DFP2010INGLES

(Convenience Translation into English from the Original Previously Issued in Portuguese)
Klabin S.A. and Subsidiaries

Financial Statements for the Years Ended December 31, 2010 and 2009 and Independent Auditors' Report
Deloitte Touche Tohmatsu Auditores Independentes
BALANCE SHEETS AS AT DECEMBER 31, 2010 AND DECEMBER 31, 2009
Related Notes A S S ET S Current assets Cash and cash equivalent Securities Trade accounts receivables Due from related parties Inventories Recoverable taxes Prepaid expenses related parties Other receivables Total current assets Noncurrent assets Due from related parties Escrow deposits Recoverable taxes Other receivables Investments . Subsidiaries . Other Property, plant and equipment Biological assets Intangible assets Total noncurrent assets Total assets
12/31/2010
12/31/2009
Company 1/1/2009
12/31/2010
12/31/2009
Consolidated 1/1/2009
5 6 7 8 9 10 8
2,268,816 198,222 566,799 312,598 427,231 125,974 13,242 31,469 3,944,351
1,697,278 209,874 507,426 157,067 403,090 290,749 15,963 30,473 3,311,920
1,079,899 407,521 384,994 469,022 410,983 322,113 18,790 108,408 3,201,730
2,531,105 198,222 753,961 460,128 131,102 13,242 39,387 4,127,147
1,841,652 209,874 661,128 470,615 294,268 15,963 42,697 3,536,197
1,295,177 407,521 650,912 478,890 326,969 18,790 61,790 3,240,049
8 17 10
5,216 89,388 131,621 122,651
7,696 80,712 164,673 105,183
7,133 124,834 206,514 97,589
1,220 90,698 131,621 124,458
1,727 81,932 164,673 111,393
2,125 126,029 206,514 103,903
12 13 14
1,793,958 11,542 3,932,348 1,394,938 7,655 7,489,317 11,433,668
1,778,638 11,542 3,905,330 1,326,757 6,365 7,386,896 10,698,816
1,805,968 8,690 4,174,160 1,428,320 1,115 7,854,323 11,056,053
11,542 5,004,023 2,762,879 7,655 8,134,096 12,261,243
11,552 4,996,892 2,491,169 6,365 7,865,703 11,401,900
8,700 5,286,477 2,667,454 1,115 8,402,317 11,642,366
BALANCE SHEETS AS AT DECEMBER 31, 2010 AND DECEMBER 31, 2009
Related Notes LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Loans and financing Trade accounts payable Taxes payable Provision for income tax and social contribution Salaries, vacation and related taxes Due to related parties Accounts payables - REFIS Other payables Total current liabilities Noncurrent liabilities Loans and financing Deferred income tax and social contribution Reserve for civil, tax and labor provision Other payables and provisions Total noncurrent liabilities Shareholders equity Capital Capital reserves Revaluation reserve Earnings reserves Valuation adjustments to equity Treasury shares Shareholders' equity attributable to owners of the Company Shareholders' equity attributable to noncontrolling interests
12/31/2010
12/31/2009
Company 1/1/2009
12/31/2010
12/31/2009
15 16
805,215 265,137 36,677 92,612 21,864 349,340 47,037 1,617,882
683,473 185,420 47,284 68,260 65,162 331,685 49,623 1,430,907
463,773 208,147 38,115 58,666 131,511 27,826 928,038
842,121 269,839 40,669 37,013 93,542 2,392 349,340 55,997 1,690,913
802,312 189,696 50,399 1,622 68,859 2,202 331,685 57,844 1,504,619
497,094 215,546 42,152 764 59,661 1,816 44,167 861,200
11 8 17
15 11 17
4,014,976 644,909 102,147 59,669 4,821,701
3,914,754 489,033 138,725 63,238 4,605,750
4,942,423 364,578 110,429 82,008 5,499,438
4,014,976 1,235,635 102,147 63,070 5,415,828
3,925,637 1,047,513 138,725 66,582 5,178,457
4,971,637 956,828 110,429 85,721 6,124,615
1,500,000 84,491 51,404 2,403,120 1,083,423 (128,353) 18 4,994,085 4,994,085 11,433,668
1,500,000 84,491 52,117 2,001,024 1,104,337 (79,810) 4,662,159 4,662,159 10,698,816
1,500,000 84,491 53,472 1,953,918 1,116,506 (79,810) 4,628,577 4,628,577 11,056,053
1,500,000 84,491 51,404 2,403,120 1,083,423 (128,353) 4,994,085 160,417 5,154,502 12,261,243
1,500,000 84,491 52,117 2,001,024 1,104,337 (79,810) 4,662,159 56,665 4,718,824 11,401,900
1,500,000 84,491 53,472 1,953,918 1,116,506 (79,810) 4,628,577 27,974 4,656,551 11,642,366
Total liabilities and shareholders equity
INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$, except earnings per thousand shares)
Related Notes Net revenue from sales Change in fair value of biological assets Cost of sales Gross profit Operating expenses Selling General and administrative Other, net 19 14 20
12/31/2010 3,566,936 220,610 (2,761,192) 1,026,354 (242,824) (209,085) 3,781 (448,128) 146,688
Company 12/31/2009 2,868,275 994 (2,473,830) 395,439 (213,369) (173,728) 15,420 (371,677) 59,828
12/31/2010 3,663,317 448,625 (2,741,103) 1,370,839 (300,153) (214,876) (34,421) (549,450) -
Consolidated 12/31/2009 2,960,179 64,577 (2,498,271) 526,485 (300,047) (176,906) 10,770 (466,183) -
20 20 20
Equity in subsidiaries Income from operations before financial income (expenses) Financial income (expenses) Financial income Financial expenses
12
724,914
83,590
821,389
60,302
21 21
206,000 (159,497) 46,503
76,987 366,905 443,892
213,162 (162,568) 50,594
84,040 360,159 444,199
Income from operations before income tax and social contribution Income tax and social contribution . Current . Deferred
771,417
527,482
871,983
504,501
11 11
(54,593) (157,048) (211,641) 559,776 559,776 -
(234,240) (124,456) (358,696) 168,786 168,786 0.1760 0.1936
(100,545) (189,286) (289,831) 582,152 559,776 22,376 0.5852 0.6436
(244,206) (88,554) (332,760) 171,741 168,786 2,955 0.1760 0.1936
Net income from continuing operations Owners of the Company Noncontrolling interests Basic/diluted earnings per common share (R$) Basic/diluted earnings per preferred share (R$) 22 22
0.5852 0.6436
STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$)
12/31/2010 Net income Foreign currency translation adjustments Comprehensive income, net of taxes Total comprehensive income attributable to: .Owners of the Company .Noncontrolling interests 559,776 (2,304) 557,472 557,472 -
Company 12/31/2009 168,786 (12,169) 156,617 156,617 -
12/31/2010 582,152 (2,304) 579,848 557,472 22,376
Consolidated 12/31/2009 171,741 (12,169) 159,572 156,617 2,955
STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$)
Company Capital reserves Special Tax Law incentives 8200/91 505 83,986 505 83,986 Revaluation reserve Of own assets 81,016 (27,544) 53,472 Earnings reserves Proposed dividends Valuation adjustments to equity (309) 1,116,815 1,116,506 (12,169) (12,169) 1,104,337 (2,304) (2,304) (18,610) 1,083,423 Treasury shares (79,810) (79,810) Retained earnings 742,733 549,558 (1,292,291) 512,381 604,434 (1,116,815) (27,544) 27,544 168,786 168,786 1,355 91,546 115,195 (656) (41,965) (123,035) (57,002) (154,224) 559,776 559,776 713 134,742 68,709 (145,605) (150,488) 18,610 (120,001) (70,002) (296,454) -
Balances as of December 31, 2008 - reported Adoption of CPCs - biological assets Adoption of CPCs - biological assets (subsidiaries) Transfer of unrealized income to reserve Adoption of CPCs - deemed cost - land Adoption of CPCs - deemed cost - land (subsidiaries) Transfer to valuation adjustments to equity Adoption of CPCs - income taxes on revaluation reserve Transfer of income taxes to revaluation reserve Balance as of January 1, 2009 - adjusted Net income Other comprehensive income Total comprehensive income Revaluation reserve Realization of unrealized earnings reserve - biological assets Realization of unrealized earnings reserve - biological assets (subsidiaries) Transfer of unrealized income to unrealized earnings reserve biological assets Transfer of unrealized income to unrealized earnings reserve biological assets (subsidiaries) Allocation of net income: . Interim dividends . Proposed dividends . Recognition of reserves Balances as of December 31, 2009 Net income Other comprehensive income Total comprehensive income Revaluation reserve Realization of unrealized earnings reserve - biological assets Realization of unrealized earnings reserve - biological assets (subsidiaries) Transfer of unrealized income to unrealized earnings reserve biological assets Transfer of unrealized income to unrealized earnings reserve biological assets (subsidiaries) Realization of demeed cost (Subsidiaries) Aquisition of treasury shares Allocation of net income: . Supplementary 2009 dividends approved at ASM . Interim dividends . Proposed dividends . Recognition of reserves Balances as of September 30, 2010
Capital 1,500,000 1,500,000
Legal 143,022 143,022
Unrealized 1,292,291 1,292,291
Bylaws 518,605 518,605
1,500,000
505
83,986
(1,355) 52,117
16,645 159,667
(91,546) (115,195) 656 41,965 1,128,171
57,002 57,002
137,579 656,184
(79,810)
Total 2,247,015 742,733 549,558 512,381 604,434 (27,544) 4,628,577 168,786 (12,169) 156,617 (123,035) 4,662,159 559,776 (2,304) 557,472 (48,543) (57,002) (120,001) 4,994,085
1,500,000
505
83,986
(713) 51,404
27,989 187,656
(134,742) (68,709) 145,605 150,488 1,220,813
(57,002) 70,002 70,002
268,465 924,649
(48,543) (128,353)
STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$)
Consolidated Capital reserves Special Tax Law incentives 8200/91 505 83,986 505 83,986 Revaluation reserve Of own assets 81,016 (27,544) 53,472 Proposed dividends Earnings reserves Valuation adjustment to equity (309) 1,116,815 1,116,506 (12,169) (12,169) 1,104,337 (2,304) (2,304) (18,610) 1,083,423 Treasury shares (79,810) (79,810) Retained earnings 1,292,291 (1,292,291) 1,116,815 (1,116,815) (27,544) 27,544 168,786 168,786 1,355 206,741 (42,621) (123,035) (57,002) (154,224) 559,776 559,776 713 203,451 (296,093) 18,610 (120,001) (70,002) (296,454) Controlling interests 2,247,015 1,292,291 1,116,815 (27,544) 4,628,577 168,786 (12,169) 156,617 (123,035) 4,662,159 559,776 (2,304) 557,472 (48,543) (57,002) (120,001) 4,994,085 Noncontrolling interests 27,974 27,974 2,955 2,955 34,328 (8,592) 56,665 22,376 22,376 90,122 (3,251) (5,495) 160,417
Balances as of December 31, 2008 - reported Adoption of CPCs - biological assets Transfer of unrealized income to reserve Adoption of CPCs - deemed cost - land Transfer to valuation adjustments to equity Adoption of CPCs - income taxes on revaluation reserve Transfer of income taxes to revaluation reserve Balance as of January 1, 2009 - adjusted Net income Other comprehensive income Total comprehensive income Revaluation reserve Realized earnings reserve - biological assets Transfer of unrealized income to reserve - biological assets Capital contribution in subsidiaries by noncontrolling shareholders Acquisition of noncontrolling interests in subsidiaries Allocation of net income: . Interim dividends: . Proposed dividends: . Recognition of reserves Balances as of December 31, 2009 - adjusted Net income Other comprehensive income Total comprehensive income Revaluation reserve Realization of unrealized earnings reserve - biological assets Transfer of unrealized income to unrealized earnings reserve - biological assets Realization of demeed cost (Subsidiaries) Capital contribution in subsidiaries by noncontrolling shareholders Acquisition of noncontrolling interests in subsidiaries Dividends paid to noncontrolling interests Aquisition of treasury shares Allocation of net income: . Supplementary 2009 dividends approved at ASM . Interim dividends: . Proposed dividends . Recognition of reserves Balances as of September 30, 2010
Capital 1,500,000 1,500,000
Legal 143,022 143,022
Unrealized 1,292,291 1,292,291
Bylaws 518,605 518,605
1,500,000
505
83,986
(1,355) 52,117
16,645 159,667
(206,741) 42,621 1,128,171
57,002 57,002
137,579 656,184
(79,810)
Total 2,274,989 1,292,291 1,116,815 (27,544) 4,656,551 171,741 (12,169) 159,572 34,328 (8,592) (123,035) 4,718,824 582,152 (2,304) 579,848 90,122 (3,251) (5,495) (48,543) (57,002) (120,001) 5,154,502
1,500,000
505
83,986
(713) 51,404
27,989 187,656
(203,451) 296,093 1,220,813
(57,002) 70,002 70,002
268,465 924,649
(48,543) (128,353)
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$)
Company 12/31/2009 168,786 Consolidated 12/31/2009 168,786
12/31/2010 Cash flows from operating activities Net income - attributed to owners of the Company Expenses (income) not affecting cash and cash equivalents: . Depreciation and amortization . Change in fair value - biological assets . Biological assets depreciation . Realization of deemed cost - land . Gains/losses on disposal of assets . Deferred income tax and social contribution . Income tax and social contribution - REFIS . Interest and exchange rate change on loans and financing . Payment of interest . Interest provision - REFIS . Equity in subsidiaries . Noncontrolling interests . Income received from subsidiaries . Other Decrease (increase) in assets . Trade accounts receivable . Inventories . Recoverable taxes . Securities . Prepaid expenses . Other receivables Increase (decrease) in liabilities . Trade accounts payable . Taxes payable . Income tax and social contribution . Salaries, vacation and related taxes . Other payables . Income tax and social contribution paid during current period Cash generated from operating activities Cash flows from investing activities: . Purchase of property, plant and equipment net of recoverable taxes . Cost of planting biological assets, net of recoverable taxes . Sale of assets . Investment acquisition and capital contribution to subsidiaries . Others Cash used in investing activities Cash flows from financing activities: . Borrowings . Repayment of borrowings . Capital contribution to subsidiaries by noncontrolling shareholders . Acquisition of noncontrolling interests in subsidiaries .Dividends paid .Dividends paid to noncontrolling interests .Aquisition of treasury shares Cash generated from (used in) financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Increase (decrease) in cash and cash equivalents 559,776
12/31/2010 559,776
222,332 (220,610) 220,647 1,880 157,048 107,773 (280,324) 17,655 (146,688) 136,035 1,585 (218,310) (24,141) 232,405 11,652 (2,237) (14,518) 36,419 (10,607) 24,352 (45,125) (34,578) 732,421
415,165 (994) 149,390 (63,398) 124,456 234,240 (500,716) (304,100) 97,445 (59,828) 63,578 32,387 246,731 7,893 119,954 197,647 7,070 13,717 (89,076) 9,169 9,594 1,128 (3,318) 876,920
223,639 (448,625) 337,100 28,197 2,120 189,286 108,452 (281,723) 17,655 22,376 6,584 (96,060) (32,244) 232,311 11,652 (872) (12,599) 80,333 (9,730) 34,227 24,683 (46,910) (36,093) 913,535
416,388 (64,577) 332,791 (63,400) 88,554 234,240 (507,897) (306,683) 97,445 2,955 29,993 (10,216) 6,215 127,621 197,647 1,423 19,755 (25,464) 8,247 1,561 9,198 (7,445) (9,648) 747,489
(258,731) (65,084) 841 (6,878) (329,852) 1,016,656 (622,141) (177,003) (48,543) 168,969 571,538 1,697,278 2,268,816 571,538
(154,482) (46,833) 73,041 (3,744) (1,335) (133,353) 403,764 (406,917) (123,035) (126,188) 617,379 1,079,899 1,697,278 617,379
(266,489) (119,108) 683 (384,914) 1,042,934 (740,515) 90,122 (3,251) (177,003) (2,912) (48,543) 160,832 689,453 1,841,652 2,531,105 689,453
(157,346) (91,929) 73,050 (1,288) (177,513) 493,446 (419,648) 34,328 (8,592) (123,035) (23,501) 546,475 1,295,177 1,841,652 546,475
STATEMENTS OF VALUE ADDED FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (In thousands of Brazilian reais - R$)
Company 12/31/2009 3,625,808 74,035 (9,708) 3,690,135 (949,492) (1,368,251) (2,317,743) 1,372,392 Consolidated 12/31/2009 3,730,650 137,628 (9,707) 3,858,571 (791,392) (1,467,308) (2,258,700) 1,599,871
12/31/2010 Revenue . Product sales . Other income . Allowance for doubtful accounts Inputs purchased from third parties . Cost of sales . Supplies, power, outside services and other Gross value added Retentions . Depreciation, amortization and depletion Net value added created Value added received in transfer . Equity in investees . Noncontrolling interests . Financial income, including exchange gains Value added for distribution Employees and labor charges: . Salaries and wages . Benefits . Severance Pay Fund (FGTS) Taxes, charges and contributions . Federal . State . Municipal 4,505,199 221,451 (3,407) 4,723,243 (1,272,783) (1,613,219) (2,886,002) 1,837,241
12/31/2010 4,617,497 454,382 (3,227) 5,068,652 (1,152,569) (1,711,570) (2,864,139) 2,204,513
(442,977) 1,394,264
(564,555) 807,837
(560,739) 1,643,774
(749,179) 850,692
146,688 372,660 519,348 1,913,612 355,632 76,369 27,843 459,844 488,944 71,229 7,662 567,835
59,828 915,387 975,215 1,783,052 288,538 64,005 25,845 378,388 658,461 98,880 7,042 764,383 471,495 471,495 180,037 (11,251) 168,786 1,783,052
(22,376) 379,856 357,480 2,001,254 357,401 77,997 27,843 463,241 570,084 71,230 7,661 648,975 329,262 329,262 190,003 369,773 559,776 2,001,254
(2,955) 920,985 918,030 1,768,722 292,989 65,445 25,845 384,279 632,948 98,880 7,042 738,870 476,786 476,786 180,037 (11,250) 168,787 1,768,722
Third parties capital compensation . Interest, including exchange loss

Shareholders capital compensation . Dividends on profit for the year . Retained earnings (absorbed losses) in the year
326,157 326,157 190,003 369,773 559,776 1,913,612
10
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated)
1.
GENERAL INFORMATION
Klabin S.A. (the Company) and its subsidiaries are engaged in the following sectors of the pulp and paper industry to serve the domestic and foreign markets: wood supply, packaging paper, paper sacks, and corrugated cardboard boxes. Their operations are integrated from forestation to production of final products. Klabin is a publicly-held corporation whose shares are traded on So Paulo Stock Exchange (BM&F Bovespa). The Company is domiciled in Brazil and headquartered in So Paulo. The Company also has investments in Special Purposes Entities (SCPs) for the specific purpose of raising funds from third parties to support reforestation projects. The Company, as an ostensible partner, has contributed with forest assets, composed basically of forests and land, by means of the granting of use, while the other investing shareholders have contributed cash to these companies. These SCPs entitle Klabin S.A. a preemptive right to acquire forestry products at market price and conditions. The Company also has ownership interests in other companies (notes 3 and 12), whose operational activities are related to the Companys business objectives. These financial statements were approved to be issued by the Board of Directors on February 23, 2011.
2.
PRESENTATION OF FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES
2.1 Presentation of financial statements The Company presents the consolidated financial statements in conformity with the International Financial Reporting Standards (IFRSs), issued by the International Accounting Standards Board (IASB), which are the first presented by the Company in accordance with IFRSs, and also the accounting practices adopted in Brazil, based on the standards issued by the Accounting Pronouncements Committee (CPC), fully convergent with the IFRSs, and the standards established by the Brazilian Securities and Exchange Commission (CVM). The Individual Financial Statements (Company) was prepared based on accounting practices adopted in Brazil, which differ from the IFRSs used to prepare the consolidated financial statements with respect to the valuation of investments in subsidiaries under the equity method, while the IFRSs require that such investments be valued at cost or fair value. As required by CVM Resolution 603/09 and CVM/SNC/SEP Circular Letter 01/10, the comparative balances as of December 31, 2009 originally presented on February 18, 2010, are restated including the effects of the adoption of new accounting pronouncements issued by CPC in conformity with the International Financial Reporting Standards (IFRS). The Company adopted the new pronouncements for the first time in its financial statements for the year ended December 31, 2009. The date of transition to the IFRS was January 1, 2009. The information on the first-time adoption is stated in note 4. 2.2 Summary of significant accounting practices The significant accounting practices adopted by the Company and its subsidiaries are as follows:
11
a) Functional currency and translation of foreign currencies The financial statements are presented in Brazilian reais (R$), which is the Company and its subsidiarys functional and presentation currency. (i) Transactions and balances Foreign currency transactions are originally recorded at the exchange rate prevailing on the transaction date. Gains and losses resulting from the difference between the translation of assets and liabilities in foreign currency at the balance sheet date are recognized in the Companys income statement. (ii) Foreign subsidiaries Assets and liabilities of foreign subsidiaries are translated based on the exchange rate of the functional currency set by the Company at the balance sheet date and the corresponding income statements are translated based on the exchange rate on the transaction dates. In the subsidiaries classified as independent entities, exchange differences arising from translation are separately recorded in a line item in shareholders' equity under Valuation adjustments to equity (comprehensive income/loss). Upon the sale of a foreign subsidiary, the accumulated deferred amount recognized in shareholders' equity relating to this foreign subsidiary is recognized in the income statement. b) Cash and cash equivalents Comprise cash, banks, and highly liquid short-term investments, immediately convertible into a known cash amount, and subject to an insignificant risk of change in value. c) Financial instruments Originally recognized at fair value plus transaction costs that are directly attributable to their acquisition or issuance of financial assets or financial liabilities, other than financial instruments measured at fair value in profit or loss. They are subsequently measured at the balance sheet date based on the classification of financial instruments into the following categories: financial asset measured at fair value through income or loss, held-to-maturity investments, loans and receivables, financial assets available-for-sale; and financial liability measured at fair value through income or loss and others financial liabilities. (i) Securities Securities are available for sale and recorded including financial income (income/loss), which approximate their fair values. (ii) Borrowings This balance corresponds to the amount of funds raised, plus interest and charges proportional to the period incurred, less installments paid, and includes the exchange rate change on the liability, if applicable. Interest is measured using the effective interest rate method and recorded as financial expenses, as well as the adjustment for inflation and foreign exchange rate on the balance of outstanding loans and financing.
12
d) Trade accounts receivable Stated at the original amounts of trade accounts receivable from sales of products, plus foreign exchange changes, when applicable. The allowance for doubtful accounts is recorded based on an individual analysis of receivables and in an amount considered sufficient by Management to cover possible losses on collection of receivables, that can be changed as a result of the recovery of receivables from defaulting customers or change in the customers financial condition. The adjustment to present value of the balance of trade accounts receivable is immaterial due to the short realization period. e) Inventories Inventories are stated at average cost, net of taxes to be offset, when applicable, and at the fair value of biological assets on the cut-off date, which is lower than net realizable values of selling costs. Inventory of finished products comprise processed raw materials and direct labor and production costs on inventory valuation. When necessary, inventories are reduced by the inventory losses provision, which is recognized for inventory devaluation, obsolescence of products and physical inventory loss. In addition, because of the nature of the Companys products, obsolete finished products may be recycled for reuse in production. f) Income tax and social contribution Current and deferred income tax is calculated at the rate of 15%, plus a 10% surtax on taxable income exceeding R$240, and current and deferred social contribution is calculated at the rate of 9% on taxable income. Balances are recorded in the Companys income on the accrual basis. Prevailing tax rates used to determine deferred tax credits are similar to those used for current taxes, in accordance with the Brazilian tax legislation. Deferred income tax and social contribution are recorded in the financial statements at the net amount of noncurrent assets or liabilities, arising basically arise from temporarily nondeductible provisions and taxes challenged in court, both in the Companys assets and liabilities, tax loss carryforwards (Company and subsidiaries), deferred foreign exchange changes (Company) and adjustments from the adoption of new pronouncements (note 4), included in the Transitional Tax Regime (RTT) as: deemed cost of property, plant and equipment (land), measurement of biological assets at fair value (note 14) and changes in depreciation rates of property, plant and equipment (note 13). The provision for current income and social contribution taxes is stated in the balance sheet net of tax prepayments made in the year. g) Investments Represented by investments in subsidiaries and accounted for using the equity method in the Companys balance sheet based on the Companys ownership interest in these companies. The financial statements of the subsidiaries are prepared for the reporting period equivalent to the Companys reporting period. The accounting practices are adjusted to conform to the accounting practices adopted by the Company, when necessary. Intercompany unrealized gains and losses are eliminated for purposes of equity accounting in the Companys balance sheet and consolidation, proportionately to the interest held in the subsidiary. After applying the equity method, the Company decides the need to recognize an additional impairment loss on the Companys investment in its subsidiaries. At each balance sheet date, the Company determines whether there is objective evidence that the investment in the subsidiary is impaired. If applicable, the Company calculates the amount of the impairment loss as the difference between the amount receivable from the subsidiary and the carrying amount and recognizes it in the income statement.
13
Exchange rate changes on the investment in foreign subsidiaries that cannot be characterized as branches are recognized as valuation adjustments to equity and realized at the time of the respective investment. h) Property, plant and equipment Stated at acquisition or construction cost, less taxes to be offset, when applicable, and accumulated depreciation. Additionally, as elected by the Company on the first-time adoption of the new pronouncements, described in note 4, land was measured at fair value, based on the adoption of the deemed cost of property, plant and equipment. Depreciation is calculated on a straight-line basis taking into consideration the estimated useful lives of the assets, based on the expectation of future economic benefits, except for land, which is not depreciated. The estimated useful lives of the assets is annually reviewed and adjusted, if necessary, and may vary based on the technological modernization of each branch. The useful lives of the Companys assets are stated in note 13. Maintenance costs on the Companys assets are directly recorded in the income statement when realized. Financial charges are capitalized in property, plant and equipment, when incurred on property, plant and equipment in progress, if applicable. i) Impairment of assets Property, plant and equipment and other assets are tested for impairment on an annual basis or whenever significant events or changes in circumstances indicate that their carrying amounts may not be recoverable. When this is the case, recoverable values are calculated to determine if assets are impaired. The recoverable value of an asset corresponds to the greater of the net sales price or value in use of an asset or a cashgenerating unit, which is separately determined for each asset, unless the asset does not result in cash flow separately from other assets or groups of assets. In estimating the value in use, estimated future cash flows are discounted to their present value, using a discount rate that reflects current market estimates of the time value of cash and specific risks inherent in the asset. Impairment losses are recognized in the income statement at the amount by which the carrying amount of an asset exceeds its recoverable amount, which is the higher of net selling price and value in use of an asset. j) Biological assets Biological assets correspond to eucalyptus and pine forests, which are used in the production of packaging paper, paper sacks and corrugated cardboard boxes and sales to third parties, when depleted. Harvest and replanting have an approximate cycle of 7 - 14 years, which varies based on the crop and genetic material. Biological assets are measured at fair value, less estimated selling costs at harvest period. Significant assumptions for determining the fair value of biological assets are stated in note 14. The evaluation of biological assets is carried out on a quarterly basis by the Company, and corresponding gains or losses on the changes in fair value of biological assets are recognized in the income statement for the period in which they occur, in a separate line item in the income statement under changes in the fair value of biological assets. The increase or decrease in the fair value is determined based on the difference between the fair values of biological assets at the beginning and end of the current period. The balancing item of the fair value of biological assets, net of deferred taxes, is recorded under unrealized earnings reserve in shareholders' equity, until financial and economic realization, when the proportional realized value is transferred to retained earnings for allocation.
14
k) Intangible assets Intangible assets are stated at cost less accumulated amortization for the period, calculated on a straight-line basis based on their estimated useful lives. Expenditures on research and development of new products and techniques used by the Company are recorded in the income statement as expenses, when incurred. l) Noncurrent assets and liabilities Comprise assets and receivables and liabilities and payables maturing 12 months after the base date of the financial statements, plus corresponding charges and adjustment for inflation, if applicable, through the balance sheet date. m) Provisions Provisions are recognized when the Company has a legal or constructive obligation as a result of past events or expected future events, it is probable that an outflow of funds will be required to settle the obligation, and the accrued amount can be reliably measured. Expense on provisions is stated in the income statement, net of any reimbursement. If the time effect of the amount is material, provisions are discounted using a discount rate that reflects the specific risks inherent in the obligation, if applicable. The estimates recorded by the Company includes reserves for civil, tax and labor provision, based on the assessment of probable loss in the lawsuits, in accordance with the opinion of the Companys legal counsel and management. This assessment is made taking into consideration the nature of lawsuits, outcome of similar lawsuits and the progress of pending litigation. When the Company expects the full or partial reimbursement of a reserve amount, this asset is recognized only when realization is clear and certain, without recognition of assets in uncertain scenarios. n) Net revenue from sales Sales revenue is stated net of taxes, discounts and rebates, and is recognized to the extent that it is probable that economic benefits will be generated and transferred to the Company, upon the transfer of ownership of the products, and when it can be reliably measured based on the fair value of the consideration received, net of discounts, rebates and taxes or charges on sales. o) Employee benefits and pension plan The Company grants to employees, benefits such as life insurance, health care, profit sharing and other benefits recorded on the accrual basis, which are discontinued after the termination of the employment relationship with the Company. Additionally, the Company grants a private pension and health care plan to former employees retired until 2001, classified as defined benefit plans. These benefits adopt liability and income/expense recognition practices measured based on the actuarial valuation. Gains and losses on the actuarial valuation of the benefits from changes in actuarial assumptions and commitments are recognized in the income statement. p) Significant accounting judgments, estimates and assumptions In preparing the financial statements, judgments, estimates and assumptions were used to account for certain assets, liabilities, income and expenses for the period. The accounting judgments, estimates and assumptions adopted by Management were defined by using the best information available up to the date of the financial statements and the experience of past events, assumptions on future events, and the assistance of experts, when applicable.
15
The financial statements include, therefore, various estimates, including, but not limited to, the determination of the useful lives of property, plant and equipment, the realization of deferred tax credits, allowance for doubtful accounts, provision for inventory losses, measurement of the fair value of biological assets, reserve for civil, tax and labor provision, fair value measurement of certain financial instruments and the provision for impairment. Actual results recognized by using accounting judgments, estimates and assumptions, when realized, could differ from those estimates, and the Company may be exposed to significant losses. q) Earnings per share The Company calculates earnings per share based on profit for the year attributed to each class of Company share, weighted by the number of shares outstanding in the period. r) Statement of value added (DVA) The Brazilian corporate law requires the presentation of the statement of value added as an integral part of the set of financial statements presented by an entity. The purpose of this statement is to disclose the economic value added created by the Company and its distribution during a certain reporting period. The statement of value added was prepared pursuant to the provisions of CPC 09 Statement of Value Added, using information obtained in the same accounting records used to prepare the financial statements. 2.3 New accounting pronouncements, reviews and interpretations Before the disclosure of these financial statements, new CVM rules, accounting pronouncements, interpretations, as well as reviews of previously pronouncements published of the CPC and the IASB were approved and issued, which are applicable to the year ending December 2011 and financial statements for 2010 to be disclosed together with the 2011 financial statements, for comparative purposes. The table below shows the new pronouncements, reviews and interpretations issued:
Pronouncement CPC 01 (R1) - Impairment of assets CPC 02 (R2) - Effects of Changes in Foreign Exchange Rates and Translation of Financial Statements CPC 03 (R2) - Statement of Cash Flows CPC 05 (R1) - Related Party Disclosures CPC 41 - Earnings per Share ICPC 13 - Rights to Interests Arising from Decommissioning, Restoration and Environmental Funds ICPC 15 - Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment Provisional Act 517/10 IFRS 1 - First-time adoption of International Financial Reporting IFRS 7 Financial Instruments: Disclosures IAS 12 Income Taxes Contents Amended to reflect changes made by IASB in IAS 36 and revision, without changing the substance of the pronouncement. Revised to better conform to IAS 21, without changing the substance of the pronouncement. Revised to better conform to IAS 7, without changing the substance of the pronouncement. Amended to reflect changes IASB in IAS 24 and revision, without changing the substance of the pronouncement. Standardized instructions for the determination and disclosure of earnings (loss) per share. This pronouncement was early adopted (note 22). This interpretation addresses accounting for in contributors financial statements interests arising from decommissioning, restoration and environmental funds, in line with IFRIC 5. Interpretation on the accounting treatment of waste management costs relating to the decommissioning of waste electrical and electronic equipment, in conformity with IFRIC 6. Amendment of the provisions of Law 6404/76 to adjust debenture issues. This Provisional Act has no impact on the financial statements presented. Incorporation of the comparative disclosures limited exemption rule and elimination of the fixed dates for first-time adopters. Inclusion of procedures regarding the disclosure of transfers of financial assets. Inclusion of procedures regarding the recovery of deferred taxes when measured at fair value.
16
3.
CONSOLIDATION OF FINANCIAL STATEMENTS
The subsidiaries are fully consolidated after the acquisition date, i.e., the date in which the parent company holds the shareholding control, and continue to be consolidated until the date in which such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using accounting practices consistent with the policies adopted by the Company. The following criteria are adopted for consolidation purposes: (i) elimination of investments in subsidiaries and equity in subsidiaries; (ii) the profits from intercompany transactions and the assets and liabilities are equally eliminated and (iii) the noncontrolling interest is calculated and disclosed separately. The consolidated financial statements comprise Klabin S.A. and its subsidiaries as of December 31, 2010 and 2009, as follows:
Ownership interest (%) Head office Subsidiaries: Klabin Argentina S.A. Klabin Ltd. Klabin Trade Klabin Forest Products Company IKAP Empreendimentos Ltda. Klabin do Paran Produtos Florestais Ltda. Antas Servios Florestais S/C Ltda. Centaurus Holdings S.A. Timber Holdings S.A. Renascena Participaes S.A. Silent partnerships: Paran Santa Catarina Argentina Cayman Islands England United States of America Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Activity Industrial sacks Interest in other companies Sale of products in the foreign market Sale of products in the foreign market Hotel services Manufacture of phytotherapic products Forestry Interest in other companies Interest in other companies Interest in other companies Reforesting Reforesting Ownership Direct/indirect Direct Indirect Direct Direct Direct Direct Direct Direct Direct Direct Direct 12/31/10 100 100 100 100 100 100 100 100 100 89 94 12/31/09 100 100 100 100 100 100 100 100 100 96 97
4.
FIRST-TIME ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
The Company, in the first-time adoption of new accounting pronouncements in convergence with the IFRS, adopts the assumptions defined in CPC 37 (equivalent to IFRS 1) - First-time Adoption of IFRSs and CPC 43 (equivalent to IFRS 1) - First-time Adoption of Technical Pronouncements CPC 15 to CPC 40. The table below describes the main effects of the adoption of new accounting pronouncements in accordance with the accounting practices previously adopted in the Companys balance sheet, changes in shareholders' equity, income statements and cash flows as at January 1, 2009 (transition date) and December 31, 2009:
17
O pe ning balance she et 1.1.2009 C ompany Note 4 Cash and cash equivalents T rade accounts receivable Due to related parties Inventories Other receivables C urre nt asse ts Investment in subsidiaries Property, plant and equipment Intangible assets Biological assets Escrow deposits Deferred tax assets Other receivables Noncurrent assets Borrowings Other payables C urre nt liabilities Borrowings Deferred tax liabilities Reserve for civil, tax and labor provisions Other payables Noncurrent liabilitie s Noncontrolling interests Share holders e quity d) b), d), f) and g) h) b), g) and i) b), g) and i) i) b) and i) c) j) b) h) Reporte d 1,487,420 384,994 469,022 410,983 449,311 3,201,730 605,850 3,700,792 47,241 78,598 311,832 319,926 5,064,239 463,773 464,265 928,038 4,942,423 2,292 64,193 82,008 5,090,916 2,247,015 Adjustme nts 1,200,118 473,368 (46,126) 1,428,320 46,236 (311,832) 2,790,084 362,286 46,236 408,522 2,381,562 Adjuste d 1,487,420 384,994 469,022 410,983 449,311 3,201,730 1,805,968 4,174,160 1,115 1,428,320 124,834 319,926 7,854,323 463,773 464,265 928,038 4,942,423 364,578 110,429 82,008 5,499,438 4,628,577 Reported 1,702,698 633,080 437,092 407,549 3,180,419 4,299,443 47,241 79,793 314,062 321,242 5,061,781 479,262 364,106 843,368 4,971,637 2,292 64,193 85,721 5,123,843 27,974 2,247,015 Adjustme nts 17,832 41,798 59,630 987,034 (46,126) 2,667,454 46,236 (314,062) 3,340,536 17,832 17,832 954,536 46,236 1,000,772 (27,974) 2,409,536 Consolidated Adjusted 1,702,698 650,912 478,890 407,549 3,240,049 5,286,477 1,115 2,667,454 126,029 321,242 8,402,317 497,094 364,106 861,200 4,971,637 956,828 110,429 85,721 6,124,615 4,656,551
b), f), g) and j) c)
18
Balance she et 12.31.2009 Company Note 4 Cash and cash equivalents T rade accounts receivable Due to related parties Inventories Other receivables Curre nt asse ts Investment in subsidiaries Property, plant and equipment Intangible assets Biological assets Escrow deposits Deferred tax assets Other receivables Noncurre nt asse ts Borrowings Dividends payable Other payables Curre nt liabilitie s Borrowings Deferred tax liabilities Reserve for civil, tax and labor provisions Other payables Noncurre nt liabilitie s Noncontrolling inte rests Share holders e quity d) a), b), d), f) and g) b), f), g) and j) c) h) a) b), g) and i) b), g) and i) i) b) and i) c) j) b) h) Reporte d 1,907,152 507,426 157,067 403,090 337,185 3,311,920 649,143 3,468,111 55,098 36,019 149,434 289,094 4,646,899 683,473 57,002 747,434 1,487,909 3,914,754 11,868 94,032 63,238 4,083,892 2,387,018 Adjustme nts 1,129,495 437,219 (48,733) 1,326,757 44,693 (149,434) 2,739,997 (57,002) (57,002) 477,165 44,693 521,858 2,275,141 Adjuste d 1,907,152 507,426 157,067 403,090 337,185 3,311,920 1,778,638 3,905,330 6,365 1,326,757 80,712 289,094 7,386,896 683,473 747,434 1,430,907 3,914,754 489,033 138,725 63,238 4,605,750 4,662,159 Re ported 2,051,526 553,614 431,047 352,928 3,389,115 4,077,402 55,098 37,239 149,533 289,345 4,608,617 694,798 57,002 702,307 1,454,107 3,925,637 13,691 94,032 66,582 4,099,942 56,665 2,387,018 Adjustments 107,514 39,568 147,082 919,490 (48,733) 2,491,169 44,693 (149,533) 3,257,086 107,514 (57,002) 50,512 1,033,822 44,693 1,078,515 (56,665) 2,331,806 C onsolidate d Adjuste d 2,051,526 661,128 470,615 352,928 3,536,197 4,996,892 6,365 2,491,169 81,932 289,345 7,865,703 802,312 702,307 1,504,619 3,925,637 1,047,513 138,725 66,582 5,178,457 4,718,824
Note 4 Shareholders' equity under previous accounting practices Fair value of biological assets Deemed cost of property, plant and equipment land Deferred income tax and social contribution on adjustments Impact of subsidiaries Deferred income tax and social contribution on revaluation reserve Reversal of proposed dividends for approval at ASM Classification of noncontrolling interests in shareholders equity Total adjustments from adopting new pronouncements Shareholders equity under current accounting practices . Attributable to owners of the Company . Attributable to noncontrolling interests b) g) b) and g) f) a) d)
1.1.2009 2,247,015 1,125,353 776,335 (646,574) 1,153,992 (27,544) 2,381,562 4,628,577 4,628,577 -
Shareholders' equity Company 12.31.2009 1.1.2009 2,387,018 987,641 776,335 (599,752) 1,080,762 (26,847) 57,002 2,275,141 4,662,159 4,662,159 2,247,015 1,958,016 1,692,144 (1,241,054) (27,544) 27,974 2,409,536 4,656,551 4,628,577 27,974
Consolidated 12.31.2009 2,387,018 1,709,350 1,692,144 (1,156,508) (26,847) 57,002 56,665 2,331,806 4,718,824 4,662,159 56,665
19
Statement of income Note 4 Net income (loss) under previous accounting practices Change in fair value of biological assets Cost of sales - decrease in fair value of biological assets Equity in subsidiaries Deferred income tax and social contribution on adjustments Total adjustments from adopting new pronouncements Net income under current accounting practices . Attributable to owners of the Company . Attributable to noncontrolling interests
Cash flow - 12.31.2009 Company Adjusted Reported 876,920 (133,353) (126,188) 617,379 837,393 (177,513) (113,405) 546,475
Company 12.31.2009 332,907
Consolidated 12.31.2009 335,862 64,577 (313,244) 84,546 (164,121) 171,741 168,786 2,955
b) b) b)
994 (138,706) (73,230) 46,821 (164,121) 168,786 168,786 -
Note 4 Cash generated from operating activities Cash generated from investing activities Cash generated from financing activities Increase in cash and cash equivalents h) h)
Reported 876,920 (133,353) (126,188) 617,379
Adjustments -
Adjustments (89,904) 89,904 -
Consolidated Adjusted 747,489 (177,513) (23,501) 546,475
The Company did not present any effects resulting from the adoption of the new standards on the statement of comprehensive income because such adoption did not have any impact on this statement. The new accounting pronouncements adopted by the Company that impacted the financial statements as a result of differences in practices in accordance with the standards in effect until December 31, 2008 are described in the notes below: a) ICPC 08/CPC 24 (equivalent to IAS 10) - Accounting for Proposed Dividend Payments Pursuant to the aforementioned accounting pronouncement, only minimum mandatory dividends should be recorded in the financial statements prior to their approval. Managements proposal for payment of dividends in excess of the minimum mandatory amount should be recorded in shareholders' equity, in a specific line item under earnings reserve denominated as proposed dividend reserve to be recorded in liabilities after approved by the Shareholders Meeting. Accordingly, the balance of R$57,002 recorded in liabilities as at December 31, 2009, relating to the Managements proposed additional dividend payment was transferred to shareholders' equity. b) CPC 29 (equivalent to IAS 41) - Biological Assets and Agricultural Produce The Companys biological assets, comprising its forests, previously recorded in property, plant and equipment, must be recorded in a specific line item in noncurrent assets, under biological assets and must be recognized at fair value, less the costs of necessary to prepare the assets for the intended use or sale, instead of historical cost was previously accounting practices. The effect of the first-time adoption of the recognition of biological assets at fair value is recorded in the Companys shareholders' equity under unrealized earnings reserve, with a transfer to retained earnings after realization, to be carried out through depletion. Additionally, fair value corresponds to a temporary difference with the related deferred taxes.
20
The Company has investments in subsidiaries whose subsidiaries have biological assets recorded in their financial statements. The new pronouncements were adopted in the investees financial statements on the same date of adoption of the new pronouncements in the Companys financial statements. c) CPC 39 (equivalent to IAS 32) - Financial Instruments: Presentation The Brazilian Corporate Law previously required the presentation of the reserve for civil, tax and labor provision, net of escrow deposits relating to the reserves recognized. The practice establishes that a financial asset and liability should be offset upon presentation of the financial statements; however, the reserve for civil, tax and labor provision is not included in the classification of financial liability and the gross amounts of escrow deposits and reserve for civil, tax and labor provision must be recorded in the financial statements. d) CPC 26 (equivalent to IAS 1) - Presentation of Financial Statements Noncontrolling interests must be stated as part of equity, by separating the amount attributable to the owners of the Company from noncontrolling interests, differently from their previous classification, in a specific line item of the balance sheet, between noncurrent liabilities and equity. e) CPC 27 (equivalent to IAS 16) - Property, Plant and Equipment Depreciation of property, plant and equipment should be calculated based on the estimated economic useful lives of assets. At the end of 2009 the Company appraised the useful life of its property, plant and equipment and defined new depreciation rates applicable in 2010. The new depreciation rates differ from those previously adopted by the Company. f) ICPC 10/CPC 27 (equivalent to IAS 16) - Interpretation on the First-time Adoption of CPCs 27, 28, 37 and 43 to Property, Plant and Equipment and Investment Property Income tax and social contribution not calculated on the revaluation of remaining assets in the Companys balance sheet in conformity with prevailing accounting practices on the revaluation date must be recognized less the revaluation reserve recorded in shareholders' equity and plus the provision for deferred income tax and social contribution in liabilities. Taxes will be realized when assets are realized, sold or depreciated (if applicable). g) ICPC 10/CPC 27 (equivalent to IAS 16) - Interpretation on the First-time Adoption of CPCs 27, 28, 37 and 43 to Property, Plant and Equipment and Investment Property In the first-time adoption of new technical pronouncements, the Company may elect to apply the deemed cost to certain property, plant and equipment. Accordingly, deemed cost was applied to property, plant and equipment recorded as land, so that these assets reflect their fair value on the date of adoption of new pronouncements, since their historical cost previously recorded significantly different from their fair values. The deemed cost applied to the Companys land was calculated based on the appraisal of assets made by a specialized outside company. The appraisal reports were approved by the Companys Board of Directors. The Companys management does not consider necessary adopting deemed cost for the other types of assets as their carrying amounts are not significantly different from their fair values, as in the case of forest land. The deemed cost determined corresponds to a temporary difference in the recording of related deferred taxes. h) CPC 38 (equivalent to IAS 39) - Financial Instruments: Recognition and Measurement The balance of discounted receivables, previously recorded in current assets, less the balance of trade accounts receivable subject to discount, must be reclassified to borrowings in liabilities as a result of its nature.
21
i) ICPC 09 - Individual Financial Statements, Separated Financial Statements, Consolidated Financial Statements and Equity Method The difference between fair value and account balances recorded in assets and liabilities acquired for Subsidiaries were primarily recorded in Investments in the individual financial statements at previous accounting practices. Such differences were allocated into its each account balance at fair value in the financial statements. j) CPC 32 (equivalent to IAS 12) - Income taxes Deferred income taxes were reclassified in the Financial Statements in order to present the net balance between deferred income taxes assets and liabilities, after analysis of criteria determined in such pronouncement. k) Mandatory exceptions and optional exemptions in adoption the new pronouncements Based on CPC 37 (equivalent to IFRS 1), the first-time adoption of the new pronouncement (January 01, 2009) allows the application of voluntary procedures if there are differences in relation to the accounting practices previously adopted; however, the standard also prohibits the adjustment of certain transactions on a retroactive basis. Managements judgment on optional and mandatory exemptions in the first-time adoption of the new pronouncement is as follows: (i) Measurement of property, plant and equipment and intangible assets at fair value: the Company elected to remeasure its property, plant and equipment at fair value (deemed cost) on the transition date only for land components, and elected to maintain the other classes of assets comprising the balances recorded at historical cost, as previously permitted, in conformity with the new pronouncements; (ii) Measurement of business combinations: the Company elected not to remeasure business combinations occurred prior to date of transition to the new pronouncements; (iii) Measurement of the employee benefit plan: the Company elected not to recognize gains or losses prior to the date of adoption of the new pronouncements on employee benefit plans; (iv) Recognition of accumulated translation differences: the Company already recorded adjustment to accumulated translation differences in the foreign subsidiaries financial statements in the statement of comprehensive income; therefore, it has not adopted the aforementioned exemption; (v) First-time adoption in subsidiaries and jointly controlled entities: the Company does not have jointly controlled entities and adopted the new pronouncements on the same transition date for its subsidiaries. (vi) Accounting for stock-based payment: the Company does not have stock-based payment transactions on the date of transition to the new pronouncements; (vii) Concession and insurance agreements: the Company does not have public utility concession agreements nor insurance agreements included in the scope of exemption on the date of transition to the new pronouncements; (viii) Adjustment of estimates: except for the revision of the useful lives of property, plant and equipment (note 13) the Company did not make any adjustment to the estimates previously used on the date of transition to the new pronouncements;
22
l) Reconciliation of the effects of the balances as at December 31, 2010 after the adoption of the new pronouncements The table below shows a reconciliation of the effects from adopting the new pronouncements on the consolidated balances of income/expenses and shareholders' equity for the period ended December 31, 2010, comparing the amounts that would be calculated prior to the new pronouncements against the corresponding effects:
12.31.2010 Shareholders' equity under previous accounting practices - Consolidated Fair value of biological assets Deemed cost of property, plant and equipment land Deferred income tax and social contribution on adjustments Deferred income tax and social contribution on revaluation reserve Classification of noncontrolling interests in shareholders equity Revaluation of asset's useful life Total adjustments from adopting new pronouncements Shareholders equity under current accounting practices . Attributable to owners of the Company . Attributable to noncontrolling interests 2,577,126 1,849,721 1,663,947 (1,194,647) (26,481) 160,417 124,419 2,577,376 5,154,502 4,994,085 160,417
12.31.2010 Net income (loss) under previous accounting practices - Consolidated Change in fair value of biological assets Cost of sales - decrease in fair value of biological assets Cost of sales - revaluation of asset's useful life Realization of deemed cost - land Deferred income tax and social contribution on adjustments Total adjustments from adopting new pronouncements Net income under current accounting practices . Attributable to owners of the Company . Attributable to noncontrolling interests 383,695 448,625 (308,252) 188,514 (28,197) (102,233) 198,457 582,152 559,776 22,376
5.
CASH AND CASH EQUIVALENTS
In order to comply with its policy for the use of funds, the Company has maintained its short-term investments in lowrisk investments at financial institutions considered by Management as prime banks both in Brazil and abroad, based on the rating disclosed by agencies. The Management has considered those financial assets as cash and cash equivalents due to its immediate liquidity in financial institutions.
23
Cash and banks Short-term investments in local currency Short-term investments in foreign currency
12/31/2010 7,117 2,261,028 671 2,268,816
12/31/2009 9,784 1,686,796 698 1,697,278
Company 1/1/2009 9,804 1,069,095 1,000 1,079,899
12/31/2010 39,880 2,361,210 130,015 2,531,105
12/31/2009 12,356 1,749,387 79,909 1,841,652
Consolidated 1/1/2009 104,586 1,129,547 61,044 1,295,177
Short-term financial investments in local currency, corresponding to Bank Certificates of Deposit (CDBs), are indexed based on the variation of the interbank deposit rate (CDI), at an annual average rate of 10.00% (8.68% as at December 31, 2009), and investments in foreign currency correspond to Time Deposits in US dollar, with maturity up to 90 days and annual average rate of 0.05% (0.03% as at December 31, 2009). The Bank Certificates of Deposits (CDBs) are immediate liquidity without interest penalties, with diary liquidity.
6.
SECURITIES
Comprise Brazilian National Treasury Bills (LFTs), whose yield is linked to fluctuations in the SELIC interest rate. The balance for these securities, which Management classified as available-for-sale, was R$198,222 as at December 31, 2010 (R$209,874 as at December 31, 2009 and R$407,521 as at January 1, 2009). Original maturities are between December 2010 and 2013. However, there is an active market for these securities and their fair value is basically the principal plus the interest originally established therein.
7.
TRADE ACCOUNTS RECEIVABLE

12/31/2010 12/31/2009 524,934 9,775 534,709 (27,283) 507,426 52,939 9.90% 6,812 9,240 5,427 3,874 27,586 481,770 534,709 Company 1/1/2009 12/31/2010 386,495 16,368 402,863 (17,869) 384,994 42,118 10.45% 5,287 10,425 6,761 3,171 16,474 360,745 402,863 584,539 200,186 784,725 (30,764) 753,961 80,823 10.30% 4,211 19,596 6,289 14,642 36,086 703,902 784,725 12/31/2009 525,000 163,665 688,665 (27,537) 661,128 52,939 7.69% 6,812 9,240 5,427 3,874 27,586 635,726 688,665 Consolidated 1/1/2009 386,533 282,610 669,143 (18,231) 650,912 42,118 6.29% 5,287 10,425 6,761 3,171 16,474 627,025 669,143
Trade accounts receivable . Local . Foreign Total trade accounts receivable Allowance for doubtful accounts
584,443 13,045 597,488 (30,689) 566,799 55,987 9.37% 4,211 8,992 4,321 5,368 33,095 541,501 597,488
Past-due % on total portfolio From 4 to 10 days From 11 to 30 days From 31 to 60 days From 61 to 90 days Over 90 days Current Total portfolio
The average collection term of trade receivables is approximately 60 days for domestic market sales and approximately 120 days foreign market sales, and interest is collected after the contractual payment term. As mentioned in note 24, the Company has standards for monitoring credits and past-due trade accounts receivable, and the related risk refers to the possibility of not receiving the amounts resulting from selling transactions. The allowance for doubtful accounts is recognized based on the analysis of the Companys outstanding trade accounts receivable and is sufficient by Management to cover possible losses on outstanding trade accounts receivable. Changes in the allowance for doubtful accounts are as follows:
24
Balance as of January 1, 2009 Current year provision Reversal provision Balance as of December 31, 2009 Current year provision Reversal provision Balance as of December 31, 2010
Company (17,869) (9,707) 293 (27,283) (5,141) 1,735 (30,689)
Consolidated (18,231) (9,707) 401 (27,537) (5,141) 1,914 (30,764)
The balance of the allowance for doubtful accounts recorded by the Company corresponds mainly to trade accounts receivable past due over 90 days. The expense on the recognition of the allowance for doubtful accounts is recorded in Selling expenses in the income statement.
25
8.
RELATED PARTY TRANSACTIONS
a) Balances and transactions with related parties

12/31/2010 12/31/2009 Klabin Argentina (i) Type Balances Current assets Noncurrent assets Current liabilities Noncurrent liabilities Transactions Revenue from sales Purchases Interest expenses on borrowings Guarantee commission expense Expenses on royalties Other income (i) (ii) (iii) (iv) (v) (vi) (vii) Klabin Trade (i) Silent Silent partnership partnership Paran Sta Catarina (ii) and (v) (ii) and (v) Subsidiary 374 5,800 3,936 64,883 Monteiro Aranha S.A. (iii) Shareholder 359 4,359 Klabin Irmos & Cia. (iii),(iv) and (vii) Shareholder 13,242 1,220 1,752 30,620 21,273 Company 1/1/2009
BNDES (vi) Shareholder 326,742 1,364,978 137,378 -
Other (vii)
Total
Total
Total
Subsidiary Subsidiary Subsidiary 7,183 1,314 298,629 651,187 6,412 13,612 9,475 80,782 -
3,996 341 125 3,420 -
325,840 5,216 348,606 1,364,978 666,037 145,665 137,378 30,620 29,052 -
173,030 7,696 375,110 1,533,922 570,560 158,240 151,249 35,890 23,704 125
487,812 7,133 319,619 1,786,682 -
Balance receivable for product sales transactions entered into under usual market prices, terms and conditions, as established by the parties; Purchase of timber made under usual market price, terms and conditions; Licensing for use of brand; Prepaid expense for guarantee commission on balance of BNDES financing due at the rate of 1% semiannually; Supply of seedlings, seeds and services under usual market prices, terms and conditions; Borrowings raised at usual market conditions; Other.
26
12/31/2010 M onteiro Aranha S.A. (i)

Shareholder
12/31/2009
Klabin Irmos & Cia. (i), (ii) and (iv)

Shareholder
BNDES (iii)
Shareholder
Outras (vii)
Total
Total
Total
Type of relationship Balances Current assets Noncurrent assets Current liabilities Noncurrent liabilities Transactions Interest expenses on borrowings Guarantee commission - expense Expenses on royalties Other income
359 4,359 -
13,242 1,220 1,752 30,620 21,273 -
326,742 1,364,978 137,378 -
3,420 -
13,242 1,220 328,853 1,364,978 137,378 30,620 29,052 -
15,963 1,727 311,900 1,533,922 151,249 35,890 23,704 125
18,790 2,125 189,666 1,786,682 -
(i) (ii) (iii) (iv)
Licensing for use of brand; Prepaid expense for guarantee commission on balance of BNDES financing due at the rate of 1% semiannually; Borrowings raised under usual market conditions; Other.
b) Management compensation and benefits Management compensation should be established by the Annual Shareholders' Meeting, in accordance with Brazilian corporate law and the Companys bylaws. Accordingly, the Annual Shareholders Meeting held on April 16, 2010 established the overall amount of the annual compensation payable to the Board of Directors and management at up to R$23.7 million in 2010. The compensation approved for 2009 amounted to R$22 million. The table below shows the compensation payable to the Board of Directors and Management in the period:
Short-term 12/31/2010 12/31/2009 Salary and benefits of Board of Directors and Directors Long-term 12/31/2010 12/31/2009 Company and Consolidated Total 12/31/2010 12/31/3009 (*)
23,563
17,176
459
122
24,022
17,298
(*) Includes an adjustment of the provision for variable compensation made in 2008.
Management compensation includes the fees of the Companys Directors, and the fees and variable compensation of the Companys Officers. Long-term benefits relate to contributions made by the Company to the pension plan. Said amounts are mostly recorded in General and Administrative expenses/income. The Company has no stock-based payment.
9.
INVENTORIES
12/31/2010 104,425 120,304 81,731 6,823 105,556 (2,923) 11,315 427,231 12/31/2009 154,962 104,354 50,752 5,269 85,411 (3,422) 5,764 403,090 Company 1/1/2009 158,045 111,604 56,696 6,054 76,837 (5,236) 6,983 410,983 12/31/2010 137,900 129,450 69,874 6,823 106,864 (2,923) 12,140 460,128 12/31/2009 185,043 111,133 79,989 5,269 86,167 (3,422) 6,436 470,615 Consolidated 1/1/2009 172,009 123,903 97,319 6,054 77,659 (5,236) 7,182 478,890
Finished products Raw materials Timber and logs Fuel and lubricants Maintenance supplies Allowance for losses Other
27
Raw material inventories include paper rolls transferred from paper to packaging units. The expense on the recognition of the allowance for inventory losses is recorded in the income statement under Cost of sales. For the years ended December 31, 2010 and 2009, the net effect of the provision for inventory losses refers to a reversal of R$499 and R$1.238 in the provision, respectively. The Company does not have inventory given as collateral.
10.
RECOVERABLE TAXES
Current assets 57,726 7,654 34,707 17,149 8,738 125,974 5,128 131,102 12/31/2010 Noncurrent assets 63,480 9,599 53,949 4,593 131,621 131,621 Current assets 64,679 21,938 101,682 93,439 9,011 290,749 3,519 294,268 12/31/2009 Noncurrent assets 84,115 12,339 65,968 2,251 164,673 164,673 Current assets 53,126 21,919 104,872 131,285 10,911 322,113 4,856 326,969 Company 1/1/2009 Noncurrent assets 139,677 12,152 51,891 2,794 206,514 206,514
State VAT (ICMS) Tax on revenue (PIS) Tax on revenue (COFINS) Income tax and social contribution Other Subsidiaries Consolidated-IFRS
In view of the expansion plan (MA1100 project, performed over the last years), the Company withheld taxes and contributions arising from purchases of property, plant and equipment, as permitted by legislation for future offset. Based on its budget analyses and projections, the Companys management does not foresee any risks related to the realization of these tax credits. Taxes on revenue (PIS/COFINS) and State VAT (ICMS) shown in the current group are expected to be offset against these same taxes payable for the next 12 months, in accordance with managements projections.
11.
INCOME TAX AND SOCIAL CONTRIBUTION
a) Nature and expected realization of deferred taxes As at December 31, 2010, December 31, 2009 and January 1, 2009, the effects of deferred tax assets and liabilities are as follows:
Reserve for contingencies Interest from enrollment with REFIS (note 16) Write-off of deferred charges (adoption of RTT) Tax loss carryforwards Temporarily nondeductible provisions Noncurrent assets Deferred exchange rate change (*) Fair value of biological assets Reassessment of useful lives of PP&E (adoption of RTT) Deemed cost of property, plant and equipment Asset revaluation reserve Other temporary differences Noncurrent liabilities Net amount in the financial statements 12/31/2010 12/31/2009 34,730 47,167 39,134 33,131 22,436 26,197 20,270 21,868 22,669 118,168 149,434 53,549 11,450 341,394 335,798 64,095 263,954 263,954 26,481 26,847 13,604 418 763,077 638,467 644,909 489,033 Company Consolidated 1/1/2009 12/31/2010 12/31/2009 1/1/2009 37,546 34,730 47,167 37,546 39,134 33,131 30,167 22,436 26,197 30,167 213,717 90 20,369 215,947 30,402 21,869 22,669 30,402 311,832 118,259 149,533 314,062 53,549 11,450 382,620 628,904 581,179 665,725 64,095 263,954 565,742 575,329 575,329 27,544 26,481 26,847 27,544 2,292 15,123 2,241 2,292 676,410 1,353,894 1,197,046 1,270,890 364,578 1,235,635 1,047,513 956,828
(*) Management decided to recognize its foreign exchange translation gains and losses on a cash basis, which generated temporary differences arising from foreign currency fluctuations that will be taxed as foreign currency-denominated assets and liabilities are realized and settled.
28
The Company adopted the Transitional Tax Regime (RTT) established by Law 11941/09, for the tax treatment of income tax and social contribution on the effects arising from the adoption of accounting pronouncements (CPCs), including those adopted in 2008 (CPC 01 to CPC 14), and the new pronouncements beginning January 1, 2009, described in note 4. Management, based on the budget, business plan and budget projection approved by the Board of Directors expects that tax credits derived from temporary differences and tax loss carryforwards will be realized as follows:
12/31/2010 Consolidated 49,874 23,566 32,948 11,871 118,259
2011 2012 2013 2014 and thereafter
Company 49,874 23,566 32,948 11,780 118,168
The projected realization may not materialize if the estimates and uncertainties used reflected in the preparation of these financial statements are different when the balances are realized. The Companys information on the taxes challenged in the courts is disclosed in note 17. b) Reconciliation of tax expenses in income (loss) The reconciliation of current and deferred income tax and social contribution expenses in the income statements for the years ended December 31, 2010 and 2009 are summarized as follows:
12/31/2010 (51,296) (3,297) (54,593) (87,358) (64,095) (5,595) (157,048) Company 12/30/2009 (217,596) (16,644) (234,240) (171,277) 46,821 (124,456) 12/31/2010 (97,248) (3,297) (100,545) (87,053) (64,095) (47,724) 9,586 (189,286) Consolidated 12/30/2009 (227,562) (16,644) (244,206) (173,100) 84,546 (88,554)
Income tax and social contribution expense Prior year adjustments Current income tax and social contribution Tax effects on temporary differences Reassessment of useful lives of PP&E Change in fair value - biological assets (note 14) Reversal of deemed cost - land Deferred income tax and social contribution
29
c) Reconciliation of income tax and social contribution to the amounts resulting from directly applying related tax rates to corporate results
Company 12/30/2009 527,482 (179,344) Consolidated 12/30/2009 504,501 (171,530)
12/31/2010 Income before income tax and social contribution Income tax and social contribution at the rate of 34% Tax effects on permanent differences: Equity in subsidiaries Provision - REFIS (note 17) Reparation from land disappropriation Other efects Difference in taxation - subsidiaries Income tax and social contribution . Current . Deferred Income tax and social contribution expense in statements of income 771,417 (262,282)
12/31/2010 871,983 (296,474)
49,874 767 (211,641) (54,593) (157,048) (211,641)
20,341 (234,240) 19,752 14,795 (358,696) (234,240) (124,456) (358,696)
(15,084) 21,727 (289,831) (100,545) (189,286) (289,831)
(234,240) 19,752 10,156 43,102 (332,760) (244,206) (88,554) (332,760)
30
12.
INVESTMENTS IN SUBSIDIARIES
Klabin Ltd. (*) Klabin Argentina S.A. Centaurus Holdings S.A. (**) Timber Holdings S.A. Silent Partnership "Paran" Silent Partnership "Santa Catarina"
Other
Total
Balance as of January 1, 2009 Acquisition and capital payment Write-off Proceeds Inclusion in property, plant and equipament (****) Equity in subsidiaries Exchange differences on translating foreign operations Balance as of December 31, 2009 Acquisition and capital payment Proceeds Equity in subsidiaries Exchange differences on translating foreign operations Transfers Balance as of December 31, 2010
5,516 (971) 4,545 16,007 20,552
35,330 4,359 (12,169) 27,520 6,012 (2,304) 31,228
168,995 2,699 (***) 1,837 173,531 6,878 (***) (23,836) 156,573
36,186 (195) 35,991 5 1 35,997
1,077,711 (664) (2,281) (***) 46,891 1,121,657 (91,164) (***) 96,369 1,126,862
463,776 (61,297) (***) 6,440 408,919 (47,004) (***) 53,884 415,799
18,454 1,045 (14,491) 1,467 6,475 (1,753) 30 2,195 6,947
1,805,968 3,744 (664) (63,578) (14,491) 59,828 (12,169) 1,778,638 6,878 (138,168) 146,688 (2,274) 2,196 1,793,958
S ummary financial information of subsidiaries in 31 December 2010 Total assets Total liabilities Total shareholders equity Net income
20,552 20,552 16,699
45,476 13,771 31,705 6,012
133,370 32,234 101,136 (23,836)
39,203 3,206 35,997 5
1,719,256 451,595 1,267,661 116,403
606,503 159,124 447,379 54,479
(*) Klabin Trades parent company (**) Includes fair value recognized on the acquisitions of the Company investments. (***) Includes the effects of changes in and realization of the fair value of biological assets (note 14). (****) Merger of Renascena Participaes S.A. substantially to property, plant and equipment, approved at the Extraordinary Shareholders' Meeting of November 30, 2009.
13.
PROPERTY, PLANT AND EQUIPMENT
a) Breakdown of property, plant and equipment

12/31/2010 Company Land Buildings and construction M achinery, equipment and fixtures Construction and facilities in progress Other (*) Consolidated Land Buildings and construction M achinery, equipment and fixtures Construction and facilities in progress Other (*) Cost 970,496 689,929 4,876,071 178,051 342,097 7,056,644 2,030,194 697,943 4,895,304 178,052 343,788 8,145,281 Accumulated depreciation (259,533) (2,698,003) (166,760) (3,124,296) (261,902) (2,711,311) (168,045) (3,141,258) Net 970,496 430,396 2,178,068 178,051 175,337 3,932,348 2,030,194 436,041 2,183,993 178,052 175,743 5,004,023 12/31/2009 Net 970,465 446,791 2,259,288 103,823 124,963 3,905,330 2,051,548 453,069 2,265,898 103,913 122,464 4,996,892 1/1/2009 Net 954,714 443,857 2,498,801 141,870 134,918 4,174,160 2,049,769 452,939 2,509,359 141,911 132,499 5,286,477
(*) Refer to vehicles, furniture and fixtures and IT equipment.
31
The information on property, plant and equipment pledged as collateral in transactions conducted by the Company is disclosed in note 15, and information on insurance coverage of assets is disclosed in note 25. b) Summary of changes in property, plant and equipment:
Company Land 954,714 (3,612) 4,336 15,027 970,465 31 970,496 Buildings and construction 443,857 9,767 (325) (26,677) 26,398 (6,229) 446,791 1,094 (93) (19,345) 1,937 12 430,396 Machinery, equipment and fixtures 2,498,801 (802) (368,933) 139,998 (9,776) 2,259,288 3 (2,446) (183,807) 106,713 (1,683) 2,178,068 Construction and facilities in progress 141,870 107,189 (2,706) (139,683) (2,847) 103,823 183,852 (105,112) (4,512) 178,051 Other (*) 134,918 37,526 (2,198) (17,983) (31,049) 3,749 124,963 73,782 (181) (16,091) (3,569) (3,567) 175,337 Total 4,174,160 154,482 (9,643) (413,593) (76) 3,905,330 258,731 (2,720) (219,243) (9,750) 3,932,348 Consolidated Land 2,049,769 2,712 (3,805) 4,336 (1,455) 2,051,557 6,929 (28,197) (37) (58) 2,030,194 Buildings and construction 452,939 9,858 (326) (26,844) 26,386 (8,944) 453,069 1,103 (93) (19,536) 1,937 (439) 436,041 Machinery, equipment and fixtures 2,509,359 372 (802) (369,895) 139,907 (13,043) 2,265,898 793 (2,478) (184,736) 106,713 (2,197) 2,183,993 Construction and facilities in progress 141,911 107,189 (2,706) (139,683) (2,798) 103,913 183,852 (105,112) (4,601) 178,052 Other (*) 132,499 37,215 (2,011) (18,299) (30,946) 3,997 122,455 73,812 (181) (16,278) (3,501) (564) 175,743 Total 5,286,477 157,346 (9,650) (415,038) (22,243) 4,996,892 266,489 (2,752) (220,550) (28,197) (7,859) 5,004,023
Amount on January 1, 2009 Additions Write-off Depreciation Internal transfers Others Amount on December 31, 2009 Additions Write-off Depreciation Internal transfers Others Amount on December 31, 2010
Amount on January 1, 2009 Additions Write-off Depreciation Internal transfers Others Amount on December 31, 2009 Additions Write-off Depreciation Reversal of deemed cost Internal transfers Others Amount on December 31, 2010
Depreciation for the period was substantially allocated to cost of production. b) Depreciation method The Company reviewed the depreciation rate of its property, plant and equipment at the end of 2009 and changed the estimated individual useful life of the assets included in buildings and construction, machinery and equipment, facilities and improvements for 2010. The estimated useful lives of the assets were calculated with the assistance of a specialized outside company. The table below shows the annual depreciation rates calculated under the straight-line method which were applicable to 2009, as well as the annual depreciation rates reviewed for depreciation beginning January 1, 2010, defined based on the economic useful lives of assets: 2009 rate - % 4 5 to 20 (*) 4 to 20 Restated rate - % 2.86 to 3.33 2.86 to 10 (*) 4 to 20
Buildings and construction Machinery, equipment and facilities Other

(*) Prevailing average rate of 10% in 2009 and 6% in 2010
The change in the depreciation rates should be treated as change in estimate, whose effects should be prospectively recognized. There is no need to recognize depreciation effects retrospectively using the revised rates.
32
Management estimates that, if the revised depreciation rates were effective in 2009, their effect would correspond to a reduction in depreciation of R$180 million compared to a depreciation expense recorded using the rates prevailing in that year. As of December 31, 2010, management conducted a new review of the useful lives of the Companys property, plant and equipment; however, no adjustments to the depreciation rates used were considered necessary. c) Construction and facilities in progress As at December 31, 2010, the balance of construction and facilities in progress relates to the following major projects: (i) evaporation and storage system and refurbishment of the Monte Alegre unit turbogenerator, (ii) technological upgrading of packaging segment plants, (iii) biomass boiler and refurbishment of the Otaclio Costa unit turbogenerator, and (iv) current investments in continuing operations of the Company. d) Adoption of deemed cost As prescribed by ICPC 10/CPC 27 (IAS 16), the Company elected to apply the deemed cost to property, plant and equipment only in respect to line item Land during the first-time adoption of the new accounting pronouncements issued by CPC convergent with IFRSs. Deemed costs were calculated using an appraisal report prepared by a specialized firm, resulting in the addition of R$776,335 to the cost of R$165,169 recorded in property, plant and equipment in the Companys balance sheet and the addition of R$1,692,144 to the cost of R$261,732 recorded in the consolidated balance sheet. Deferred income tax and social contribution liabilities are recognized on the resulting balance. The contra entry to the balance is recorded in shareholders' equity, in Valuation adjustments to equity, net of taxes. e) Impairment of assets The Company did not identify any indicators that as of December 31, 2010 and 2009 its assets might be impaired, based on its analysis of discounted cash flows prepared in accordance with the budget plan approved by Management.
14.
BIOLOGICAL ASSETS
The Companys biological assets comprise the planting and growing of pine and eucalyptus trees for the supply of raw material to produce the pulp used in the paper production process and sales of timber to third parties. As at December 31, 2010, the Company has 213 million hectare (214 million hectare as at December 31, 2009) of planted areas (information not audited by independent auditors), not considering the conservation areas and legal reserve to be maintained to comply with the Brazilian environmental law. The balance of the Companys biological assets consists of the cost to grow forests and the fair value difference on the growing cost so that the total balance of biological assets is recorded at fair value less the costs of necessary to prepare the assets for the intended use or sale, as follows:
Company 1/1/2009 302,967 1,125,353 1,428,320 Consolidated 1/1/2009 751,236 1,916,218 2,667,454
Growing cost of biological assets Fair value of biological assets Noncurrent assets
12/31/2010 390,837 1,004,101 1,394,938
12/31/2009 339,116 987,641 1,326,757
12/31/2010 913,159 1,849,720 2,762,879
12/31/2009 821,387 1,669,782 2,491,169
Measurement of biological assets at their fair values takes into consideration certain estimates, such as: wood price, discount rate, forest harvesting planning, and productivity, which are subject to uncertainties, as any variation would have an impact on actual results.
33
The information on assets pledged as collateral in transactions conducted by the Company is disclosed in note 15, and information on insurance coverage of biological assets and financial risks of forestry operations is disclosed in note 25. a) Assumptions for recognition of the fair value of biological assets Under CPC 29 (IAS 41) Biological Assets and Agricultural Produce, the Company recognizes its biological assets at fair value in accordance with the following assumptions: (i) Eucalyptus forests are recorded at historical cost through their third year and pine forests through their fifth year, based on the Managements understanding that during these periods the historical cost of biological assets approximates their fair values; (ii) After the third and fifth year, eucalyptus and pine forests, respectively, are measured at fair value, which reflects the sales price of the assets less the costs of necessary to prepare the assets for the intended use or sale; (iii) The methodology used to measure the fair value of biological assets corresponds to future cash flows estimated according to the projected productivity cycle of forests, taking into consideration the pricing changes and growth of biological assets; (iv) The discount rate used in cash flows corresponds to the Companys WACC, which is periodically reviewed by Management; (v) The estimated productivity volumes of forests are defined using a stratification method based on the type, genetic material, forest management system, productive potential, rotation and age of forests. This set of characteristics forms an index called Average Annual Growth (AAG), expressed in cubic meters per hectare/year used as a basis to estimate productivity. The harvesting plan of Company forests varies from 6 to 7 years for eucalyptus trees and 14 to 15 years for pine trees; (vi) The prices of biological assets, denominated in R$/cubic meter, are obtained using market price surveys disclosed by specialized firms, and the prices charged by the Company on sales to third parties. The prices are adjusted by deducting the capital costs relating to land, since they refer to assets used to plant forests and other costs to adjust the assets to sale or consumption conditions; (vii) Planting expenses refer to the costs on development of biological assets; (viii) Depletion of biological assets is calculated based on the fair value of biological assets harvested in the period; (ix) The Company decided to revalue the fair value of its biological assets on a quarterly basis since it understands that this time interval is sufficient to prevent any mismatch in the fair value of the biological assets recoded in its financial statements.
34
b) Reconciliation of changes in fair value The changes for the period are as follows:
Company 1,428,320 46,833 (149,390) (100,327) 101,321 1,326,757 65,084 3,134 (220,647) 45,499 175,111 1,394,938 Consolidated 2,667,454 91,929 (332,791) (152,336) 216,913 2,491,169 119,108 41,077 (337,100) 75,455 373,170 2,762,879
Balance as of January 1, 2009 Planting Depletion Change in fair value due to: . Price . Growth Balance as of December 31, 2009 Planting Transfers Depletion Change in fair value due to: . Price . Growth Balance as of December 31, 2010
The depletion of biological assets in the periods was mainly recognized as production costs, after allocating inventories as forests are harvested either to use in production or sale to third parties. During 2009, among the factors that caused the reduction in the balance of biological assets, is the drop in the price of eucalyptus and pine wood in the market equivalent to 7%, in addition to a 5% reduction in the planted areas. With the resumption of economic activities in 2010, total wood volumes that entail the transfer to pulp and paper plants and sale to third parties grew 25% as compared to prior year and average prices are rebounding, which has a positive on the measurement fair value of forests. Additionally, there was an increase in the volume of forests that started to be recognized at fair value based on the assumptions set by the Company, under which eucalyptus and pine forests start to be measured at their fair values from their third year and fifth year, respectively.
35
15.
BORROWINGS
a) Breakdown of borrowings
Company: In local currency . BNDES - Project MA1100 . BNDES - Other projects . Export credit . Working capital . Other In foreign currency (**) . Property, plant and equipment . Export prepayments . Export credit notes Annual interest % Current TJLP + 2.0 and basket (*) + 1.5 TJLP + 0.0 to 4.5 96,6 to 97,0 CDI CDI + 0.6 1.0 to 8.7 254,711 72,031 150,452 17,432 1,140 495,766 3,933 256,850 48,666 309,449 805,215 26,278 10,628 842,121 Noncurrent 1,069,519 295,459 83,333 57,656 1,505,967 37,474 1,990,554 480,981 2,509,009 4,014,976 4,014,976 12/31/2010 Total 1,324,230 367,490 150,452 100,765 58,796 2,001,733 41,407 2,247,404 529,647 2,818,458 4,820,191 26,278 10,628 4,857,097
USD + 6.5 USD + 1.1 to 5.9 USD + 7.5 to 8.1
Subsidiaries Discounted export receivables Other Total Consolidated - IFRS
USD + 1.0 to 1.5 7.2
Company: In local currency . BNDES - Projeto MA1100 . BNDES - Other . Export credit . Working capital . Other In foreign currency (**) . Property, plant and equipment . Export prepayments . Export credit notes
Annual interest % Current TJLP + 2.0 and basket (*) + 1.5 TJLP + 2.2 to 4.5 96.6 to 97.0 of CDI CDI + 0.6 1.0 to 8.7 255,469 54,479 180,690 597 1,001 492,236 1,654 155,545 34,038 191,237 683,473 107,514 11,325 802,312 Noncurrent 1,319,534 214,388 100,000 48,476 1,682,398 22,169 1,674,599 535,588 2,232,356 3,914,754 10,883 3,925,637
12/31/2009 Total 1,575,003 268,867 180,690 100,597 49,477 2,174,634 23,823 1,830,144 569,626 2,423,593 4,598,227 107,514 22,208 4,727,949
USD + 6.5 USD + 1.2 to 6.5 USD + 7.5 to 8.1
USD + 1.0 to 1.5 7.2
36
Company:
Annual interest % Current Noncurrent 1,612,384 174,298 165,039 100,000 39,877 2,091,598 8,274 2,097,587 744,964 2,850,825 4,942,423 29,214 4,971,637
1/1/2009 Total 1,746,212 228,578 338,024 134,210 40,767 2,487,791 10,464 2,143,416 764,525 2,918,405 5,406,196 17,832 44,703 5,468,731
In local currency . BNDES - Projeto MA1100 . BNDES - Other . Export credit . Working capital . Other In foreign currency (**) . Property, plant and equipment . Export prepayments . Export credit notes
TJLP + 2.0 TJLP + 4.5 96.0 to 103.0 of CDI CDI + 0.5 to 106.1 of CDI 1.0 to 8.7
133,828 54,280 172,985 34,210 890 396,193 2,190 45,829 19,561 67,580 463,773 17,832 15,489 497,094
Forex + 6.8 Forex + 2.2 to 6.6 Forex + 7.3 to 8.1
USD + 1.0 to 1.5 7.2
(*) Currency basket basically composed of U.S. dollars. (**) In US dollars.
BNDES
The Company has agreements with BNDES for financing of industrial development projects, such as project MA1100, repayable through January 2017. These borrowings are amortized on a monthly basis, including the corresponding interest. Export prepayments and credit notes Export prepayments and credit notes were raised with prime banks in order to manage working capital and promote the Companys activities. The agreements will be settled by July 2019. Discounted export receivables Refer to realized export notes, with insurance, discounted with financial institutions, to be settled upon realization of the trade accounts receivable linked to the discount. b) Maturities of long-term borrowings The maturity of the Companys borrowings as at December 31, 2010, classified in noncurrent liabilities, is as follows:
Year Amount 2012 788,609 2013 845,309 2014 715,481 2015 684,322 2016 309,842 2017 167,308 2018 208,996 2019 204,225 2020 and thereafter 90,884 Total 4,014,976
37
c) Summary of changes in borrowings
Balance as of January 1, 2009 Borrowings Accrued interest Exchange rate change Amortization and payment of interest Balances as of December 31, 2009 Borrowings Accrued interest Exchange rate change Amortization and payment of interest Balances as of December 31, 2010
Company 5,406,196 403,764 289,319 (790,035) (711,017) 4,598,227 1,016,656 251,240 (143,467) (902,465) 4,820,191
Consolidated 5,468,731 493,446 291,462 (799,359) (726,331) 4,727,949 1,042,934 252,410 (143,958) (1,022,238) 4,857,097
d) Guarantees BNDES borrowings are guaranteed by land, buildings, improvements, machinery, equipment, and plants in Correia Pinto, Santa Catarina state, and Monte Alegre, Paran state, whose carrying amount in December 2010, net of depreciation is R$2,091,353, the financed assets, in addition to escrow deposits and sureties of controlling shareholders. Export credit, export prepayment, and working capital loans are not collateralized. e) Restrictive covenants At the end of the reporting period, the Company and its subsidiaries did not have any financing agreements that contain restrictive covenants requiring the maintenance of certain financial ratios on the transactions under the agreements or the debt payment acceleration. f) Credit limits As at December 31, 2010, the Companys unutilized operating limit available at BNDES is R$724 million (R$512 million at December 31, 2009), to be used after the Company files an investment project to be financed by such facility.
16.
TRADE PAYABLES
The balance of trade payables is broken down as follows:

Company 1/1/2009 186,374 21,773 208,147 Consolidated 1/1/2009 189,940 25,606 215,546
Local currency Foreign currency
12/31/2010 246,110 19,027 265,137
12/31/2010 178,290 7,130 185,420
12/31/2010 247,928 21,911 269,839
12/31/2010 178,858 10,838 189,696
The Companys average collection term from suppliers is approximately 45 days.
38
17.
RESERVE FOR CIVIL, TAX AND LABOR PROVISION
a) Summary of reserve for civil, tax and labor provision Based on the individual analysis of the lawsuits and the opinion of their legal counsel, the Company and its subsidiaries recorded, in noncurrent liabilities, reserves for probable losses, as shown below:
Accrued amount (13,466) (8,646) (16,357) (1,508) (39,977) (55,996) (6,174) (102,147) (102,147) Escrow deposits 13,466 8,646 9,480 1,508 33,100 14,587 47,687 47,687 Net liability (6,877) (6,877) (41,409) (6,174) (54,460) (54,460) 12/31/2010 Escrow deposits 22,676 19,025 41,701 41,701 1,310 43,011
Company: Tax: . PIS/COFINS (taxes on revenue) . CPMF (tax on banking transactions) . Income tax and social contribution . OTHER Labor Civil Subsidiaries: Other Consolidated - IFRS
Company: Tax: . PIS/COFINS (taxes on revenue) . CPMF (tax on banking transactions) . Income tax and social contribution . OTHER Labor Civil Subsidiaries: Other Consolidated - IFRS
Accrued amount (12,695) (8,646) (16,356) (1,929) (39,626) (90,078) (9,021) (138,725) (138,725)
Escrow deposits 12,695 8,646 9,528 1,929 32,798 11,895 44,693 44,693
Net liability (6,828) (6,828) (78,183) (9,021) (94,032) (94,032)
12/31/2009 Escrow deposits 21,138 14,881 36,019 36,019 1,220 37,239
Company: Tax: . PIS/COFINS (taxes on revenue) . CPMF (tax on banking transactions) . Income tax and social contribution . OTHER Labor Cveis
Accrued amount (12,120) (8,646) (12,674) (12,554) (45,994) (58,104) (6,331) (110,429)
Escrow deposits 12,120 8,646 9,528 6,137 36,431 9,805 46,236
Net liability (3,146) (6,417) (9,563) (48,299) (6,331) (64,193)
1/1/2009 Escrow deposits 68,021 10,577 78,598 78,598
Subsidiaries: Other Consolidated - IFRS
(110,429)
46,236
(64,193)
1,195 79,793
39
As at December 31, 2010, the Companys accrued provisions related to tax lawsuits related mainly to challenges regarding the payment of PIS/COFINS on the sale of shares and income tax and social contribution on the inflation adjustments under Law 8200/91, labor lawsuits comprising mostly lawsuits filed by former employees of the Companys plants claiming the payment of labor rights (severance pay, overtime, hazardous duty and health hazard premiums), compensations and joint liability, as well as civil lawsuits related mainly to compensation claims due to property damage and/or pain and suffering resulting from accidents. b) Summary of changes in reserve for civil, tax and labor provisions
Tax (9,365) (1,545) 4,082 (6,828) 440 (489) (6,877) Labor (48,497) (*) (29,686) (78,183) 1,647 35,127 (41,409) Company / Consolidated Civil Net exposure (6,331) (64,193) (2,690) (33,921) 4,082 (9,021) (94,032) (312) 1,775 3,159 37,797 (6,174) (54,460)
Balance as of January 1, 2009 New lawsuits/increases and inflation adjustments (Recognitions)/reversals Balances as of December 31, 2009 New lawsuits/increases and inflation adjustments (Recognitions)/reversals Balance as of December 31, 2010
(*) Resulting substantially from the inflation adjustment of lawsuits and settlement with representatives of the companies, still at approval stage.
During the year ended December 31, 2010, the main change in the balance recorded refers to a reversal due to an unfavorable outcome in a labor lawsuit claiming the payment of rights, resulting in the recognition of the amount payable, in the amount of R$28,107. c) Unaccrued civil, tax and labor risks The Company and its subsidiaries are parties to other tax, labor and civil lawsuits for which the risk of loss was assessed as possible, involving the following approximate amounts: tax - R$455,310 (does not include income tax assessment described below), labor - R$58,022, and civil - R$29,305. Based on the individual analysis of the lawsuits and the opinion of the Companys legal counsel, Management understands that these lawsuits do not need to be accrued because the likelihood of loss is possible. d) Contingent assets As at December 31, 2010, the Company was a plaintiff in lawsuits for which no amount was recognized in its financial statements, based on the accounting principle of prudence. Amounts are recognized only after a final and unappealable decision is rendered. The Companys legal counsel assessed the likelihood of a favorable outcome in some of the lawsuits as possible and probable. These lawsuits include the Companys claim for the full inflation adjustment and interest on inflation adjustment differences of compulsory loans made to Eletrobrs, deemed IPI credits on the purchase of electric power, fuel and natural gas used in production, and the offset of IPI credits paid on exports made while the Federal Governments tax offset program (BEFIEX) was effective. e) Income tax and social contribution assessment/Enrollment with REFIS On July 27, 2007, the Company received an income tax and social contribution assessment notice with respect to divestures made by the Company in 2003. This tax assessment notice, which amounts approximately to R$1,069 million, including principal, fine and interest at December 31, 2009 values, was not recorded as a reserve for tax provision in light of the aforementioned likelihood of loss.
40
The Company joined the Tax Debt Refinancing Program (REFIS) within the legal deadline set out by Law 11941/09 and, as disclosed in the Material Fact of February 18, 2010, included part of the amounts collected in said tax assessment. As at December 31, 2009, the amount included in the REFIS tax installment plan was approximately R$862 million and, after applying the plans rules, it dropped to approximately R$332 million, accrued in the financial statements for the year ended December 31, 2009, and which as at December 31, 2010 represents R$349 million, properly adjusted for inflation. f) Commitments At the end of the reporting period, the Company and its subsidiaries do not have any future material commitments that have not been disclosed in the financial statements.
18.
EQUITY
a) Capital As at December 31, 2010 and December 31, 2009, the Companys subscribed and paid-in capital in the amount of R$1,500,000 is represented by 917,683,296 shares, without par value, held as follows:
12/31/2010 Preferred shares 108,421,640 58,217,715 27,832,549 379,187,029 27,196,800 600,855,733 12/31/2009 Preferred shares 185,859,840 57,218,235 29,788,770 311,080,988 16,907,900 600,855,733
Shareholders BNDESPAR The Bank of New York Department Monteiro Aranha S/A Klabin Irmos & Cia Niblak Participaes S/A Other Treasury shares
Common shares 63,458,605 163,797,753 24,699,654 64,871,551 316,827,563
Common shares 63,458,605 163,797,753 24,699,654 64,871,551 316,827,563
Preferred shares are nonvoting but have priority in capital reimbursement in case of Company liquidation and are paid dividends 10% higher than those paid on common shares. As disclosed in the Market Releases issued by the Company on September 13 and December 3, 2010, in 2010 BNDESPAR sold in the market 77,438,200 preferred shares, reducing its interest in Company shares from 31% at December 31, 2009 to 18% at December 31, 2010. b) Treasury shares The Extraordinary Board of Directors Meeting held on October 13, 2010 approved the buyback of up to 45,278,818 preferred shares of the Company (equivalent to 10% of the outstanding shares of this class on that date) over a 365-day period, to be held in treasury and be subsequently sold or cancelled with no capital reduction. In October and November 2010, the Company purchased, under the share buyback plan described above, 10,288,900 own preferred shares, at the average price of R$4.72 per share, totaling R$48,543, thus increasing the number of shares held in treasury for subsequent sale of cancellation from 16,907,900 to 27,196,800 preferred shares. These treasury shares were bought back as a way to invest available funds. As at December 31, 2010, the price of this class of shares (PN) traded on the So Paulo Stock Exchange was R$5.85.
41
c) Reserves Capital reserve Recognized pursuant to Law 8200/91, capital reserve refers to the effects of the inflation adjustment of capital, while not capitalized, and may be used for share buyback and capital increase purposes. Earnings reserve (i) Legal reserve Pursuant to Brazilian Corporate Law, the Company shall allocate 5% of net income for year that does not exceed 20% of capital to this reserve or, at the Companys discretion, recognize a reserve capped to 30% of capital. The objective of the legal reserve is to ensure the integrity of the Companys capital and can only be utilized to offset losses or increase capital, if determined by the Shareholders Meeting. (ii) Bylaws reserve Comprises the variable portion of net income adjusted as provided for by the law and, pursuant to Company bylaws, from 5% to 75% of net income, to ensure investments in property, plant and equipment and reinforcement of working capital. (iii) Unrealized earnings reserve The Company opted to recognize an unrealized earnings reserve to absorb the balance arising from the measurement at fair value of the Companys biological assets (see note 14), which are recognized in income but have not yet been economically and financially realized. After the actual realization of the biological asset, i.e., the asset depletion, the portion of fair value of the depleted asset is transferred from the unrealized earnings reserve to the statutory allocations of net income earned. The related balance is net of applicable income tax and social contribution. (iv) Reserve of proposed interim dividends Recognized based on Managements proposed dividends on the portion exceeding the mandatory minimum dividend, whose payment is contingent upon approval by the Shareholders Meeting. Revaluation reserves Based on CVM Resolution 27/86, this balance refers to the revaluation of property, plant and equipment in 1988, based on the depreciation or sale of the revalued assets. The related balance is net of applicable income tax and social contribution. d) Dividends Dividends comprise the portion of income earned by the Company that is paid to shareholders as compensation for the capital invested over the years. All shareholders are entitled to dividends proportionally to their ownership interest, as established by the Brazilian corporate law and the Companys bylaws. Company bylaws also grant management the right to distribute interim dividends in advance during the year.
42
The Company entitles its shareholders to mandatory minimum dividends corresponding to 25% of net income. Profit for 2010 was allocated as follows:
Net income for the year (-) Recognition of legal reserves - (5% of net income) (-) Recognition of unrealized earnings reserves (+) Realization of revaluation reserves (+) Realization of unrealized earnings reserves (+) Realization of valuation adjustments to equity Net income adjusted for distribution of dividends 2010 Interim dividends July (paid on July 20, 2010) . R$ 52,13 per thousand registered common shares . R$ 57,34 per thousand registered preferred shares September (paid on October, 2010) . R$ 72,98 per thousand registered common shares . R$ 80,28 per thousand registered preferred shares Company 559,776 (27,989) (296,093) 713 203,451 18,610 458,468
16,515 33,485 23,122 46,879 120,001
2010 Proposed dividends to be approved in the Shareholders Meeting . R$ 72,98 per thousand registered common shares . R$ 80,28 per thousand registered preferred shares
23,398 46,604 70,002 190,003
Total - Dividends paid/proposed for the year (42% of net income adjusted)
The Companys management has proposed, for approval at the Annual Shareholders' Meeting related to 2010, the distribution of supplementary dividends for 2010 totaling R$70,002, corresponding to R$73.85 per thousand registered common share (ON), and R$81,24 per thousand registered preferred share (PN), to be paid within 30 days after being approved by shareholders. The remaining profit for the year not distributed as dividends is allocated to corporate statutory reserves, working capital, and investments, according to the profit allocation proposal submitted to the Annual Shareholders Meeting.
43
In 2009, the Companys management distributed as dividends R$180,037 from profits earned, as follows:
2009 Interim dividends May (paid on May 26, 2009) . R$ 34,20 per thousand registered common shares . R$ 37,62 per thousand registered preferred shares August (paid on August 31, 2009) . R$ 48,80 per thousand registered common shares . R$ 53,68 per thousand registered preferred shares October (paid on November 16, 2009) . R$ 45,27 per thousand registered common shares . R$ 49,80 per thousand registered preferred shares
10,836 21,968 15,461 31,347 14,342 29,081 123,035
2009 Proposed dividends to be approved in the Shareholders Meeting . R$ 59,43 per thousand registered common shares . R$ 65,37 per thousand registered preferred shares
18,829 38,173 57,002
The proposed 2009 supplementary dividends totaling R$57,002 were approved at the Annual Shareholders Meeting held on April 16, 2010 and paid to shareholders on April 30, 2010.
19.
NET REVENUE FROM SALES
The Companys net revenue includes only the sales of its products and is broken down as follows:
Company 12/31/2009 3,480,777 (22,280) (590,222) 2,868,275 2,249,730 618,545 2,868,275 Consolidated 12/31/2009 3,590,924 (27,592) (603,153) 2,960,179 2,247,450 712,729 2,960,179
Gross sales Discounts and rebates Taxes on sales
12/31/2010 4,317,012 (18,397) (731,679) 3,566,936 2,840,423 726,513 3,566,936
12/31/2010 4,431,465 (20,564) (747,584) 3,663,317 2,850,297 813,020 3,663,317
. Domestic market . Foreign market Net revenue from sales
44
20.
EXPENSES/REVENUE BY NATURE
Company 12/31/2010 12/31/2009 (1,265,963) (419,588) (571,827) (113,790) (183,559) (306,200) (2,860,927) 12/31/2010 (1,395,740) (518,334) (556,181) (178,480) (235,116) (372,281) (3,256,132) Consolidated 12/31/2009 (1,136,451) (425,069) (719,496) (173,766) (184,162) (336,280) (2,975,224)
Variable costs (raw materials and consumption supplies) Personnel expenses (*) Depreciation, amortization and depletion Freight Services received Other
(1,523,436) (508,211) (450,251) (144,677) (234,898) (351,628) (3,213,101)
Other, net Land expropriation compensation, net (**) Reserve for civil, tax and labor provision, and other reserves Adjustment of actuarial liability Realization of deemed cost of property, plant and equipment Other 10,660 (8,205) 1,326 3,781 Operating expenses (3,209,320) 54,500 (41,548) (3) 2,471 15,420 (2,845,507) 10,660 (8,205) (28,197) (8,679) (34,421) (3,290,553) 54,500 (41,548) (3) (2,179) 10,770 (2,964,454)
(*) Includes an expense of R$4,010 at December 31, 2010 and R$2,547 at December 31, 2009 related to expenditure on Company personnel training. (**) Compensation for expropriation of a site in Paran due to the construction of a power plant.
21.
FINANCIAL INCOME (EXPENSES)

12/31/2010 Company 12/31/2009 147,425 1,016 15,119 (86,573) 76,987 (289,319) (35,890) (59,712) 751,826 366,905 443,892 12/31/2010 215,949 18,162 (20,949) 213,162 (252,410) (30,620) (20,735) 141,197 (162,568) 50,594 Consolidated 12/31/2009 154,411 1,016 15,208 (86,595) 84,040 (291,462) (35,890) (62,839) 750,350 360,159 444,199
Financial income . Income from short-term investments . Derivatives (NDF) . Other . Exchange gains Financial expenses . Interest on financing . Guarantee . Other . Exchange losses
208,762 18,153 (20,915) 206,000 (251,420) (30,620) (18,654) 141,197 (159,497) 46,503
Financial income, net
22.
EARNINGS PER SHARE
Basic earnings per share are calculated by dividing net income attributable to the holders of Company common and preferred shares by the weighted average number of common and preferred shares outstanding in the year. Diluted earnings per share correspond to basic earnings per share as the Company has no potentially dilutive common or preferred shares.
45
As commented in note 18, in October and November 2010 the Company bought back 10,288,900 own preferred shares, of which 6,366,500 in October and 3,922,400 in November, increasing the number of shares held in treasury to 27,196,800 from 16,907,900. This transaction impacts the weighted average of the number of preferred shares held in treasury used in the 2010 calculation, which is calculated as follows:
Number of treasury shares in 2010 Jan to Sep Oct Nov and Dec 16,907,900 x 9/12 + 23,274,400 x 1/12 + 27,196,800 x 2/12
Weighted average of treasury preferred shares 2010 19,153,258
The reconciliation of net income for the period ended December 31, 2010 and 2009 and the amounts used for the calculation of basic and diluted earnings per share is as follows:
Common shares Denominator Weighted average number of shares Treasury shares Weighted average number of shares 316,827,563 316,827,563 316,827,563 33,12%
Company / Consolidated 12/31/2010 Preferred shares (*) Total 600,855,733 (19,153,258) 581,702,475 581,702,475 66,88% 917,683,296 (19,153,258) 898,530,038 898,530,038 100.00%
% of shares Numerator Net income attributable to each class of shares (R$) Weighted average number of shares Earnings per share - basic and diluted (R$)
185,397,811 316,827,563 0.5852
374,378,189 581,702,475 0.6436
559,776,000 898,530,038
Common shares Denominator Weighted average number of shares Treasury shares Weighted average number of shares 316,827,563 316,827,563 316,827,563 33.03%
Company / Consolidated 12/31/2009 Preferred shares (*) Total 600,855,733 (16,907,900) 583,947,833 583,947,833 66.97% 917,683,296 (16,907,900) 900,775,396 900,775,396 100.00%
% of shares Numerator Net income attributable to each class of shares (R$) Weighted average number of shares Earnings per share - basic and diluted (R$)
55,750,016 316,827,563 0.1760
113,035,984 583,947,833 0.1936
168,786,000 900,775,396
(*) Preferred shares are entitled to dividends 10% higher than those paid to common shares.
46
23.
OPERATING SEGMENTS
a) Criteria for identification of operating segments The Company segmented its operating structure taking into consideration the way Management manages the business. Management defined the following operating segments: (i) Forestry segment: includes planting and growing pine and eucalyptus trees to supply of the Companys paper plants and sell timber (logs) to third parties in the domestic market. (ii) Paper segment: substantially includes the production and sale of cardboard, kraftliner and recycled paper rolls in the domestic and foreign markets. (iii) Conversion segment: includes the production and sale of corrugated cardboard boxes and boards, and industrial bags in the domestic and foreign markets. b) Consolidated information on operating segments
Consolidated 12/31/2010 Forestry Sales, net: .Domestic market .Foreign market Revenue from sales to third parties Intersegment revenue Total sales, net Change in fair value of biological assets Cost of sales Gross profit Operating expenses Income from operations before financial income (expenses) Sale of products (tonne) .Domestic market .Foreign market .Intersegment Sale of timber (tonne) .Domestic market .Intersegment 273,310 273,310 433,789 707,099 448,625 (753,524) 402,200 (81,828) Papers 1,030,650 720,162 1,750,812 855,209 2,606,021 (1,966,806) 639,215 (262,762) Conversion 1,545,780 92,858 1,638,638 10,377 1,649,015 (1,311,184) 337,831 (178,967) Corporate/ eliminations 557 557 (1,299,375) (1,298,818) 1,290,411 (8,407) (25,893) Total 2,850,297 813,020 3,663,317 3,663,317 448,625 (2,741,103) 1,370,839 (549,450)
320,372
376,453
158,864
(34,300)
821,389
3,113,132 6,828,064 9,941,196 129,516 5,243,263 1,490,704 3,752,559
537,401 522,254 713,359 1,773,014 179,783 3,823,136 617,824 3,205,312
623,907 32,022 2,549 658,478 67,825 807,530 129,484 678,046
(715,908) (715,908) (6,828,064) (6,828,064) 8,473 2,387,314 4,868,729 (2,481,415)
1,161,308 554,276 1,715,584 3,113,132 3,113,132 385,597 12,261,243 7,106,741 5,154,502
Investments in the current year Total assets Total liabilities Shareholders equity
47
Consolidated 12/31/2009 Forestry Sales, net: .Domestic market .Foreign market Revenue from sales to third parties Intersegment revenue Total sales, net Change in fair value of biological assets Cost of sales Gross profit Operating expenses Income from operations before financial income (expenses) Sale of products (tonne) .Domestic market .Foreign market .Intersegment Sale of timber (tonne) .Domestic market .Intersegment 168,241 168,241 378,703 546,944 64,577 (645,965) (34,444) 13,419 Papers 794,993 609,167 1,404,160 722,654 2,126,814 (1,797,057) 329,757 (315,579) Conversion 1,283,767 103,562 1,387,329 8,132 1,395,461 (1,151,039) 244,422 (167,085) Corporate/ eliminations 449 449 (1,109,489) (1,109,040) 1,095,790 (13,250) 3,062 Total 2,247,450 712,729 2,960,179 2,960,179 64,577 (2,498,271) 526,485 (466,183)
(21,025)
14,178
77,337
(10,188)
60,302
1,891,578 6,042,839 7,934,417 97,556 5,057,281 1,346,001 3,711,280
432,316 519,480 634,895 1,586,691 123,732 3,682,850 458,515 3,224,335
556,120 35,866 1,735 593,721 25,959 724,088 123,846 600,242
(636,630) (636,630) (6,042,839) (6,042,839) 2,028 1,937,681 4,754,714 (2,817,033)
988,436 555,346 1,543,782 1,891,578 1,891,578 249,275 11,401,900 6,683,076 4,718,824
Investments in the current year Total assets Total liabilities Shareholders equity
Corporate refers basically to the corporate units expenses not apportioned among the other segments, and eliminations refers to adjustments of intersegment transactions. The information related to financial income (expenses) and income tax and social contribution was not disclosed in segment reporting because the Companys management does not use said data on a segmented basis, which is managed and analyzed on a consolidated basis. c) Information on net revenue from sales The Companys consolidated net revenue for the year ended December 31, 2010 generated by sales to foreign market customers amounts to R$813 million (R$712 million in 2009). The table below shows the distribution of net revenue from sales in 2010 and 2009 per country:
Consolidated 12/31/2010 Total revenue Country Argentina China Singapore Spain Nigeria Germany Italy United States of America Sundry others (R$ million) 262 84 27 9 3 1 1 1 425 813 % of revenue Total net 7.2% 2.3% 0.7% 0.2% 0.1% 0.0% 0.0% 0.0% 11.6% 22% Total revenue (R$ million) 204 51 35 16 19 30 34 32 292 713 Consolidated 12/31/2009 % of revenue Total net 6.9% 1.7% 1.2% 0.6% 0.6% 1.0% 1.1% 1.1% 9.9% 24%
48
The Companys consolidated net revenue for the year ended December 31, 2010 generated by sales to domestic market customers amounts to R$2.850 billion (R$2.248 billion in 2009). As at December 31, 2010, in the papers segment, a single customer of cardboards accounts for approximately 21% of the Company net revenue, corresponding approximately to R$773 million (R$601 million as at December 31, 2009). The remaining customer base is diluted as none of the other customers individually accounts for a material share of the Companys gross revenue (above 10%).
24.
RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
a) Risk management The Company and its subsidiaries conduct transactions with financial instruments that are intended to meet their operational needs and reduce exposure to financial risks, mainly credit and investment of funds, market risks (foreign exchange and interest rates) and liquidity risks, to which the Company understands that it is exposed based on the nature of its business and corporate structure. Management of these risks is implemented through strategies defined and approved by the Companys Management in conjunction with control systems and specific limits. Transactions are not conducted with financial instruments for speculative purposes. In addition, Management assesses on a timely basis the Companys consolidated position and monitors the financial income (expenses) obtained based on the analysis of future projections to ensure that the business plan is fulfilled and the risks to which the Company is exposed are monitored. The risks to which the Company is exposed are described below: Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument fluctuates due to changes in market prices. Market prices are affected by two types of risks: interest rate risk and currency risk. The financial instruments affected by market risks are short-term investments, trade receivables, trade payables, borrowings, available-for-sale instruments, and derivatives. (i) Currency risk The Company has foreign market transactions which are exposed to market risks arising from fluctuations in foreign exchange rates. Any fluctuation in the exchange rate can increase or reduce these balances. Breakdown of exposure to foreign exchange fluctuation:
Consolidated 1/1/2009 154,700 236,500 (16,500) (2,963,000) (2,588,300)
Cash and short-term investments Trade accounts receivable Trade accounts payable Export prepayments (financing) Net exposure
12/31/2010 162,000 184,800 (19,000) (2,829,086) (2,501,286)
12/31/2009 82,400 54,200 (7,100) (2,445,801) (2,316,301)
As at December 31, 2010, the balance by maturity for this net exposure is as follows:
2018 thereafter (434,270)
Year amount
2011 7,724
2012 (449,926)
2013 (530,851)
2014 (404,628)
2015 (329,705)
2016 (226,795)
2017 (132,835)
Total (2,501,286)
49
The Company has not entered into derivative contracts to hedge against long-term currency exposure. However, in order to hedge against this net liability exposure, the Company has a plan for projected exports sales of US$500 million receivable annually that, if received, would exceed the flow of payments for the respective liabilities, thus offsetting the effect of this currency exposure in the future. (ii) Interest rate risk The Company has loans indexed to the TJLP and CDI and short-term investments indexed to CDI and SELIC fluctuations, which expose these assets and liabilities to fluctuations in interest rates as shown in the interest sensitivity schedule shown below. The Company does not have swap or hedging derivative contracts to hedge against this risk. However, market interest rates are constantly monitored to assess the need to hedge against the risk of volatility in these rates. The Company understands that the high cost associated with entering into transactions at fixed interest rates in the Brazilian macroeconomic scenario justifies its option for floating rates. Breakdown of exposure to interest rate risk:
Consolidated 1/1/2009 1,129,549 407,521 1,537,070 (472,234) (1,974,790) (2,447,024)
Short-term investments - CDI Short-term investments - Selic Asset exposure Financing - CDI Financing - TJLP Liability exposure
12/31/2010 2,361,210 198,222 2,559,432 (251,217) (1,691,720) (1,942,937)
12/31/2009 1,749,387 209,874 1,959,261 (281,287) (1,843,870) (2,125,157)
Credit risk and investment of funds Credit risk is the risk that the counterparty of a business does not meet an obligation established by a financial instruments or contract with a customer, thus resulting in a financial loss. The Companys operating activities (mainly those related to trade accounts receivable) and investment, including deposits in banks and financial institutions, foreign exchange transactions, short-term investments and other contracted financial instruments, are exposed to credit risks. As at December 31, 2010, the maximum amount exposed to credit risks is the carrying amount of trade accounts receivable stated in note 7. The investment amount exposed to credit risks corresponds substantially to the amounts of short-term investments and securities, described in notes 5 and 6. The credit risks to which the Company is exposed are managed based on specific rules for acceptance of customers, credit ratings, and individual limits for exposure by customer, which are periodically reviewed. Monitoring of past-due trade receivables is carried out in a timely manner. Additionally, there are specific analyses and rules approved by Management for investment in financial institutions highly rated by rating agencies, and the types of investments offered in financial markets, which seek to invest funds conservatively and safely. Liquidity risk The Company monitors the risk of lack of funds through a recurring liquidity planning tool, in particular by means of financing with financial institutions, so that it has funds available to meet its obligations. The table below shows the maturity of the financial liabilities contracted by the Company, in consolidated, and the related amounts include principal and future interest levied on transactions calculated based on rates and ratios prevailing as at December 31, 2010:
50
Trade accounts payable Borrowings Total
2011 269,839 1,000,008 1,269,847
2012 947,041 947,041
2013 973,982 973,982
2014 811,627 811,627
2015 748,344 748,344
2016 341,349 341,349
2017 thereafter Total 269,839 734,395 5,556,746 734,395 5,826,585
The projection for the following years, which was approved by the Board of Directors, shows the Companys ability to meet the obligations, if required. The Companys equity structure consists of its net debt, consisting of borrowings and financing (note 15) less the cash, cash equivalents, and securities (notes 5 and 6), and equity, including the balance of issued capital and all recognized reserves. The Companys net indebtedness is broken down as follows:
Consolidated 1/1/2009 1,702,698 (5,468,731) (3,766,033) 4,656,551 (0.81)
Cash, cash equivalents and securities Loans and financing Net indebtedness Shareholders equity Debt to asset ratio
12/31/3010 2,729,327 (4,857,097) (2,127,770) 5,154,502 (0.41)
12/31/2009 2,051,526 (4,727,949) (2,676,423) 4,718,824 (0.57)
b) Financial instruments
The Companys main financial instruments are classified as follows:

Borrowings, short-term investments, payables and receivables The financial instruments included in this group comprise balances arising from transactions related to the Companys activities, such as accounts receivable, trade accounts payable, accounts and taxes payable, as well as Company borrowings and short-term investments. All these instruments are recognized at their nominal amounts plus contractual charges and interest, when applicable, and related expenses and income are recognized in income for the year. Financial asset measured at fair value through income Up to December 31, 2008, the Company contracted simple, unleveraged financial instruments to manage short-term currency risks (NDF). These transactions were settled in the first quarter of 2009 and resulted in a financial gain of R$1,016. Beginning 2009, the Company has not carried out new derivative transactions. Available-for-sale financial assets The Company classified its securities that comprise National Treasury Bills (LFT) (note 6) as financial assets available for sale, because they can be traded in the future. These securities are recorded at fair value. Due to this assets liquidity, its fair value approximates its amortized cost, and thus it has no impact on the Companys equity. As at December 31, 2010, the balance of these securities on a consolidated basis is R$198,222. c) Sensitivity analysis The Company presents below sensitivity schedules for currency and interest rate risks to which the Company is exposed considering that any effects would impact future earnings, based on the exposures presented as at December 31, 2010.
51
(i) Currency exposure The Company has assets and liabilities indexed to a foreign currency in the balance sheet as at December 31, 2010, and for sensitivity analysis purposes adopted as scenario I the future market rate in effect at the time these statements were prepared. In scenario II and scenario III this rate was adjusted by 25% and 50%, respectively. It is important to note in the maturity schedule disclosed in note 15 that most of the Companys borrowings will not mature in 2010. Therefore, exchange fluctuations will have no impact on cash resulting from this analysis. On the other hand, the Companys exports should already be impacted by currency appreciation during the year. The sensitivity analysis of exchange fluctuations is being calculated in relation to net currency exposure (basically advances on foreign exchange contracts) and the effects of these scenarios were not considered in relation to export sales, which as mentioned previously tend to offset any possible future exchange loss. Accordingly, the schedule below simulates the effects of currency fluctuations on future income (loss).
Balance as of 12/31/2010 Scenario I US$ Assets Cash and cash equivalents Trade accounts receivable, net of allowance for doubtful accounts and discounted export receivables Liabilities Trade accounts payable Borrowings Total effect on net income - R$ 97,227 Rate 1.71 R$ income (loss) 4,259 Scenario II Rate 2.14 R$ income (loss) 46,066 Scenario III Rate 2.57 R$ income (loss) 87,874
110,911 11,403 1,697,927
1.71 1.71 1.71
4,858 (499) (74,369) (65,751)
2.14 2.14 2.14
52,550 (5,403) (804,478) (711,265)
2.57 2.57 2.57
100,241 (10,306) (1,534,586) (1,356,777)
(ii) Interest rate exposure Short-term investments and borrowings, except those linked to the TJLP, are linked to CDI. For sensitivity analysis purposes, for the projection of scenario I the Company used the same rates prevailing on dates close to the end of the reporting period for Selic and CDI, given their proximity. These rates were adjusted by 25% and 50% for the projection of scenarios II and III, respectively. Accordingly, the table below simulates the effects of interest rate fluctuations on income (loss):
Balance as of 12/31/2010 Scenario I R$ Short-term investments Bank Certificates of Deposit (CDBs) Treasury Bills (LTFs) Borrowings Export credit Working capital BNDES Total effect on net income - R$ CDI Selic CDI CDI TJLP 2,361,210 198,222 150,452 100,765 1,691,720 Rate 12.22% 12.22% 12.22% 12.22% 6.00% R$ income (loss) 288,540 24,223 (18,385) (12,313) (101,503) 180,562 Scenario II Rate 15.28% 15.28% 15.28% 15.28% 7.50% R$ income (loss) 360,793 30,288 (22,989) (15,397) (126,879) 225,816 Scenario III Rate 18.33% 18.33% 18.33% 18.33% 9.00% R$ income (loss) 432,810 36,334 (27,578) (18,470) (152,255) 270,841
52
25.
INSURANCE
As at December 31, 2010, the Company has insurance against fire, lightening, explosion, electrical damages, and windstorm covering all its industrial, administrative, and storage facilities. The Company also has general civil liability and D&O, auto, and multiperils insurance for its chattels, amounting to R$1,769,240. In view of the nature of its activities, the location of forests in different areas, and the preventive actions taken against fire and other risks, the Company, rather than contracting insurance against damage caused to forests, opted to adopt protection policies which, historically, have proven to be highly effective and caused no harm to the Companys activities or financial position. Management understands that the Companys structure of management of the financial risks related to forest activities is appropriate to guarantee its continuity as a going concern.
26.
EMPLOYEE BENEFITS AND PENSION PLAN
The Company and its subsidiaries offer their employees life insurance, healthcare, and pension plan benefits. These benefits are accounted for on an accrual basis and stop being granted after severance. a) Pension Plan Klabins pension fund Plano Prever, administered by Ita Vida e Previdncia S.A., was created in 1986 as a defined benefit plan. Beginning 1998, the plan was restructured, resulting in the transformation of the plan into a defined contribution plan. In November 2001, a new pension plan was created, the Plano de Aposentadoria Complementar Klabin - PACK, also administered by Ita Vida e Previdncia S.A. and structured as a PGBL (plan/life insurance plan). The participants of the Prever plan were offered the option to migrate to the new plan. The Company does not assume any responsibility to pay minimum benefits to retirees in either of the plans. In 2010, the Company contributed with R$4,493 to the plans (R$4,029 in 2009); these contributions were accounted for as expenses in profit or loss. Total plan participants as at December 31, 2010 was 2,058 (1,867 as at December 31, 2009), of whom 2,017 are active employees and 41 are retirees. b) Healthcare Pursuant to the agreement entered into the Union of the So Paulo State Pulp and Paper Workers, the Company pays for a lifetime healthcare plan (Hospital SEPACO, principal plan) for its former employees who retired up to 2001, and their dependents (spouses and children until they reach majority age), while no new beneficiaries are allowed. The Company understands that said healthcare benefit is a defined benefit plan in accordance with accounting practices adopted in Brazil and thus recognizes a provision for the estimated actuarial liability, calculated by an independent actuary for a total of 1,060 beneficiaries, amounting to R$32,805 (R$24,600 as at December 31, 2009), in noncurrent liabilities, in line item Other payables and provisions.
53
The reconciliation of the actuarial liability of the reporting periods is broken down as follows:
Consolidated 12/31/2009 24,597 (2,655) 2,476 182 24,600
Present value of obligation Benefits paid Interest cost Gain (loss) actuarial Actuarial liabilities
12/31/2010 24,600 (2,772) 2,995 7,982 32,805
The following economic and biometrical assumptions were used: nominal discount rate of 10.75% per year (11.25% as at December 31, 2009), nominal growth rate of variable medical costs of 12.5% per year in 2011, reaching 6.5% per year in 2023, long-term inflation of 4.5% per year (4.5% per year as at December 31, 2009), and biometrical mortality table RP 2000. The amount recognized as expense for 2010 totaled R$8,205 (R$3 in 2009). This plan does not assets for disclosure.
27.
EVENTS AFTER THE REPORTING PERIOD
By the end of the reporting period the Company did not have events after the reporting period that should be reported in an explanatory or reported in its financial statements. According to the minutes of the Extraordinary Board of Directors Meeting disclosed to the market February 2, 2011, Mr. Fabio Schvartsman was elected Managing Director of the Company, replacing Mr. Reinoldo Poernbacher.
54
___________________________________________________________________________
KLABIN S.A. CNPJ 89.637.490/0001-45 Corporation
___________________________________________________________________________
BOARD OF DIRECTORS Chairman Pedro Franco Piva Directors Armando Klabin Celso Lafer Daniel Miguel Klabin Israel Klabin Lilia Klabin Levine Miguel Lafer Olavo Egydio Monteiro de Carvalho Paulo Srgio Coutinho Galvo Filho Rui Manuel de Medeiros DEspiney Patrcio Roberto Luiz Leme Klabin Vera Lafer
___________________________________________________________________________
AUDIT COMMITTEE BOARD Antonio Gonalves de Oliveira Antonio Marcos Vieira Santos Joo Alfredo Dias Lins Lus Eduardo Pereira de Carvalho Wolfgang Eberhard Rohrbach
___________________________________________________________________________
EXECUTIVE COMMITTEE Fabio Schvartsman Antonio Sergio Alfano Paulo Roberto Petterle Francisco Cezar Razzolini Arthur Canhisares Managing Director Financial, Planning, and Investor Relations Officer Operating Officer Project, Industrial Technology, and Supplies Officer Monte Alegre, Angatuba and Recycled Paper Industrial Officer of the Paper Business Unit
___________________________________________________________________________
Pedro Guilherme Zan Controller CRC-1SP 168.918/O-9 Angel Alvarez Nez Accountant TC - CRC-1SP 157.878/O-3
2010-2996
55

DFP2010INGLES

Enviado por

Dados do documento

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

DFP2010INGLES

Enviado por

Direitos autorais:

Formatos disponíveis

(Convenience Translation into English from the Original Previously Issued in Portuguese)

Klabin S.A. and Subsidiaries

Deloitte Touche Tohmatsu Auditores Independentes

2,268,816 198,222 566,799 312,598 427,231 125,974 13,242 31,469 3,944,351

1,697,278 209,874 507,426 157,067 403,090 290,749 15,963 30,473 3,311,920

1,079,899 407,521 384,994 469,022 410,983 322,113 18,790 108,408 3,201,730

2,531,105 198,222 753,961 460,128 131,102 13,242 39,387 4,127,147

1,841,652 209,874 661,128 470,615 294,268 15,963 42,697 3,536,197

1,295,177 407,521 650,912 478,890 326,969 18,790 61,790 3,240,049

5,216 89,388 131,621 122,651

7,696 80,712 164,673 105,183

7,133 124,834 206,514 97,589

1,220 90,698 131,621 124,458

1,727 81,932 164,673 111,393

2,125 126,029 206,514 103,903

1,793,958 11,542 3,932,348 1,394,938 7,655 7,489,317 11,433,668

1,778,638 11,542 3,905,330 1,326,757 6,365 7,386,896 10,698,816

1,805,968 8,690 4,174,160 1,428,320 1,115 7,854,323 11,056,053

11,542 5,004,023 2,762,879 7,655 8,134,096 12,261,243

11,552 4,996,892 2,491,169 6,365 7,865,703 11,401,900

8,700 5,286,477 2,667,454 1,115 8,402,317 11,642,366

805,215 265,137 36,677 92,612 21,864 349,340 47,037 1,617,882

683,473 185,420 47,284 68,260 65,162 331,685 49,623 1,430,907

463,773 208,147 38,115 58,666 131,511 27,826 928,038

842,121 269,839 40,669 37,013 93,542 2,392 349,340 55,997 1,690,913

802,312 189,696 50,399 1,622 68,859 2,202 331,685 57,844 1,504,619

497,094 215,546 42,152 764 59,661 1,816 44,167 861,200

4,014,976 644,909 102,147 59,669 4,821,701

3,914,754 489,033 138,725 63,238 4,605,750

4,942,423 364,578 110,429 82,008 5,499,438

4,014,976 1,235,635 102,147 63,070 5,415,828

3,925,637 1,047,513 138,725 66,582 5,178,457

4,971,637 956,828 110,429 85,721 6,124,615

1,500,000 84,491 51,404 2,403,120 1,083,423 (128,353) 18 4,994,085 4,994,085 11,433,668

1,500,000 84,491 52,117 2,001,024 1,104,337 (79,810) 4,662,159 4,662,159 10,698,816

1,500,000 84,491 53,472 1,953,918 1,116,506 (79,810) 4,628,577 4,628,577 11,056,053

Total liabilities and shareholders equity

12/31/2010 3,663,317 448,625 (2,741,103) 1,370,839 (300,153) (214,876) (34,421) (549,450) -

206,000 (159,497) 46,503

76,987 366,905 443,892

213,162 (162,568) 50,594

84,040 360,159 444,199

(54,593) (157,048) (211,641) 559,776 559,776 -

(234,240) (124,456) (358,696) 168,786 168,786 0.1760 0.1936

(100,545) (189,286) (289,831) 582,152 559,776 22,376 0.5852 0.6436

(244,206) (88,554) (332,760) 171,741 168,786 2,955 0.1760 0.1936

Company 12/31/2009 168,786 (12,169) 156,617 156,617 -

12/31/2010 582,152 (2,304) 579,848 557,472 22,376

Consolidated 12/31/2009 171,741 (12,169) 159,572 156,617 2,955

Capital 1,500,000 1,500,000

Legal 143,022 143,022

Unrealized 1,292,291 1,292,291

Bylaws 518,605 518,605

(91,546) (115,195) 656 41,965 1,128,171

(134,742) (68,709) 145,605 150,488 1,220,813

(57,002) 70,002 70,002

Capital 1,500,000 1,500,000

Legal 143,022 143,022

Unrealized 1,292,291 1,292,291

Bylaws 518,605 518,605

(206,741) 42,621 1,128,171

(203,451) 296,093 1,220,813

(57,002) 70,002 70,002

12/31/2010 4,617,497 454,382 (3,227) 5,068,652 (1,152,569) (1,711,570) (2,864,139) 2,204,513

168,995 2,699 () 1,837 173,531 6,878 () (23,836) 156,573

463,776 (61,297) () 6,440 408,919 (47,004) () 53,884 415,799