LATAM AIRLINES GROUP SA AND SUBSIDIARIES INTERIM CONSOLIDATED FINANCIAL

141 Pages·2017·1.19 MB·English

LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2018

CONTENTS

Interim Consolidated Statement of Financial Position
Interim Consolidated Statement of Income by Function
Interim Consolidated Statement of Comprehensive Income
Interim Consolidated Statement of Changes in Equity
Interim Consolidated Statement of Cash Flows - Direct Method
Notes to the Interim Consolidated Financial Statements

CLP - CHILEAN PESO
ARS - ARGENTINE PESO
US$ - UNITED STATES DOLLAR
THUS$ - THOUSANDS OF UNITED STATES DOLLARS
COP - COLOMBIAN PESO
BRL/R$ - BRAZILIAN REAL
THR$ - THOUSANDS OF BRAZILIAN REAL
MXN - MEXICAN PESO
VEF - STRONG BOLIVAR
Contents of the notes to the consolidated financial statements of LATAM Airlines Group S.A. and
Subsidiaries.

Notes Page

1 - General information ....................................................................................................................... 1
2 - Summary of significant accounting policies .................................................................................. 5
2.1. Basis of Preparation ................................................................................................................. 5
2.2. Basis of Consolidation ........................................................................................................... 11
2.3. Foreign currency transactions ................................................................................................ 12
2.4. Property, plant and equipment ............................................................................................... 13
2.5. Intangible assets other than goodwill ..................................................................................... 14
2.6. Goodwill ................................................................................................................................. 14
2.7. Borrowing costs ..................................................................................................................... 15
2.8. Losses for impairment of non-financial assets ....................................................................... 15
2.9. Financial assets ....................................................................................................................... 15
2.10. Derivative financial instruments and hedging activities ...................................................... 16
2.11. Inventories ............................................................................................................................ 17
2.12. Trade and other accounts receivable .................................................................................... 17
2.13. Cash and cash equivalents .................................................................................................... 18
2.14. Capital .................................................................................................................................. 18
2.15. Trade and other accounts payables ....................................................................................... 18
2.16. Interest-bearing loans ........................................................................................................... 18
2.17. Current and deferred taxes ................................................................................................... 18
2.18. Employee benefits ................................................................................................................ 19
2.19. Provisions ............................................................................................................................. 19
2.20. Revenue recognition ............................................................................................................. 19
2.21. Leases ................................................................................................................................... 21
2.22. Non-current assets (or disposal groups) classified as held for sale ...................................... 21
2.23. Maintenance ......................................................................................................................... 21
2.24. Environmental costs ............................................................................................................. 22
3 - Financial risk management .......................................................................................................... 22
3.1. Financial risk factors .............................................................................................................. 22
3.2. Capital risk management ........................................................................................................ 36
3.3. Estimates of fair value ............................................................................................................ 36
4 - Accounting estimates and judgments ........................................................................................... 38
5 - Segmental information ................................................................................................................. 41
6 - Cash and cash equivalents ........................................................................................................... 46
7 - Financial instruments ................................................................................................................... 48
7.1. Financial instruments by category .......................................................................................... 48
7.2. Financial instruments by currency ......................................................................................... 50
8 - Trade, other accounts receivable and non-current accounts receivable ....................................... 51
9 - Accounts receivable from/payable to related entities .................................................................. 54
10 - Inventories ................................................................................................................................. 55
11 - Other financial assets ................................................................................................................. 56
12 - Other non-financial assets .......................................................................................................... 57
13 - Non-current assets and disposal group classified as held for sale ............................................. 58
14 - Investments in subsidiaries ........................................................................................................ 59
15 - Intangible assets other than goodwill ......................................................................................... 62
16 - Goodwill .................................................................................................................................... 63
17 - Property, plant and equipment ................................................................................................... 65
18 - Current and deferred tax ............................................................................................................ 72
19 - Other financial liabilities ............................................................................................................ 77
20 - Trade and other accounts payables ............................................................................................ 86
21 - Other provisions ......................................................................................................................... 88
22 - Other non-financial liabilities .................................................................................................... 90
23 - Employee benefits ...................................................................................................................... 92
24 - Accounts payable, non-current .................................................................................................. 94
25 - Equity ......................................................................................................................................... 94
26 - Revenue ................................................................................................................................... 100
27 - Costs and expenses by nature .................................................................................................. 100
28 - Other income, by function ....................................................................................................... 102
29 - Foreign currency and exchange rate differences ...................................................................... 102
30 - Earnings per share .................................................................................................................... 111
31 - Contingencies ........................................................................................................................... 112
32 - Commitments ........................................................................................................................... 120
33 - Transactions with related parties ............................................................................................. 124
34 - Share based payments .............................................................................................................. 125
35 - Statement of cash flows ........................................................................................................... 128
36 - The environment ...................................................................................................................... 129
37 - Events subsequent to the date of the financial statements ....................................................... 130
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS
As of As of
June 30, December 31,
Note 2018 2017
ThUS$ ThUS$
Unaudited
Current assets
Cash and cash equivalents 6 - 7 773,889 1,142,004
Other financial assets 7 - 11 514,937 559,919
Other non-financial assets 12 290,178 221,188
Trade and other accounts receivable 7 - 8 1,187,476 1,214,050
Accounts receivable from related entities 7 - 9 1,535 2,582
Inventories 10 247,625 236,666
Tax assets 18 103,176 77,987
Total current assets other than non-current assets
(ordisposalgroups)classifiedasheldforsaleorasheldfor
distribution to owners 3,118,816 3,454,396
Non-current assets (or disposal groups) classified as
held for sale or as held for distribution to owners 13 28,475 291,103
Total current assets 3,147,291 3,745,499
Non-current assets
Other financial assets 7 - 11 86,582 88,090
Other non-financial assets 12 206,587 220,807
Accounts receivable 7 - 8 5,638 6,891
Intangible assets other than goodwill 15 1,430,913 1,617,247
Goodwill 16 2,310,528 2,672,550
Property, plant and equipment 17 9,887,245 10,065,335
Tax assets 18 16,332 17,532
Deferred tax assets 18 301,014 364,021
Total non-current assets 14,244,839 15,052,473
Total assets 17,392,130 18,797,972

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial
statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

LIABILITIES AND EQUITY
As of As of
June 30, December 31,
LIABILITIES Note 2018 2017
ThUS$ ThUS$
Current liabilities Unaudited
Other financial liabilities 7 - 19 1.390.660 1.300.949
Trade and other accounts payables 7 - 20 1.534.476 1.695.202
Accounts payable to related entities 7 - 9 379 760
Other provisions 21 3.316 2.783
Tax liabilities 18 5.245 3.511
Other non-financial liabilities 22 2.689.570 2.823.963
5.623.646 5.827.168
Liabilities included in disposal groups
classified as held for sale 13 8.822 15.546
Total current liabilities 5.632.468 5.842.714
Non-current liabilities
Other financial liabilities 7 - 19 6.116.921 6.605.508
Accounts payable 7 - 24 535.383 498.832
Other provisions 21 330.110 374.593
Deferred tax liabilities 18 887.523 949.697
Employee benefits 23 113.599 101.087
Other non-financial liabilities 22 120.523 158.305
Total non-current liabilities 8.104.059 8.688.022
Total liabilities 13.736.527 14.530.736
EQUITY
Share capital 25 3.146.265 3.146.265
Retained earnings 25 445.903 475.117
Treasury Shares 25 (178) (178)
Other reserves (15.593) 554.885
Parent's ownership interest 3.576.397 4.176.089
Non-controlling interest 14 79.206 91.147
Total equity 3.655.603 4.267.236
Total liabilities and equity 17.392.130 18.797.972

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial
statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF INCOME BY FUNCTION

For the 6 months ended For the 3 months ended
June 30, June 30,
Note 2018 2017 2018 2017
ThUS$ ThUS$ ThUS$ ThUS$
Unaudited
Revenue 26 4,870,093 4,504,729 2,256,258 2,144,822
Cost of sales (3,939,523) (3,600,645) (1,919,940) (1,742,880)
Gross margin 930,570 904,084 336,318 401,942
Other income 28 217,797 246,454 101,096 128,912
Distribution costs (325,022) (339,459) (154,387) (165,994)
Administrative expenses (379,043) (412,831) (180,028) (207,918)
Other expenses (209,286) (198,210) (96,519) (109,095)
Other gains/(losses) 27,675 (1,130) 31,131 (14,706)
Income from operation activities 262,691 198,908 37,611 33,141
Financial income 24,927 42,224 12,740 19,300
Financial costs 27 (177,469) (198,333) (91,252) (102,545)
Foreign exchange gains/(losses) 29 (78,072) (10,529) (78,883) (45,902)
Result of indexation units 3,089 47 655 35
Income (loss) before taxes 35,166 32,317 (119,129) (95,971)
Income (loss) tax expense / benefit 18 (39,271) (81,507) 7,452 (28,019)
NET INCOME (LOSS) FOR THE PERIOD (4,105) (49,190) (111,677) (123,990)
Income (loss) attributable to owners
of the parent (19,665) (72,481) (113,554) (138,038)
Income (loss) attributable to
non-controlling interest 14 15,560 23,291 1,877 14,048
Net income (loss) for the year (4,105) (49,190) (111,677) (123,990)
EARNINGS PER SHARE
Basic earnings (losses) per share (US$) 30 (0.03243) (0.11953) (0.18726) 0.22763
Diluted earnings (losses) per share (US$) 30 (0.03243) (0.11953) (0.18726) 0.22763

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial
statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 6 months ended For the 3 months ended
June 30, June 30,
Note 2018 2017 2018 2017
ThUS$ ThUS$
Unaudited
NET INCOME (LOSS) (4,105) (49,190) (111,677) (123,990)
Components of other comprehensive income
that will not be reclassified to income before taxes
Other comprehensive income, before taxes,
gains (losses) by new measurements
on defined benefit plans 25 (1,973) 4,027 125 1,426
Total other comprehensive income
that will not be reclassified to income before taxes (1,973) 4,027 125 1,426
Components of other comprehensive income
that will be reclassified to income before taxes
Currency translation differences
Gains (losses) on currency translation, before tax 29 (610,051) (36,015) (581,392) (145,137)
Other comprehensive income, before taxes,
currency translation differences (610,051) (36,015) (581,392) (145,137)
Cash flow hedges
Gains (losses) on cash flow hedges before taxes 19 32,509 (7,329) 15,390 (2,450)
Other comprehensive income (losses),
before taxes, cash flow hedges 32,509 (7,329) 15,390 (2,450)
Total other comprehensive income
that will be reclassified to income before taxes (577,542) (43,344) (566,002) (147,587)
Other components of other comprehensive
income (loss), before taxes (579,515) (39,317) (565,877) (146,161)
Income tax relating to other comprehensive income
that will not be reclassified to income
Income tax relating to new measurements
on defined benefit plans 18 505 (874) (20) 166
Accumulate income tax relating
to other comprehensive income
that will not be reclassified to income 505 (874) (20) 166
Income tax relating to other comprehensive income
that will be reclassified to income
Income tax related to cash flow hedges in other
comprehensive income 192 2,005 719 2,725
Income taxes related to components of other
comprehensive incomethat will be reclassified to income 192 2,005 719 2,725
Total Other comprehensive income (578,818) (38,186) (565,178) (143,270)
Total comprehensive income (loss) (582,923) (87,376) (676,855) (267,260)
Comprehensive income (loss) attributable to
owners of the parent (588,488) (108,585) (669,979) (274,918)
Comprehensive income (loss) attributable to
non-controlling interests 5,565 21,209 (6,876) 7,658
TOTAL COMPREHENSIVE INCOME (LOSS) (582,923) (87,376) (676,855) (267,260)

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial
statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of the parent
Change in other reserves
Actuarial gains
or losses on
Currency Cash flow defined benefit Shares based Other Total Parent's Non-
Share Treasury translation hedging plans payments sundry other Retained ownership controlling Total
Note capital shares reserve reserve reserve reserve reserve reserve earnings interest interest equity
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Equity as of January 1, 2018 3,146,265 (178) (2,131,590) 18,140 (10,926) 39,481 2,639,780 554,885 475,117 4,176,089 91,147 4,267,236
Total increase (decrease) in equity
Comprehensive income
Gain (losses) 25 - - - - - - - - (19,665) (19,665) 15,560 (4,105)
Other comprehensive income - - (600,689) 33,277 (1,411) - (568,823) - (568,823) (9,995) (578,818)
Total comprehensive income - - (600,689) 33,277 (1,411) - - (568,823) (19,665) (588,488) 5,565 (582,923)
Transactions with shareholders
Dividens 25 - - - - - - - - - - - -
Increase (decrease) through
transfers and other changes, equity 25-34 - - - - - (1,420) (235) (1,655) (9,549) (11,204) (17,506) (28,710)
Total transactions with shareholders - - - - - (1,420) (235) (1,655) (9,549) (11,204) (17,506) (28,710)
Closing balance as of
June 30, 2018 (Unaudited) 3,146,265 (178) (2,732,279) 51,417 (12,337) 38,061 2,639,545 (15,593) 445,903 3,576,397 79,206 3,655,603

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of the parent
Change in other reserves
Actuarial gains or
Currency Cash flow losses on defined Shares based Other Total Parent's Non-
Share Treasury translation hedging benefit plans payments sundry other Retained ownership controlling Total
Note capital shares reserve reserve reserve reserve reserve reserve earnings interest interest equity
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Equity as of January 1, 2017 3,149,564 (178) (2,086,555) 1,506 (12,900) 38,538 2,640,281 580,870 366,404 4,096,660 88,644 4,185,304
Total increase (decrease) in equity
Comprehensive income
Gain (losses) 25 - - - - - - - - (72,481) (72,481) 23,291 (49,190)
Other comprehensive income - - (33,990) (5,264) 3,150 - (36,104) - (36,104) (2,082) (38,186)
Total comprehensive income - - (33,990) (5,264) 3,150 - - (36,104) (72,481) (108,585) 21,209 (87,376)
Transactions with shareholders
Dividens 25 - - - - - - - - - - - -
Increase (decrease) through
transfers and other changes, equity 25-34 (3,299) - - - - 739 (274) 465 - (2,834) (20,521) (23,355)
Total transactions with shareholders (3,299) - - - - 739 (274) 465 - (2,834) (20,521) (23,355)
Closing balance as of
June 30, 2017 (Unaudited) 3,146,265 (178) (2,120,545) (3,758) (9,750) 39,277 2,640,007 545,231 293,923 3,985,241 89,332 4,074,573

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial statements.
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD
For the periods ended
June 30,
Note 2018 2017
ThUS$ ThUS$
(Unaudited)
Cash flows from operating activities
Cash collection from operating activities
Proceeds from sales of goods and services 4.923.137 5.025.079
Other cash receipts from operating activities 48.217 29.562
Payments for operating activities
Payments to suppliers for goods and services (3.343.545) (3.398.364)
Payments to and on behalf of employees (983.543) (960.316)
Other payments for operating activities (127.326) (112.785)
Income taxes refunded (paid) (40.145) (71.703)
Other cash inflows (outflows) 35 (15.745) (41.968)
Net cash flows from operating activities 461.050 469.505
Cash flows used in investing activities
Cash flows used in the purchase ofnon-controlling interest 40.248 6.124
Other cash receipts from sales of equity or debt
instruments of other entities 1.937.709 1.403.463
Other payments to acquire equity
or debt instruments of other entities (1.931.759) (1.372.576)
Amounts raised from sale of property, plant and equipment 215.904 19.706
Purchases of property, plant and equipment (277.352) (189.483)
Purchases of intangible assets (44.830) (38.004)
Interest received 5.836 10.338
Other cash inflows (outflows) 35 5.757 (1.583)
Net cash flow from (used in) investing activities (48.487) (162.015)
Cash flows from (used in) financing activities 35
Amounts raised from long-term loans 382.663 908.748
Amounts raised from short-term loans 205.000 100.000
Loans repayments (588.714) (785.901)
Payments of finance lease liabilities (371.982) (160.546)
Dividends paid (63.359) (43.394)
Interest paid (181.451) (181.865)
Other cash inflows (outflows) (6.890) 71.722
Net cash flows from (used in) financing activities (624.733) (91.236)
Net increase (decrease) in cash and cash equivalents
before effect of exchanges rate change (212.170) 216.254
Effects of variation in the exchange rate on cash and cash equivalents (155.945) (15.028)
Net increase (decrease) in cash and cash equivalents (368.115) 201.226
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6 1.142.004 949.327
CASH AND CASH EQUIVALENTS AT END OF PERIOD 6 773.889 1.150.553

The accompanying Notes 1 to 37 form an integral part of these interim consolidated financial
statements.