Edgar Filing: Bunge LTD

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-16625

BUNGE LIMITED

(Exact name of registrant as specified in its charter)

Bermuda		98-0231912
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

50 Main Street, White Plains, New York		10606
(Address of principal executive offices)		(Zip Code)

(914) 684-2800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o No x

As of July 27, 2012 the number of shares issued of the registrant was:

Common shares, par value $.01 per share: 146,055,782

Table of Contents

BUNGE LIMITED

TABLE OF CONTENTS

		Page

PART I— FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2012 and 2011	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2012 and 2011	3

	Condensed Consolidated Balance Sheets at June 30, 2012 and December 31, 2011	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011	5

	Condensed Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2012 and 2011	6

	Notes to the Condensed Consolidated Financial Statements	7

	Cautionary Statement Regarding Forward-Looking Statements	31

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	50

PART II — INFORMATION

Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 3.	Defaults upon Senior Securities	51

Item 4.	Mine Safety Disclosures	51

Item 5.	Other Information	51

Item 6.	Exhibits	51

Signatures		S-1

Exhibit Index		E-1

Table of Contents

PART I— FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(U.S. dollars in millions, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Net sales	$	15,090		$	14,488		$	28,536		$	26,682
Cost of goods sold	(14,430		)	(13,841		)	(27,355		)	(25,396		)

Gross profit	660			647			1,181			1,286
Selling, general and administrative expenses	(396		)	(383		)	(815		)	(727		)
Interest income	21			23			47			44
Interest expense	(82		)	(70		)	(144		)	(142		)
Foreign exchange gain (loss)	18			77			84			119
Other income (expense) — net	(8		)	1			(37		)	(7		)
Gain on sale of investments in affiliates	85			37			85			37
Gain on acquisition of controlling interest	36			—			36			—

Income before income tax	334			332			437			610
Income tax expense	(68		)	(20		)	(82		)	(63		)

Net income	266			312			355			547
Net loss (income) attributable to noncontrolling interest	8			4			11			1

Net income attributable to Bunge	274			316			366			548
Convertible preference share dividends	(9		)	(9		)	(17		)	(17		)

Net income available to Bunge common shareholders	$	265		$	307		$	349		$	531

Earnings per common share — basic (Note 19)
Earnings to Bunge common shareholders	$	1.82		$	2.08		$	2.39		$	3.61

Earnings per common share — diluted (Note 19)
Earnings to Bunge common shareholders	$	1.78		$	2.02		$	2.37		$	3.51

Dividends per common share	$	0.27		$	0.25		$	0.52		$	0.48

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

Table of Contents

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(U.S. dollars in millions)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Net income	$	266		$	312		$	355		$	547
Other comprehensive income (loss):
Foreign exchange translation adjustment	(1,133		)	361			(798		)	658
Unrealized gains (losses) on commodity futures and foreign exchange contracts designated as cash flow hedges, net of tax (expense) benefit of $12 and $8 in 2012, $(7) and $(7) in 2011	(25		)	9			(16		)	13
Unrealized gains (losses) on investments, net of tax (expense) benefit of $1 and $(6) in 2012, $(2) and $(2) in 2011	(2		)	3			11			3
Reclassification of realized net losses (gains) to net income, net of tax expense (benefit) of $(1) and $0 in 2012, $7 and $7 in 2011	21			(13		)	21			(13		)
Pension adjustment, net of tax (expense) benefit of nil in all periods	—			—			1			(2		)
Total other comprehensive income (loss)	(1,139		)	360			(781		)	659
Total comprehensive income (loss)	(873		)	672			(426		)	1,206
Less: comprehensive (income) loss attributable to noncontrolling interest	47			(6		)	37			(17		)
Total comprehensive income (loss) attributable to Bunge	$	(826	)	$	666		$	(389	)	$	1,189

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

Table of Contents

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(U.S. dollars in millions, except share data)

	June 30,			December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	467		$	835
Trade accounts receivable (less allowances of $117 and $113) (Note 13)	2,805			2,459
Inventories (Note 4)	7,930			5,733
Deferred income taxes	394			305
Other current assets (Note 5)	4,764			3,796
Total current assets	16,360			13,128

Property, plant and equipment, net	5,596			5,517
Goodwill (Note 6)	880			893
Other intangible assets, net	306			220
Investments in affiliates (Note 7)	278			600
Deferred income taxes	1,276			1,211
Other non-current assets (Note 8)	2,017			1,706
Total assets	$	26,713		$	23,275

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	2,332		$	719
Current portion of long-term debt (Note 12)	315			14
Trade accounts payable	3,048			3,173
Deferred income taxes	275			152
Other current liabilities (Note 10)	3,704			2,889
Total current liabilities	9,674			6,947

Long-term debt (Note 12)	4,247			3,348
Deferred income taxes	155			134
Other non-current liabilities	765			771

Commitments and contingencies (Note 16)

Equity (Note 17):
Convertible perpetual preference shares, par value $.01; authorized, issued and outstanding: 2012 and 2011 — 6,900,000 shares (liquidation preference $100 per share)	690			690
Common shares, par value $.01; authorized — 400,000,000 shares; issued and outstanding: 2012 — 146,035,349 shares, 2011 — 145,610,029 shares	1			1
Additional paid-in capital	4,868			4,829
Retained earnings	7,190			6,917
Accumulated other comprehensive income (loss) (Note 17)	(1,365		)	(610		)
Treasury shares, at cost - 1,933,286 shares	(120		)	(120		)
Total Bunge shareholders’ equity	11,264			11,707
Noncontrolling interest (Note 18)	608			368
Total equity	11,872			12,075
Total liabilities and equity	$	26,713		$	23,275

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

Table of Contents

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(U.S. dollars in millions)

	Six Months Ended
	June 30,
	2012			2011
OPERATING ACTIVITIES
Net income	$	355		$	547
Adjustments to reconcile net income to cash provided by (used for) operating activities:
Gain on sale of investments in affiliates	(85		)	(37		)
Gain on acquisition of controlling interest	(36		)	—
Foreign exchange loss (gain) on debt	(49		)	(78		)
Bad debt expense	29			9
Depreciation, depletion and amortization	264			247
Stock-based compensation expense	31			26
Deferred income taxes	(108		)	(136		)
Other, net	—			(7		)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Trade accounts receivable	(434		)	(64		)
Inventories	(2,513		)	(86		)
Prepayments and advances to suppliers	(687		)	(239		)
Trade accounts payable and accrued liabilities	186			(431		)
Net unrealized gain/loss on derivative contracts	214			129
Margin deposits	(63		)	390
Other, net	197			(6		)
Cash provided by (used for) operating activities	(2,699		)	264
INVESTING ACTIVITIES
Payments made for capital expenditures	(473		)	(454		)
Acquisitions of businesses (net of cash acquired)	(277		)	(83		)
Proceeds from sale of investments in affiliates	483			70
Payments for investments in affiliates	(89		)	(10		)
Other, net	73			37
Cash provided by (used for) investing activities	(283		)	(440		)
FINANCING ACTIVITIES
Net change in short-term debt with maturities of 90 days or less	1,618			(294		)
Proceeds from short-term debt with maturities greater than 90 days	369			439
Repayments of short-term debt with maturities greater than 90 days	(367		)	(983		)
Proceeds from long-term debt	2,761			1,377
Repayments of long-term debt	(1,638		)	(440		)
Proceeds from sale of common shares	10			16
Dividends paid	(89		)	(85		)
Other, net	—			28
Cash provided by (used for) financing activities	2,664			58
Effect of exchange rate changes on cash and cash equivalents	(50		)	10
Net (decrease) increase in cash and cash equivalents	(368		)	(108		)
Cash and cash equivalents, beginning of period	835			578
Cash and cash equivalents, end of period	$	467		$	470

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

Table of Contents

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(U.S. dollars in millions, except share data)

	Convertible												Accumulated
	Preference							Additional					Other						Non
	Shares				Common Shares			Paid-in		Retained			Comprehensive			Treasury			Controlling			Total
	Shares	Amount			Shares	Amount		Capital		Earnings			Income (Loss)			Shares			Interest			Equity
Balance, January 1, 2011	6,900,000	$	690		146,635,083	$	1	$	4,793	$	6,153		$	583		$	—		$	334		$	12,554
Net income	—	—			—	—		—		548			—			—			(1		)	547
Other comprehensive income (loss)	—	—			—	—		—		—			641						18			659
Dividends on common shares	—	—			—	—		—		(71		)	—			—			—			(71		)
Dividends on preference shares	—	—			—	—		—		(17		)	—			—			—			(17		)
Dividends to noncontrolling interest on subsidiary common stock	—	—			—	—		—		—			—			—			(12		)	(12		)
Capital contributions from noncontrolling interest	—	—			—	—		—		—			—			—			53			53
Stock-based compensation expense	—	—			—	—		26		—			—						—			26
Issuance of common shares	—	—			709,526	—		12		—			—			—			—			12
Balance, June 30, 2011	6,900,000	$	690		147,344,609	$	1	$	4,831	$	6,613		$	1,224		$	—		$	392		$	13,751

	Convertible												Accumulated
	Preference							Additional					Other						Non
	Shares				Common Shares			Paid-in		Retained			Comprehensive			Treasury			Controlling			Total
	Shares	Amount			Shares	Amount		Capital		Earnings			Income (Loss)			Shares			Interest			Equity
Balance, January 1, 2012	6,900,000	$		690	145,610,029	$	1	$	4,829	$	6,917		$	(610	)	$	(120	)	$	368		$	12,075
Net income	—	—			—	—		—		366			—			—			(11		)	355
Other comprehensive income (loss)	—	—			—	—		—		—			(755		)	—			(26		)	(781		)
Dividends on common shares	—	—			—	—		—		(76		)	—			—			—			(76		)
Dividends on preference shares	—	—			—	—		—		(17		)	—			—			—			(17		)
Dividends to noncontrolling interest on subsidiary common stock	—	—			—	—		—		—			—			—			(6		)	(6		)
Capital contributions from noncontrolling interest	—	—			—	—		—		—			—			—			10			10
Noncontrolling interest at acquisition	—	—			—	—		—		—			—			—			273			273
Stock-based compensation expense	—	—			—	—		31		—			—			—			—			31
Issuance of common shares	—	—			425,320	—		8		—			—			—			—			8
Balance, June 30, 2012	6,900,000	$		690	146,035,349	$	1	$	4,868	$	7,190		$	(1,365	)	$	(120	)	$	608		$	11,872

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

Table of Contents

BUNGE LIMITED AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Bunge Limited (Bunge), its subsidiaries and variable interest entities (VIEs) in which it is considered the primary beneficiary. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended (Exchange Act) and include the assets, liabilities, revenues and expenses of all entities in which Bunge has a controlling financial interest or is otherwise deemed to be the primary beneficiary. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to Securities and Exchange Commission (SEC) rules. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included. The condensed consolidated balance sheet at December 31, 2011 has been derived from Bunge’s audited consolidated financial statements at that date. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for the year ending December 31, 2012. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2011, forming part of Bunge’s 2011 Annual Report on Form 10-K filed with the SEC on February 27, 2011.

As described in Note 3, Bunge acquired an asset management business in Europe on March 19, 2012. Based on the accounting requirements of Accounting Standards Codification (ASC) Topic 810-10, Consolidation, Bunge concluded that restrictions on certain subsidiaries of this asset management business that serve as general partners in certain investment funds managed by that business to sell, transfer or encumber their partnership interests without advance approval of specified majorities of limited partner investors, and similar restrictions on such limited partner investors to sell, transfer or encumber their interests in the funds without prior approval of the general partner, result in a potential de facto principal/agency relationship as defined under accounting requirements and therefore Bunge is required to consolidate these investment funds, although it does not have significant equity at risk in these investment funds. The consolidation of these investment funds into Bunge’s financial statements impacts primarily investments, long-term debt and noncontrolling interest in Bunge’s condensed consolidated balance sheet as of June 30, 2012 in the amounts of $335 million, $92 million and $253 million, respectively. Bunge does not provide performance guarantees and has no financial obligation to provide funding to these investment funds.

Certain prior year amounts have been reclassified to conform to the current year presentation (see Notes 6 and 20).

2. NEW ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Pronouncements— In May 2011, the Financial Accounting Standards Board (FASB) amended the guidance in ASC Topic 820, Fair Value Measurement. This guidance is intended to result in convergence between U.S. GAAP and IFRS requirements for measurement of, and disclosures about, fair value. The amendment clarifies or changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. The adoption of this standard on January 1, 2012 did not have a material impact on Bunge’s condensed consolidated financial statements.

3. BUSINESS ACQUISITIONS

In June 2012, Bunge acquired sugarcane milling assets in Brazil in its sugar and bioenergy segment for $61 million in cash. The preliminary purchase price allocation includes $10 million of biological assets, $43 million of property, plant and equipment, $1 million of finite-lived intangible assets and $7 million of goodwill.

In May 2012, Bunge acquired an additional 63.5% interest in a wheat mill and bakery dry mix operation in North America in its milling products segment for $102 million, net of cash acquired. Bunge had an existing 31.5% interest in the entity which was accounted for as an equity method investment. Upon completion of the transaction,

Table of Contents

Bunge has a 95% interest in the entity which it consolidates. Upon assuming control of the entity Bunge recorded a non-cash gain of $36 million to adjust its previously existing noncontrolling interest to its fair value of $52 million. The preliminary purchase price allocation includes $19 million of inventories, $35 million of other current assets, $71 million of property, plant and equipment, $32 million of finite-lived intangible assets, $21 million of other liabilities, $27 million of deferred tax liabilities, $6 million of noncontrolling interest and $51 million of goodwill (see Notes 7 and 18).

In March 2012, Bunge acquired an asset management business in Europe in its agribusiness segment for $9 million, net of cash acquired. The preliminary purchase price allocation includes $25 million of current assets, $346 million of long-term investments, $21 million of other finite-lived intangible assets, $25 million of other liabilities, $94 million of debt and $264 million of noncontrolling interest. Of these amounts, $14 million of other net assets, $344 million of long-term investments, $94 million of long-term debt and $264 million of noncontrolling interest are attributed to certain managed investment funds, which Bunge consolidates as it is deemed to be the primary beneficiary.

In February 2012, Bunge acquired an edible oils and fats business in India in its edible oils segment for $94 million, net of cash acquired. The purchase price consisted of $77 million in cash and $17 million of acquired debt. The preliminary purchase price allocation includes $15 million of inventories, $4 million of current assets, $27 million of property, plant and equipment, $53 million of intangible assets (primarily trademark and brands) and $5 million of other liabilities.

Also in 2012, Bunge acquired finite-lived intangible assets and property, plant and equipment in two transactions in North America in its agribusiness segment for $24 million in cash.

4. INVENTORIES

Inventories by segment are presented below. Readily marketable inventories refers to inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.

	June 30,		December 31,
(US$ in millions)	2012		2011
Agribusiness (1)	$	5,902	$	4,080
Sugar and bioenergy (2)	422		465
Edible oil products (3)	618		489
Milling products (4)	151		130
Fertilizer (4)	837		569
Total	$	7,930	$	5,733

(1) Includes readily marketable agricultural commodity inventories at fair value of $5,574 million and $3,724 million at June 30, 2012 and December 31, 2011, respectively. All other agribusiness segment inventories are carried at lower of cost or market.

(2) Includes readily marketable sugar inventories of $85 million and $139 million at June 30, 2012 and December 31, 2011, respectively. Of these sugar inventories, $57 million and $83 million are carried at fair value at June 30, 2012 and December 31, 2011, respectively, in Bunge’s trading and merchandising business. Sugar and ethanol inventories in Bunge’s industrial production business are carried at lower of cost or market.

(3) Edible oil products inventories are generally carried at lower of cost or market, with the exception of readily marketable inventories of bulk soybean oil which are carried at fair value in the aggregate amount of $217 million and $212 million at June 30, 2012 and December 31, 2011, respectively.

(4) Milling products and fertilizer inventories are carried at lower of cost or market.

5. OTHER CURRENT ASSETS

Other current assets consist of the following:

Table of Contents

	June 30,		December 31,
(US$ in millions)	2012		2011
Prepaid commodity purchase contracts (1)	$	835	$	206
Secured advances to suppliers, net (2)	337		349
Unrealized gains on derivative contracts at fair value	1,624		1,283
Recoverable taxes, net	495		528
Margin deposits (3)	417		352
Marketable securities	69		50
Deferred purchase price receivable (4)	156		192
Prepaid expenses	368		369
Restricted cash (5)	—		43
Other	463		424
Total	$	4,764	$	3,796

(1) Prepaid commodity purchase contracts represent advance payments against fixed price contracts for future delivery of specified quantities of agricultural commodities. These contracts are recorded at fair value based on prices of the underlying agricultural commodities.

(2) Bunge provides cash advances to suppliers, primarily Brazilian farmers of soybeans, to finance a portion of the suppliers’ production costs. Bunge does not bear any of the costs or risks associated with the related growing crops. The advances are largely collateralized by future crops and physical assets of the suppliers, carry a local market interest rate and settle when the farmer’s crop is harvested and sold. The secured advances to farmers are reported net of allowances of $4 million at June 30, 2012 and $3 million at December 31, 2011.

Interest earned on secured advances to suppliers of $5 million for both the three months ended June 30, 2012 and 2011, respectively, and $13 million and $12 million for the six months ended June 30, 2012 and 2011, respectively, is included in net sales in the condensed consolidated statements of income.

(3) Margin deposits include U.S. treasury securities at fair value and cash.

(4) Deferred purchase price receivable represents additional credit support for the investment conduits in Bunge’s accounts receivables sales program (see Note 13) and is recognized at its estimated fair value.

(5) Restricted cash at December 31, 2011, includes an escrowed cash deposit related to an equity investment, which was completed in the first quarter of 2012.

6. GOODWILL

The table below summarizes the carrying amount of goodwill by segment.

				Sugar and			Edible Oil			Milling
(US$ in millions)	Agribusiness			Bioenergy			Products			Products			Fertilizer		Total
Balance, December 31, 2010	$	215		$	631		$	80		$	7		$	1	$	934
Acquired goodwill	34			—			41			—			—		75
Reallocation of acquired goodwill	(5		)	—			—			—			—		(5		)
Tax benefit on goodwill amortization (3)	(7		)	—			—			—			—		(7		)
Foreign exchange translation	(21		)	(71		)	(11		)	(1		)	—		(104		)
Balance, December 31, 2011	$	216		$	560		$	110		$	6		$	1	$	893
Acquired goodwill (1)	—			7			—			51			—		58
Reallocation of acquired goodwill (2)	(1		)	—			(13		)	—			1		(13		)
Tax benefit on goodwill amortization (3)	(3		)	—			—			—			—		(3		)
Foreign exchange translation	(11		)	(40		)	(1		)	(3		)	—		(55		)
Balance, June 30, 2012	$	201		$	527		$	96		$	54		$	2	$	880

(1) See Note 3.

(2) Beginning in the first quarter of 2012, the management responsibilities for certain Brazilian port facilities were moved from the agribusiness segment to the fertilizer segment. Accordingly, $1 million of goodwill attributable to these port facilities was reclassified to conform to the 2012 segment presentation. Also in the first quarter of 2012, the purchase price allocation for the 2011 edible oil products acquisition was revised resulting in a reduction of goodwill of $13 million, a reduction of inventories of $6 million, an increase in finite-lived intangibles of $14 million and a reduction of deferred tax liabilities of $5 million.

Table of Contents

(3) Bunge’s Brazilian subsidiary’s tax deductible goodwill is in excess of its book goodwill. For financial reporting purposes, for goodwill acquired prior to 2009, the tax benefits attributable to the excess tax goodwill are first used to reduce associated goodwill and then other intangible assets to zero, prior to recognizing any income tax benefit in the condensed consolidated statements of income.

7. INVESTMENTS IN AFFILIATES

In June 2012, Bunge entered into a joint venture agreement for the construction and operation of a corn wet mill in Argentina. Bunge has a 50% interest in this joint venture for $14 million. Bunge accounts for this equity method investment in its sugar and bioenergy segment. Also during the six months ended June 30, 2012, Bunge made contributions of $18 million and $15 million to its North American biofuels and Paraguay oilseed processing facility joint ventures, respectively.

In May 2012, Bunge completed the acquisition of an additional 63.5% voting interest in a North American wheat mill and bakery dry mix operations (see Note 3) in which it previously had a 31.5% interest, and which it reported as an equity method investment in its milling products segment. Upon completion of the transaction, Bunge began to consolidate this entity in its consolidated financial statements. Upon assuming control of this entity, Bunge recognized a non-cash gain of $36 million to adjust its previously existing investment to fair value.

In April 2012, Bunge sold its 28.06% interest in The Solae Company (Solae) to E.I. du Pont de Nemours and Company for $448 million in cash exclusive of a special cash dividend of $35 million. Bunge recognized a pre-tax gain of $85 million in its agribusiness segment related to this transaction.

In January 2012, Bunge completed the acquisition in its agribusiness segment of a 35% interest in PT Bumiraya Investindo, an Indonesian palm plantation company, for $43 million which is reported as an equity method investment.

8. OTHER NON-CURRENT ASSETS

Other non-current assets consist of the following:

	June 30,		December 31,
(US$ in millions)	2012		2011
Recoverable taxes, net	$	473	$	386
Long-term receivables from farmers in Brazil, net	225		284
Judicial deposits	162		167
Income taxes receivable	462		565
Affiliate loans receivable	80		63
Long-term investments	417		37
Other	198		204
Total	$	2,017	$	1,706

Recoverable taxes — Recoverable taxes are reported net of valuation allowances of $36 million and $41 million at June 30, 2012 and December 31, 2011, respectively.

Long-term receivables from farmers in Brazil — Bunge provides financing to farmers in Brazil, primarily through secured advances against farmer commitments to deliver agricultural commodities (primarily soybeans) upon harvest of the then-current year’s crop and through credit sales of fertilizer to farmers.

Table of Contents

The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil for amounts in the legal collection process and renegotiated amounts.

	June 30,		December 31,
(US$ in millions)	2012		2011
Legal collection process (1)	$	313	$	358
Renegotiated amounts:
Current on repayment terms	110		125
Total	$	423	$	483

(1) All amounts in legal process are considered past due upon initiation of legal action.

The average recorded investment in long-term receivables from farmers in Brazil for the six months ended June 30, 2012 and the year ended December 31, 2011 was $485 million and $561 million, respectively. The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil and the related allowance amounts.

	June 30, 2012				December 31, 2011
	Recorded				Recorded
(US$ in millions)	Investment		Allowance		Investment		Allowance
For which an allowance has been provided:
Legal collection process	$	157	$	143	$	162	$	147
Renegotiated amounts	68		55		64		52
For which no allowance has been provided:
Legal collection process	156		—		196		—
Renegotiated amounts	42		—		61		—
Total	$	423	$	198	$	483	$	199

The table below summarizes the activity in the allowance for doubtful accounts related to long-term receivables from farmers in Brazil.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(US$ in millions)	2012			2011			2012			2011
Beginning balance	$	215		$	205		$	199		$	201
Bad debt provisions	11			3			26			4
Recoveries	(5		)	(4		)	(9		)	(5		)
Write-offs	(1		)	—			(1		)	—
Transfers (1)	—			2			—			2
Foreign exchange translation	(22		)	9			(17		)	13
Ending balance	$	198		$	215		$	198		$	215

(1) Represents reclassifications from allowance for doubtful accounts — current for secured advances to suppliers.

Judicial deposits — Judicial deposits are funds that Bunge has placed on deposit with the courts in Brazil. These funds are held in judicial escrow relating to certain legal proceedings pending legal resolution and bear interest at the SELIC rate (benchmark rate of the Brazilian central bank).

Table of Contents

Income taxes receivable — Income taxes receivable at June 30, 2012 and December 31, 2011 includes overpayments of current income taxes plus accrued interest. These income tax prepayments are expected to be utilized for settlement of future income tax obligations. Income taxes receivable in Brazil bear interest at the SELIC rate.

Affiliate loans receivable — Affiliate loans receivable are primarily interest bearing receivables from unconsolidated affiliates with an initial maturity of greater than one year.

Long-term investments— Long-term investments primarily relate to investments held by certain managed investment funds (see Note 1) for which Bunge has been deemed the primary beneficiary, resulting in Bunge’s consolidation of the associated entities.

9. INCOME TAXES

Income tax expense is provided on an interim basis based upon management’s estimate of the annual effective income tax rate and includes the tax effects of certain discrete items, such as changes in tax laws or tax rates or other unusual or nonrecurring tax adjustments, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The effective tax rate is highly dependent upon the geographic distribution of Bunge’s worldwide earnings or losses and tax regulations in each jurisdiction. Management regularly monitors the assumptions used in estimating its annual effective tax rate and adjusts estimates accordingly. If actual results differ from management’s estimates, reported income tax expense in future periods could be materially affected.

As a global enterprise, Bunge files income tax returns that are subject to periodic examination and challenge by federal, state and foreign tax authorities. In many jurisdictions, income tax examinations, including settlement negotiations or litigation, may take several years to finalize. While it is often difficult to predict the final outcome or timing of resolution of any particular matter with the various tax authorities, management believes that the condensed consolidated financial statements reflect the largest amount of tax benefit that will be more likely than not be realized. There were no material changes to uncertain tax positions for the six months ended June 30, 2012 and 2011. It is reasonably possible that the amount of unrecognized tax benefit will increase or decrease during the next 12 months; however, management does not expect a material effect on results of operations or financial position.

During the first quarter 2012, the Brazilian tax authorities proposed certain adjustments to the income tax returns for one of Bunge’s Brazilian subsidiaries for the years 2008 and 2009. The proposed adjustments totaled approximately $62 million plus applicable interest and penalties. Management, in consultation with external legal advisors, has reviewed and responded to the proposed adjustments and believes that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability.

In 2011, the Brazilian tax authorities commenced an examination of the income tax returns of one of Bunge’s Brazilian subsidiaries for the years 2005 to 2009 and proposed adjustments totaling approximately $160 million plus applicable interest and penalties. Management, in consultation with external legal advisors, has reviewed and responded to the proposed adjustments and believes that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability.

In 2010, the Brazilian tax authorities had proposed certain significant adjustments to the income tax returns of one of Bunge’s Brazilian subsidiaries for the years 2005 to 2007. The proposed adjustments totaled approximately $525 million plus applicable interest and penalties. In the fourth quarter of 2011, Bunge received a decision from the Tax Inspector that dismissed approximately $170 million of this tax claim against Bunge. Management is appealing the remainder of the case, and has not changed its position that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability.

Table of Contents

10. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

	June 30,		December 31,
(US$ in millions)	2012		2011
Accrued liabilities	$	1,179	$	1,179
Unrealized losses on derivative contracts at fair value	1,907		1,370
Advances on sales	567		283
Other	51		57
Total	$	3,704	$	2,889

11. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Bunge’s various financial instruments include certain components of working capital such as cash and cash equivalents, trade accounts receivable and trade accounts payable. Additionally, Bunge uses short and long-term debt to fund operating requirements. Cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt are stated at their carrying value, which is a reasonable estimate of fair value. See Note 13 for deferred purchase price receivable (DPP) related to sales of trade receivables. See Note 8 for long-term receivables from farmers in Brazil, net and see Note 12 for long-term debt. Bunge’s financial instruments also include derivative instruments and marketable securities, which are stated at fair value.

Fair value is the expected price that would be received for an asset or paid to transfer a liability (an exit price) in Bunge’s principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Bunge determines the fair values of its readily marketable inventories, derivatives, and certain other assets based on the fair value hierarchy established in ASC Topic 820, Fair Value Measurements and Disclosures, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs based on market data obtained from sources independent of Bunge that reflect the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are inputs that are developed based on the best information available in circumstances that reflect Bunge’s own assumptions based on market data and on assumptions that market participants would use in pricing the asset or liability. The standard describes three levels within its hierarchy that may be used to measure fair value.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include exchange traded derivative contracts.

Level 2: Observable inputs, including Level 1 prices (adjusted); quoted prices for similar assets or liabilities; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include readily marketable inventories and over-the-counter (OTC) commodity purchase and sale contracts and other OTC derivatives whose value is determined using pricing models with inputs that are generally based on exchange traded prices, adjusted for location specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. In evaluating the significance of fair value inputs, Bunge gives consideration to items that individually, or when aggregated with other inputs, generally represent more than 10% of the fair value of the assets or liabilities. For such identified inputs which are primarily related to inland transportation costs, judgments are required when evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification and disclosure. Level 3 assets and liabilities include assets and liabilities whose value is determined using proprietary pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation. Bunge believes a change in these inputs would not result in a significant change in the fair values.

The majority of Bunge’s exchange traded agricultural commodity futures are settled daily generally through its clearing subsidiary and therefore, such futures are not included in the table below. Assets and liabilities are classified in their entirety based on the lowest level of input that is a significant component of the fair value measurement. The lowest level of input is considered Level 3. Bunge’s assessment of the significance of a

Table of Contents

particular input to the fair value measurement requires judgment, and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. The following table sets forth, by level, Bunge’s assets and liabilities that were accounted for at fair value on a recurring basis.

	Fair Value Measurements at Reporting Date
	June 30, 2012								December 31, 2011
(US$ in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Assets:
Readily marketable inventories (Note 4)	$	—	$	4,028	$	1,820	$	5,848	$	—	$	3,736	$	283	$	4,019
Unrealized gain on designated derivative contracts (1):
Foreign exchange	—		3		—		3		—		13		—		13
Unrealized gain on undesignated derivative contracts (1):
Foreign exchange	—		262		—		262		—		451		1		452
Commodities	157		849		333		1,339		75		586		125		786
Freight	—		—		—		—		5		—		1		6
Energy	12		4		4		20		11		13		2		26
Deferred purchase price receivable (Note 13)	—		156		—		156		—		192		—		192
Other (2)	248		46		—		294		146		34		—		180
Total assets	$	417	$	5,348	$	2,157	$	7,922	$	237	$	5,025	$	412	$	5,674

Liabilities:
Unrealized loss on designated derivative contracts (3):
Foreign exchange	$	—	$	32	$	—	$	32	$	—	$	45	$	—	$	45
Unrealized loss on undesignated derivative contracts (3):
Interest rate	—		—		—		—		—		2		—		2
Foreign exchange	—		580		—		580		—		617		—		617
Commodities	200		914		142		1,256		147		417		116		680
Freight	—		—		—		—		1		—		—		1
Energy	30		—		8		38		4		6		15		25
Total liabilities	$	230	$	1,526	$	150	$	1,906	$	152	$	1,087	$	131	$	1,370

(1) Unrealized gains on designated and undesignated derivative contracts are generally included in other current assets. There are no such amounts included in other non-current assets at June 30, 2012 and December 31, 2011.

(2) Other assets include primarily the fair values of U.S. Treasury securities held as margin deposits and other marketable securities.

(3) Unrealized losses on designated and undesignated derivative contracts are generally included in other current liabilities. There are no such amounts included in other non-current liabilities at June 30, 2012 and December 31, 2011.

Derivatives — Exchange traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Bunge’s forward commodity purchase and sale contracts are classified as derivatives along with other OTC derivative instruments relating primarily to freight, energy, foreign exchange and interest rates, and are classified within Level 2 or Level 3 as described below. Bunge estimates fair values based on exchange quoted prices, adjusted as appropriate for differences in local markets. These differences are generally valued using inputs from broker or dealer quotations, or market transactions in either the listed or OTC markets. In such cases, these derivative contracts are classified within Level 2. Changes in the fair values of these contracts are recognized in the condensed consolidated financial statements as a component of cost of goods sold,

Table of Contents

foreign exchange gains (losses), interest income (expense), other income (expense), net or other comprehensive income (loss).

OTC derivative contracts include swaps, options and structured transactions that are valued at fair value generally determined using quantitative models that require the use of multiple market inputs including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets which are not highly active, other observable inputs relevant to the asset or liability, and market inputs corroborated by correlation or other means. These valuation models include inputs such as interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. Certain OTC derivatives trade in less active markets with less availability of pricing information and certain structured transactions can require internally developed model inputs that might not be observable in or corroborated by the market. When unobservable inputs have a significant impact on the measurement of fair value, the instrument is categorized in Level 3.

Bunge’s policy is to only classify exchange traded or cleared derivative contracts in Level 1, thus transfers of assets and liabilities into and/or out of Level 1 occur infrequently. Transfers into Level 1 would generally only be expected to occur when an exchange-cleared derivative contract historically valued using a valuation model as the result of a lack of observable inputs becomes sufficiently observable, resulting in the valuation price being essentially the exchange traded price. There were no significant transfers into or out of Level 1 during the periods presented.

Bunge may designate certain derivative instruments as either fair value hedges or cash flow hedges and assesses, both at inception of the hedge and on an ongoing basis, whether derivatives that are designated as hedges are highly effective in offsetting changes in the hedged items or anticipated cash flows.

Readily marketable inventories — The majority of Bunge’s readily marketable commodity inventories are valued at fair value. These agricultural commodity inventories are readily marketable, have quoted market prices and may be sold without significant additional processing. Changes in the fair values of these inventories are recognized in the condensed consolidated statements of income as a component of cost of goods sold.

Readily marketable inventories reported at fair value are valued based on commodity futures exchange quotations, broker or dealer quotations, or market transactions in either listed or OTC markets with appropriate adjustments for differences in local markets where Bunge’s inventories are located. In such cases, the inventory is classified within Level 2. Certain inventories may utilize significant unobservable data related to local market adjustments to determine fair value. In such cases, the inventory is classified as Level 3.

If Bunge used different methods or factors to determine fair values, amounts reported as unrealized gains and losses on derivative contracts and readily marketable inventories at fair value in the condensed consolidated balance sheets and condensed consolidated statements of income could differ. Additionally, if market conditions change subsequent to the reporting date, amounts reported in future periods as unrealized gains and losses on derivative contracts and readily marketable inventories at fair value in the condensed consolidated balance sheets and condensed consolidated statements of income could differ.

Level 3 Valuation — Bunge’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy. In evaluating the significance of fair value inputs, Bunge gives consideration to items that individually, or when aggregated with other inputs, represent more than 10% of the fair value of the asset or liability. For such identified inputs, judgments are required when evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification and disclosure. Because of differences in the availability of market pricing data over their terms, inputs for some assets and liabilities may fall into any one of the three levels in the fair value hierarchy or some combination thereof. While FASB guidance requires Bunge to classify these assets and liabilities in the lowest level in the hierarchy for which inputs are significant to the fair value measurement, a portion of that measurement may be determined using inputs from a higher level in the hierarchy.

The significant unobservable inputs resulting in Level 3 classification relate to freight in the interior of Brazil and the lack of market corroborated information in Canada. In both situations, Bunge uses proprietary information such as purchase and sale contracts and contracted prices for freight, premiums and discounts to value

Table of Contents

its contracts. Movements in the price of these unobservable inputs alone would not have a material effect on Bunge’s financial statements as these contracts do not typically exceed one future crop cycle.

Transfers in and/or out of Level 3 represent existing assets or liabilities that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during the period. Bunge’s policy regarding the timing of transfers between levels is to record the transfers at the beginning of the reporting period.

Level 3 Derivatives — Level 3 derivative instruments utilize both market observable and unobservable inputs within the fair value measurements. These inputs include commodity prices, price volatility factors, interest rates, volumes and locations. In addition, with the exception of the exchange cleared instruments where Bunge clears trades through an exchange, Bunge is exposed to loss in the event of the non-performance by counterparties on over-the-counter derivative instruments and forward purchase and sale contracts. Adjustments are made to fair values on occasions when non-performance risk is determined to represent a significant input in Bunge’s fair value determination. These adjustments are based on Bunge’s estimate of the potential loss in the event of counterparty non-performance. Bunge did not have significant allowances related to non-performance by counterparties at June 30, 2012.

Level 3 Readily marketable inventories — Readily marketable inventories are considered Level 3 when at least one significant assumption or input is unobservable. These assumptions or unobservable inputs include certain management estimations regarding costs of transportation and other local market or location-related adjustments.

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended June 30, 2012 and 2011. Level 3 instruments presented in the tables include readily marketable inventories and derivatives. These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions that would be used by a marketplace participant to determine fair value.

	Level 3 Instruments:
	Fair Value Measurements
	Three Months Ended June 30, 2012
				Readily
	Derivatives,			Marketable
(US$ in millions)	Net (1)			Inventories			Total
Balance, April 1, 2012	$	62		$	677		$	739
Total gains and (losses) (realized/unrealized) included in cost of goods sold	172			190			362
Total gains and (losses) (realized/unrealized) included in foreign exchange gains (losses)	—			—			—
Purchases	1			511			512
Sales	1			(351		)	(350		)
Issuances	(1		)	—			(1		)
Settlements	(101		)	—			(101		)
Transfers into Level 3	55			802			857
Transfers out of Level 3	(2		)	(9		)	(11		)
Balance, June 30, 2012	$	187		$	1,820		$	2,007

(1) Derivatives, net include Level 3 derivative assets and liabilities.

Table of Contents

	Level 3 Instruments:
	Fair Value Measurements
	Three Months Ended June 30, 2011
				Readily
	Derivatives,			Marketable
(US$ in millions)	Net (1)			Inventories			Total
Balance, April 1, 2011	$	237		$	796		$	1,033
Total gains and (losses) (realized/unrealized) included in cost of goods sold	(76		)	130			54
Total gains and (losses) (realized/unrealized) included in foreign exchange gains (losses)	(1		)	—			(1		)
Purchases	34			614			648
Sales	—			(962		)	(962		)
Issuances	(33		)	—			(33		)
Settlements	(6		)	—			(6		)
Transfers into Level 3	10			157			167
Transfers out of Level 3	(31		)	(13		)	(44		)
Balance, June 30, 2011	$	134		$	722		$	856

(1) Derivatives, net include Level 3 derivative assets and liabilities.

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2012 and 2011. Level 3 instruments presented in the tables include readily marketable inventories and derivatives. These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions that would be used by a marketplace participant to determine fair value.

	Level 3 Instruments:
	Fair Value Measurements
	Six Months Ended June 30, 2012
				Readily
	Derivatives,			Marketable
(US$ in millions)	Net (1)			Inventories			Total
Balance, January 1, 2012	$	(2	)	$	283		$	281
Total gains and (losses) (realized/unrealized) included in cost of goods sold	246			230			476
Purchases	3			1,276			1,279
Sales	1			(876		)	(875		)
Issuances	(3		)	—			(3		)
Settlements	(83		)	—			(83		)
Transfers into Level 3	41			981			1,022
Transfers out of Level 3	(16		)	(74		)	(90		)
Balance, June 30, 2012	$	187		$	1,820		$	2,007

(1) Derivatives, net include Level 3 derivative assets and liabilities.

Table of Contents

	Level 3 Instruments:
	Fair Value Measurements
	Six Months Ended June 30, 2011
				Readily
	Derivatives,			Marketable
(US$ in millions)	Net (1)			Inventories			Total
Balance, January 1, 2011	$	307		$	264		$	571
Total gains and (losses) (realized/unrealized) included in cost of goods sold	(119		)	92			(27		)
Purchases	71			1,486			1,557
Sales	—			(1,362		)	(1,362		)
Issuances	(58		)	—			(58		)
Settlements	(57		)	—			(57		)
Transfers into Level 3	14			274			288
Transfers out of Level 3	(24		)	(32		)	(56		)
Balance, June 30, 2011	$	134		$	722		$	856

(1) Derivatives, net include Level 3 derivative assets and liabilities.

The table below summarizes changes in unrealized gains or (losses) recorded in earnings during the three months ended June 30, 2012 and 2011 for Level 3 assets and liabilities that were held at June 30, 2012 and 2011.

	Level 3 Instruments:
	Fair Value Measurements
	Three Months Ended
				Readily
	Derivatives,			Marketable
(US$ in millions)	Net (1)			Inventories		Total
Changes in unrealized gains and (losses) relating to assets and liabilities held at June 30, 2012
Cost of goods sold	$	145		$	600	$	745
Foreign exchange gains (losses)	$	—		$	—	$	—
Changes in unrealized gains and (losses) relating to assets and liabilities held at June 30, 2011
Cost of goods sold	$	21		$	459	$	480
Foreign exchange gains (losses)	$	(1	)	$	—	$	(1	)

(1) Derivatives, net include Level 3 derivative assets and liabilities.

The table below summarizes changes in unrealized gains or (losses) recorded in earnings during the six months ended June 30, 2012 and 2011 for Level 3 assets and liabilities that were held at June 30, 2012 and 2011.

	Level 3 Instruments:
	Fair Value Measurements
	Six Months Ended
		Readily
	Derivatives,	Marketable
(US$ in millions)	Net (1)