Company Quick10K Filing
Quick10K
Bunge
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$53.17 141 $7,520
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-24 Shareholder Vote
8-K 2019-05-08 Officers, Exhibits
8-K 2019-04-26 Officers, Exhibits
8-K 2019-03-31 Earnings, Exhibits
8-K 2019-02-28 Officers
8-K 2019-01-24 Officers
8-K 2019-01-24 Officers
8-K 2019-01-17 Earnings, Officers, Other Events, Exhibits
8-K 2018-12-31 Earnings, Exhibits
8-K 2018-12-14 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-12-09 Officers, Other Events, Exhibits
8-K 2018-12-05 Officers, Regulation FD, Exhibits
8-K 2018-10-31 Enter Agreement, Officers, Regulation FD, Exhibits
8-K 2018-10-31 Earnings, Exhibits
8-K 2018-10-30 Regulation FD, Other Events, Exhibits
8-K 2018-09-10 Other Events, Exhibits
8-K 2018-09-04 Regulation FD, Exhibits
8-K 2018-09-04 Other Events, Exhibits
8-K 2018-08-06 Officers, Exhibits
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-07-12 Officers, Exhibits
8-K 2018-05-24 Shareholder Vote
8-K 2018-05-15 Other Events, Exhibits
8-K 2018-05-01 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-20 Officers
8-K 2018-02-14 Earnings, Exit Costs, Exhibits
8-K 2018-01-03 Officers, Exhibits
DUK Duke Energy 63,180
IMO Imperial Oil 22,230
BPR Brookfield Property REIT 14,690
CIM Chimera Investment 3,530
VRTV Veritiv 379
MFAC Megalith Financial Acquisition 211
MIND Mitcham Industries 47
GIGM Gigamedia 27
DRUS Drone 0
JONE Jones Energy 0
BG 2019-03-31
Part I- Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II.
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 bg-03312019x10qex311.htm
EX-31.2 bg-03312019x10qex312.htm
EX-32.1 bg-03312019x10qex321.htm
EX-32.2 bg-03312019x10qex322.htm

Bunge Earnings 2019-03-31

BG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 bg-03312019x10q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
¨         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  ý  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  ý  No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý
 
Accelerated filer ¨
 
Non-accelerated filer ¨
(Do not check if a smaller
reporting company)
 
Smaller reporting company ¨
 
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934).  Yes    No  
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  ¨  No  ý
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Shares, $0.01 par value per share
 
BG
 
New York Stock Exchange
As of May 3, 2019 the number of shares issued of the registrant was:
Common shares, par value $.01 per share: 141,477,794




BUNGE LIMITED
TABLE OF CONTENTS
 
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
 

2


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
March 31,
 
 
2019
 
2018
Net sales
 
$
9,938

 
$
10,641

Cost of goods sold
 
(9,501
)
 
(10,257
)
Gross profit
 
437

 
384

Selling, general and administrative expenses
 
(305
)
 
(344
)
Interest income
 
7

 
8

Interest expense
 
(75
)
 
(70
)
Foreign exchange gains (losses)
 
(7
)
 

Other income (expense) – net
 
31

 
24

Income (loss) from continuing operations before income tax
 
88

 
2

Income tax (expense) benefit
 
(38
)
 
(19
)
Income (loss) from continuing operations
 
50

 
(17
)
Income (loss) from discontinued operations, net of tax
 

 
(2
)
Net income (loss)
 
50

 
(19
)
Net (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests
 
(5
)

(2
)
Net income (loss) attributable to Bunge
 
45

 
(21
)
Convertible preference share dividends
 
(8
)
 
(8
)
Net income (loss) available to Bunge common shareholders
 
$
37

 
$
(29
)
 
 
 
 
 
Earnings per common share—basic (Note 19)
 
 

 
 

Net income (loss) from continuing operations
 
$
0.26

 
$
(0.20
)
Net income (loss) from discontinued operations
 

 
(0.01
)
Net income (loss) attributable to Bunge common shareholders
 
$
0.26

 
$
(0.21
)
 
 
 
 
 
Earnings per common share—diluted (Note 19)
 
 

 
 

Net income (loss) from continuing operations
 
$
0.26

 
$
(0.20
)
Net income (loss) from discontinued operations
 

 
(0.01
)
Net income (loss) attributable to Bunge common shareholders
 
$
0.26

 
$
(0.21
)
The accompanying notes are an integral part of these condensed consolidated financial statements.

3


BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(U.S. dollars in millions)
 
 
Three Months Ended
March 31,
 
 
2019
 
2018
Net income (loss)
 
$
50

 
$
(19
)
Other comprehensive income (loss):
 
 

 
 

Foreign exchange translation adjustment
 
(29
)
 
(12
)
  Unrealized gains (losses) on designated hedges, net of tax (expense) benefit of nil in 2019 and ($1) in 2018
 
(23
)
 
3

Reclassification of realized net (gains) losses to net income, net of tax expense (benefit) of nil in 2019 and nil in 2018
 
(1
)
 
(4
)
Pension adjustment, net of tax (expense) benefit of nil in 2019 and nil in 2018
 

 
(1
)
Total other comprehensive income (loss)
 
(53
)
 
(14
)
Total comprehensive income (loss)
 
(3
)
 
(33
)
Less: comprehensive (income) loss attributable to noncontrolling interests and redeemable noncontrolling interests
 
4

 
(5
)
Total comprehensive income (loss) attributable to Bunge
 
$
1

 
$
(38
)
The accompanying notes are an integral part of these condensed consolidated financial statements.


4


BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(U.S. dollars in millions, except share data)
 
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
464

 
$
389

Trade accounts receivable (less allowances of $117 and $113) (Note 14)
 
1,717

 
1,637

Inventories (Note 6)
 
5,938

 
5,871

Other current assets (Note 7)
 
3,120

 
3,171

Total current assets
 
11,239

 
11,068

Property, plant and equipment, net
 
5,197

 
5,201

Operating lease assets (Note 4)
 
1,010

 

Goodwill
 
723

 
727

Other intangible assets, net
 
657

 
697

Investments in affiliates
 
463

 
451

Deferred income taxes
 
425

 
458

Other non-current assets (Note 8)
 
821

 
823

Total assets
 
$
20,535

 
$
19,425

LIABILITIES AND EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Short-term debt
 
$
1,733

 
$
750

Current portion of long-term debt (Note 13)
 
414

 
419

Trade accounts payable (includes $846 and $441 carried at fair value)
 
3,841

 
3,501

Current operating lease obligations (Note 4)
 
225

 

Other current liabilities (Note 10)
 
1,840

 
2,502

Total current liabilities
 
8,053

 
7,172

Long-term debt (Note 13)
 
3,821

 
4,203

Deferred income taxes
 
323

 
356

Non-current operating lease obligations (Note 4)
 
739

 

Other non-current liabilities
 
874

 
892

Commitments and contingencies (Note 16)
 


 


Redeemable noncontrolling interest (Note 17)
 
421

 
424

Equity (Note 18):
 
 

 
 

Convertible perpetual preference shares, par value $.01; authorized – 21,000,000 shares, issued and outstanding: 2019 - 6,899,683 shares and 2018 - 6,899,683 shares (liquidation preference $100 per share)
 
690

 
690

Common shares, par value $.01; authorized – 400,000,000 shares; issued and outstanding: 2019 – 141,469,061 shares, 2018 – 141,111,081 shares
 
1

 
1

Additional paid-in capital
 
5,284

 
5,278

Retained earnings
 
8,045

 
8,059

Accumulated other comprehensive income (loss) (Note 18)
 
(7,000
)
 
(6,935
)
Treasury shares, at cost - 2019 and 2018 - 12,882,313 shares
 
(920
)
 
(920
)
Total Bunge shareholders’ equity
 
6,100

 
6,173

Noncontrolling interests
 
204

 
205

Total equity
 
6,304

 
6,378

Total liabilities, redeemable noncontrolling interest and equity
 
$
20,535

 
$
19,425

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

5


BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars in millions)
 
 
Three Months Ended
March 31,
 
 
2019
 
2018
OPERATING ACTIVITIES
 
 

 
 

Net income (loss)
 
$
50

 
$
(19
)
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities:
 
 

 
 

Impairment charges
 
9

 
2

Foreign exchange loss on net debt
 
37

 
33

Bad debt expense
 
7

 
10

Depreciation, depletion and amortization
 
139

 
142

Share-based compensation expense
 
4

 
7

Deferred income tax (benefit)
 
(3
)
 
(15
)
Other, net
 
12

 
2

Changes in operating assets and liabilities, excluding the effects of acquisitions:
 
 

 
 

Trade accounts receivable
 
(128
)
 
47

Inventories
 
(94
)
 
(1,466
)
Secured advances to suppliers
 
(31
)
 
(110
)
Trade accounts payable and accrued liabilities
 
248

 
268

Advances on sales
 
(97
)
 
(93
)
Net unrealized gains and losses on derivative contracts
 
(370
)
 
435

Margin deposits
 
102

 
(187
)
Marketable securities
 
(36
)
 
(153
)
Beneficial interest in securitized trade receivables
 
(244
)
 
(663
)
Other, net
 
(7
)
 
(13
)
Cash provided by (used for) operating activities
 
(402
)
 
(1,773
)
INVESTING ACTIVITIES
 
 

 
 

Payments made for capital expenditures
 
(119
)
 
(105
)
Acquisitions of businesses (net of cash acquired)
 

 
(968
)
Proceeds from investments
 
37

 
336

Payments for investments
 
(193
)
 
(620
)
Settlement of net investment hedges
 
(51
)
 
10

Proceeds from beneficial interest in securitized trade receivables
 
275

 
662

Payments for investments in affiliates
 
(4
)
 
(16
)
Other, net
 
14

 
(6
)
Cash provided by (used for) investing activities
 
(41
)
 
(707
)
FINANCING ACTIVITIES
 
 

 
 

Net change in short-term debt with maturities of 90 days or less
 
1,193

 
931

Proceeds from short-term debt with maturities greater than 90 days
 
9

 
53

Repayments of short-term debt with maturities greater than 90 days
 
(214
)
 

Proceeds from long-term debt
 
978

 
2,560

Repayments of long-term debt
 
(1,376
)
 
(1,296
)
Proceeds from the exercise of options for common shares
 
5

 
4

Dividends paid to common and preference shareholders
 
(79
)
 
(73
)
Other, net
 
(3
)
 
(5
)
Cash provided by (used for) financing activities
 
513

 
2,174

Effect of exchange rate changes on cash and cash equivalents and restricted cash
 
6

 
(7
)
Net increase (decrease) in cash and cash equivalents and restricted cash
 
76

 
(313
)
Cash and cash equivalents and restricted cash - beginning of period
 
393

 
605

Cash and cash equivalents and restricted cash - end of period
 
$
469

 
$
292

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

6


BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS
(Unaudited)
(U.S. dollars in millions, except share data)
 
 
 
Convertible
Preference Shares
 
Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable
Non-
Controlling
Interests
Shares
 
Amount
 
Shares
 
Amount
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Shares
 
Non-
Controlling
Interests
 
Total
Equity
Balance, January 1, 2019
 
$
424

6,899,683

 
$
690

 
141,111,081

 
$
1

 
$
5,278

 
$
8,059

 
$
(6,935
)
 
$
(920
)
 
$
205

 
$
6,378

Net income (loss)
 
5


 

 

 

 

 
45

 

 

 

 
45

Other comprehensive income (loss)
 
(8
)

 

 

 

 

 

 
(44
)
 

 
(1
)
 
(45
)
Dividends on common shares, $0.50 per share
 


 

 

 

 

 
(71
)
 

 

 

 
(71
)
Dividends on preference shares, $1.21875 per share
 


 

 

 

 

 
(8
)
 

 

 

 
(8
)
Dividends to noncontrolling interests on subsidiary common stock
 


 

 

 

 

 

 

 

 
(1
)
 
(1
)
Contribution from noncontrolling interest
 


 

 

 

 

 

 

 

 
1

 
1

Share-based compensation expense
 


 

 

 

 
4

 

 

 

 

 
4

Impact of adoption of new accounting standards (1)
 


 

 

 

 

 
21

 
(21
)
 

 

 

Issuance of common shares, including stock dividends
 


 

 
357,980

 

 
2

 
(1
)
 

 

 

 
1

Balance, March 31, 2019
 
$
421

6,899,683

 
$
690

 
141,469,061

 
$
1

 
$
5,284

 
$
8,045

 
$
(7,000
)
 
$
(920
)
 
$
204

 
$
6,304

 
 
 
Convertible
Preference Shares
 
Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable
Non-
Controlling
Interests
Shares
 
Amount
 
Shares
 
Amount
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Shares
 
Non-
Controlling
Interests
 
Total
Equity
Balance, January 1, 2018
 
$

6,899,700

 
$
690

 
140,646,829

 
$
1

 
$
5,226

 
$
8,081

 
$
(5,930
)
 
$
(920
)
 
$
209

 
$
7,357

Net income (loss)
 


 

 

 

 

 
(21
)
 

 

 
2

 
(19
)
Other comprehensive income (loss)
 
4


 

 

 

 

 

 
(17
)
 

 
3

 
(14
)
Dividends on common shares, $0.46 per share
 


 

 

 

 

 
(65
)
 

 

 

 
(65
)
Dividends on preference shares, $1.21875 per share
 


 

 

 

 

 
(8
)
 

 

 

 
(8
)
Deconsolidation of a subsidiary
 


 

 

 

 

 

 

 

 
(2
)
 
(2
)
Acquisition of noncontrolling interest
 
466


 

 

 

 

 

 

 

 

 

Share-based compensation expense
 


 

 

 

 
7

 

 

 

 

 
7

Impact of adoption of new accounting standards
 


 

 

 

 

 
21

 

 

 

 
21

Issuance of (conversion to) common shares
 


 

 
257,199

 

 

 

 

 

 

 

Balance, March 31, 2018
 
$
470

6,899,700

 
$
690

 
140,904,028

 
$
1

 
$
5,233

 
$
8,008

 
$
(5,947
)
 
$
(920
)
 
$
212

 
$
7,277

(1) See Note 2 for further details.

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


7


BUNGE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION, AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements include the accounts of Bunge Limited (“Bunge”), its subsidiaries and variable interest entities (“VIEs”) in which Bunge is considered to be the primary beneficiary, and as a result, include the assets, liabilities, revenues and expenses of all entities over which Bunge has a controlling financial interest. 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”).  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, 2018 has been derived from Bunge’s audited consolidated financial statements at that date.  Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.  The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018, forming part of Bunge’s 2018 Annual Report on Form 10-K filed with the SEC on February 22, 2019.

Cash, Cash Equivalents, and Restricted Cash
Restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheet that sums to the total of the same such amounts shown in the condensed consolidated statement of cash flows.
(US$ in millions)
March 31, 2019
March 31, 2018
Cash and cash equivalents
$
464

$
287

Restricted cash included in other current assets
5

5

Total
$
469

$
292

Statement of Cash Flows
On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). Subsequent to the Company's initial adoption of ASU 2016-15, additional interpretative guidance was released by the SEC in the third quarter of 2018 that clarified the method to be used for calculating the cash received from payments on the deferred purchase price of securitized receivables. This additional guidance indicated that an entity must evaluate daily transaction activity to calculate the value of cash received from payments on the deferred purchase price. The company has applied this guidance on a retrospective basis, effective with the Form 10-Q for the quarterly period ended September 30, 2018, which resulted in additional reclassification of cash inflows from operating activities to cash inflows from investing activities. Therefore, the condensed consolidated statement of cash flows for the three months ended March 31, 2018 and certain amounts in Note 14, Trade Receivables Securitization Program, have been revised to reflect this change.

2.
ACCOUNTING PRONOUNCEMENTS
The below outlines updates on certain previously disclosed ASUs.
New Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which introduces a new accounting model, referred to as the current expected credit losses ("CECL") model, for estimating credit losses on certain financial instruments and expands the disclosure requirements for estimating such credit losses. Under the new model, an entity is required to estimate the credit losses expected over the life of an exposure (or pool of

8


exposures). The guidance also amends the current impairment model for debt securities classified as available-for-sale securities. The new guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Bunge is evaluating the impact of this standard on its consolidated financial statements.    
Recently Adopted Accounting Pronouncements
On January 1, 2019 the Company adopted ASU 2016-02, Leases (Topic 842). Under the new provisions, all leases, except short-term leases, are recognized on the balance sheet as right-of-use assets and lease liabilities for the obligation to make payments under such leases. Bunge has elected the amended transition approach provided by ASU 2018-11, Leases (Topic 842): Targeted Improvements, which allows entities to apply the guidance as of the date of initial application by recognizing a cumulative-effect adjustment to opening retained earnings, with no retrospective adjustments. The Company also elected the package of practical expedients that permits the Company to not reassess under the new standard prior conclusions about lease identification, lease classification, and initial direct costs, as well as the practical expedient to not separate lease components from non-lease components in accounting for all classes of underlying assets. Upon adoption, the Company recorded $1,006 million of operating lease assets and $962 million of operating lease liabilities. Included in Operating lease assets at January 1, 2019 was $44 million of prepaid lease balances that were reclassified from Other non-current assets.
On January 1, 2019 the Company adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU allows a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("Tax Act"). Consequently, the ASU eliminates the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. However, because this ASU only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The Company's stranded tax effects relate to unrecognized costs associated with certain pension plans for which the tax benefit was initially recorded to AOCI. Absent this ASU, the Company's policy is to release stranded tax effects upon the pension plans' termination. Upon the adoption of this ASU, the Company elected to reclassify the income tax effects of the Tax Act, resulting in a decrease to AOCI and an increase to retained earnings of $21 million.    

3.     GLOBAL COMPETITIVENESS PROGRAM
In July 2017, Bunge announced a comprehensive global competitiveness program to improve its cost position and deliver increased value to shareholders (the “Global Competitiveness Program”). When fully implemented, the Global Competitiveness Program is expected to reduce the Company’s overhead costs by approximately $250 million annually by the end of 2019. The Company identified key elements of its strategy to meet this goal, including adopting a zero-based budgeting process that will target excess costs in specific budget categories and improving efficiency and scalability by simplifying organizational structures, streamlining processes and consolidating back office functions globally. In conjunction with the Global Competitiveness Program, the Company has implemented other cost reduction and strategic initiatives to enhance the efficiency and performance of the Company’s business.

The table below sets forth, by segment, the types of costs recorded for the Global Competitiveness Program.
 
Three Months Ended March 31,
 
2019
 
2018
(US$ in millions)
Severance and Other Employee Benefit Costs
 
Consulting and Professional Services
 
Other Program Costs
 
Total Program Costs
 
Severance and Other Employee Benefit Costs
 
Consulting and Professional Services
 
Total Program Costs
Agribusiness Segment
$
2

 
$
2

 
$
1

 
$
5

 
$
5

 
$
6

 
$
11

Edible Oils Segment
1

 
1

 

 
2

 
1

 
1

 
2

Milling Segment

 

 

 

 
1

 
1

 
2

Sugar and Bioenergy Segment
(1
)
 

 

 
(1
)
 

 
1

 
1

Total
$
2

 
$
3

 
$
1

 
$
6

 
$
7

 
$
9

 
$
16

In addition to the above charges, nil and $1 million of severance and other employee benefit costs were recorded related to other industrial productivity initiatives for the three months ended March 31, 2019 and 2018, respectively. For the

9


three months ended March 31, 2019 and 2018 costs recorded above, nil and $3 million, respectively, were recorded in Cost of goods sold and $6 million and $14 million, respectively, were recorded in Selling, general and administrative expenses.

Bunge's liability associated with the Global Competitiveness Program and other associated initiatives is primarily comprised of accruals for severance and other employee benefit costs. The following table sets forth the activity affecting the liability for severance and other employee benefit costs related to the Global Competitiveness Program and other associated initiatives, which is recorded in Other current liabilities on the condensed consolidated balance sheet.
(US$ in millions)

Severance and Other Employee Benefit Costs
Balance at January 1, 2019
 
$
3

Charges incurred
 
2

Cash payments
 
(2
)
Balance at March 31, 2019
 
$
3


In addition to the cash charges described above, the Company's restructuring initiatives may include the sale or disposal of long-lived assets and rationalization of certain investments. As Bunge continues to review its opportunities, certain gains and charges may be recorded in earnings, including those related to the disposal of assets or investments. For the three months ended March 31, 2019 and 2018, nil and $1 million, respectively, of such gains have been recognized.

4.     LEASES
Bunge routinely leases storage facilities, transportation equipment, land, and office facilities which are typically classified as operating leases. The accounting for some of Bunge's leases may require significant judgment when determining whether a contract is or contains a lease, the lease term, and the likelihood of renewal or termination options. Leases with an initial term of more than 12 months are recognized on the balance sheet as right-of-use assets (Operating lease assets) and lease liabilities for the obligation to make payments under such leases (Current operating lease obligations and Non-current operating lease obligations). As of the lease commencement date, the lease liability is initially measured as the present value of lease payments not yet paid. The lease asset is initially measured equal to the lease liability and adjusted for lease payments made at or before lease commencement (e.g., prepaid rent), lease incentives, and any initial direct costs. Over time, the lease liability is reduced for lease payments made and the lease asset is reduced through expense, classified as either Cost of goods sold or Selling, general and administrative expense depending upon the nature of the lease. Lease assets are subject to review for impairment in a manner consistent with Property, plant and equipment. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet, and lease expense for these short-term leases is recognized on a straight-line basis over the lease term.
The Company’s leases range in length of term, with an average remaining lease term of 6.4 years, but with certain land leases continuing for up to 94 years. Additionally, certain leases contain renewal options that can extend the lease term up to an additional 5 years. Renewal options are generally exercisable solely at the Company’s discretion. When a renewal option is reasonably certain to be exercised, such additional terms are considered when calculating the associated operating lease asset and liability. When determining the lease liability at commencement of the lease, the present value of lease payments is based on the Company’s incremental borrowing rate determined using a portfolio approach and the Company’s incremental cost of debt, adjusted to arrive to the rate in the applicable country and for the applicable term of the lease, as the rate implicit in the lease is generally not readily determinable. As of March 31, 2019, such weighted average discount rate was 6.8%.
Certain of the Company’s freight supply agreements for ocean freight vessels and rail cars, as well as land leases associated with agricultural partnership agreements for the production of sugarcane, may include rental payments that are variable in nature. Variable payments on time charter agreements for ocean freight vessels under freight supply agreements are dependent on then current market daily hire rates. Variable payments for certain rail cars can be based on volumes, and in some cases, benchmark interest rates. Payments under the Company's agricultural partnership agreements in Brazil are dependent on the quantity of sugarcane produced per hectare, the total recoverable sugar ("ATR") per ton of sugarcane produced, and the price for each kilogram of ATR as determined by Consecana, the state of São Paulo sugarcane, sugar and ethanol council. Such variable payments are not included in the calculation of the associated operating lease asset or liability subsequent to the inception date of the associated lease and are recorded as expense in the period in which the adjustment to the variable payment obligation is incurred. Certain of the Company’s lease agreements related to railcars and barges contain residual value guarantees (see Note 16, Commitments and Contingencies). None of the Company’s lease agreements contain material restrictive covenants.

10


The components of lease expense were as follows:
(US$ in millions)
 
Three Months Ended
March 31, 2019
Operating lease cost
 
$
80

Short-term lease cost
 
152

Variable lease cost
 
3

Sublease income
 
(30
)
Total lease cost
 
$
205


Supplemental cash flow information related to leases was as follows:
(US$ in millions)
 
Three Months Ended
 March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
       Operating cash flows from operating leases
 
$
79

Supplemental noncash information:
 
 
       Right-of-use assets obtained in exchange for lease obligations
 
$
70

    
Maturities of lease liabilities for operating leases as of March 31, 2019, are as follows:
(US$ in millions)
 
Remaining in 2019
 
$
215

2020
 
237

2021
 
197

2022
 
157

2023
 
117

Thereafter
 
289

Total lease payments (1)
 
1,212

Less imputed interest
 
248

Present value of lease liabilities
 
$
964


(1) Minimum lease payments have not been reduced by minimum sublease income receipts of $42 million due in future periods under non-cancelable subleases. Non-cancelable subleases primarily relate to an agreement with a third party for the use of a portion of a port terminal facility with a remaining sublease term of approximately 5 years, as well as an agreement with an unconsolidated joint venture in which Bunge subleases rail cars with remaining sublease terms of approximately three to four years. Additionally, Bunge may enter into re-let agreements to sell the right to use ocean freight vessels under time charter agreements when excess capacity is available.

As of March 31, 2019, the Company has additional operating leases for freight supply agreements on ocean freight vessels, that have not yet commenced, of $162 million. These operating leases will commence in 2019 and 2020, with lease terms of up to seven years.











11



Prior year lease disclosures
The following pertains to previously disclosed information from Note 21, Commitments and contingencies and Note 26, Lease commitments, contained in Bunge's 2018 Annual Report on Form 10-K, which incorporates information about leases now in scope of ASC 842, Leases, disclosed above.
Operating lease for storage facilities, transportation equipment and office facilities—Future minimum lease payments by year and in the aggregate under non-cancelable operating leases with initial term of one year or more at December 31, 2018 are as follows:
(US$ in millions)
 
2019
$
134

2020
107

2021
84

2022
58

2023
48

Thereafter
126

Total (1)
$
557

(1) Minimum lease payments have not been reduced by minimum sublease income receipts of $43 million due in future periods under non-cancelable subleases.
Freight Supply Agreements—In the ordinary course of business, Bunge enters into time charter agreements for the use of ocean freight vessels for the purpose of transporting agricultural commodities. In addition, Bunge sells the right to use these ocean freight vessels when excess freight capacity is available. These agreements generally range from two months to approximately seven years. Future minimum payment obligations due under these agreements as of December 31, 2018 are as follows:
(US$ in millions)
 
2019
$
172

2020 and 2021
176

2022 and 2023
121

2024 and thereafter
37

Total
$
506



5.    TRADE STRUCTURED FINANCE PROGRAM
Bunge engages in various trade structured finance activities to leverage the value of its trade flows across its operating regions. For the three months ended March 31, 2019 and 2018, net returns from these activities were $5 million and $8 million, respectively, and were included as a reduction of cost of goods sold in the accompanying condensed consolidated statements of income. These activities include programs under which Bunge generally obtains U.S. dollar-denominated letters of credit (“LCs”), each based on an underlying commodity trade flow, from financial institutions and time deposits denominated in either the local currency of the financial institutions' counterparties or in U.S. dollars, as well as foreign exchange forward contracts, and other programs in which trade related payables are set-off against receivables, all of which are subject to legally enforceable set-off agreements.
As of March 31, 2019 and December 31, 2018, time deposits and LCs of $4,543 million and $4,729 million, respectively, were presented net on the condensed consolidated balance sheets as the criteria of ASC 210-20, Offsetting, had been met. At March 31, 2019 and December 31, 2018, time deposits, including those presented on a net basis, carried weighted-average interest rates of 3.82% and 3.76%, respectively. During the three months ended March 31, 2019 and 2018, total net proceeds from issuances of LCs were $1,117 million and $1,488 million, respectively. These cash inflows are offset by

12


the related cash outflows resulting from placement of the time deposits and repayment of the LCs. All cash flows related to the programs are included in operating activities in the condensed consolidated statements of cash flows.

6.
INVENTORIES
Inventories by segment are presented below. Readily marketable inventories (“RMI”) are agricultural commodity inventories, such as soybeans, soybean meal, soybean oil, corn, and wheat carried at fair value because of their commodity characteristics, widely available markets, and international pricing mechanisms.  Bunge engages in trading and distribution, or merchandising activities, and part of RMI can be attributable to such activities and is not held for processing. All other inventories are carried at lower of cost or net realizable value.
(US$ in millions)
 
March 31,
2019
 
December 31,
2018
Agribusiness (1)
 
$
4,623

 
$
4,551

Edible Oil Products (2)
 
731

 
742

Milling Products
 
243

 
220

Sugar and Bioenergy (3)
 
253

 
280

Fertilizer
 
88

 
78

Total
 
$
5,938

 
$
5,871

 
(1)
Includes RMI of $4,372 million and $4,365 million at March 31, 2019 and December 31, 2018, respectively.  Of these amounts, $3,360 million and $3,300 million can be attributable to merchandising activities at March 31, 2019 and December 31, 2018, respectively.
(2)
Includes RMI of $97 million and $88 million at March 31, 2019 and December 31, 2018, respectively.
(3)
Includes RMI of $33 million and $79 million at March 31, 2019 and December 31, 2018, respectively. Of these amounts, $27 million and $74 million can be attributable to merchandising activities at March 31, 2019 and December 31, 2018, respectively.

7.
OTHER CURRENT ASSETS
Other current assets consist of the following:
(US$ in millions)
 
March 31,
2019
 
December 31,
2018
Unrealized gains on derivative contracts, at fair value
 
$
1,014

 
$
1,071

Prepaid commodity purchase contracts (1)
 
238

 
253

Secured advances to suppliers, net (2)
 
301

 
257

Recoverable taxes, net
 
473

 
500

Margin deposits
 
248

 
348

Marketable securities, at fair value, and other short-term investments
 
343

 
162

Deferred purchase price receivable, at fair value (3)
 
97

 
128

Income taxes receivable
 
48

 
102

Prepaid expenses
 
144

 
165

Other
 
214

 
185

Total
 
$
3,120

 
$
3,171

 
(1)
Prepaid commodity purchase contracts represent advance payments against contracts for future delivery of specified quantities of agricultural commodities.

13


(2)
Bunge provides cash advances to suppliers, primarily Brazilian farmers of soybeans and sugarcane, to finance a portion of the suppliers’ production costs.  Bunge does not bear any of the costs or operational 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 $1 million at March 31, 2019 and $1 million at December 31, 2018.
Interest earned on secured advances to suppliers of $7 million and $10 million for the three months ended March 31, 2019 and 2018, respectively, is included in net sales in the condensed consolidated statements of income.
(3)
Deferred purchase price receivable represents additional credit support for the investment conduits in Bunge’s trade receivables securitization program (see Note 14).
Marketable Securities and Other Short-Term Investments - Bunge invests in foreign government securities, corporate debt securities, deposits, and other securities. The following is a summary of amounts recorded in the condensed consolidated balance sheets for marketable securities and other short-term investments.
(US$ in millions)
 
March 31,
2019
 
December 31,
2018
Foreign government securities
 
$
61

 
$
55

Corporate debt securities
 
115

 
91

Certificates of deposit/time deposits
 
164

 
15

Other
 
3

 
1

Total
 
$
343

 
$
162

As of March 31, 2019, total marketable securities and other short-term investments includes $176 million that are recorded at fair value and $167 million of other short-term investments. As of December 31, 2018, total marketable securities and other short-term investments includes $144 million that are recorded at fair value and $18 million as other short-term investments. Due to the short-term nature of these investments, carrying value approximates fair value.

8.
OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
(US$ in millions)
 
March 31,
2019
 
December 31,
2018
Recoverable taxes, net (1)
 
$
156

 
$
112

Judicial deposits (1)
 
116

 
115

Other long-term receivables
 
6

 
8

Income taxes receivable (1)
 
230

 
221

Long-term investments
 
85

 
91

Affiliate loans receivable
 
29

 
29

Long-term receivables from farmers in Brazil, net (1)
 
91

 
93

Other
 
108

 
154

Total
 
$
821

 
$
823

 
(1)
These non-current assets arise primarily from Bunge’s Brazilian operations and their realization could take several years.
Recoverable taxes, net - Recoverable taxes are reported net of allowances of $27 million and $27 million at March 31, 2019 and December 31, 2018, respectively.
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, which is the benchmark rate of the Brazilian central bank.

14


Income taxes receivable - Income taxes receivable includes overpayments of current income taxes plus accrued interest. These income tax prepayments are expected to be primarily 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 a remaining maturity of greater than one year.
Long-term receivables from farmers in Brazil, net - 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. Certain of such long-term receivables from farmers are originally recorded in other current assets as prepaid commodity contracts or secured advances to suppliers (see Note 7) and reclassified to other non-current assets when collection issues with farmers arise and amounts become past due and resolution of matters is expected to take more than one year.
The average recorded investment in long-term receivables from farmers in Brazil for the three months ended March 31, 2019 and the year ended December 31, 2018 was $203 million and $215 million, respectively.  The table below summarizes Bunge’s recorded investment in long-term receivables from farmers in Brazil and the related allowance amounts.
 
 
March 31, 2019
 
December 31, 2018
(US$ in millions)
 
Recorded
Investment
 
Allowance
 
Recorded
Investment
 
Allowance
For which an allowance has been provided:
 
 

 
 

 
 

 
 

Legal collection process (1)
 
$
105

 
$
90

 
$
105

 
$
89

Renegotiated amounts (2)
 
15

 
15

 
17

 
17

For which no allowance has been provided:
 
 

 
 

 
 

 
 

Legal collection process (1)
 
48

 

 
51

 

Renegotiated amounts (2)
 
9

 

 
10

 

Other long-term receivables
 
19

 

 
16

 

Total
 
$
196

 
$
105

 
$
199

 
$
106

(1)
All amounts in legal process are considered past due upon initiation of legal action.
(2)
All renegotiated amounts are current on repayment terms.
The table below summarizes the activity in the allowance for doubtful accounts related to long-term receivables from farmers in Brazil.
 
Three Months Ended
March 31,
(US$ in millions)
2019
 
2018
Beginning balance
$
106

 
$
113

Bad debt provisions
1

 
4

Recoveries
(1
)
 
(1
)
Foreign exchange translation
(1
)
 

Ending balance
$
105

 
$
116


9.
INCOME TAXES
Income tax expense is provided on an interim basis based on 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 non-recurring 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 on 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, including the realizability of deferred tax assets. Volatility in earnings within a taxing jurisdiction could result in a determination that additional valuation allowance adjustments may be warranted.

15


For the three months ended March 31, 2019 and 2018, income tax expense related to continuing operations was $38 million and $19 million, respectively. The effective tax rates for the first quarters of 2019 and 2018 were higher than the U.S. statutory rate of 21% primarily due to an unfavorable earnings mix associated with pretax losses in certain jurisdictions.
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 difficult to predict the outcome or timing of resolution of any particular matter, management believes that the condensed consolidated financial statements reflect the largest amount of tax benefit that is more likely than not to be realized.

10.
OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
(US$ in millions)
 
March 31,
2019
 
December 31,
2018
Unrealized losses on derivative contracts, at fair value
 
$
763

 
$
1,192

Accrued liabilities
 
517

 
618

Advances on sales
 
310

 
405

Other
 
250

 
287

Total
 
$
1,840

 
$
2,502


11.
FAIR VALUE MEASUREMENTS
The fair value standard describes three levels within its hierarchy that may be used to measure fair value.
Level
Description
Financial Instrument (Assets / Liabilities)
Level 1
Quoted price (unadjusted) in active markets for identical assets or liabilities.
Exchange traded derivative contracts.

Marketable securities in active markets.
Level 2
Observable inputs, including adjusted Level 1 quotes, 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.
Readily marketable inventories.

Over-the-counter (‘‘OTC’’) commodity purchase and sale contracts.

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.

Marketable securities in less active markets.
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.
Assets and liabilities whose value is determined using proprietary pricing models, discounted cash flow methodologies or similar techniques.
 
Assets and liabilities for which the determination of fair value requires significant management judgment or estimation.
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurement determines the placement of the entire fair value measurement in the hierarchy. Bunge’s assessment of the significance of a 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.
Bunge’s policy regarding the timing of transfers between levels, including both transfers into and transfers out of Level 3, is to measure and record the transfers at the end of the reporting period.
For a further definition of fair value and the associated fair value levels, refer to the Financial Instruments and Fair Value Measurements footnote included in Bunge's 2018 Annual Report on Form 10-K.

16


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
 
 
March 31, 2019
 
December 31, 2018
(US$ in millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Readily marketable inventories (Note 6)
 
$

 
$
3,869

 
$
633

 
$
4,502

 
$

 
$
4,286

 
$
246

 
$
4,532

Unrealized gain on derivative contracts (1):
 
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Interest rate
 

 
19

 

 
19

 

 
6

 

 
6

Foreign exchange
 

 
443

 

 
443

 

 
473

 

 
473

Commodities
 
64

 
422

 
27

 
513

 
128

 
407

 
18

 
553

Freight
 
15

 

 
4

 
19

 
6

 

 
6

 
12

Energy
 
34

 

 

 
34

 
30

 

 

 
30

Credit
 

 
1

 

 
1

 







Deferred purchase price receivable (Note 14)
 

 
97

 

 
97

 

 
128

 

 
128

Other (2)
 
96

 
100

 

 
196

 
67

 
98

 

 
165

Total assets
 
$
209

 
$
4,951

 
$
664

 
$
5,824

 
$
231

 
$
5,398

 
$
270

 
$
5,899

Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Trade accounts payable (3)
 
$

 
$
449

 
$
397

 
$
846

 
$

 
$
394

 
$
47

 
$
441

Unrealized loss on derivative contracts (4):
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Interest rate
 

 
24

 

 
24

 

 
42

 

 
42

Foreign exchange
 

 
398

 

 
398

 

 
499

 

 
499

Commodities
 
49

 
229

 
26

 
304

 
152

 
446

 
23

 
621

Freight
 
21

 

 
5

 
26

 
13

 

 
6

 
19

Energy
 
26

 

 
2

 
28

 
43

 

 
1

 
44

Equity
 
1






1

 







Total liabilities
 
$
97

 
$
1,100

 
$
430

 
$
1,627

 
$
208

 
$
1,381

 
$
77

 
$
1,666

 
(1)
Unrealized gains on derivative contracts are generally included in other current assets. There were $15 million and $3 million included in other non-current assets at March 31, 2019 and December 31, 2018, respectively.
(2)
Other includes the fair values of marketable securities and investments in other current assets and other non-current assets.
(3)
These payables are hybrid financial instruments for which Bunge has elected the fair value option.
(4)
Unrealized losses on derivative contracts are generally included in other current liabilities. There are $18 million and $33 million included in other non-current liabilities at March 31, 2019 and December 31, 2018, respectively.
Readily marketable inventories—RMI 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 RMI at fair value in the consolidated balance sheets and 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 RMI at fair value in the consolidated balance sheets and consolidated statements of income could differ.
Derivatives—Exchange traded futures and options contracts and exchange cleared contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. The majority of the Bunge’s exchange-traded agricultural commodity futures are cash-settled on a daily basis and, therefore, are not included in these tables. Bunge's forward

17


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.
OTC derivative contracts include swaps, options and structured transactions that are generally fair valued 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.
Level 3 Measurements
The following relates to Level 3 measurements. An instrument may transfer into or out of Level 3 due to inputs becoming either observable or unobservable.
Level 3 Readily marketable inventories and other—The significant unobservable inputs resulting in Level 3 classification for RMI, physically settled forward purchase and sale contracts, and trade accounts payable, relate to certain management estimations regarding costs of transportation and other local market or location-related adjustments, primarily freight related adjustments 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 to value freight, premiums and discounts in 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.
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, interest rates, volumes and locations.
The tables below present reconciliations for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2019 and 2018.  These instruments were valued using pricing models that management believes reflect the assumptions that would be used by a marketplace participant.
 
 
Three Months Ended March 31, 2019
(US$ in millions)
 
Readily
Marketable
Inventories
 
Derivatives,
Net
 
Trade
Accounts
Payable
 
Total
Balance, January 1, 2019
 
$
246

 
$
(6
)
 
$
(47
)
 
$
193

Total gains and losses (realized/unrealized) included in cost of goods sold (1)
 
37

 
2

 
5

 
44

Purchases
 
699

 

 
(361
)
 
338

Sales
 
(570
)
 

 

 
(570
)
Issuances
 

 

 

 

Settlements
 

 
1

 
(21
)
 
(20
)
Transfers into Level 3
 
276

 
1

 
27

 
304

Transfers out of Level 3
 
(55
)
 

 

 
(55
)
Balance, March 31, 2019
 
$
633

 
$
(2
)
 
$
(397
)
 
$
234

1)
Readily marketable inventories, derivatives, net and trade accounts payable, include gains/(losses) of $37 million, $6 million and $5 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at March 31, 2019.

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Three Months Ended March 31, 2018
(US$ in millions)
 
Readily
Marketable
Inventories
 
Derivatives,
Net
 
Trade
Accounts Payable
 
Total
Balance, January 1, 2018
 
$
365

 
$
2

 
$
(116
)
 
$
251

Total gains and losses (realized/unrealized) included in cost of goods sold (1)
 
63

 
(3
)
 
10

 
70

Purchases
 
613

 
9

 
(248
)
 
374

Sales
 
(279
)
 

 

 
(279
)
Issuances
 

 
(9
)
 

 
(9
)
Settlements
 

 
8

 
40

 
48

Transfers into Level 3
 
124

 
(2
)
 
(3
)
 
119

Transfers out of Level 3
 
(26
)
 

 

 
(26
)
Balance, March 31, 2018
 
$
860

 
$
5

 
$
(317
)
 
$
548

1) Readily marketable inventories, derivatives, net and trade accounts payable, includes gains/(losses) of $(3) million, $(12) million and $0 million, respectively, that are attributable to the change in unrealized gains/(losses) relating to Level 3 assets and liabilities still held at March 31, 2018.
 
 
 
 
 
 
 
 
 
12.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Bunge uses derivative instruments to manage several market risks, such as interest rate, foreign currency rate, and commodity risk. Some of those hedges Bunge enter into qualify for hedge accounting in the financial statements (Hedge Accounting Derivatives) and some, while intended as economic hedges, do not qualify (Economic Hedge Derivatives). As these impact the financial statements in different ways, they are discussed separately below.
Hedge Accounting Derivatives - Bunge uses derivatives in qualifying hedge accounting relationships to manage certain of its interest rate and foreign currency risks. In executing these hedge strategies, Bunge primarily relies on the shortcut and critical terms match methods in designing its hedge accounting strategy, which results in little to no net earnings impact for these hedge relationships. Bunge monitors these relationships on a quarterly basis and will perform a quantitative analysis to validate the assertion that the hedges are highly effective if there are changes to the hedged item or hedging derivative.
Fair value hedges - These derivatives are used to hedge the effect of interest rate and currency exchange rate changes on certain long-term debt. Under hedge accounting, the derivative is measured at fair value and the carrying value of hedged debt is adjusted for the change in value related to the exposure being hedged, with both adjustments offset to earnings. In other words, the earnings effect of an increase in the fair value of the derivative will be substantially offset by the earnings effect of the increase in the carrying value of the hedged debt. The net impact of hedge accounting for interest rate swaps is recognized in Interest expense. For cross currency swaps the changes in currency risk on the derivative are recognized in Foreign exchange gains (losses), and the changes in interest rate risk are recognized in Interest expense. Changes in basis risk are held in Accumulated other comprehensive income (loss) until realized through the coupon.
Cash flow hedges of currency risk - Bunge manages currency risk on certain forecasted purchases, sales, and selling, general and administrative expenses with currency forwards. The change in the value of the forward is classified in Accumulated other comprehensive income (loss) until the transaction affects earnings, at which time the change in value of the currency forward is reclassified to Net sales, Cost of goods sold or Selling, general and administrative expenses. These hedges mature at various times through November 2020. Of the amount currently in Accumulated other comprehensive income (loss), $0 million is expected to be reclassified to earnings in the next twelve months.
Net investment hedges - Bunge hedges the currency risk of certain of its foreign subsidiaries with currency forwards and intercompany loans for which the currency risk is remeasured through Accumulated other comprehensive income (loss). For currency forwards, the forward method is used. The change in the value of the forward is classified in Accumulated other comprehensive income (loss) until the transaction affects earnings.
The table below provides information about the balance sheet values of hedged items and the notional amount of derivatives used in hedging strategies. The notional amount of the derivative is the number of units of the underlying (for example, the notional principal amount of the debt in an interest rate swap). The notional amount is used to compute interest or

19


other payment streams to be made under the contract and is a measure of Bunge’s level of activity. Bunge discloses derivative notional amounts on a gross basis.
(US$ in millions)
March 31, 2019
December 31, 2018
Hedging instrument type:
 
 
Fair value hedges of interest rate risk
 
 
 
Carrying value of hedged debt
$
2,238

$
2,229

 
Cumulative adjustment to long-term debt from application of hedge accounting
$
(3
)
$
(29
)
 
Interest rate swap - notional amount
$
2,249

$
2,266

 
 
 
 
Fair value hedges of currency risk
 
 
 
Carrying value of hedged debt
$
311

$
312

 
Cross currency swap - notional amount
$
312

$
313

 
 
 
 
Cash flow hedges of currency risk
 
 
 
Foreign currency forward - notional amount
$
81

$
50

 
 
 
 
Net investment hedges
 
 
 
Foreign currency forward - notional amount
$
1,503

$
1,888

 
Carrying value of non-derivative hedging instrument
$
895

$
912

Economic Hedge Derivatives - In addition to using derivatives in qualifying hedge relationships, Bunge enters into derivatives to economically hedge its exposure to a variety of market risks it incurs in the normal course of operations.
Interest rate derivatives are used to hedge exposures to the Company's financial instrument portfolios and debt issuances. The impact of changes in fair value of these instruments is primarily presented in Interest expense.
Currency derivatives are used to hedge the balance sheet and commercial exposures that arise from the Company's global operations. The impact of changes in fair value of these instruments is presented in Cost of goods sold when hedging commercial exposures and Foreign exchange gains (losses) when hedging monetary exposures.
Agricultural commodity derivatives are used primarily to manage the Company's inventory and forward purchase and sales contracts. Contracts to purchase agricultural commodities generally relate to current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of agricultural commodities generally do not extend beyond one future crop cycle. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
Bunge uses derivative instruments referred to as forward freight agreements ("FFA") and FFA options to hedge portions of its current and anticipated ocean freight costs. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
Bunge uses energy derivative instruments to manage its exposure to volatility in energy costs. Hedges may be entered into for natural gas, electricity, coal and fuel oil, including bunker fuel. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
The Company may also enter into other derivatives, including credit default swaps and equity derivatives to manage exposure to credit risk and broader macroeconomic risks, respectively. The impact of changes in fair value of these instruments is presented in Cost of goods sold.
The table below summarizes the volume of economic derivatives as of March 31, 2019 and December 31, 2018. For those contracts traded bilaterally through the over-the-counter markets (e.g., forwards, forward rate agreements ("FRA") and swaps), the gross position is provided. For exchange traded (e.g., futures, FFAs and options) and cleared positions (e.g., energy swaps), the net position is provided.

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March 31,
December 31,
 
 
2019
2018
Unit of
Measure
(US$ in millions)
Long
(Short)
Long
(Short)
Interest rate