such groundwater and that supposedly come from Chilean fertilizer.
  Status : Conditional waiver as a result of pending appeal. Appeal will be reviewed in a hearing in October of 2013. Sentence pending.
  Nominal value : Not possible to determine
       
4. Plaintiff : City of Lindsay, California USA
  Defendant : SQM North America Corporation
      The lawsuit also was filed against Sociedad Química y
      Minera de Chile S.A. this lawsuit has not yet been notified to the Company
  Date : December 2010
  Court : United States District Court Eastern District of California
  Reason : Payment of expenses and other amount related to the treatment of groundwater to allow for consumption by removing the existing perchlorate in such groundwater and that supposedly come from Chilean fertilizer.
  Status : Claim. Suspended procedure
  Nominal value : Not possible to determine
       
5. Plaintiff : Metalúrgica FAT Limitada
  Defendant : SQM Salar S.A.
  Date : August 2011
  Court : 9th Civil Court in Santiago
  Reason : Compensation for early termination of supply contract and installation of metal structures
  Status : .Verdict of $40m in damages. Appeal pending.
  Nominal value : ThUS$175

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
155
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.1Lawsuits and other relevant events, continued

 

6. Plaintiff : Angelina Castillo Figueroa and others
  Defendant : SQM Nitratos S.A. and its insurers
  Date : June 2012
  Court : 2nd Civil Court in Santiago
  Reason : Compensation claim for alleged civil liability under tort derived from explosion occurred on September 6, 2010 near Baquedano causing the death of 6 workers
  Status : Evidence.
  Nominal value : ThUS$9,400
       
7. Plaintiff : María Angélica Alday Fuentes
  Defendant : Vladimir Roco Alvarez, Compass Catering S.A. and SQM S.A.
  Date : August 2012
  Court : 1st Civil Court in Antofagasta
  Reason : Compensation for moral damages for attempted sexual assault.
  Status : Replay to claim.
  Nominal value : ThUS$200
       
8. Plaintiff : Workers Union of the Sociedad Industrial Minera Nueva Victoria
  Defendant : SQM S.A. and SQM Industrial S.A.
  Date : May 2013
  Court : Iquique Labor Court of First Instance
  Reason : Charging of benefits allegedly owed due to possible issue of bonus for meeting goals
  Status : Trial Preparation Hearings (2)
  Nominal value : ThUS$400
       
9. Plaintiff : Cristián Plaza Portilla, Sergio Herrera Contreras and other
  Defendant : SQM Salar S.A.
  Date : August 2013
  Court : Antofagasta Labor Court of First Instance
  Reason : Charging of benefits allegedly owed due to possible issue of bonus for meeting goals
  Status : Trial Preparation Hearings (8)
  Nominal value : ThUS$1,120

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
156
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.1Lawsuits and other relevant events, continued

 

10. Plaintiff : E-CL S.A
  Defendant : Sociedad Química y Minera de Chile S.A.
  Date : September 2013
  Court : Arbitration
  Reason : Early termination of the Power Supply Contract entered into on February 12, 1999 (which matures in March 2016), on the basis of the alleged incompliance of a prior sentence between both parties that was resolved in favor of SQM S.A.
  Status : Evidentiary stage
  Nominal value : ThUS$5,100
       
11. Plaintiff : Workers Union of the Sociedad Industrial Minera Nueva Victoria
  Defendant : SQM S.A. and SQM Industrial S.A.
  Date : October 2013
  Court : Iquique Labor Court of First Instance
  Reason : Charging of benefits allegedly owed due to possible issue of bonus for meeting goals
  Status : Response to law suit (2)
  Nominal value : ThUS$400

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
157
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.1Lawsuits and other relevant events, continued

 

The Company and its subsidiaries have been involved in and will probably continue to be involved in either as plaintiffs or defendants in certain judicial proceedings that have been and will be heard by the Arbitral or Ordinary Courts of Justice that will make the final decision. Those proceedings that are regulated by the appropriate legal regulators are intended to exercise or oppose certain actions or exceptions related to certain mining claims either granted or to be granted and that do not or will not affect in an essential manner the development of the Company and its subsidiaries.

 

Soquimich Comercial S.A. has been involved in and will probably continue to be involved in either as plaintiff or defendant in certain judicial proceedings through which it intends to collect and receive the amounts owed, the total nominal value of which is approximately ThUS$700.

 

The Company has made efforts and continues to make efforts to obtain payment of certain amounts that are still owed to it on occasion of their activities. Such amounts will continue to be required using judicial or non-judicial means by the plaintiffs, and the actions and exercise related to these are currently in full force and effect.

 

The Company and its subsidiaries have not received legal notice of any claims other than those mentioned in paragraph I above. The claims detailed above seek to annul certain mining claims that were purchased by SQM S.A. and Subsidiaries, the proportional purchase value of which, with respect to the portion affected by the superimposition, exceeds the nominal and approximate amount of ThUS$150. The claims seek payment of certain amounts allegedly owed by the Company due to its own activities, which exceed the approximate, nominal and individual amount of ThUS$150.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
158
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.2Restrictions to management or financial limits

 

Credit contracts subscribed to by the SQM Group with domestic and foreign banks and for issuance of bonuses in the local and international market, requires the Company to comply with the following level of consolidated financial indicators, calculated for a moving period which considers the last twelve months:

 

-To maintain a minimum equity of ThUS$900,000.
-To maintain a Net Financial Debt and EBITDA ratio not higher than 3x.
-To maintain a Total Indebtedness Ratio not higher than 1.4x Total Indebtedness level defined as the Total Liabilities ratio divided by Total Equity.
-To maintain a ratio between the operating subsidiaries SQM Industrial S.A. and SQM Salar S.A., or their respective legal successor’ financial debt and the total Issuer’s consolidated current assets not higher than 0.3x.

 

As of December 31, 2013, the aforementioned financial indicators are as follows:

Indicator  12/31/2013   12/31/2012 
Equity ThUS$   2,432,241    2,187,446 
Net Financial Debt/ EBITDA   1.06    0.83 
Indebtedness   0.96    1.02 
SQM Industrial and SQM Salar debt / Current assets   0.02    0.04 

 

Issuance contracts for bonuses issued abroad require that the Company does not merge or dispose of any title of an asset as a whole or as a substantial part of it, unless the following copulative conditions are met: (i) the legal successor is an entity subject to Chilean or United States’ laws, and assumes under a complimentary contract the Company’s obligations, (ii) the Issuer does not fail to comply immediately after the merge or disposal, and (iii) The Issuer delivers a legal opinion stating the merge or disposal and the complimentary contract meet the requirements described in the original contract.

 

In addition, SQM S.A. is committed to disclose financial information on quarterly basis.

The Company and its subsidiaries have complied and are fully complying with all aforementioned limitations, restrictions and obligations.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
159
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.3Commitments

 

The subsidiary SQM Salar S.A. has signed a rental contract with the Economic Development Agency (CORFO), which establishes that this subsidiary will pay rent to CORFO for the concept of commercialization of certain mining properties owned by CORFO and for the products resulting from this commercialization. The annual rent stated in the aforementioned contract is calculated on the basis of sales of each type of product. The contract is in force until 2030, and rent began being paid in 1996 reflecting an expense amount of ThUS$22,885 as of December 31, 2013 (ThUS$ 27,193 as of December 31, 2012).

 

On 15 November 2013, Corporación de Fomento de la Producción (CORFO) sent a letter to SQM Salar S.A. (SQMS) stating its intention to a) collect the amount of Ch$2,530,298,919 (ThUS$4,823) that in CORFO’s opinion, SQMS owed to it for the calculation and payment of rental payments according to the “Lease Agreement of OMA Mining Claims located in the Atacama Salt Flat” entered into between CORFO and SQMS on November 12, 1993 (the AGREEMENT) and b) require the constitution of an instance of arbitrage stated in the AGREEMENT with the purpose that the arbitrator appointed by the “Arbitration Center of the Santiago Chamber of Commerce” determines if other alleged lese payment obligations may exist that SQMS could owe to CORFO under the AGREEMENT. SQMS differs completely form CORFO’s claims. In fact, the AGREEMENT has been in force for more than 20 years and during all this time, SQMS has paid to CORFO more than 80 quarterly payments in their entirety and on a timely basis that CORFO has received satisfactorily. Each of the parties, CORFO and SQMS, have requested the formation of an appropriate arbitration and such processes have not yet began.

 

19.4Restricted or pledged cash

 

The subsidiary Isapre Norte Grande Ltda. in compliance with that established by the Chilean Superintendence of Healthcare, which regulates the running of pension-related health institutions, maintains a guarantee in financial instruments, delivered in deposits, custody and administration to Banco de Chile.

 

This guarantee, according to the regulations issued by the Chilean Superintendence of Healthcare is equivalent to the total sum owed to its members and medical providers, Banco de Chile reports the present value of the guarantee to the Chilean Superintendence of Healthcare and Isapre Norte Grande Ltda. on a daily basis. As of December 31, 2013, the guarantee amounts to ThUS$708.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
160
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.5Securities obtained from third parties

 

The main security received from third parties (distributors) to guarantee Soquimich Comercial S.A.’s compliance with obligations in contracts of commercial mandates for the distribution and sale of fertilizers amounted to ThUS$14,178 as of December 31, 2013; which is detailed as follows:

 

Company  31/12/2013 
   ThUS$ 
     
Agrícola Lobert Ltda.   1,271 
Agroc Patricio Bornand L. Eirl   392 
Agrocomercial Bornand Ltda.   344 
Agroindustrial Orzonaga Ltda.   133 
Aldo Epple Davazno   935 
Bernardo Guzman Schmidt   139 
Coop. Ag. Lechera Bio Bio Ltda.   3,431 
Comercial Agrosal Ltda.   116 
Contador Frutos S.A.   1,447 
Dante Hauri Gomez   126 
Gilberto Rivas Y Cia. Ltda.   136 
Hortofruticola La Serena   323 
Jose Antonio Gonzalez   118 
Juan Luis Gaete Chesta   425 
Lemp Martin Julian   124 
Neyib Farran Y Cia. Ltda.   133 
Patricio Meneses Saglieto   953 
Sebastian Urrutia Araya   116 
Soc.Agr. Huifquenco Cia Ltda.   117 
Soc. Agrocom. Julio Polanco   132 
Tattersall S.A.   1,789 
Vicente Oyarce Castro   525 
Vito Leopolo Llanos   953 
Total   14,178 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
161
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.6Indirect guarantees

 

Guarantees in which there is no pending balance indirectly reflect that the respective guarantees are in force and approved by the Company's Board of Directors and have not been used by the respective subsidiary.

 

            Pending balances as of 
            the closing date of the 
            financial statements 
   Debtor  Type of  12/31/2013   12/31/2012 
Creditor of the guarantee  Name  Relationship  guarantee  ThUS$   ThUS$ 
Australian and New Zealand Bank  SQM North America Corp  Subsidiary  Bond   -    - 
Australian and New Zealand Bank  SQM Europe N.V.  Subsidiary  Bond   -    - 
Generale Bank  SQM North America Corp  Subsidiary  Bond   -    - 
Generale Bank  SQM Europe N.V.  Subsidiary  Bond   -    - 
Kredietbank  SQM North America Corp  Subsidiary  Bond   -    - 
Kredietbank  SQM Europe N.V.  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM Europe N.V.  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM North America Corp  Subsidiary  Bond   -    - 
Banks and financial institutions  Nitratos Naturais do Chile Ltda.  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM México S.A. de C.V.  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM Brasil Ltda.  Subsidiary  Bond   -    - 
“BNP”  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 
Sociedad Nacional de Mineria A.G.  SQM Potasio S.A.  Subsidiary  Bond   -    - 
Scotiabank & Trust (Cayman) Ltd.  Royal Seed Trading A.V.V.  Subsidiary  Bond   50,189    50,235 
Scotiabank & Trust (Cayman) Ltd.  Royal Seed Trading A.V.V.  Subsidiary  Bond   50,139    50,164 
Bank of America  Royal Seed Trading A.V.V.  Subsidiary  Bond   40,120    40,141 
Export Development Canada  Royal Seed Trading A.V.V.  Subsidiary  Bond   50,014    50,020 
The Bank of Tokyo-Mitsubishi UFJ Ltd.  Royal Seed Trading A.V.V.  Subsidiary  Bond   50,108    50,140 
JP Morgan Chase Bank  SQM Industrial S.A.  Subsidiary  Bond   -    - 
The Bank of Nova Scotia  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 
Morgan Stanley Capital Services  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 
The Bank of Tokyo-Mitsubishi UFJ Ltd.  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
162
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 19 -Contingencies and restrictions (continued)

 

19.6Indirect guarantees, continued

 

            Pending balances as of 
            the closing date of the 
            financial statements 
   Debtor  Type of  12/31/2013   12/31/2012 
Creditor of the guarantee  Name  Relationship  guarantee  ThUS$   ThUS$ 
                  
HSBC  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 
Deutsche Bank AG  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 
Credit Suisse International  SQM Investment Corp. N.V.  Subsidiary  Bond   -    - 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
163
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 20 -Revenue

 

As of December 31, 2013 and 2012, revenue is detailed as follows:

 

   January to
December
 
   2013   2012 
 Types of revenue  ThUS$   ThUS$ 
         
Sales of goods   2,191,650    2,420,357 
Lending of services   11,490    8,803 
Total   2,203,140    2,429,160 

 

Note 21 -Earnings per Share

 

Basic earnings per share are calculated by dividing net income attributable to the Company’s shareholders by the weighted average of the number of shares in circulation during that period.

 

As expressed, earnings per share are detailed as follows:

 

Basic earnings per share  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Earnings (losses) attributable to owners of the parent   467,113    649,167 

 

   12/31/2013
Units
   12/31/2012
Units
 
Number of common shares in circulation   263,196,524    263,196,524 

 

   12/31/2013   12/31/2012 
         
Basic earnings per share (US$ per share)   1.7748    2.4665 

 

The Company has not made any operation with a potential dilutive effect that assumes diluted earnings per share different from the basic earnings per share.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
164
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 22 -Borrowing costs

 

The cost of interest is recognized as an expense in the year in which it is incurred, except for interest that is directly related to the acquisition and construction of tangible property, plant and equipment assets which comply with the requirements of IAS 23. As of December 31, 2013, total interest expenses incurred amount to ThUS$58,608 (ThUS$54,095 as of December 31, 2012).

 

The Company capitalizes all interest costs directly related to the construction or to the acquisition of property, plant and equipment, which require a substantial time to be suitable for use.

 

Costs of capitalized interest, property, plant and equipment

 

The cost of capitalized interest is determined by applying the average or weighted average of all financing costs incurred by the Company to the monthly end balances of works-in-progress meeting the requirements of IAS 23.

 

The rates and costs for capitalized interest of property, plant and equipment are detailed as follows:

 

   12/31/2013   12/31/2012 
         
Capitalization rate of costs for capitalized interest, property, plant and equipment   7%   7%
           
Amount of costs for interest capitalized in ThUS$   17,232    14,153 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
165
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 23 -Effect of fluctuations on foreign currency exchange rates

 

a)Foreign currency exchange differences recognized in profit or loss except for financial instruments measured at fair value through profit or loss:

 

   12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Foreign exchange conversion gains (losses) recognized in the result of the year.   (11,954)   (26,787)
Foreign exchange conversion reserves attributable to the owners of the controlling entity   (3,487)   921 
           
Foreign exchange conversion reserves attributable to the non-controlling entity   (72)   61 

 

b)Reserves for foreign currency exchange differences:

 

As of December 31, 2013, and December 31, 2012, foreign currency exchange differences are detailed as follows:

 

Detail  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
         
Changes in equity generated through the equity method:          
Comercial Hydro S.A.   1,004    1,004 
SQMC Internacional Ltda.   22    39 
Proinsa Ltda.   16    29 
Comercial Agrorama Ltda.   36    87 
Isapre Norte Grande Ltda.   15    59 
Almacenes y Depósitos Ltda.   69    99 
Sales de Magnesio Ltda.   103    209 
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   9    20 
Agrorama S.A.   (16)   (6)
Doktor Tarsa   (3,647)   (1,074)
SQM Vitas Fzco   (657)   (318)
Ajay Europe   146    (275)
SQM Eastmed Turkey   (42)   (42)
Charlee SQM (Thailand) Co. Lta.   (129)   (32)
Coromandel SQM India   (231)   (118)
SQM Italia SRL   89    28 
SQM Oceania Pty Limited   (619)   (39)
SQM Indonesia S.A.   15    - 
Total   (3,817)   (330)

 

c)Functional and presentation currency

 

The functional currency in these companies corresponds to the currency of the country of origin of each entity, and its presentation currency is the US dollar.

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
166
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 23 -Effect of fluctuations on foreign currency exchange rates (continued)

 

d)Reasons to use one presentation currency and a different functional currency

 

-The total revenues of these subsidiaries are associated with the local currency.
-The commercialization cost structure of these companies is affected by the local currency.
-The equities of these companies are expressed in local currency (Chilean peso).

 

Note 24 -Environment

 

24.1Disclosures of disbursements related to the environment

 

The Company is continuously concerned with protecting the environment both in its production processes and with respect to products manufactured. This commitment is supported by the principles indicated in the Company’s Sustainable Development Policy. The Company is currently operating under an Environmental Management System (EMS) that has allowed it to strengthen its environmental performance through the effective application of the Company’s Sustainable Development Policy.

 

Operations that use caliche as a raw material are carried out in desert areas with climatic conditions that are favorable for drying solids and evaporating liquids using solar energy. Operations involving the open-pit extraction of minerals, due to their low waste-to-mineral ratio, generate remaining deposits that slightly alter the environment. A portion of the ore extracted is crushed, a process in which particle emissions occur. Currently this operation is conducted only at the Pedro de Valdivia worksite and no ore crushing process is conducted in the Maria Elena sector.

 

Many of the Company’s products are shipped in bulk at the Port of Tocopilla. In 2007 the city of Tocopilla was declared a zone Saturated with MP10 Particles mainly due to the emissions from the electric power plants that operate in that city. In October 2010 the Decontamination Plan for Tocopilla was put in place. Accordingly, the Company has committed to taking several measures to mitigate the effects derived from bulk product movements in the port. These measures have been successfully implemented since 2007.

 

The Company carries out environmental follow-up and monitoring plans based on specialized scientific studies. Within this context, the Company entered into a contract with the National Forestry Corporation (CONAF) aimed at researching the activities of flamingo groups that live in the Salar de Atacama (Atacama Saltpeter Deposit) lagoons. Such research includes a population count of the birds, as well as breeding research. Environmental monitoring activities carried out by the Company at the Salar de Atacama and other systems in which it operates are supported by a number of studies that have integrated diverse scientific efforts from prestigious research centers, including Dictuc from the Pontificia Universidad Católica in Santiago and the School of Agricultural Science of the Universidad de Chile.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
167
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24 -Environment (continued)

 

24.1Disclosures of disbursements related to the environment, continued

 

Furthermore, within the framework of the environmental studies which the Company is conducting, the Company performs significant activities in relation to the recording of Pre-Columbian and historical cultural heritage, as well as the protection of heritage sites, in accordance with current Chilean laws. These activities have been especially performed in the areas surrounding Maria Elena and the Nueva Victoria plants. This effort is being accompanied by cultural initiatives within the community and the organization of exhibits in local and regional museums.

 

As emphasized in its Sustainable Development Policy, the Company strives to maintain positive relationships with the communities surrounding the locations in which it carries out its operations, as well as to participate in communities’ development by supporting joint projects and activities which help to improve the quality of life for residents. For this purpose, the Company has focused its efforts on activities involving the rescue of historical heritage, education and culture, as well as development, and in order to do so, it acts both individually and in conjunction with private and public entities.

 

24.2   Detail of information on disbursements related to the environment

 

The accumulated disbursements in which the Company incurred as of December 31, 2013 for the concept of investments in production processes, verification and control of compliance with ordinances and laws relative to industrial processes and facilities, including prior year disbursements related to these projects amounted to ThUS$20,043 and are detailed as follows:

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
168
 

 

  

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2 Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2013

 

Identification of the
Parent or subsidiary 
  Name of the project with which the disbursement is
associated 
  Concept for which the disbursement was made or
will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period 
  Actual or 
estimated date on 
which

disbursements
were or will be
made 
Others   Environmental-operational area   Not classified   Expense   Not-classified   1,753   12-31-2013
SQM Industrial S.A.   CQLX-S Carmen and Lagarto hazardous waste yard   Sustainability   Asset/expense   Not classified   98   12-31-2012
SQM Industrial S.A.   FP55 - FPXA-EIA Pampa Blanca Expansion   Environmental processing   Asset   Not classified   1,493   12-30-2012
SQM Industrial S.A.   IQWZ - Normalization TK NV liquid fuels   Sustainability: Environment and Risk prevention   Asset   Not classified   24   04-01-2014
SQM Industrial S.A.   JQ8K – DIA Line 4 Floor Drying, Coya Sur   Environmental processing   Asset   Not classified   32   09-01-2012
SQM Industrial S.A.   JQB6 - DIA Plant NPT4, Coya Sur   Environmental processing   Asset   Not classified   84   04-30-2012
SQM Industrial S.A.   JQH9 – Purchase of Bertrams Boiler   Sustainability: Environment and Risk prevention   Asset   Development   612   08-01-2013
SQM Industrial S.A.   MNYS - Measures of Technological Change Cultural Heritage Dissemination Maria Elena   Environmental processing   Expense   Not classified   37   12-31-2012
SQM Industrial S.A.   MP5W - Normalization TK´s Combustibles   Sustainability: Environment and Risk prevention   Asset   Not classified   2,114   06-30-2008
SQM Industrial S.A.   MPQU - Construction of Hazardous Chemical Supplies warehouse   Sustainability: Environment and Risk prevention   Asset   Development   449   12-15-2010
SQM Industrial S.A.   MQA8- Normalization gas system, external cafeterias (Stage 1: projects)   Sustainability: Environment and Risk prevention   Asset/Expense   Not classified   139   12-31-2012
SQM Industrial S.A.   MQBM-Archaeological Digging Deployment Maria Elena - Toco   Sustainability: Environment and Risk prevention   Expense   Not classified   14   12-31-2012
SQM Industrial S.A.   MQHF -Sustaining of batteries ME   Sustainability: Environment and Risk prevention   Asset/Expense   Not classified   310   08-01-2013
SQM Industrial S.A.   MQK2-Elimination of PCBs I   Sustainability: Environment and Risk prevention   Expense   Not classified   17   03-31-2014
SQM Industrial S.A.   PPC1-Remove switches park PCB sub 3 and 1/12 Pedro de Valdivia   Sustainability: Environment and Risk prevention   Asset/ Expense   Not classified   147   05-31-2009
SQM Industrial S.A.   PPZU - Standardize and certify Plant Fuel Tanks   Environmental processing   Asset   Not classified   2,644   07-01-2011
SQM Industrial S.A.   PQLV-DIA Pedro de Valdivia Mine   Environmental processing   Asset   Not classified   271   06-01-2013
SQM Industrial S.A.   SQ7X-Reach 2011-2013   Sustainability: Environment and Risk prevention   Expense   Not classified   341   01-31-2014
SQM Industrial S.A.   TQA2 - Drainage Improvement Villa Prat   Sustainability: Environment and Risk prevention   Expense   Not classified   17   12-31-2012
SQM Industrial S.A.   PQXM – Elaboration DIA Operation with batteries in PV   Environmental processing   Asset   Not classified   89   12-01-2014

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
169
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2 Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2013, continued

 

Identification of the
Parent or subsidiary 
  Name of the project with which the disbursement is
associated 
  Concept for which the disbursement was made or
will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period 
  Actual or 
estimated date on
which

disbursements
were or will be
made 
SQM S.A.   IP83-DIA Expansion TLN-15   Environmental Processing   Asset   Not Classified   23   12-31-2009
SQM S.A.   IPFT-Cultural Heritage Region I   Sustainability   Expense   Not classified   174   12-31-2012
SQM S.A.   IPXE-Environmental monitoring plan Llamara Salt Flat   Cost Reduction   Expense   Not classified   1,013   12-31-2012
SQM S.A.   IPXF-Environmental monitoring plan Pampa del Tamarugal   Sustainability: Environment and Risk prevention   Expense   Not Classified   951   12-31-2012
SQM S.A.   IQ1M-PSA Re-injection of water to Puquíos Llamara   Sustainability: Environment and Risk prevention   Asset   Not Classified   2,320   03-31-2013
SQM S.A.   IQ3S-Hazardous Materials Management Standardization   Sustainability   Asset-Expense   Not Classified   378   12-30-2012
SQM S.A.   IQ54-Cultural heritage Pampa Hermosa   Minor projects (between ThUS$50 and ThUS$299)   Asset   Not Classified   506   12-31-2012
SQM S.A.   IQOW-Deposit authorization for Humberstone heritage   Sustainability: Environment and Risk prevention   Expense   Not Classified   1   12-31-2012
SQM S.A.   IQPJ-Mine Area equity measures Stage I   Sustainability   Expense   Not Classified   110   03-31-2013
SQM S.A.   IQWS - Mine Area equity measures Stage II   Sustainability: Environment and Risk prevention   Expense   Not Classified   79   04-30-2014
SQM S.A.   IQX6 – Environmental management plan of Tamarugos Pampa del Tamarugal 2013-2014   Sustainability: Environment and Risk prevention   Asset   Not Classified   193   04-01-2015
SQM S.A.   IQXB - Environmental management plan of Tamarugos Llamara Salt Flat 2013-2014   Sustainability: Environment and Risk prevention   Asset   Not Classified   141   04-01-2015
SQM S.A.   MQLQ- Gas scrubbing system   Not Classified   Asset   Development   468   01-01-2013
SQM Salar S.A   LQG8 – Waste room  Toconao Campsite   Sustainability: Natural Resources   Expense   Not Classified   15   12-31-2012
SQM Salar S.A.   LQDM – Certification of tanks     Sustainability: Replacement of equipment   Asset   Not classified   256   03-31-2014
SQM Salar S.A.   LQI6-EIA Operating maintenance at Salar de Atacama   Environmental processing   Asset   Not classified   466   12-31-2013
SQM Salar S.A.   LQNI-DIA KCI Floor Drying and compacting expansion   Environmental processing   Asset   Not classified   59   03-30-2014
SIT S.A.   TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla   Sustainability: Environment and Risk prevention   Asset / Expense   Development   1,708   12-31-2011

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
170
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2013, continued

 

Identification of the
Parent or subsidiary 
  Name of the project with which the disbursement is
associated 
  Concept for which the disbursement was made or
will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period 
  Actual or
estimated date on
which
disbursements
were or will be
made 
SIT S.A.   TQAV - Paving paths IV   Sustainability:   Asset   Development   3   12-01-2011
SIT S.A.   TQQ5- Environmental curtains Field No. 8   Sustainability: Environment and Risk prevention   Expense   Not classified   221   04-27-2013
SQM Nitratos S.A.   IQMH - Normalization Mine NV area operation   Sustainability: Environment and Risk prevention   Asset   Not classified   222   12-31-2012
SQM Nitratos S.A.   PQI9 – Mine waste water treatment plant   Sustainability: Environment and Risk prevention   Asset   Not classified   51   08-01-2013
Total                   20,043    

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
171
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2013

 

Identification of the
Parent or subsidiary
  Name of the project with which the disbursement is
associated
  Concept for which the disbursement was
made or will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period
  Actual or
estimated date on
which
disbursements
were or will be
made
SQM Industrial S.A.   FP55 - FPXA-EIA Pampa Blanca Expansion   Environmental processing   Asset   Not classified   1   12-30-2012
SQM Industrial S.A.   IQWZ - Normalization TK NV liquid fuels   Sustainability: Environment and Risk prevention   Asset   Not classified   800   04-01-2014
SQM Industrial S.A.   MP5W - Normalization TK´s Combustibles   Sustainability: Environment and Risk prevention   Asset   Not classified   795   06-30-2008
SQM Industrial S.A.   MQBM-Archaeological Digging Deployment Maria Elena - Toco   Sustainability: Environment and Risk prevention   Expense   Not classified   63   12-31-2012
SQM Industrial S.A.   MQK2-Elimination of PCBs I   Sustainability: Environment and Risk prevention   Expense   Not classified   33   03-31-2014
SQM Industrial S.A.   PPZU - Standardize and certify Plant Fuel Tanks   Environmental processing   Asset   Not classified   533   07-01-2011
SQM Industrial S.A.   PQLV-DIA Pedro de Valdivia Mine   Environmental processing   Asset   Not classified   103   06-01-2013
SQM S.A.   IP83-DIA Expansion TLN-15   Environmental Processing   Asset   Not Classified   0   12-31-2009
SQM S.A.   IPFT-Cultural Heritage Region I   Sustainability   Expense   Not classified   1   12-31-2012
SQM S.A.   IQ1M-PSA Re-injection of water to Puquíos Llamara   Sustainability: Environment and Risk prevention   Asset   Not Classified   300   03-31-2013
SQM S.A.   IQ3S-Hazardous Materials Management Standardization   Sustainability   Asset-Expense   Not Classified   12   12-30-2012
SQM S.A.   IQOW-Deposit authorization for Humberstone heritage   Sustainability: Environment and Risk prevention   Expense   Not Classified   10   12-31-2012
SQM S.A.   IQWS - Mine Area equity measures Stage II   Sustainability: Environment and Risk prevention   Expense   Not Classified   29   04-30-2014
SQM S.A.   IQX6 – Environmental management plan of Tamarugos Pampa del Tamarugal 2013-2014   Sustainability: Environment and Risk prevention   Asset   Not Classified   595   04-01-2015
SQM S.A.   IQXB - Environmental management plan of Tamarugos Llamara Salt Flat 2013-2014   Sustainability: Environment and Risk prevention   Asset   Not Classified   266   04-01-2015
SQM Salar S.A.   LQDM – Certification of tanks     Sustainability: Replacement of equipment   Asset   Not Classified   94   03-31-2014
SQM Salar S.A.   LQI6-EIA Operating Maintenance at Salar de Atacama   Environmental Processing   Asset   Not Classified   59   12-31-2013
SIT S.A.   TQQ5- Environmental curtains Field No. 8   Sustainability: Environment and Risk prevention   Expense   Not Classified   90   04-27-2013
SQM Industrial S.A.   PQXM – Elaboration DIA Operation with batteries in PV   Environmental processing   Asset   Not classified   212   12-01-2014
Total                   3,996    
SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
172
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2012, continued

 

Identification of the Parent
or subsidiary
  Name of the project with which the disbursement is
associated
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period
ThUS$
  Actual or estimated
date on which
disbursements were or
will be made
SQM Industrial S.A.   Environmental and community management (2012 Expense Accumulated as of 4Q)   Not classified   Expense   Not classified   1,808   12-31-2012
SQM Industrial S.A.   IQ8G- Improvement of Bureau of Exchange, offices and facilities   Medium projects (between ThUS$300 and ThUS$999)   Asset   Sustainability   72   12-31-2012
SQM Industrial S.A.   JQEZ – Change of Bertrams Prilling Boiler CS   Sustainability: Replacement of equipment   Asset   Development   235   12-31-2012
SQM Industrial S.A.   JQH9 – Purchase of Bertrams Boiler   Sustainability: Environment and Risk prevention   Asset   Development   600   12-31-2012
SQM Industrial S.A.   MNYS - Measures of Technological Change Cultural Heritage Dissemination Maria Elena   Environmental processing   Expense   Not classified   37   12-31-2012
SQM Industrial S.A.   MP5W - Normalization TK´s Combustibles   Sustainability: Environment and Risk prevention   Asset   Not classified   841   12-31-2012
SQM Industrial S.A.   MPQU - Construction of Hazardous Chemical Supplies warehouse   Sustainability: Environment and Risk prevention   Asset   Development   211   12-31-2012
SQM Industrial S.A.   MQ8M - Reconditioning monitoring station ME   Sustainability: Natural Resources   Expense   Not classified   8   12-31-2012
SQM Industrial S.A.   MQA8- Normalization gas system, external cafeterias (Stage 1: projects)   Sustainability: Environment and Risk prevention   Expense   Not classified   106   12-31-2012
SQM Industrial S.A.   MQAJ - Improvements to Camp Water and Sewage (P Contesse commitment to DDSS)   Sustainability: Natural Resources   Expense   Not classified   8   12-31-2012
SQM Industrial S.A.   MQHF -Sustaining of batteries ME   Sustainability: Environment and Risk prevention   Asset / Expense   Not classified   161   12-31-2012
SQM Industrial S.A.   PPC1-Remove switches park PCB sub 3 and 1/12 Pedro de Valdivia   Sustainability: Environment and Risk prevention   Expense   Not classified   147   12-31-2012
SQM Industrial S.A.   PPNK-Management of Ammonia PV stoppage plant   Sustainability: Environment and Risk prevention   Asset / Expense   Not classified   193   12-31-2012

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
173
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2012, continued

 

Identification of the Parent
or subsidiary
  Name of the project with which the disbursement is
associated
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period
ThUS$
  Actual or estimated
date on which
disbursements were or
will be made
SQM Industrial S.A.   PPZU - Standardize and certify Plant Fuel Tanks   Environmental processing   Asset   Not classified   1,763   12-31-2012
SQM Industrial S.A.   SQ7X-Reach 2011-2013   Sustainability: Environment and Risk prevention   Expense   Not classified   199   12-31-2012
SQM Industrial S.A.   TQA2 - Drainage Improvement Villa Prat   Sustainability: Environment and Risk prevention   Expense   Not classified   16   12-31-2012
SQM Industrial S.A.   CQLX-SCarmen and Lagarto hazardous waste yard   Sustainability   Expense   Not classified   47   12-31-2012
Sqm Industrial S.A.   MQBM-Archaeological Digging Deployment Maria Elena - Toco   Sustainability: Environment and Risk prevention   Expense   Not classified   7   12-31-2012
Sqm Industrial S.A.   MQK2-Elimination of PCBs I   Sustainability: Environment and Risk prevention   Expense   Not classified   16   12-31-2012
SQM Industrial S.A.   JQ8K – DIA Line 4 Floor Drying, Coya Sur   Environmental processing   Asset   Not classified   32   12-31-2012
SQM Industrial S.A.   FP55 - FPXA-EIA Pampa Blanca Expansion   Environmental processing   Asset   Not classified   1,425   12-31-2012
SQM Industrial S.A.   JQB6 - DIA Plant NPT4, Coya Sur   Environmental processing   Asset   Not classified   65   12-31-2012
SQM Industrial S.A.   PQLV-DIA Pedro de Valdivia Mine   Environmental processing   Asset   Not classified   131   12-31-2012
SQM S.A.   AQ0A-Drilling of 4 Wells for Change in Catchment Point at Pampa del Tamarugal   Increase of capacity   Asset   Development   534   12-31-2012
SQM S.A.   IPFT-Cultural Heritage Region I   Sustainability   Expense   Not Classified   166   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
174
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2012, continued

 

 

Identification of
the Parent or
subsidiary 
  Name of the project with which the disbursement is
associated 
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period 
  Actual or estimated
date on which
disbursements were
or will be made 
SQM S.A.   IPXE-Environmental monitoring plan Llamara Salt Flat   Cost reduction   Expense   Not Classified   872   12-31-2012
SQM S.A.   IPXF-Environmental monitoring plan Pampa del Tamarugal   Sustainability: Environment and Risk prevention   Expense   Not Classified   881   12-31-2012
SQM S.A.   IQ08-PSA Llamara & Pampa del Tamarugal   Sustainability: Environment and Risk prevention   Asset   Development   1,759   12-31-2012
SQM S.A.   IQ0C-Mine Area Enhancement NV   Sustainability: Environment and Risk prevention   Expense   Not Classified   66   12-31-2012
SQM S.A.   IQ1K-Construcion of 3 observation wells in Sur Viejo   Capacity expansion   Asset   Development   195   12-31-2012
SQM S.A.   IQ1M-PSA Re-injection of water to Puquíos Llamara   Sustainability: Environment and Risk prevention   Asset   Not Classified   1,653   12-31-2012
SQM S.A.   IQ3S-Hazardous Materials Management Standardization   Sustainability   Asset-Expense   Not Classified   251   12-31-2012
SQM S.A.   IQ52- Nueva Victoria Environmental Office   Minor projects (between ThUS$50 and ThUS$299)   Expense   Not Classified   29   12-31-2012
SQM S.A.   IQ53-Cultural heritage route Soronal adduction (Pampa Hermosa)   General Projects (ThUS$ < 50)   Expense   Not Classified   24   12-31-2012
SQM S.A.   IQ54-Cultural heritage Pampa Hermosa   Minor projects (between ThUS$50 and ThUS$299)   Asset   Not Classified   500   12-31-2012
SQM S.A.   IQ9V – Quillagua Project   Minor projects (between ThUS$50 and ThUS$299)   Expense   Not classified   788   12-31-2012
SQM S.A.   PQB9-PQB9 - Change of exhaust extractor SO2 gas   Not classified   Asset   Not classified   178   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
175
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2012, continued

 

Identification of
the Parent or
subsidiary 
  Name of the project with which the disbursement is
associated 
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period 
  Actual or estimated
date on which
disbursements were
or will be made 
SQM S.A.   MQLQ- Gas scrubbing system   Not classified   Asset   Development   324   12-31-2012
SQM S.A.   IQOW- Deposit authorization for Humberstone heritage   Sustainability: Environment and Risk prevention   Expense   Not classified   1   12-31-2012
SQM S.A.   IQPJ- Mine Area equity measures Stage I   Sustainability:   Expense   Not classified   61   12-31-2012
SQM S.A.   IQ6M -IQ6N-DIA  Nueva Victoria Sur Mine Expansion   Environmental processing   Asset   Not classified   115   12-31-2012
SQM S.A.   IP83 - DIA Expansion TLN-15   Environmental processing   Asset   Not classified   23   12-31-2012
SQM Salar S.A.   CQ4M – Regularization of Contractor facilities   Sustainability: Environment and Risk prevention   Asset   Not classified   17   12-31-2012
SQM Salar S.A.   CQ8U - New Changing Room CL - HL   Sustainability: Environment and Risk prevention   Asset   Not classified   242   12-31-2012
SQM Salar S.A.   LP82 - Project for the Promotion of Agricultural Activity in Communities of the Salt deposit   Sustainability: Environment and Risk prevention   Expense   Development   1,126   12-31-2012
SQM Salar S.A.   LPTF – Environmental study and exploration 2010   Environmental processing   Expense   Not classified   398   12-31-2012
SQM Salar S.A.   LPTJ - Improvements Sanitary Works   Sustainability:   Asset   Not classified   206   12-31-2012
SQM Salar S.A.   LQDM – Certification of tanks     Sustainability: Replacement of equipment   Asset   Not classified   146   12-31-2012
SQM Salar S.A.   LQI6-EIA Operating maintenance at Salar de Atacama   Environmental processing   Asset   Not classified   358   12-31-2012
SQM Salar S.A.   LQNI-DIA KCI Floor Drying and compacting expansion   Environmental processing   Asset   Not classified   19   12-31-2012
SIT S.A.   MQ6Y-MQ6Y - Maintenance and repair of ME and Tocopilla bureau of exchange   Sustainability: Environment and Risk prevention   Expense   Not classified   20   12-31-2012

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
176
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2012, continued

 

Identification of
the Parent or
subsidiary 
  Name of the project with which the disbursement is
associated 
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description of
the asset or
expense Item
  Amount of
disbursement
for the Period 
  Actual or estimated
date on which
disbursements were
or will be made 
SIT S.A.   TPR8 - Disposal of liquid waste generation by aspiration   Sustainability:   Expense   Not classified   64   12-31-2012
SIT S.A.   TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla   Sustainability: Environment and Risk prevention   Asset / Expense   Development   1,658   12-31-2012
SIT S.A.   TQAP - Paving Field No. 3 and No. 4   Capacity Expansion   Expense   Not classified   13   12-31-2012
SIT S.A.   TQAV - Paving paths IV   Sustainability:   Asset   Development   3   12-31-2012
SIT S.A.   TQM2- Unloading/loading encapsulation project/Field 1 and 8   Sustainability:   Asset   Not classified   8   12-31-2012
SIT S.A.   TQLY- Dust extractor packing machine No. 1   Environmental processing   Asset   Not classified   25   12-31-2012
SIT S.A.   TQNA- Tocopilla weather station (Tocopilla Decontamination Plan Network)   Sustainability: Environment and Risk prevention   Asset   Not classified   15   12-31-2012
SIT S.A.   TQQ5- Environmental curtains Field No. 8   Sustainability: Environment and Risk prevention   Expense   Not classified   22   12-31-2012
SQM Nitratos S.A   IQDN - Storage Rises – Maintenance of Mine NV   Not classified   Asset   Not classified   26   12-31-2012
Minera Nueva Victoria S.A.   IQ4C - Development Camp (Osmosis and Others)   Minor projects (between ThUS$50 and ThUS$299)   Asset   Not classified   1,987   12-31-2012
SQM Nitratos S.A.   PQI9 – Mine waste water treatment plant   Sustainability: Environment and Risk prevention   Asset   Not classified   47   12-31-2012
SQM Nitratos S.A.   IQMH - Normalization Mine NV area operation   Sustainability: Environment and Risk prevention   Asset   Not classified   99   12-31-2012
SQM Salar S.A   LQFD – Bureaus of exchange   Not classified   Asset   Not classified   160   12-31-2012
                TOTAL   23,207    

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
177
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2 Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2012

 

Identification of
the Parent or
subsidiary
  Name of the project with which the disbursement is
associated
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description
of the asset
or expense
Item
  Amount of
disbursement
for the Period
  Actual or
estimated date on
which
disbursements
were or will be
made 
SQM Industrial S.A.   Environmental and Community Management (Budget available for the second quarter of 2012)   Not classified   Expense   Not classified   2,027   12-31-2013
SQM Industrial S.A.   MNYS - Measures of Technological Change Cultural Heritage Dissemination Maria Elena   Environmental processing   Expense   Not classified   68   12-31-2013
SQM Industrial S.A.   MP5W - Normalization TK´s Combustibles   Sustainability: Environment and Risk prevention   Asset   Not classified   1,600   12-31-2013
SQM Industrial S.A.   MPQU - Construction of Hazardous Chemical Supplies warehouse   Sustainability: Environment and Risk prevention   Asset   Development   152   06-30-2013
SQM Industrial S.A.   MQHF -Sustaining of batteries ME   Sustainability: Environment and Risk prevention   Asset - Expense   Not classified   16   08-01-2013
SQM Industrial S.A.   PPC1-Remove switches park OCB sub 3 and 1/12 Pedro de Valdivia   Sustainability: Environment and Risk prevention   Expense   Not classified   44   12-31-2013
SQM Industrial S.A.   PPZU - Standardize and certify Plant Fuel Tanks   Environmental processing   Asset   Not classified   1,315   12-31-2013
SQM Industrial S.A.   SQ7X-Reach 2011-2013   Sustainability: Environment and Risk prevention   Expense   Not classified   20   01-31-2014
SQM Industrial S.A.   TQA2 - Drainage Improvement Villa Prat   Sustainability: Environment and Risk prevention   Expense   Not classified   104   06-30-2013
SQM Industrial S.A.   CQLX- S Carmen and Lagarto hazardous waste yard   Sustainability   Asset   Not classified   53   03-31-2013
SQM Industrial S.A.   JQL7- KNO3 prilled dust collection and drying engineering and project   Sustainability   Asset   Research   200   08-01-2013
SQM Industrial S.A.   MQBM - Archaeological Digging Deployment Maria Elena - Toco   Sustainability: Environment and Risk prevention   Expense   Not classified   49   03-31-2013
SQM Industrial S.A.   MQK2 – Elimination of PCBs I   Sustainability: Environment and Risk prevention   Expense   Not classified   554   03-31-2014
SQM Industrial S.A.   FP55 - FPXA-EIA Pampa Blanca Expansion   Environmental processing   Asset   Not classified   135   08-31-2013

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
178
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2012

 

Identification of
the Parent or
subsidiary
  Name of the project with which the disbursement is
associated
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description
of the asset
or expense
Item
  Amount of
disbursement
for the Period
  Actual or
estimated date on
which
disbursements
were or will be
made 
SQM Industrial S.A.   JQB6 - DIA Plant NPT4, Coya Sur   Environmental processing   Asset   Not classified   5   11-30-2013
SQM Industrial S.A.   PQLV-DIA Pedro de Valdivia Mine   Environmental processing   Asset   Not classified   243   09-30-2013
SQM S.A.   IPFT - Cultural Heritage Region I   Sustainability   Expense   Not classified   17   03-31-2013
SQM S.A.   IPXE - Environmental Monitoring Plan Llamara Salt flat   Cost reduction   Expense   Not classified   87   03-31-2013
SQM S.A.   IPXF - Environmental Monitoring Plan Pampa del Tamarugal   Sustainability: Environment and Risk prevention   Expense   Not classified   168   06-30-2013
SQM S.A.   IQ1M - PSA Re-injection of water to Puquios Llamara   Sustainability: Environment and Risk prevention   Asset   Not classified   441   12-31-2013
SQM S.A.   IQ3S- Hazardous Materials Management Standardization   Sustainability   Asset - Expense   Not classified   148   12-31-2013
SQM S.A.   IQ54 - Cultural heritage Pampa Hermosa   Minor projects (between ThUS$50 and ThUS$299)   Asset   Not classified   219   12-31-2013
SQM S.A.   MQLQ- Gas scrubbing system   Not classified   Asset   Development   288   06-30-2013
SQM S.A.   IQOW- Deposit authorization for Humberstone heritage   Sustainability: Environment and Risk prevention   Expense   Not classified   38   03-31-2013
SQM S.A.   IQ6M -IQ6N-DIA Nueva Victoria Sur Mine Expansion   Environmental processing   Asset   Not classified   2   03-31-2013
SQM Salar S.A.   LQDM – Certification of tanks     Sustainability: Replacement of equipment   Asset   Not classified   600   12-31-2013
SQM Salar S.A.   LQI6-EIA Operating maintenance at Salar de Atacama   Environmental processing   Asset   Not classified   265   06-30-2013
SQM Salar S.A.   LQNI-DIA KCI Floor Drying and compacting expansion   Environmental processing   Asset   Not classified   16   08-31-2013
SIT S.A.   TPYX - Enabling the dust collector of the crib and court seal 3 Tocopilla   Sustainability: Environment and Risk prevention   Asset / Expense   Development   40   12-31-2013

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
179
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24- Environment (continued)

 

24.2Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2012

 

Identification of
the Parent or
subsidiary
  Name of the project with which the disbursement is
associated
  Concept for which the
disbursement was made
or will be made
  Asset /
Expense
  Description
of the asset
or expense
Item
  Amount of
disbursement
for the Period
  Actual or
estimated date on
which
disbursements
were or will be
made 
SIT S.A.   TQAV - Paving paths IV   Sustainability   Asset   Development   162   12-31-2013
SIT S.A.   TQQ5- Environmental curtains Field No. 8   Sustainability: Environment and Risk prevention   Expense   Not classified   30   04-27-2013
SQM Nitratos S.A.   IQMH - Normalization Mine NV area operation   Sustainability: Environment and Risk prevention   Asset   Not classified   157   03-31-2013
SQM Salar S.A.   LQG8 – Waste room  Toconao Campsite   Sustainability: Natural Resources   Expense   Not classified   16   03-31-2012
                Total   9,279    

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
180
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24 – Environment (continued)

 

24.3Description of each project, indicating whether these are in process or have been finished

 

SQM Industrial S.A.

 

CQLX: The project includes the construction at each location of a courtyard of 145 m2 approx. The project is finished.

 

FP55 – FPXA: These 2 projects have a final objective consisting in the installation of a sea water sucking system of 87 km from the Mejillones area to the SQM facilities located in Pampa Blanca. The projected expenses correspond only to the filing of the EIA of the PB mine zone and the EIA of the PB expansion. Both projects are in process.

 

IQW2: Gathering, information and recording into the Company’s system, the water level, volume, instantaneous and average flow data of the exploitation wells that are currently in the Operations Center No.1, LLamara area wells, two Iris area wells and the information of the Sonoral wells that will be provided during the current year. The purpose of this project is to monitor in real time the exploitation variables of water resources and to be able to perform a more precise control of extractions. The project is in process.

 

IQWZ: Perform an analysis of the Tank facilities (civil works, mechanical work, piping, electrical work and instrumentation) by a certified company specialized in liquid fuels and that is a Certifying Entity. After that, performing the detail engineering and then implementing the modifications required to normalize the TKs facilities and leaving them in conditions to be declared and filed with the SEC. The budget of ThUS$123 only covers expenses related to the analysis and detail engineering. The project is in process.

 

JQ8K: This project has the purpose of building a new drying plant in Coya Sur. The projected expenses correspond only to the environmental filing. The project is in finishing stage.

 

JQB6: Preparation and filing of the EID of project NPT4 of Coya Sur, which increases the salt production capacity. The project is in process.

 

JQH9: The purpose of this project is to purchase Bertram’s boilers in order to improve the combustion levels, decrease and control the emission of fumes to the environment. The project is closed.

 

JQL7: Perform a study that allows optimizing of the dust collection and lost product in KNO3 drying and CS prilling plants in the future. Assess accurately the product lost in dust. The project is in process.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
181
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24 - Environment (continued)

 

24.3Description of each project, indicating whether these are in process or have been finished, continued

 

MNYS: Preparation and execution of a project of geoglyphs conservation; editing and publishing a book and implementing a diffusion center. Construction of a collection deposit. All these are compensation measures of the Maria Elena Technological Change Project. The project is in process.

 

MP5W: Normalization of the fuel storage and distribution system in SQM installations. The project is in process.

 

MPQU: Construction of warehouses for dangerous chemical supplies in order to decrease the chance of accidents and pollution. The project is in process.

 

MQA8: Normalization of gas networks of peripheral casinos (stage 1: projects): CS, Lagarto, Iodum, PV, Toco and Rancho 6. The Project is in process.

 

MQBM: Implementing archeological measures in Maria Elena – Toco site, such as the archeological registry, analysis of lithic materials, and generation of reports. The project is in process.

 

MQHF: Enable a wastewater plant in Toco according to SD 594, a change room for operators and contractors, among other things. The project is finished.

 

MQK2: The project involves the decontamination of equipment and items contaminated with PCBs and / or final disposal in accordance with applicable regulations. The project is in process.

 

PPC1: Purchase and replacement of equipment contaminated with PCB and obsolete equipment without spare parts. The project is in process.

 

PPZU: The necessary actions to normalize and certify certified fuel tanks in the plants in María Elena, Coya Sur and Pedro de Valdivia were performed. The project is in process.

 

PQLV: Preparation and filing of EID Pedro de Valdivia. The project is in process.

 

PQXM: Elaborate a project to enter into the Environmental Impact Assessment System (SEIA), with the intention of obtaining the environmental approval for the operation of Batteries in Pedro de Valdivia. This project is in process.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
182
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24 - Environment (continued)

 

24.3Description of each project, indicating whether these are in process or have been finished, continued

 

SQ7X: The purpose of this project is to obtain and record information of components and finished products of SQM in the ECHA database in order to comply with the requirements set by the REACH regulation of the European Union. The project is in finishing stage.

 

TQA2: This project aims to improve the sewerage system of Villa Prat. The project is in finishing stage.

 

SQM S.A.

 

IP83: Preparation and filing of the EID of the Project “Extension TLN-15”. The projected expenses only include the environment document filing. The project is in process.

 

IPFT: The project considers the implementation of measures committed in projects in the area of the Nueva Victoria mine, update of operations in Nueva Victoria, evaporation ducts and pits in Iris. The project is in finishing stage.

 

IPXE: To implement the follow-up plan of environment of Project Pampa Hermosa in Salar de Llamara. The project is in finishing stage.

 

IPXF: To implement the environment plan follow-up of the project Pampa Hermosa in Pampa del Tamarugal. The project is in finishing stage.

 

IQ1M: To implement environmental commitments included in the EIS of project “Pampa Hermosa” to safeguard the puquíos zone in the Salar de Llamara water reservoir. The project is in finishing stage.

 

IQ3S: Improvements in the storage installations of dangerous raw materials in Nueva Victoria. The project is in process.

 

IQ54: This corresponds to the implementation of environmental commitments acquired through the environment assessment of the project Pampa Hermosa (RCA N°890/2010). The project is in process.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
183
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24 - Environment (continued)

 

24.3Description of each project, indicating whether these are in process or have been finished, continued

 

IQOW: Enable a deposit in Humberstone Saltpeter to store material of heritage interest recovered in land campaigns of Project ZMNV (performed and to be performed). The project is in finishing stage.

 

IQPJ: The project consists of the implementation of heritage measures involved in the Environmental Assessment for the mine areas. The measures will be implemented according to the requirements of the mining operation VPONV.

 

IQWS: Implementation of heritage-related environmental commitments, to make Mining areas available in 2013, required to develop the mining exploitation of the VPONV, in compliance with the commitments agreed through the Environmental Assessment System (SEA), The project is in process.

 

IQX6: Implementation of environmental commitments of the Pampa Hermosa Project at Pampa del Tamarugal contemplated for the years 2013-2014. The project is in process.

 

IQXB: Implementation of environmental commitments of the Pampa Hermosa Project at Salar de Llamara contemplated for the years 2013-2014. The project is in process.

 

MQLQ: Design and implement a system to scrub gases allowing mitigation of SO2 emissions, this system should be aligned to SQM´s Sustainable Development Policy. The project is in process.

 

SQM Salar S.A.

 

LQG8: Increase the capacity of the waste room of Toconao Camp, in order to avoid accumulation problems and waste handling. The project is in process.

 

LQDM: Certification of the liquid fuel storage tanks. The project is in process.

 

LQI6: Preparation and processing of the EIA Update Operations in the Salar de Atacama. The project is in process.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
184
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 24 - Environment (continued)

 

24.3Description of each project, indicating whether these are in process or have been finished, continued

 

LQNI: Preparation and processing of EID of project "Expansion of Drying and KCI Compacting Plant". The expenses considered include environmental processing only. The project is in process.

 

LQSZ: To perform certifications in order to comply with the SEC regulations.

 

SIT S.A.

 

TPYX: To comply with the commitment of decreasing the emission of particulate material towards the city of Tocopilla. The project is in process.

 

TQAV: Paving and maintenance of internal roads of the port of Tocopilla, to decrease pollution and to comply with the Supreme Decree related to the saturated zone. The project is in process.

 

TQLY: This project aims at eliminating environmental contamination that may exist in the areas of work of operators. The project is in process.

 

TQQ5: This project aims to contain emissions of particle waste to prevent contamination of adjacent communities. The project is in process

 

SQM Nitratos S.A.

 

IQMH: Creation of an area allowing to store hazardous substances. The project is in process.

 

PQI9: Construction of a new pit replacing the current with a new waste water treatment technology. The project is in process.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
185
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 25 - Other current and non-current non-financial assets

 

As of December 31, 2013, and December 31, 2012, the detail of other current and non-current assets is as follows:

 

Other non-financial  assets, current  12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
Domestic Value Added Tax   21,263    42,136 
Foreign Value Added Tax   5,842    9,306 
Prepaid mining licenses   1,522    1,512 
Prepaid insurance   9,767    8,278 
Other prepayments   623    494 
Other assets   5,213    6,094 
Total   44,230    67,820 

 

Other non-financial  assets, non-current   12/31/2013    12/31/2012 
    ThUS$    ThUS$ 
Stain development expenses and prospecting expenses (1)   33,388    22,496 
Guarantee deposits   708    571 
Pension plan   987    - 
Other assets   1,422    272 
Total   36,505    23,339 

 

1)Reconciliation of changes in assets for exploration and mineral resource evaluation, by type

 

Movements in assets for the exploration and evaluation of mineral resources as of December 31, 2013, and December 31, 2012:

 

Reconciliation  12/31/2013   12/31/2012 
    ThUS$    ThUS$ 
           
Assets for the exploration and evaluation of mineral resources, net, opening balance   22,496    21,395 
Changes in assets for exploration and assessment of mineral resources:          
Additions, other than business combinations   13,064    843 
Depreciation and amortization   (2,059)   (2,080)
Increase (Decrease) due to transfers and other charges   (113)   2,338 
Assets for exploration and assessment of mineral resources, net, closing balance   33,388    22,496 

 

As of the presentation date, no reevaluations of assets for exploration and assessment of mineral resources have been conducted.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
186
 

  

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments

 

26.1Operating segments

 

General information:

 

The amount of each item presented in each operating segment is equal to that reported to the highest authority that makes decisions regarding the operation, in order to decide on the allocation of resources to the defined segments and to assess its performance.

Factors used to identify segments on which a report should be presented:

Segments reported are strategic business units that offer different products and services. These are managed separately because each business requires different technology and marketing strategies.

 

Description of the types of products and services on which each reportable segment obtain its income from ordinary activities

 

The operating segments, through which incomes of ordinary activities are obtained, that generate expenses and whose operating results are reviewed on a regular basis by the maximum authority who makes decisions regarding operations, relate to the following groups of products:

 

1.- Specialty plant nutrients

2.- Iodine and its derivatives

3.- Lithium and its derivatives

4.- Industrial chemicals

5.- Potassium

6.- Other products and services

 

Description of income sources for all the other segments

 

Information relative to assets, liabilities and profit and expenses that cannot be assigned to the segments indicated above, due to the nature of production processes, is included under "Unassigned amounts” category of the disclosed information.

Basis of accounting for transactions between reportable segments

 

Sales between segments are made in the same conditions as those made to third parties, and are consistently measured as presented in the income statement.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
187
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments (continued)

 

26.1Operating segments, continued

 

Description of the nature of the differences between measurements of results of reportable segments and the result of the entity before the expense or income tax expense of incomes and discontinued operations.

 

The information reported in the segments is extracted from the Company´s consolidated financial statements and therefore is not required to prepare reconciliations between the data mentioned above and those reported in the respective segments, according to what is stated in paragraph 28 of IFRS 8, "Operating Segments".

 

Description of the nature of the differences between measurements of assets of reportable segments and the Company´s assets

 

Assets are not shown classified by segments, as this information is not readily available, some of these assets are not separable by the type of activity which they affect and as this information is not used by management in decision making with respect to resources to be allocated to each defined segment. All assets are disclosed in the "unallocated amounts" category.

 

Description of the nature of the differences between measurements of liabilities of reportable segments and the Company´s liabilities

 

Liabilities are not shown classified by segments, as this information is not readily available, some of these liabilities are not separable by the type of activity which affects them and as this information is not used by management in decision making regarding resources to be allocated to each defined segment. All liabilities are disclosed in the "unallocated amounts" category.

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
188
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments (continued)

 

26.2 Operating segment disclosures as of December 31, 2013 and December 31, 2012:

 

12/31/2013
  Specialty
plant
nutrients
   Iodine and
its
derivatives
   Lithium and
its
derivatives
   Industrial
chemicals
   Potassium   Other
products
and
services
   Reportable
segments
   Operating
segments
   Elimination
of inter-
segments
amounts
   Unallocated
amounts
   Significant
reconciliation
entries
   Total 
12/31/2013
 
Operating segment items   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                             
Revenue   687,455    461,015    196,492    153,963    606,315    97,900    2,203,140    2,203,140    -    -    -    2,203,140 
Revenues from transactions with other operating segments of the same entity   121,735    723,801    122,616    309,127    462,565    337,690    2,077,534    2,077,534    (2,077,534)   -    -    - 
                                                             
Revenues from external customers and transactions with other operating segments of the same entity   809,190    1,184,816    319,108    463,090    1,068,880    435,590    4,280,674    4,280,674    (2,077,534)   -    -    2,203,140 
                                                             
Interest revenue   -    -    -    -    -    -    -    -    -    -    -    - 
Interest expense   -    -    -    -    -    -    -    -    195,404    (254,012)   -    (58,608)
depreciation and amortization expense   (67,656)   (45,371)   (19,338)   (15,152)   (59,670)   (9,634)   (216,821)   (216,821)   -    -    -    (216,821)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    -    -    -    18,786    -    18,786 
income tax expense, continuing operations   -    -    -    -    -    -    -    -    (2,377)   (136,162)   -    (138,539)
Other items other tan significant cash   -    -    -    -    -    -    -    -    -         -    - 
Income (loss) before taxes   151,388    258,366    97,248    43,042    162,327    93,079    805,450    805,450    (567,919)   375,578    -    613,109 
                                                             
Net income (loss) from continuing operations   151,388    258,366    97,248    43,042    162,327    93,079    805,450    805,450    (570,296)   239,416    -    474,570 
Net income (loss) from discontinued operations                                                            
Net income (loss)   151,388    258,366    97,248    43,042    162,327    93,079    805,450    805,450    (570,296)   239,416    -    474,570 
                                                             
Assets   -    -    -    -    -    -    -    -    (7,077,766)   11,845,374    -    4,767,608 
Equity-accounted investees   -    -    -    -    -    -    -    -    (3,353,672)   3,430,690    -    77,018 
Increase of non-current assets   -    -    -    -    -    -    -    -         171,980    -    171,980 
Liabilities   -    -    -    -    -    -    -    -    (3,354,422)   5,689,789    -    2,335,367 
Equity                                                          2,432,241 
Equity and liability                                                          4,767,608 
Impairment loss recognized in profit or loss   (15,985)   (1,832)   (783)   (3,733)   (2,509)   (353)   (25,195)   (25,195)   -    (5,732)   -    (30,927)
Cash flows from (used in) operating activities   -    -    -    -    -    -    -    -    -    -    -    651,713 
Cash flows from (used in) investing activities   -    -    -    -    -    -    -    -    -    -    -    (487,385)
Cash flows from (used in) financing activities   -    -    -    -    -    -    -    -    -    -    -    (2,285)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
189
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments (continued)

 

26.2 Operating segment disclosures as of December 31, 2013 and December 31, 2012:

 

12/31/2012
  Specialty
plant
nutrients
   Iodine and
its
derivatives
   Lithium
and its
derivatives
   Industrial
chemicals
   Potassium   Other
products
and
services
   Reportable
segments
   Operating
segments
   Elimination
of inter-segments
amounts
   Unallocated
amounts
   Significant
reconciliation
entries
   Total 
12/31/2012
 
Operating segment items  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                             
Revenue   675,350    578,091    222,238    245,208    605,059    103,214    2,429,160    2,429,160    -    -    -    2,429,160 
Revenues from transactions with other operating segments of the same entity   265,814    848,243    154,248    348,667    569,219    493,884    2,680,075    2,680,075    (2,680,075)   -    -    - 
                                                             
Revenues from external customers and transactions with other operating segments of the same entity   941,164    1,426,334    376,486    593,875    1,174,278    597,098    5,109,235    5,109,235    (2,680,075)   -    -    2,429,160 
                                                             
Interest revenue   -    -    -    -    -    -    -    -    -    -    -    - 
Interest expense   -    -    -    -    -    -    -    -    225,396    (279,491)   -    (54,095)
depreciation and amortization expense   (54,383)   (47,100)   (17,896)   (19,745)   (48,723)   (8,311)   (196,158)   (196,158)   -    -    -    (196,158)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    -    -    -    24,357    -    24,357 
income tax expense, continuing operations   -    -    -    -    -    -    -    -    -    (216,082)   -    (216,082)
Other items other tan significant cash   -    -    -    -    -    -    -    -    -         -    - 
Income (loss) before taxes   217,880    362,518    110,695    83,055    246,027    8,419    1,028,594    1,028,594    (786,634)   631,491    -    873,451 
                                                             
Net income (loss) from continuing operations   217,880    362,518    110,695    83,055    246,027    8,419    1,028,594    1,028,594    (786,634)   415,409    -    657,369 
Net income (loss) from discontinued operations                                                            
Net income (loss)   217,880    362,518    110,695    83,055    246,027    8,419    1,028,594    1,028,594    (786,634)   415,409    -    657,369 
                                                             
Assets   -    -    -    -    -    -    -    -    (7,296,791)   11,713,222    -    4,416,431 
Equity-accounted investees   -    -    -    -    -    -    -    -    (3,423,758)   3.494,056    -    70,298 
Increase of non-current assets   -    -    -    -    -    -    -    -         255,363    -    255,363 
Liabilities   -    -    -    -    -    -    -    -    (3,393,525)   5,622,510    -    2,228,985 
Equity                                                          2,187,446 
Equity and liability                                                          4,416,431 
Reversal of impairment losses recognized in profit and loss for the year                       -         -    -         -         - 
Impairment loss recognized in profit or loss   (10,281)   (2,081)   (162)   (3,043)   (2,471)   (120)   (18,158)   (18,158)   -    (2,900)   -    (21,058)
Cash flows from (used in) operating activities   -    -    -    -    -    -    -    -    -    650,206    -    650,206 
Cash flows from (used in) investing activities   -    -    -    -    -    -    -    -    -    (562,885)   -    (562,885)
Cash flows from (used in) financing activities   -    -    -    -    -    -    -    -    -    (197,697)   -    (197,697)

  

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
190
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments (continued)

 

26.3 Statement of comprehensive income classified by operating segments based on groups of products as of December 31, 2013:

 

Items in the statement of comprehensive income  Specialty
plant nutrients
ThUS$
   Iodine and
its
derivatives
ThUS$
   Lithium and
its
derivatives
ThUS$
   Industrial
chemicals
ThUS$
   Potassium 
ThUS$
   Other
products
and
services
ThUS$
   Corporate
Unit ThUS$
   Total
segments
and
Corporate
unit
ThUS$
 
                                 
Revenue   687,455    461,015    196,492    153,963    606,315    97,900    -    2,203,140 
Cost of sales   (536,067)   (202,650)   (99,244)   (110,921)   (443,988)   (88,820)   -    (1,481,690)
                                         
Gross profit   151,388    258,365    97,248    43,042    162,327    9,080    -    721,450 
                                         
Other incomes by function   -    -    -    -    -    84,000    12,716    96,716 
Administrative expenses   -    -    -    -    -    -    (105,189)   (105,189)
Other expenses by function   -    -    -    -    -    -    (49,397)   (49,397)
Other gains (losses)   -    -    -    -    -    -    (11,391)   (11,391)
Financial income   -    -    -    -    -    -    12,696    12,696 
Financial costs   -    -    -    -    -    -    (58,608)   (58,608)
interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    18,786    18,786 
Exchange differences   -    -    -    -    -    -    (11,954)   (11,954)
Profit (loss )before taxes   151,388    258,365    97,248    43,042    162,327    93,080    (192,341)   613,109 
Income tax expense   -    -    -    -    -    -    (138,539)   (138,539)
Profit (loss )from continuing operations   151,388    258,365    97,248    43,042    162,327    93,080    (330,880)   474,570 
Profit (loss ) from discontinued operations   -    -    -    -    -    -    -    - 
Profit (loss)   151,388    258,365    97,248    43,042    162,327    93,080    (330,880)   474,570 
Profit (loss, attributable to                                        
Profit (loss ) attributable to the controller´s owners   -    -    -    -    -    -    -    467,113 
Profit (loss ) attributable to the non-controllers   -    -    -    -    -    -    -    7,457 
Profit (loss)   -    -    -    -    -    -    -    474,570 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
191
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments (continued)

 

26.3 Statement of comprehensive income classified by operating segments based on groups of products as of December 31, 2012:

 

Items in the statement of comprehensive income  Specialty
plant nutrients
ThUS$
   Iodine and
its
derivatives
ThUS$
   Lithium and
its
derivatives
ThUS$
   Industrial
chemicals
ThUS$
   Potassium 
ThUS$
   Other
products
and
services
ThUS$
   Corporate
Unit ThUS$
   Total
segments
and
Corporate
unit
ThUS$
 
                                 
Revenue   675,350    578,091    222,238    245,208    605,059    103,214    -    2,429,160 
Cost of sales   (457,470)   (215,573)   (111,543)   (162,153)   (359,032)   (94,796)   -    (1,400,567)
                                         
Gross profit   217,880    362,518    110,695    83,055    246,027    8,418    -    1,028,593 
                                         
Other incomes by function   -    -    -    -    -    -    12,702    12,702 
Administrative expenses   -    -    -    -    -    -    (106,442)   (106,442)
Other expenses by function   -    -    -    -    -    -    (34,628)   (34,628)
Other gains (losses)   -    -    -    -    -    -    683    683 
Financial income   -    -    -    -    -    -    29,068    29,068 
Financial costs   -    -    -    -    -    -    (54,095)   (54,095)
interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    24,357    24,357 
Exchange differences   -    -    -    -    -    -    (26,787)   (26,787)
Profit (loss )before taxes   217,880    362,518    110,695    83,055    246,027    8,418    (155,142)   873,451 
Income tax expense   -    -    -    -    -    -    (216,082)   (216,082)
Profit (loss )from continuing operations   217,880    362,518    110,695    83,055    246,027    8,418    (371,224)   657,369 
Profit (loss ) from discontinued operations   -    -    -    -    -    -    -    - 
Profit (loss)   217,880    362,518    110,695    83,055    246,027    8,418    (371,224)   657,369 
Profit (loss, attributable to                                        
Profit (loss ) attributable to the controller´s owners   -    -    -    -    -    -    -    649,167 
Profit (loss ) attributable to the non-controllers   -    -    -    -    -    -    -    8,202 
Profit (loss)   -    -    -    -    -    -    -    657,369 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
192
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments (continued)

 

26.4Revenue from transactions with other Company operating segments as of December 31, 2013

 

Items in the statement of comprehensive
income
  Specialty plant
nutrients
ThUS$
   Iodine and
its
derivatives
ThUS$
   Lithium and
its
derivatives
ThUS$
   Industrial
chemicals
ThUS$
   Potassium 
ThUS$
   Other
products
and services
ThUS$
   Total
segments and
Corporate unit
ThUS$
 
                                    
Revenue   687,455    461,015    196,492    153,963    606,315    97,900    2,203,140 

 

26.4Revenue from transactions with other Company operating segments as of December 31, 2012

 

Items in the statement of comprehensive
income
  Specialty plant
nutrients
ThUS$
   Iodine and
its
derivatives
ThUS$
   Lithium and
its
derivatives
ThUS$
   Industrial
chemicals
ThUS$
   Potassium 
ThUS$
   Other
products
and services
ThUS$
   Total
segments and
Corporate unit
ThUS$
 
                                    
Revenue   675,350    578,091    222,238    245,208    605,059    103,214    2,429,160 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
193
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 - Operating segments (continued)

 

26.5 Disclosures on geographical areas

 

As indicated in paragraph 33 of IFRS 8, the entity discloses geographical information on its revenue from operating activities with external customers and from non-current assets that are not financial instruments, deferred income tax assets, assets related to post-employment benefits or rights derived from insurance contracts.

 

26.6 Disclosures on main customers

 

With respect to the degree of dependency of the Company on its customers, in accordance with paragraph N° 34 of IFRS N° 8, the Company has no external customers who individually represent 10% or more of its revenue. Credit risk concentrations with respect to trade and other accounts receivable are limited due to the significant number of entities in the Company’s portfolio and its worldwide distribution. The Company’s policy requires guarantees (such as letters of credit, guarantee clauses and others) and/or to maintain insurance policies for certain accounts as deemed necessary by the Company's Management.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
194
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 -Operating segments (continued)

 

26.7Segments by geographical areas as of December 31, 2013 and December 31, 2012

 

  Chile   Latin America
and the
Caribbean
   Europe   North
America
   Asia and
others
   12/31/2013 
Items  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Revenue   242,373    379,063    504,043    546,075    531,586    2,203,140 
                               
Non-current assets:   2,218,631    434    36,680    16,636    38,270    2,310,651 
Investment accounted for under the equity method   1,649    -    24,847    13,126    37,396    77,018 
Intangible assets other than goodwill   104,043    -    -    317    3    104,363 
Goodwill   26,929    86    11,373    -    -    38,388 
Property, plant and equipment, net   2,050,684    157    460    2,205    871    2,054,377 
Investment property   -    -    -    -    -    - 
Other non-current assets   35,326    191    -    988    -    36,505 

 

  Chile   Latin America
and the
Caribbean
   Europe   North
America
   Asia and
others
   12/31/2012 
Items   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Revenue   269,421    416,089    558,245    619,667    565,738    2,429,160 
                               
Non-current assets:   2,054,806    488    35,709    18,066    29,602    2,138,671 
Investment accounted for under the equity method   1,656    -    24,051    15,357    29,234    70,298 
Intangible assets other than goodwill   23,630    -    -    378    5    24,013 
Goodwill   26,929    86    11,373    -    -    38,388 
Property, plant and equipment, net   1,985,128    183    285    2,331    363    1,988,290 
Investment property   -    -    -    -    -    - 
Other non-current assets   17,463    219    -    -    -    17,682 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
195
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 26 -Operating segments (continued)

 

26.8Property, plant and equipment classified by geographical areas

 

The company's main productive facilities are located near their mines and extraction facilities in northern Chile. The following table presents the main production facilities as of December 31, 2013 and December 31, 2012:

  

Location   Products:
Pedro de Valdivia   Production of iodine and nitrate salts
María Elena   Production of iodine and nitrate salts
Coya Sur   Production of nitrate salts
Nueva Victoria   Production of iodine and nitrate salts
Salar de Atacama   Potassium chloride, Lithium chloride, boric acid potassium sulfate
Salar del Carmen   Production of Lithium carbonate and lithium hydroxide
Tocopilla   Port facilities

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
196
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 27 -Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature

 

      12/31/2013   12/31/2012 
      ThUS$   ThUS$ 
27.1  Revenue          
              
   Products   2,191,650    2,420,357 
   Services   11,490    8,803 
              
   Total   2,203,140    2,429,160 

 

      12/31/2013   12/31/2012 
      ThUS$   ThUS$ 
27.2  Cost of sales          
              
   Raw material and supplies   (811,518)   (1,066,803)
              
   Types of employee benefits expenses          
   Salaries and wages   (138,937)   (134,400)
   Other short-term employee benefits   (44,601)   (66,370)
   Termination benefit expenses   (10,811)   (4,325)
   Total employee benefits expenses   (194,349)   (205,095)
              
   Depreciation expense   (216,388)   (190,509)
   Amortization expense   -    - 
   Impairment loss (review of impairment losses) recognized in profit or loss for the year   (25,195)   (1,762)
   Other expenses, by nature (*)   (234,240)   63,602 
              
   Total    (1,481,690)   (1,400,567)

 

(*)     Include the variation of finished and products in-process

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
197
 

 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 27 -Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

      12/31/2013   12/31/2012 
      ThUS$   ThUS$ 
27.3  Other income          
              
   Discounts obtained from suppliers   1,349    648 
   Compensation received and insurance claim recovery   5,306    5,240 
   Penalties charged to suppliers   374    312 
   Taxes recovered   9    15 
   Excess in the provision of liabilities with 3rd parties   712    669 
   Excess in allowance for doubtful accounts   -    154 
   Sale of Property, plant and equipment   107    281 
   Sale of materials, spare parts and supplies   1,392    1,388 
   Sale of mining concessions (1)   86,157    1,578 
   Sale of scrap   27    176 
   Indemnity Minera Esperanza   -    28 
   Excess indemnity provision Yara South Africa   272    335 
   Lowest Price paid in portfolio purchase   337    - 
   Lowest Price in goodwill purchases   248    - 
   Other operating results   426    1,878 
              
   Total    96,716    12,702 

 

(1)Sociedad Química y Minera de Chile S.A., Antofagasta Minerals S.A. and Minera Antucoya entered into an amendment to the Mining Claim Sale Contract between these parties in relation to the “Antucoya Project”. During 2013, the mining claims were sold for an amount of ThUS$84,000.

 

      12/31/2013   12/31/2012 
      ThUS$   ThUS$ 
27.4  Administrative expenses          
              
   Employee benefit expenses by nature          
   Salaries and wages   (48,033)   (44,429)
   Other short-term benefits to employees   (3,176)   (2,868)
              
   Total employee benefit expenses   (51,209)   (47,297)
              
   Other expenses, by nature   (53,980)   (59,145)
              
   Total    (105,189)   (106,442)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
198
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 27 -Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

      12/31/2013   12/31/2012 
      ThUS$   ThUS$ 
27.5  Other expenses by function          
              
   Employee benefit expenses by nature          
   Other short-term benefits to employees   (6)   (24)
              
   Depreciation and amortization expenses          
   Depreciation of stopped assets   (433)   (5,649)
              
   Impairment loss (review of impairment losses) recognized in profit or loss for the year          
   Impairment of allowance for doubtful accounts   (732)   (1,054)
              
   Subtotal to date   (732)   (1,054)
              
   Other expenses, by nature          
   Legal Expenses   (3,791)   (1,984)
   Worksite stoppage expenses   (75)   (75)
   VAT and other unrecoverable tax   (1,196)   (1,182)
   Fines paid   (444)   (790)
   Consultancy services   (8)   (19)
   Provisions, investment and materials, supplies, plan expenses   (19,397)   (15,578)
   Donations rejected as expense   (5,253)   (5,517)
   Provision for environmental rehabiitation   (1,276)   (634)
   Adjustment to net realizable value of items of PP&E   (10,085)   - 
   Indemnities paid   (146)   (281)
   Other operating expenses   (6,555)   (1,841)
              
   Subtotal to date   (48,226)   (27,901)
              
   Total   (49,397)   (34,628)

 

      12/31/2013   12/31/2012 
      ThUS$   ThUS$ 
27.6  Other income (expenses)          
              
   Personnel restructuring expenses   (11,545)   - 
   Adjustment of Equity Method, prior year   22    736 
   Sale of investment in associates   -    (404)
   Other   132    351 
              
   Total   (11,391)   683 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
199
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 27 -Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

27.7  Summary of expenses by nature :  January to December 
      2013   2012 
      ThUS$   ThUS$ 
              
   Raw material and supplies used   (811,518)   (1,066,803)
              
   Types of employee benefits expenses          
              
   Salaries and wages   (186,970)   (178,829)
   Other short-term employee benefits   (47,783)   (69,262)
   Termination benefit expenses   (10,811)   (4,325)
   Total employee benefit expenses   (245,564)   (252,416)
   Depreciation and amortization expenses          
   Depreciation expense   (216,821)   (196,158)
   Amortization expense   -    - 
   Impairment loss (reversal of impairment losses) recognized in profit or loss for the year   (25,927)   (2,816)
   Other expenses, by nature   (347,837)   (23,444)
              
   Total expenses, by nature   (1,647,667)   (1,541,637)

 

This table corresponds to the summary from Note 27.2 to 27.6 required by the Chilean Superintendence of Securities and Insurance

 

27.8  Finance expenses  January to December 
      2013   2012 
      ThUS$   ThUS$ 
              
   Interest expense from bank borrowings and overdrafts   (3,186)   (2,613)
   Interest expense from bonds   (62,966)   (54,130)
   Interest expense from loans   (8,691)   (10,043)
   Capitalized interest expenses   17,232    14,153 
   Other finance costs   (997)   (1,462)
              
   Total   (58,608)   (54,095)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
200
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes

 

Accounts receivable from taxes as of December 31, 2013 and December 31, 2012, are as follows:

 

28.1Current tax assets:

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
Monthly provisional income tax payments, Chilean companies current year   44,018    23,713 
Monthly provisional payment Royalty   10,417    2,430 
Monthly provisional income tax payments, foreign companies   1,444    1,979 
Corporate tax credits (1)   2,025    144 
Corporate tax absorbed by tax losses (2)   1,572    1,968 
Total   59,476    30,234 

 

(1)These credits are available to companies and relate to the corporate tax payment in April of the following year. These credits include, amongst others, training expense credits (SENCE) and property, plant and equipment acquisition credits that are equivalent to 4% of the property, plant and equipment purchases made during the year. In addition, some credits relate to the donations the Group has made during 2013 and 2012.

 

(2)This concept corresponds to the absorption of non-operating losses (NOL’s) determined by the company at year end, which must be imputed or recorded in the Retained Taxable Profits Registry (FUT).

 

In accordance with the laws in force and as provided by article 31, No. 3 of the Income Tax Law, when profits recorded in the FUT that have not been withdrawn or distributed are totally or partially absorbed by NOL’s, the corporate tax paid on such profits (20%, 17%, 16.5%, 16%, 15%, 10% depending on the year in which profits were generated) will be considered to be a provisional payment with respect to the portion representing the absorbed accumulated tax profits.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
201
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.1Current tax assets, continued

 

Taxpayers are entitled to apply for a refund of this monthly provisional income tax payments on the absorbed profits recorded in the FUT registry via their tax returns (Form 22).

 

Therefore, the provisional payment for absorbed profits (PPAP) recorded in the FUT is in effect a recoverable tax, and as such the Company records it as an asset.

 

28.2Current tax liabilities:

 

Current tax liabilities  12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
1st Category income tax   21,466    9,811 
Royalty tax on mining activity   -    3,597 
Foreign company income tax   10,113    10,206 
Article 21 Sole Penalty Tax   128    10 
Total   31,707    23,624 

 

Income tax is determined on the basis of the determination of tax result to which the tax rate currently in force in Chile is applied. As established by Law 20.630, beginning on 2012 and after this tax rate is 20%.

 

The provision for royalty is determined by applying the tax rate determined for the Net operating income (NOI).

 

In conclusion, both concepts represent the estimated amount the Company will have to pay for income tax and specific tax on mining.

 

28.3Tax earnings

 

As of December 31, 2013, and December 31, 2012, the Company and its subsidiaries have recorded the following consolidated balances for retained tax earnings, income not constituting revenue subject to income tax, accumulated tax losses and credit for shareholders:

 

   12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Taxable profits with credit rights (1)   1,321,643    1,262,201 
Taxable profits without credit right(1)   90,628    138,535 
Taxable loss   7,425    9,931 
Credit for shareholders   321,006    294,146 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
202
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.3Tax earnings, continued

 

The Retained Taxable Profits Registry (FUT) is a chronological registry where the profits generated and distributed by the company are recorded. The objective of the FUT is to control the accumulated tax profits of the company that may be distributed, withdrawn or remitted to the owners, shareholders or partners, and the final taxes that must be imposed, called in Chile Global Aggregate Tax (that levies persons resident or domiciled in Chile), or Withholding Tax (that levies persons “Not” resident or domiciled in Chile).

 

The FUT Register contains profits with credit rights and profits without credit rights, which arise out of the inclusion of the net taxable income determined by the company or the profits received by the company that may be dividends received or withdrawals made during the period.

 

Profits without credit rights represent the tax payable by the company within the year and filed the following year, therefore they will be deducted from the FUT Registry the following year.

 

Profits with credit rights may be used to reduce the final tax burden of owners, shareholders or partners, which upon withdrawal are entitled to use the credits associated with the relevant profits.

 

In summary, companies use the FUT Registry to maintain control over the profits they generate that have not been distributed to the owners and the relevant credits associated with such profits.

 

28.4Income tax and deferred taxes

 

Assets and liabilities recognized in the Statement of financial position are offset if and only if:

 

1The Company has legally recognized before the right the tax authority to offset the amounts recognized in these entries; and

 

2Deferred income tax assets and liabilities are derived from income tax related to the same tax authority on:

 

(i)the same entity or tax subject; or

 

(ii)different entities or tax subjects who intend either to settle current fiscal assets and liabilities for their net amount, or to realize assets and pay liabilities simultaneously in each of the future periods in which the Company expects to settle or recover significant amounts of deferred tax assets or liabilities.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
203
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

Deferred income tax assets recognized are those income taxes to be recovered in future periods, related to:

 

(a) deductible temporary differences;

(b) the offset of losses obtained in prior periods and not yet subject to tax deduction; and

(c) the offset of unused credits from prior periods.

 

The Company recognizes a deferred tax asset when there is certainty that these can be offset with tax income from subsequent periods, losses or fiscal credits not yet used, but solely as long as it is more likely than not that there will be tax earnings in the future against which to charge to these losses or unused fiscal credits.

 

Deferred tax liabilities recognized refer to the amounts of income taxes payable in future periods related to taxable temporary differences.

 

d.1Income tax assets and liabilities as of December 31, 2013 are detailed as follows:

 

   Net position, assets   Net position, liabilities 
Description of deferred income tax assets and  Assets   Liabilities   Assets   Liabilities 
liabilities  ThUS$   ThUS$   ThUS$   ThUS$ 
Depreciation   -    -    -    162,378 
Doubtful accounts impairment   -    -    7,030    - 
Accrued vacations   -    -    3,566    - 
Manufacturing expenses   -    -    -    66,759 
Unrealized gains (losses) from sales of products   -    -    84,711    - 
Fair value of bonds   -    -    661    - 
Severance indemnity   -    -    -    4,628 
Hedging   -    -    -    5,261 
Inventory of products, spare parts and supplies   1    -    20,828    - 
Research and development expenses   -    -    -    7,018 
Tax losses   -    -    468    - 
Capitalized interest   -    -    -    21,759 
Expenses in assumption of bank loans   -    -    -    2,917 
Unaccrued interest   -    -    39    - 
Fair value of property, plant and equipment   -    -    -    603 
Employee benefits   -    -    381    - 
Royalty deferred income taxes   -    -    -    7,923 
Purchase of intangible assets   -    -    -    235 
Provision for lawsuits and legal expenses   -    -    1,878    - 
Provision for investment plan   -    -    4,225    - 
Provision of fines and crushing site closure   -    -    1,600    - 
Other   530    -    -    201 
Balance to date   531    -    125,387    279,682 
Net balance   531    -    -    154,295 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
204
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.2Income tax assets and liabilities as of December 31, 2012 are detailed as follows

 

 

   Net position, assets   Net position, liabilities 
Description of deferred income tax assets and  Assets   Liabilities   Assets   Liabilities 
liabilities  ThUS$   ThUS$   ThUS$   ThUS$ 
Depreciation   -    -    -    145,251 
Doubtful accounts impairment   -    -    5,807    - 
Accrued vacations   -    -    3,971    - 
Manufacturing expenses   -    -    -    60,160 
Unrealized gains (losses) from sales of products   -    -    105,879    - 
Fair value of bonds   -    -    3,684    - 
Severance indemnity   -    -    -    4,483 
Hedging   -    -    -    22,890 
Inventory of products, spare parts and supplies   37    -    14,990    - 
Research and development expenses   -    -    -    4,917 
Tax losses   -    -    1,509    - 
Capitalized interest   -    -    -    20,449 
Expenses in assumption of bank loans   -    -    -    2,243 
Unaccrued interest   -    -    215    - 
Fair value of property, plant and equipment   -    -    -    2,743 
Employee benefits   -    -    2,027    - 
Royalty deferred income taxes   -    -    -    8,430 
Purchase of intangible assets   -    -    -    - 
Provision for lawsuits and legal expenses   -    -    1,823    - 
Provision for investment plan   -    -    2,487    - 
Provision of fines and crushing site closure   -    -    745    - 
Other   186    -    2,984    - 
Balance to date   223    -    146,121    271,566 
Net balance   223    -    -    125,445 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
205
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.3Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2013

 

   Deferred tax
liabilities
(assets) at
the beginning
of the period
   Deferred tax
expense
(income)
recognized in
profit or loss
   Deferred tax
related to items
credited (debited)
directly to equity
   Total increase
(decrease) of
deferred tax
liabilities
(assets)
   Deferred
tax
liabilities
(assets) at
the end of
the period
 
Depreciation   145,251    17,127    -    17,127    162,378 
Doubtful accounts impairment   (5,807)   (1,223)   -    (1,223)   (7,030)
Accrued vacations   (3,971)   405    -    405    (3,566)
Manufacturing expenses   60,160    6,599    -    6,599    66,759 
Unrealized gains (losses) from sales of products   (105,879)   21,168    -    21,168    (84,711)
Fair value of bonds   (3,684)   -    3,023    3,023    (661)
Severance indemnity   4,483    146    -    146    4,629 
Hedging   22,890    (17,629)   -    (17,629)   5,261 
Inventory of products, spare parts and supplies   (15,027)   (5,802)   -    (5,802)   (20,829)
Research and development expenses   4,917    2,101    -    2,101    7,108 
Capitalized interest   20,449    1,310    -    1,310    21,759 
Expenses in assumption of bank loans   2,243    674    -    674    2,917 
Unaccrued interest   (215)   176    -    176    (39)
Fair value of property, plant and equipment   2,743    (2,140)   -    (2,140)   603 
Employee benefits   (2,027)   1,646    -    1,646    (381)
Royalty deferred income taxes   8,430    (507)   -    (507)   7,923 
Unused tax losses   (1,509)   1,041    -    1,041    (468)
Purchase of intangible assets   -    235    -    235    235 
Provision for lawsuits and legal expenses   (1,823)   (55)   -    (55)   (1,878)
Provision for investment plan   (2,487)   (1,738)   -    (1,738)   (4,225)
Provision of fines and crushing site closure   (745)   (855)   -    (855)   (1,600)
Other   (3,170)   2,841    -    2,841    (329)
Total temporary differences, losses and unused fiscal credits   125,222    25,520    3,023    28,543    153,855 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
206
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.3Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2012

 

   Deferred tax
liabilities
(assets) at
the beginning
of the period
   Deferred tax
expense
(income)
recognized in
profit or loss
   Deferred tax
related to items
credited (debited)
directly to equity
   Total increase
(decrease) of
deferred tax
liabilities
(assets)
   Deferred
tax
liabilities
(assets) at
the end of
the period
 
Depreciation   114,151    31,100    -    31,100    145,251 
Doubtful accounts impairment   (4,061)   (1,746)   -    (1,746)   (5,807)
Accrued vacations   (2,642)   (1,329)   -    (1,329)   (3,971)
Manufacturing expenses   54,747    5,413    -    5,413    60,160 
Unrealized gains (losses) from sales of products   (97,441)   (8,438)   -    (8,438)   (105,879)
Fair value of bonds   (2,104)   -    (1,580)   (1,580)   (3,684)
Severance indemnity   3,036    1,447    -    1,447    4,483 
Hedging   16,636    6,254    -    6,254    22,890 
Inventory of products, spare parts and supplies   (7,866)   (7,161)   -    (7,161)   (15,027)
Research and development expenses   4,598    319    -    319    4,917 
Capitalized interest   17,461    2,988    -    2,988    20,449 
Expenses in assumption of bank loans   1,855    388    -    388    2,243 
Unaccrued interest   (386)   171    -    171    (215)
Fair value of property, plant and equipment   (1,539)   4,282    -    4,282    2,743 
Employee benefits   (1,177)   (850)   -    (850)   (2,027)
Royalty deferred income taxes   10,035    (1,605)   -    (1,605)   8,430 
Unused tax losses   (1,046)   (463)   -    (463)   (1,509)
Purchase of intangible assets   -    -        -    - 
Provision for lawsuits and legal expenses   (1,848)   25    -    25    (1,823)
Provision for investment plan   (2,861)   374    -    374    (2,487)
Provision of fines and crushing site closure   (640)   (105)   -    (105)   (745)
Other   (618)   (2,552)   -    (2,552)   (3,170)
Total temporary differences, losses and unused fiscal credits   98,290    28,512    (1,580)   26,932    125,222 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
207
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.4Deferred taxes related to benefits for tax losses

 

The Company’s tax loss carryforwards (net operating loss) were mainly generated by losses in Chile, which in accordance with current Chilean tax regulations have no expiration date.

 

As of December 31, 2013 and December 31, 2012, tax loss carryforwards (NOL carryforwards) are detailed as follows:

 

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
         
Chile   468    1,509 
Other countries   -    - 
           
Other countries   468    1,509 

 

Tax losses as of December 31 correspond mainly to Servicios Integrales de Tránsitos y Transferencias S.A., Exploraciones Mineras S.A. e Isapre Norte Grande Ltda.

 

d.5Unrecognized deferred income tax assets and liabilities

 

Unrecognized deferred tax assets and liabilities as of December 31, 2013 and December 31, 2012 are as follows:

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
   Assets (liabilities)   Assets (liabilities) 
         
Tax losses Carry Forwards   139    139 
Doubtful accounts impairment   81    81 
Inventory impairment   1,020    1,020 
Pensions plan   (536)   (536)
Accrued vacations   29    29 
Depreciation   (57)   (57)
Other   (19)   (19)
           
Balances to date   657    657 

 

Tax losses mainly relate to the United States, and they expire in 20 years.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
208
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.6Movements in deferred tax assets and liabilities

 

Movements in deferred tax assets and liabilities as of December 31, 2013 and December 31, 2012 are detailed as follows:

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
   Liabilities
(assets)
   Liabilities
(assets)
 
         
Deferred tax assets and liabilities, net opening balance   125,222    98,290 
Increase (decrease) in deferred taxes in profit or loss   25,519    28,512 
Tax Recovery of first category credit absorbed by tax losses   -    - 
Increase (decrease) in deferred taxes in equity   3,023    (1,580)
           
Balances to date   153,764    125,222 

 

d.7Disclosures on income tax expense (income)

 

The Company recognizes current tax and deferred taxes as income or expenses, and they are included in profit or loss, unless they arise from:

 

(a)a transaction or event recognized in the same period or in a different period, outside profit or loss either in other comprehensive income or directly in equity; or

 

(b)a business combination

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
209
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

Current and deferred tax expenses (income) are detailed as follows:

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
   Income
(expenses)
   Income
(expenses)
 
         
Current income tax expense          
Current income tax expense   (113,326)   (187,715)
Adjustments to prior year current income tax   305    145 
           
Current income tax expense, net, total   (113,021)   (187,570)
           
Deferred tax expense          
Deferred tax expense (income) relating to the creation and reversal of temporary differences   (25,518)   (28,512)
Deferred tax expense (income) relating changes in tax rates or the application of new taxes   -    - 
Deferred tax expense, net, total   (25,518)   (28,512)
           
Tax expense (income)   (138,539)   (216,082)

 

Tax expenses (income) for foreign and domestic parties are detailed as follows:

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
   Income
(expenses)
   Income
(expenses)
 
         
Current income tax expense by foreign and domestic parties, net          
Current income tax expense, foreign parties, net   (8,267)   (14,790)
Current income tax expense, domestic, net   (104,769)   (172,780)
           
Current income tax expense, net, total   (113,036)   (187,570)
           
Deferred tax expense by foreign and domestic parties, net          
Deferred tax expense, foreign parties, net   492    474 
Deferred tax expense, domestic, net   (25,995)   (28,986)
           
Deferred tax expense, net, total   (25,503)   (28,512)
           
Income tax expense   (138,539)   (216,082)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
210
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.8Equity interest in taxation attributable to equity-accounted investees

 

The Company does not recognize any deferred tax liability in all cases of taxable temporary differences associated with investments in subsidiaries, branches and associated companies or interest in joint ventures, because as indicated in the standard, the following two conditions are jointly met:

 

(a)the parent, investor or interest holder is able to control the better opportunity for reversal of the temporary difference; and

 

(b)It is more likely than not that the temporary difference is not reversed in the foreseeable future.

 

In addition, the Company does not recognize deferred income tax assets for all deductible temporary differences from investments in subsidiaries, branches and associated companies or interests in joint ventures because it is not possible to meet for the following requirements:

 

(a)Temporary differences are reversed in a foreseeable future; and

 

(b)The Company has tax earnings, against which temporary differences can be used.

 

d.9Disclosures on the tax effects of other comprehensive income components:

 

   12/31/2013 
   ThUS$ 
Income tax related to components of other income and expense with a charge or credit to net equity  Amount before
taxes
(expense) gain
   (Expense)
income for
income taxes
   Amount
after taxes
 
             
Cash flow hedge   15,113    (3,023)   12,090 
                
Total   15,113    (3,023)   12,090 

 

   12/31/2012 
   ThUS$ 
Income tax related to components of other income and expense with a charge or credit to net equity  Amount before
taxes
(expense) gain
   (Expense)
income for
income taxes
   Amount
after taxes
 
             
Cash flow hedge   (6,236)   1,580    (4,656)
                
Total   (6,236)   1,580    (4,656)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
211
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.10Explanation of the relationship between expense (income) for tax purposes and accounting income.

 

In accordance with paragraph No. 81, letter c) of IAS 12, the Company has estimated that the method that discloses more significant information for the users of its financial statements is the reconciliation of tax expense (income) to the result of multiplying financial gains for accounting purposes by the tax rate in force in Chile. This option is based on the fact that the Parent and its subsidiaries incorporated in Chile generate almost the total amount of tax expense (income) and the fact that amounts of subsidiaries incorporated in foreign countries have no relevant significance within the context of the total amount of tax expense (income.)

 

Reconciliation of numbers in income tax expenses (income) and the result of multiplying financial gain by the prevailing rate in Chile

 

   12/31/2013   12/31/2012 
   ThUS$   ThUS$ 
   Income
(expense)
   Income
(expense)
 
         
Consolidated income before taxes   613,110    873,451 
Income tax rate in force in Chile   20%   20%
           
Tax expense using the legal rate   (122,622)   (174,690)
Effect of royalty tax expense   (10,277)   (25,486)
Tax effect of non-taxable revenue   5,669    7,419 
Effect of taxable rate of non-deductible expenses for determination of taxable income (loss)   (1,955)   (3,091)
Tax effect of tax rates supported abroad   (2,268)   (5,265)
Effect on the tax rate arising from changes in the tax rate   -    - 
Other tax effects from the reconciliation between the accounting income and tax expense (income)   (7,086)   (14,969)
Tax expense using the effective rate   (138,539)   (216,082)

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
212
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 28 -Income tax and deferred taxes (continued)

 

28.4Income tax and deferred taxes, continued

 

d.11Tax periods potentially subject to verification:

 

The Group’s Companies are potentially subject to income tax audits by tax authorities in each country. These audits are limited to a number of interim tax periods, which, in general, when they elapse, give rise to the expiration of these inspections.

 

Tax audits, due to their nature, are often complex and may require several years. Below, we provide a summary of tax periods that are potentially subject to verification, in accordance with tax regulations in force in the country of origin:

 

a)Chile:

 

According to article 200 of Decree Law No. 830, the tax authority shall review for any deficiencies in its settlement of any taxes to be paid, by applying a requirement of a 3 year term from the expiration of the legal deadline when payment should have been made. In addition, this requirement could be extended to a 6 year term for the revision of taxes subject to declaration, when such declaration has not been filed or has been presented purposely false.

 

b)United States

 

In the United States, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event that an omission or error is detected in the tax return of sales or cost of sales, the review can be extended for a period of up to 6 years.

 

c)Mexico:

 

In Mexico, the tax authority can review tax returns up to 5 years from the expiration date of the tax return.

 

d)Spain:

 

In Spain, the tax authority can review tax returns up to 4 years from the expiration date of the tax return.

 

e)Belgium:

 

In Belgium, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return if no tax losses exist. In the event of detecting an omission or error in the tax return, the review can be extended for a period of up to 5 years.

 

f)South Africa:

 

In South Africa, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event an omission or error in the tax return is detected, the review can be extended for a period of up to 5 years.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
213
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 29 -Disclosures on the effects of fluctuations in foreign currency exchange rates

 

Assets held in foreign currency subject to fluctuations in exchange rates are detailed as follows:

 

Class of asset  Currency  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Current assets:             
Cash and cash equivalents  BRL   73    20 
Cash and cash equivalents  CLP   25,391    76,712 
Cash and cash equivalents  CNY   384    181 
Cash and cash equivalents  EUR   9,230    3,601 
Cash and cash equivalents  GBP   14    70 
Cash and cash equivalents  IDR   4    5 
Cash and cash equivalents  INR   7    13 
Cash and cash equivalents  MXN   428    720 
Cash and cash equivalents  PEN   2    75 
Cash and cash equivalents  THB   2,161    - 
Cash and cash equivalents  YEN   1,435    1,369 
Cash and cash equivalents  ZAR   7,229    7,421 
Subtotal cash and cash equivalents      46,358    90,187 
Other current financial assets  CLP   108,892    182,427 
Subtotal other current financial assets      108,892    182,427 
Other current non-financial assets  ARS   21    29 
Other current non-financial assets  AUD   95    - 
Other current non-financial assets  BRL   1    5 
Other current non-financial assets  CLF   75    23 
Other current non-financial assets  CLP   25,814    42,378 
Other current non-financial assets  CNY   33    29 
Other current non-financial assets  EUR   5,383    8,534 
Other current non-financial assets  MXN   793    736 
Other current non-financial assets  PEN   3    55 
Other current non-financial assets  THB   13    - 
Other current non-financial assets  YEN   -    15 
Other current non-financial assets  ZAR   801    702 
Subtotal other current non-financial assets      33,032    52,506 
Trade and other receivables  AUD   -    14 
Trade and other receivables  BRL   32    58 
Trade and other receivables  CLF   507    826 
Trade and other receivables  CLP   50,112    78,112 
Trade and other receivables  CNY   9    2,014 
Trade and other receivables  EUR   31,975    47,962 
Trade and other receivables  GBP   261    399 
Trade and other receivables  MXN   240    200 
Trade and other receivables  PEN   92    114 
Trade and other receivables  THB   1,823    - 
Trade and other receivables  YEN   -    - 
Trade and other receivables  ZAR   14,742    16,004 
Subtotal trade and other receivables      99,793    145,703 
Receivables from related parties  AED   379    - 
Receivables from related parties  CLP   517    1,154 
Receivables from related parties  EUR   845    34 
Receivables from related parties  YEN   197    28 
Receivables from related parties  ZAR   9,157    3,312 
Subtotal receivables from related parties      11,095    4,528 
Current tax assets  AUD   -    452 
Current tax assets  CLP   1,033    457 
Current tax assets  EUR   75    72 
Current tax assets  INR   -    5 
Current tax assets  MXN   230    698 
Current tax assets  PEN   267    363 
Current tax assets  YEN   -    135 
Subtotal current tax assets      1,605    2,182 
Total current assets      300,775    477,533 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
214
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 29 -Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Class of asset  Currency  12/31/2013
ThUS$
   12/31/2012
ThUS$
 
Non-current assets:             
Other non-current financial assets  BRL   27    30 
Other non-current financial assets  CLP   20    20 
Other non-current financial assets  YEN   45    54 
Subtotal other non-current financial assets      92    104 
Other non-current non-financial assets  BRL   191    219 
Other non-current non-financial assets  CLP   758    624 
Subtotal other non-current non-financial assets      949    843 
Non-current rights receivable  CLF   465    602 
Non-current rights receivable  CLP   818    709 
Subtotal non-current rights receivable      1,283    1,311 
Equity-accounted investees  AED   24,215    17,044 
Equity-accounted investees  CLP   1,649    1,656 
Equity-accounted investees  IDR   802    - 
Equity-accounted investees  EUR   7,924    8,495 
Equity-accounted investees  INR   -    683 
Equity-accounted investees  THB   1,876    1,608 
Equity-accounted investees  TRY   15,336    15,431 
Subtotal equity-accounted investees      51,802    44,917 
Intangible assets other than goodwill  CLP   507    170 
Intangible assets other than goodwill  CNY   3    6 
Subtotal intangible assets other than goodwill      510    176 
Property, plant and equipment  CLP   5,633    3,639 
Subtotal property, plant and equipment      5,633    3,639 
Total non-current assets      60,269    50,990 
Total assets      361,044    528,523 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
215
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 29 -Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Liabilities held in foreign currencies are detailed as follows:

 

      12/31/2013   12/31/2012 
Class of liability  Currency  Up to 90 days
ThUS$
   Over 90 days
up to 1 year
ThUS$
   Total
ThUS$
   Up to 90
days
ThUS$
   Over 90 days
up to 1 year
ThUS$
   Total
ThUS$
 
Current liabilities                                 
Other current financial liabilities  CLF   1,455    77,866    79,321    5,967    7,465    13,432 
Other current financial liabilities  CLP   -    141,704    141,704    1,265    1,470    2,735 
Subtotal other current financial liabilities      1,455    219,570    221,025    7,232    8,935    16,167 
Trade and other payables  ARS   3    -    3    1    -    1 
Trade and other payables  BRL   64    -    64    71    -    71 
Trade and other payables  CHF   1    -    1    155    -    155 
Trade and other payables  CLP   55,785    26,224    82,009    132,037    35    132,072 
Trade and other payables  CNY   117    -    117    1,642    -    1,642 
Trade and other payables  EUR   18,654    -    18,654    18,983    279    19,262 
Trade and other payables  GBP   6    -    6    142    -    142 
Trade and other payables  INR   1    -    1    4    -    4 
Trade and other payables  MXN   485    -    485    808    2    810 
Trade and other payables  PEN   3    -    3    36    -    36 
Trade and other payables  YEN   -    -    -    66    49    115 
Trade and other payables  ZAR   2,517    -    2,517    1,810    -    1,810 
Subtotal trade and other payables      77,636    26,224    103,860    155,755    365    156,120 
Other current provisions  ARS   62    -    62    -    -    - 
Other current provisions  BRL   821    595    1,416    17    1,606    1,623 
Other current provisions  CLP   6    -    6    28    -    28 
Other current provisions  EUR   7    -    7    248    -    248 
Other current provisions  INR   1    -    1    -    -    - 
Subtotal other current provisions      897    595    1,492    293    1,606    1,899 
Current tax liabilities  INR   -    -    -    5    -    5 
Current tax liabilities  BRL   -    -    -    -    3    3 
Current tax liabilities  CLP   -    33    33    -    2,660    2,660 
Current tax liabilities  CNY   -    -    -    -    22    22 
Current tax liabilities  EUR   -    1,553    1,553    -    2,742    2,742 
Current tax liabilities  MXN   -    -    -    36    -    36 
Current tax liabilities  ZAR   -    -    -    -    55    55 
Subtotal current tax liabilities      -    1,586    1,586    41    5,482    5,523 
Current provisions for employee benefits  CLP   24,172    -    24,172    7,557    14,760    22,317 
Current provisions for employee benefits  MXN   156    -    156    -    212    212 
Subtotal current provisions for employee benefits      24,328    -    24,328    7,557    14,972    22,529 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
216
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 29 -Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

       12/31/2013   12/31/2012 
Class of liabilities  Currency   Up to 90 days
ThUS$
   Over 90 days
up to 1 year
ThUS$
   Total
ThUS$
   Up to 90
days
ThUS$
   Over 90 days
up to 1 year
ThUS$
   Total
ThUS$
 
Other current non-financial liabilities   BRL    55    -    55    12    44    56 
Other current non-financial liabilities   CLP    7,055    19,922    26,977    9,561    26,714    36,275 
Other current non-financial liabilities   CNY    18    -    18    26    -    26 
Other current non-financial liabilities   EUR    2,442    -    2,442    637    -    637 
Other current non-financial liabilities   MXN    720    62    782    250    103    353 
Other current non-financial liabilities   AUD    -    -    -    -    -    - 
Other current non-financial liabilities   PEN    70    -    70    70    -    70 
Other current non-financial liabilities   THD    -    -    -    -    -    - 
Other current non-financial liabilities   ZAR    8    -    8    9    -    9 
Subtotal other current non-financial liabilities        10,368    19,984    30,352    10,565    26,861    37,426 
Total current liabilities        114,684    267,959    382,643    181,443    58,221    239,664 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
217
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 29 -Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

      12/31/2013   12/31/2012 
Class of liabilities  Currency  Over 1
year up to
3 years
ThUS$
   Over 3 years up
to 5 years
ThUS$
   Over 5 years
ThUS$
   Total
ThUS$
   Over 1
year up
to 3 years
ThUS$
   Over 3 years up
to 5 years
ThUS$
   Over 5
years
ThUS$
   Total
ThUS$
 
Non-current liabilities                                           
Other non-current financial liabilities  CLF   12,957    57,168    293,844    363,969    85,681    61,119    321,857    468,657 
Other non-current financial liabilities  CLP   -    -    -    -    151,500    -    -    151,500 
Subtotal other non-current financial liabilities      12,957    57,168    293,844    363,969    237,181    61,119    321,857    620,157 
                                            
Deferred tax liabilities  CLP   -    -    -    -    -    -    43    43 
Deferred tax liabilities  MXN   -    -    -    -    159    -    -    159 
Subtotal deferred tax liabilities      -    -    -    -    159    -    43    202 
Non-current provisions for employee benefits  CLP   -    -    28,532    28,532    -    -    33,766    33,766 
Non-current provisions for employee benefits  MXN   -    -    131    131    -    -    132    132 
Non-current provisions for employee benefits  YEN   -    -    494    494    -    -    532    532 
Subtotal non-current provisions for employee benefits      -    -    29,157    29,157    -    -    34,430    34,430 
Total non-current liabilities      12,957    57,168    323,001    393,126    237,340    61,119    356,330    654,789 

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
218
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

Note 30 –Subsequent events

 

30.1Authorization of the financial statements

 

The consolidated financial statements of Sociedad Química y Minera de Chile S.A. and subsidiaries prepared in accordance with International Financial Reporting Standards for the period ended December 31, 2013 were approved and authorized for issuance by the Board of Directors at their meeting held on March 4, 2014.

 

30.2Disclosures on events occurring after the reporting date

 

Management is not aware of any significant events that occurred between December 31, 2013 and the date of issuance of these consolidated financial statements that may significantly affect them.

 

30.3Detail of dividends declared after the reporting date

 

At the date of these financial statements, there are no dividends declared after the balance sheet date.

 

SQM
Los Militares 4290,
Las Condes, Santiago, Chile
Tel: (56 2) 425 2000
www.sqm.com
219
 

 

Notes to the Consolidated Financial Statements as of December 31, 2013

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  CHEMICAL AND MINING COMPANY OF CHILE INC.
  (Registrant)
   
Date: April 03, 2014  
  By: Ricardo Ramos
  CFO & Vice-President of Development

 

Persons who are to respond to the collection of information contained SEC 1815 (04-09) in this form are not required to respond unless the form displays currently valid OMB control number.

 

220