Professional Documents
Culture Documents
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1.
For the services described above, PwC received the following values in 2011: (i) services of
audit and limited review of the restated financial statements for the fiscal year ended 2010:
R$441.9 thousand; (ii) for services related to the implementation of ERP: R$180 thousand. The
expenses in 2011 with the contracted services that are not audit or limited review of financial
statements amounted to 28.9% of total fees paid to PwC.
2.3
(i)
(ii)
In the Board of Directors meeting held on April 8th of 2011, has been approved the replacement of
PricewaterhouseCoopers Auditores Independentes with Deloitte Touche Tohmatsu Auditores
Independentes, as of the first quarter of fiscal year 2011, as the Companys independent auditors.
2009
172,641
440,294
404,193
234,590
68,388
87,420,577
1.97
0.78
2011
736,140
1,288,603
677,592
337,170
92,177
125,656,724
5.86
0.73
EBITDA
EBITDA is a non-accounting measurement adopted by the Company, reconciled with its financial
statements, in accordance with CVM Instruction 01/2007, when applicable. The Company has calculated
its EBITDA as net earnings before financial results, the effect of depreciation of assets and equipment
used for rental, and the amortization of intangible assets. EBITDA is not a measure recognized under BR
GAAP, IFRS or US GAAP. It is not significantly standardized and cannot be compared to measurements
with similar names provided by other companies. The Company has reported EBITDA because it is used
to measure its performance. EBITDA should not be considered in isolation or as a substitute for "net
income" or "operating income" as indicators of operational performance or cash flow, or for the
measurement of liquidity or debt repayment capacity.
divided by average Invested Capital. ROIC is not a measure recognized under BR GAAP, and it is not
significantly standardized and cannot be compared to measurements with similar names provided by
other companies.
Annual ROIC: (Annual Operational Income (30% Income Tax Rate) + remuneration from affiliates) /
Average Invested Capital of the last thirteen months.
For the Company, invested capital is defined as the sum of its own capital (net equity or shareholders
equity) and capital from third parties (total loans and other liabilities that carry interest, from banks or
not), both being average capital from the beginning to the end of the period considered.
510,538
501,006
182,561
173,029
932,708
498,821
433,887
97,929
21.0%
12.3%
(1)
(2)
(3)
Effective tax rate on operational Income before financial result, and since 2011 theoretical rate of 30%.
Comprising shareholders equity.
Comprising total loans and other liabilities that carry interest.
On April 24, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, totalizing on the amount of R$4,613,384.16 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2010"). There was issuance of 371,448 new common stocks.
Also on April 24, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$892,862.10 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2011"). There was issuance of 44,421 new common stocks.
On April 2nd, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, totalizing on the amount of R$112,171.78 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Plano Especial TopMills). There was issuance of 47,131 new common stocks.
On February 28th, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$4,227.33 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes- Programa de Outorga de Opes 1/2010"). There was issuance of 339 new common stocks.
On January 24th, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$398,490.09, due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2010"). There was issuance of 32,583 new common stocks.
Debentures Issuance
On August 15, 2012, the Company held its second issuance, in two series of simple debentures, non
convertible into shares, unsecured, public offering object with limited placement efforts, pursuant to CVM
Instruction 476.
27,000 debentures were issues, each with a nominal value of R$ 10,000.00, of which:
i) 16,094 debentures of the first series, amounting to R$ 160.9 million, with maturity date on August 15,
2017, not subject to monetary adjustment. The nominal value of the first series debentures will be
amortized in two annual installments starting on the fourth year of the issuance, and the interest paid
semi-annually and equal to surtax of 0.88% per annum of 100% of DI accrued variation.
8
ii) 10,906 debentures of the second series, amounting to R$ 109.1 million, with maturity date on August
15, 2020, subject to monetary adjustment by the accrued variation of the IPCA. The nominal value of the
second series debentures will be amortized in three annual installments starting on the sixth year of the
issuance, and the interest paid annually and equal to 5.50% per annum of the above mentioned
monetarily adjusted amount.
The credit risk agency Moody's assigned rating Aa3.br for the Company's corporate credit in national
currency, as well as for their debentures.
The net proceeds of the Offering will be fully used to: (a) finance investments to be made by the
Company, (b) payment of Company debts, and (c) general corporate purposes of the Company.
For more information on the securities issued by the Company, see item 18 from this Reference Form.
Other Events
th
On June 21 , 2012 was approved, in the Board of Directors Meeting, the removal of 4,000 registered
common shares with no par value, held in treasury, as a result of the appraisal rights extended to
dissenting shareholders in connection with the resolutions passed at the shareholders meeting held on
th
April 20 , 2012.
3.4
Rules on retention
of profits
2009
2010
2011
In provision introduced on
February 8, 2010, the Companys
bylaws provide that up to 75% of
the adjusted net income for the
year could be allocated to the
expansion reserve, as long as the
recorded
amount
in
such
reservation does not exceed 80%
of its capital.
Arrangements for
distribution
of dividends
Frequency of
dividend
distribution
Restrictions to
dividend
distribution
No
restrictions.
The
debt
contained in the clause of
prepayment to the payment of
dividends in an amount greater
than 50% of the adjusted net
income for the year. was settled
in 2011.
2009
2010
2011
64,969
98,119
87,568
% of dividend distributed
25.0%
25.0%
25.0%
Rate in return
39.6%
15.8%
12.5%
16,956
28,113
25,347
16,242
24,530
21,892
52,146
71,527
63,742
03/12/10
04/19/11
4/20/2012
04/28/2010
04/29/2011
4/30/2012
7,780
2,713
947
2,943
4,548
25,400
24,400
1,685
(in R$ thousands)
3.5
3.6
The dividends presented in the chart of item 3.5 were declared in the net income of the fiscal year.
10
3.7
Debt
552,463
736,140
75.0%
410,946
(35,179)
375,767
() EBITDA .........................................................................
238,156
157.8%
Collateral
Floating Guarantee
Unsecured obligations
Total
3.9
32,924
144,813
177,737
Maturity
Between 1 and 3 Between 3 and 5
years
years
(in R$ thousands)
33,607
4,513
118,352
179,786
151,959
184,299
11
Over 5 years
Total
7,081
31,387
38,468
78,125
474,338
552,463
4.
RISK FACTORS
4.1
Risk factors
a.
to the Company
The Company may not be able to fully implement its business strategy
One of the Companys key objectives over the next few years is to sustain its accelerated annual growth
rate. The continued growth depends on several factors, many of which are beyond the Companys
control. In particular, the Companys strategy for the expansion of its divisions is based on the assumption
that the Brazilian construction, industrial, and oil and gas sectors will experience significant growth in
coming years, driven, to a large extent, by public investments aimed at improving Brazils infrastructure
for energy, sanitation, public transportation and housing, as preparing the country to host the 2014 FIFA
World Cup and the 2016 Olympic Games, meeting the objectives set by the Brazilian governments PAC
program, the Brazilian governments low income housing program and exploiting natural resources
recently discovered in the pre-salt strata, among others. If these investments are not made, the Company
would expect a significant decrease in the demand for its products and services and would not be able to
implement its growth strategy satisfactorily.
The Companys organic growth strategy also includes substantial geographic expansion of its operations
through the opening of new branches. The Company may not be able to successfully expand its
operations to additional Brazilian cities and regions for a number of reasons, including shortages of
qualified workers, lack of reliable suppliers in such cities and regions, competition from local players, and
difficulties in securing market acceptance of its brands. Although the geographic expansion occurs
satisfactorily, the Company will be subjected to risks from the local economy of these new regions.
Additionally, the Companys future performance will depend on its ability to manage the rapid and
significant growth of its operations. The Company cannot guarantee that it will be able to manage its
growth successfully, or that this growth will not have an adverse effect on its existing business. If the
Company is unable to manage its growth, it may lose its leading market position, which could have a
material adverse effect on its financial condition, results of operations and the negotiation price of its
shares.
The Company provides solutions for companies that operate in a number of industries,
primarily the residential, commercial and heavy construction sectors and the oil and gas
sectors. As a result, the Companys business is exposed to risks that are similar to those
faced by companies that operate in these and in other sectors.
The Heavy Construction division offers customized solutions to companies involved in the implementation
of large infrastructure projects, while the Jahu division provides services to residential and commercial
construction companies. The main sectors served by the Industrial Services division include the oil and
gas, chemicals and petrochemicals, heavy construction, pulp and paper, naval, and mining industries,
among others, as the products offered by the equipment of the Rental division are leased to companies
operating in a broad number of industrial segments. Consequently, the Companys financial condition and
results of operations are directly linked to the growth and performance of these several industries, and
the Company is exposed to many of the risks faced by companies operating in these industries.
Events that may negatively affect these industries in such sectors, including macroeconomic factors,
adverse climate conditions, deterioration of the Brazilian social conditions, decreases in public investment,
changes to laws and regulations that adversely affect these industries, credit restrictions, supplier
problem, reductions in client purchasing power, and difficulties in the management of the clients
business, among others, are beyond the managements control and may cause an adverse material effect
on the Companys operations and results.
Adverse conditions in the financial and credit markets, or the Companys failure to secure
financing on adequate terms, may adversely affect its ability to run its business or to
implement its strategy.
13
The implementation of the Companys expansion strategy will demand additional investments and require
additional capital, which may not result in an equivalent increase in its operating income. In addition, the
Company may face an increase in operating costs as a result of other factors, as shortages of raw
materials, equipment or skilled labor, increased equipment costs and increased competition in the
segments in which it operates. The Company may need to raise additional funds through securities
offerings, including offerings of its shares or debt instruments, or through credit financings, in order to
meet its future capital needs. The Company may not be able to secure such funds on favorable terms, or
at all.
The Company future capital needs will be determined by a number of factors, including the rate of growth
of its revenues, the cost and significance of future acquisitions, and the expansion of its business
operations. The Company may need to increase its cash flow and/or seek alternative funding by entering
into strategic partnership agreements. Efforts to increase its cash flow by means of an increase in sales,
reduction in operating expenses, introduction of more efficient processes for the collection of receivables,
or inventory cuts may not be successful. In addition, the Company may not be able to raise funds to
finance the Companys operations on favorable terms, in which case it may be unable to take advantage
of future opportunities, to react to an increase in competition, or to meet its existing debt obligations. Any
of the events mentioned above could have a material adverse effect on its financial condition, operation
results and the negotiation price of its shares.
The current funding lines from the Company represented, on December 31 of 2011, a short-term debt of
R$71.4 million, and long-term debt of R$339.5 million. Pursuant to the terms of the Companys existing
financing agreements it must comply with certain conditions which restrict, among other things, its ability
to incur additional debt, pay dividends and carry out capital reductions. As a result of these restrictions,
the Company may have difficulty in securing additional financing to run its operations.
In addition, some of the Companys clients are dependent on the credit availability to finance their
investments. A scenario of credit shortages and high interest rates may adversely affect its clients ability
to fund their projects and, consequently, purchase the Companys services, which may have a material
adverse effect on its financial condition and results of operations.
The Company is also exposed to the fact that counterparts to its financing agreements may be prevented
from fulfilling their obligations toward the company, should they go bankrupt or into receivership due to a
sharp decrease in their liquidity levels, so great that such institutions may be prevented from fulfilling
their obligations. The Companys difficulty in the credit scarcity may also adversely affect its suppliers.
Therefore, should the Companys financial counterparts or suppliers be unable to satisfactorily meet their
obligations under the terms of the Companys existing agreements, the Company may need to secure
alternative financing and/or approach alternative suppliers in order to meet its own obligations toward its
clients. Such events could also lead to litigation with its partners or clients, which could have a significant
adverse impact on its reputation, operation and financial condition.
The Companys growth may be adversely affected if it fails to identify and complete strategic
acquisitions. Difficulties in the integration of acquisitions could adversely affect its results of
operations.
The Company operates in a fragmented market, where the credit access is limited. The Company
believes, therefore, that its sector will go through a process of consolidation over the next few years,
which may significantly change the existing competitive landscape. The Company believes that identifying
and executing strategic acquisitions is one way it could successfully implement its growth strategy and
quickly and efficiently expand its operations and geographic footprint. However, this strategy could be
adversely affected if the Company fails to identify suitable acquisition opportunities and/or fail to execute
such acquisitions on favorable terms. In addition, the Company may not be able to integrate companies it
acquires into its operations within the timeframe and in the manner determined by its management. Any
such failure could have an adverse effect on the rate of return on the Companys investment, preventing
from taking full advantage of the potential synergies of any such acquisition and result in an adverse
effect on its financial condition and results of operations.
14
The loss of members of the Companys management team may have a material adverse
effect on its operations.
The Companys current market position and its ability to maintain this position is largely dependent on the
skill of its highly experienced management team. None of the Companys executive officers are subject to
long-term employment contracts or non-compete agreements. The Company cannot guarantee that it will
be able to retain its current executive officers or hire other qualified professionals. The loss of a few of the
Companys senior executive officers, or its failure to attract and retain experienced professionals, may
adversely affect its business.
The Companys expansion strategy could be adversely affected if it is unable to hire qualified
professionals and provide training to its staff.
As part of the execution of its expansion strategy, the Company will need to hire new qualified
professionals active in the most various business sectors. However, it faces significant competition in the
hiring of qualified personnel from other providers of engineering and industrial services and there can be
no assurance that it will be able to attract the number of professionals necessary to implement its
expansion plan in the desired timeframe. In addition, the Company may face difficulties in retaining its
current staff if it is unable to preserve its corporate culture and offer competitive compensation packages.
The Company believes that the hiring and retention of skilled labor is a critical factor for business success
and its growth strategy. The Companys financial condition and results of operations could be adversely
affected if it fails to implement this strategy.
The Companys operations have already been interrupted in the past by labor issues, and the
Company cannot guarantee that such interruptions will not occur in the future.
As of December 31, 2011, approximately 3.9% of the Companys employees were members of labor
unions, primarily in the civil construction and trade industries. The Company has entered into collective
bargaining agreements with each of these unions, which agreements are renegotiated on an annual basis.
The renegotiation of these agreements could become more difficult as unions campaign for salary
increases on the basis of the growth of its operations. During the last three years, the operations of
Industrial Services division have been interrupted during negotiation of new collective bargaining
agreements. In addition, the Companys employees could become involved in the suspension of the
operations of its clients. Strikes affecting any of the Companys divisions could have an adverse impact on
its operations, including the cost of its projects and its ability to make timely delivery.
The Companys success depends, to a large extent, on the quality and safety of its services
and products.
The Companys success depends, to a large extent, on the quality and safety of the machinery and
equipment that it uses in the provision of its services or that are rented to its clients. If the Companys
products are in any way defective, incorrectly assembled or unsafe, if they cause any kind of accident or
delay in its clients operations, or if they do not meet the expected quality and safety standards, the
Companys relationships with its clients and partners could suffer, its reputation and strength of its brand
could be adversely affected, and the Company could lose market share, besides being exposed to
administrative proceedings and lawsuits in connection with any potential failures of its machinery or
equipment and incur significant expenses. The occurrence of any of these factors could adversely affect
the Companys business, financial condition and results of operations.
Proceeds from the Companys insurance policies may not be sufficient to cover damages
resulting from a contingent event.
The Company cannot guarantee that proceeds from its insurance policies will be sufficient to cover the
damages resulting from any event covered by such policies. Accordingly, certain risks may not be covered
under the terms of its insurance policies (such as war, fortuitous events, force majeure and interruption of
15
certain operations). Therefore, if any non-covered event occurs, the Company may incur additional
expenses to rebuild or refurbish its buildings, or to repair or replace its equipment. Furthermore, the
Company cannot guarantee that the proceeds from its insurance policies will be sufficient to cover the
damages caused by any event for which its insurance policies provide coverage. There can be no
assurance that the Company will be able to renew its insurance policies on favorable or acceptable terms,
or at all, or enter into new insurance policies with alternate providers.
The nature of the services rendered by the Company requires to make significant financial
and technical investments before knowing whether or not it will be hired.
Due to the nature of the services the Company provides, it is required to make substantial initial
investments in the development of new processes, the provision of constant training to its employees
and, in particular, the acquisition of machinery and equipment to be used in the provision of its services.
Some of these investments are carried out before the Company knows whether its services will be used
on a continuous, successive basis and it is exposed to the risk that significant initial investments will not
generate the returns that are anticipated. The Company is particularly vulnerable to a sudden decrease in
the level of demand for its services that would result in an increase in its spare capacity and leave its
revenue-generating assets idle, which could have an adverse affect on its financial condition and results
of operations.
All of the Companys business divisions face significant competition in the markets in which
they operate.
The Company faces strong competition in all of the segments in which it operates. Moreover, the
Company may be exposed in the future to additional competition from new market players, as well as
from foreign competitors entering the Brazilian market. The Company operates in a fragmented market
which demonstrates considerable potential for growth and is served by a substantial number of
companies offering less sophisticated and, therefore, less cost services. The Companys clients decision to
hire a particular service provider is influenced by a number of factors, including the quality of the services,
the reliability of the contractor and its ability to offer innovative solutions, and the price charged for the
services required. The Companys competitors are making substantial efforts to improve their market
positions and the Company may lose certain clients to these competitors, including long-standing clients
that regularly employ its services.
Certain competitors of the Industrial Services division have more experience and greater scale in the
provision of certain industrial maintenance services, and may have greater financial resources. If the
Company is unable to effectively compete against these companies, its market share could decrease,
which would adversely affect the Companys financial condition and results of operations.
In addition, if construction companies and companies operating in the oil and gas sector create new inhouse departments to complement their core operations, so as to no longer require the Companys
services (or even to compete with the Company), it may experience a reduction in the demand for its
services, and a potential increase in competition, which may adversely affect its financial condition and
results of operations.
16
The development of engineering solutions and technological innovations which add value to
the Companys services is critical to the protection of its leading market position and to the
expansion of its business.
Due to the nature of the Companys business, it must remain abreast of the latest engineering solutions
and technological innovations in its industry. The Company must employ qualified personnel, maintain an
adequate infrastructure, and expand relationships with suppliers that have a successful track record.
Should the Company fail to provide value-added engineering solutions, or to buy or license new
technologies developed by third-parties on acceptable terms, the services rendered by the Company could
become outdated or obsolete in comparison to the services offered by its competitors. Any failure to
remain at the technological forefront of the industry would adversely affect its relationship with clients
and, consequently, its financial condition and results of operations.
b.
The interests of the Companys controlling shareholder may conflict with the interests of its
investors.
The Companys controlling shareholder has the ability, among other things, to elect the majority of the
members of its board of directors and determine the outcome of decisions requiring shareholder approval,
including with respect to transactions with related parties, corporate restructurings, asset sales and
partnership agreements, and will have power to influence the amount and timing of any dividends to be
distributed in the future, subject to the provisions of the Brazilian corporate law regarding the payment of
mandatory dividends. The Companys controlling shareholder may choose to pursue acquisition
opportunities, dispose of assets, and enter into partnership and financing agreements or similar
operations which may conflict with the interests of its other shareholders.
After the completion of the public offering, the Company became to be a diffused controlled
company, since it does not have a controlling shareholder or group of shareholders holding
more than 50% of its voting capital, which can allow it be susceptible to alliances and
conflicts between shareholders and other events resulting from the absence of a controlling
shareholder or shareholder group holding more than 50% of the voting capital.
After the completion of the public offering, the Company came to not have a shareholder holding more
than 50% of its voting capital. There is no established practice in Brazil of a public company with no
controlling shareholder of the voting capital. Alliances or agreements can be made between the new
shareholders, which could have the same effect as having a group of shareholders. In the event of a
group of shareholders and this group takes a hold of the decision power of the company, it can suffer
sudden and unexpected changes in the corporate policies and strategies, including through mechanisms
such as the replacement of the Companys management staff. Besides this, the Company may be more
vulnerable to hostile attempts to acquire control and conflicts from this outcome.
Additionally, the Company's shareholders can possibly change or exclude these provisions from its bylaws
which provide a public offering for share acquisition by a shareholder who becomes holder of 20% of its
share capital and then disregard their obligation to make a public offering to acquire shares as it is
required by its bylaws. The absence of a controlling shareholder or controlling group of shareholders of
more than 50% of the voting shares of the Company may also hinder certain decision-making processes,
which could not be reached the quorum required by law for certain decisions. In the case that there isnt
a controlling shareholder holding the absolute majority of the voting shares of the Company, the
Company's shareholders may not use of the same protection granted by Share Companies Law against
abuses practiced by other shareholders and, consequently, may have difficulty in repairing the damage
caused. Any sudden or unexpected change in the Company's management team in its business policy or
strategic direction, attempt to acquire control or any dispute among shareholders concerning their
respective rights may adversely affect the Company's business and operating results.
c.
to the shareholders.
17
An active and liquid market for the Companys shares may not develop. The volatility and
lack of liquidity of the Brazilian capital market could substantially limit the investors ability
to sell their shares at the desired price and time.
An investment in securities traded in emerging market countries such as Brazil frequently involves a
greater degree of risk when compared to investments in securities of issuers located in major international
securities markets, and are generally considered to be more speculative in nature. The Brazilian securities
market is substantially smaller, less liquid, more concentrated and usually more volatile than major
international securities markets such as the United States. As of December 31, 2011, the BM&FBOVESPA
represented a market capitalization of approximately R$2.3 trillion (US$1.2 trillion), with an average daily
trading volume of R$6.5 billion during the period from December 30, 2009 to December 30, 2010. The
Brazilian capital market is significantly concentrated. The main ten shares traded on the BM&FBOVESPA
accounted for approximately 48.8% of the total volume of shares traded on this stock exchange during
the year ended December 31, 2011.
These characteristics from the Brazilian Capital Market may substantially limit investors ability to sell the
Companys shares for the desired price and at the desired time, which in turn may have a significant
adverse effect on the price of its shares.
The average daily trading volume of the Companys shares, in 2011, was of R$ 5.6 million.
The Company may need additional funds in the future and may issue additional securities to
secure such funds. This may adversely affect the price of the shares and result in a dilution of
the investors percentage interest in the Companys shares.
The Company may need to raise funds in the future through an additional public or private offering of
shares or securities convertible into or exchangeable for shares. Any additional funds raised by the
distribution of shares or securities convertible into or exchangeable for shares may impact their price and
dilute the investors percentage interest.
Provisions in the Companys bylaws may discourage, delay or make more difficult a change of
control of the company or the approval of transactions that might otherwise in the best
interests of its shareholders.
The Companys bylaws contain provisions intended to avoid the concentration of ownership of its shares
in small groups of investors and to foster a dispersed ownership. These provisions require that any
shareholder that acquires or becomes the holder, except any involuntary increase, as provided in the
Bylaws of the Company, of (i) Companys shares representing 20% of its capital stock, (ii) derivatives to
be settled in shares of the Company and / or paid in currency, exchange-traded or privately organized
market, which are referenced in any actions or other securities issued by the Company and having rights
to shares of the Company representing 20% or more of the Companys shares, or (b) giving the right to
receive an amount equal to 20% or more of the Companys shares; or (iii) certain other rights in the
corporate nature of amount equal to or greater than 20% of the total shares issued by the Company or
which may result in the acquisition of Company shares in the amount equal to or greater than 20% of the
total shares the Companys capital; shall make, within sixty days to the purchase date of this acquisition
or event that resulted in this acquired percentage, an OPA for all shares issued by the Company at the
price determined by its bylaws. These provisions could have the effect to discourage, delay or even
18
prevent the Company to merge with another company or be acquired by another company, including
transactions in which the investor may receive a bonus over the market value of the Companys shares.
Likewise, statutory provision might allow the maintenance or perpetuation of the staff members of the
Company nominated and elected by shareholders holding less predominant portion of the Company's
capital.
d.
The Company does not have subsidiaries or affiliates. The only society in which the Company holds a
stake is Rohr S/A Estruturas Tubulares (Rohr). Since Rohr operates in the same market of the Company,
the Companys management believes that both societies are subject to the same risks listed in the items
(a) above and (e), (f) and (g) below.
In addition, the minority stake held by the Company in Rohr does not allow it to prevail in the
deliberations of its general meetings or elect administrators, and shall only be facultative to elect a fiscal
council member and exercise the rights of shareholders provided for in corporate law. Consequently, the
Company is exposed to various risks, such as (i) does not receive dividends beyond the minimum required
in Rohrs bylaws, the corresponding amount, in each fiscal year of 6% of its capital, (ii) to not be able to
influence the executive administration and management of Rohr, including the case of disagreeing with
decisions made by its officers, and (iii) eventual difficulty to access Rohrs documents and information, or
related to its operations.
e.
to its suppliers.
Fluctuations in the price of raw materials, components and equipment used in the Companys
operations, as well as of commodities, may adversely affect its results.
Certain raw materials and components used in the Companys operations are prone to sudden and
significant fluctuations in price, over which it has no control. The final price of components, machinery
and equipment that are acquired or rented from third parties correlates to a significant extent with the
price of commodities such as steel and aluminum. A substantial increase in the price of such commodities
generally results in an equivalent increase in the Companys suppliers operating costs and, consequently,
in an increase in the prices they charge for their products. The Company may not be able to pass these
price increases on to its clients, which could have an adverse effect on its operating costs and financial
condition and results of operations.
In addition, all of the equipment used by the Rental division is imported, as there is no equipment of
comparable quality available locally, and their prices are defined in foreign currencies. Should the real
depreciate against the foreign currencies in which the Company purchases equipment, its purchase costs
will increase and it may be unable to reflect the increased cost of equipment in the rental prices charged.
The components, machinery and equipment used in the Companys operations are
manufactured and supplied by third parties.
The components, machinery and equipment used in the Companys operations are manufactured by thirdparties. The Company also buys other materials used in its operations from local or foreign companies.
The Company generally does not carry a very large inventory of equipment in its warehouses, only the
minimum required for the provision of its services. As a result, the Company is vulnerable to delays in the
delivery of equipment or increases in the prices charged by its suppliers, which could prevent from
providing its services or renting its equipment to its clients in a timely manner. Also, if the Companys
suppliers are not prepared for and are unable to meet potential increases in the demand for their
products, it may not be able to buy the amount of equipment or volume of raw materials necessary to
carry out its operations. If such delays in delivery or lack of products become recurrent, the company may
not be able to find new suppliers quickly enough to meet its clients needs. In addition, the introduction of
restrictions on the acquisition of imported goods, or the increase of taxes due on imported equipment,
may have a negative impact on the Companys business, in particular on the operations of the Rental
division. Any delays or price increases resulting from the actions or failures of the Companys suppliers, or
19
due to new import regulations, could result in increased costs for the Company, requiring a price increase,
in which case the demand for the Companys services could be adversely affected, affecting its financial
condition and operation results.
f.
to its clients.
The success of the Heavy Construction division depends on the development of long-term
relationships with a limited number of large companies operating in the Brazilian civil
construction sector.
According to O Empreiteiro magazine, the revenue of the ten largest Brazilian construction companies
represented, in the year 2010, 57.1% of the revenues from the 50 largest construction companies in the
country. Maintaining long-standing partnerships with such companies is the key to ensure the Companys
involvement in the implementation of prestigious and innovative activities and execute its operations, in
particular, more complex projects. Should the Company lose any of its main clients, or in case the
Company is unable to maintain a close relationship with such clients, the operations and revenue from the
Heavy Construction division could be materially adversely affected.
The Company may be unable to attract new clients or to develop new business at the pace
required for the expansion of the Jahu and Rental divisions.
The average term of the service agreements between the Jahu and Rental divisions and their clients is
generally shorter than that of the service agreements negotiated by the other business divisions. As a
result, both the Jahu and Rental divisions rely on the constant generation of new business in order to
maintain their revenue at a constant level. Due to the high degree of competition faced by the Jahu and
Rental divisions, the Company must make significant investments in order to attract new clients and retain
existing ones, in addition to offering its services at competitive prices. In 2011, the Jahu and Rental
divisions accounted for 23% and 25.9%, respectively, of the Companys net revenue, compared to 19.1%
and 17.3%, respectively, of the Companys net revenue in 2010. If the Company is unable to generate
new business at the rate required by the Jahu and Rental divisions, the operations and expansion of the
activities carried out by these divisions could be adversely affected.
The Company may be unable to meet the needs of all of its clients or deliver its services in a
timely manner.
The Company owns a limited number of machinery and equipment, which must be properly allocated to
each project in which it is involved. Delays or interruptions in the manufacturing and maintenance of such
equipment and its component parts, as well as sudden increases in the demand for the Companys
services, could prevent from providing its services in the agreed timeframe or from meeting the needs of
its clients satisfactorily and efficiently, as a result of any of the following factors:
inability to foresee the needs of its clients;
delays caused by its suppliers;
insufficient production capacity;
equipment failure;
shortage of qualified workers, strikes and labor claims;
interruption in the provision of public services, in particular power cuts;
delays or interruption of the equipment transportation system;
changes to customs regulations;
20
Fluctuations in the price of commodities may impact the Companys clients investment
decisions and the cost of equipment and, consequently, the Company may face cancellations
or delays affecting its existing and future projects or loss of revenue.
Fluctuation in commodity prices may affect the Companys clients in many areas. For example, for clients
engaged in the oil and gas, copper and fertilizers business, fluctuation in their product prices may have a
direct impact in the profit margins and cash flows, and consequently influence decisions between
maintaining existing investments or making new expenditures. Should the Companys clients choose to
postpone new investments and/or to cancel or delay the execution of existing projects, the demand for
the Companys services would drop, which could have a material adverse effect on its operations and
financial condition. The Companys operations and financial situation has been adversely affected in the
past, and could be substantially affected in the future, due to cancellations and delays in connection with
projects in which it was or is involved.
The prices of commodities may also have a strong impact on the cost of the Companys equipment and
projects. Any increase in such prices could adversely affect the potential return on the planned projects
that the Company was going to execute, as well as the current investments, should its clients choose to
postpone, cancel or delay their execution.
g.
The Brazilian government has been and continues to be a significant influence over the
Brazilian economy. This influence, as well as Brazilian political and economic conditions,
could adversely affect the Companys business and results of operations.
The Brazilian government has frequently intervened in the Brazilian economy and has occasionally
introduced significantly changes to the countrys monetary, credit and tax policies, among others. The
Brazilian governments actions to control inflation have often involved, among others, increases in interest
rates, changes in tax policies, price controls, currency devaluations, capital controls, and customs
restrictions. The Company haa no control over and cannot predict what measures or policies may be
introduced by the Brazilian government in the future. The Companys business, financial condition and
operations results, as well as the trading price of its shares, may be adversely affected by Brazilian, state
and municipal changes to public policies relating to tax rates and exchange controls or regulations
involving or affecting factors such as:
interest rates;
exchange controls and restrictions on remittances abroad;
fluctuations in exchange rates;
inflation;
social and political instability;
expansion or contraction of the global or Brazilian economies;
21
Uncertainty over whether the Brazilian government will implement changes in policy or regulation
affecting these or other factors in the future may contribute to economic uncertainty in Brazil and
heightened volatility in the Brazilian securities markets. For example, on October 20, 2009, the Brazilian
government introduced a 2% tax on foreign investments in the Brazilian financial and capital markets.
With the purpose of reducing the exchange rate pressure, on October 18, 2010, Finance Minister Guido
Mantega, announced the increase of the IOF tax rate on foreign investments in fixed income to 6%. In
2011, the IOF tax rate returned to the level of 2%, but on December 1st the government cut this tax on
investments in equities in order to stimulate the national economy and protect the Country from the
effects of the international financial crisis.
In October 2010, Dilma Rouseff was elected president of Brazil. Brazilian presidents have significant
power to determine public policies, as well as to introduce measures affecting the Brazilian economy and
the operations and financial results of companies such as the Company, whose operations rely to a
significant extent on public investment in infrastructure and development. The campaign for the
presidency could result in changes to existing public policies. For example, the new government faces
pressure to cut expenses and public investments, including investments in infrastructure, due to
increasing inflation and public debt, which can cause negatively and relevant impact in the Companys
operations. In February of 2011, the Federal Government announced a cut of R$ 50 billion in the Union
budget. There was also the contention of R$ 5 billion from the government to the program Minha casa,
Minha vida, as a consequence of the delay in the approval of the second part of the program by the
Congress. Public investments suffered reduction in 2011, when the spending on buildings and equipment
declined around 6%, reaching a level of R$ 41.9 billion in 2011 from a level of R$ 44.7 billion in 2010. In
December 2011, was announced by the Minister Guido Mantega that there would be efforts to reduce the
spending in public administration and that the increase of the investments would be a priority in 2012,
thus it has a key role in the creation of infrastructure and logistics needed to sustain further growth.
Moreover, there are major sport events, such as the 2014 World Cup and 2016 Olympic Events, which will
be held in Brazil, demanding the government to fulfill its public investments goals.
The Company cannot predict whether the current or future Brazilian government will implement changes
to existing policies on taxation, exchange controls, monetary strategy and social security, among others,
nor estimate the possible impact of any such changes on the Brazilian economy or the Companys
operations.
Federal Government's efforts to reduce inflation may delay the Brazilian economys growth
and affect the Company's business negatively.
In the past, Brazil experienced extremely high inflation rates and, consequently, adopted monetary
policies that resulted in one of the largest real interest rates in the world. Between 2005 and 2011, the
SELIC medium rate was 19.1% and 11.7% respectively. Inflation and measures taken by the Federal
Government to combat it, especially through the Central Bank, had and can return to have significant
impact on the Brazilian economy and on the Company's business. The strict monetary policy with high
interest rates may limit the Brazilian growth and the credit availability. Conversely, looser government and
monetary policies, the decline in interest rates and the intervention in the exchange and stock markets to
adjust or fix the real value may trigger increases in inflation rates and, consequently, the volatility of
growth and the need for sudden and significant interest rate increases. Besides this, the Company may
not have conditions to adjust the prices to offset the effects of inflation on its cost structure. Any of these
factors could adversely affect the Companys business.
Exchange rate instability may affect the Brazilian economy, as well as the Companys
operations and the market value of its shares.
22
Over the last few decades, the Brazilian currency faced frequent and substantial exchange rate
fluctuations in relation to the U.S. dollar and other foreign currencies. The real showed significant
devaluation against the U.S. dollar between 2000 and 2002, reaching an exchange rate of R$3.53 per
U$1.00 by the end of 2002. On the other hand, the real appreciated substantially against the U.S. dollar
in the period from 2003 to mid-2008 as a result of stability in the macroeconomic environment and strong
growth in foreign investments in the country, reaching an exchange rate of R$1.56 per US$1.00 in August
2008. As a result of the global financial crisis in mid-2008, the real depreciated 31.9% against the U.S.
dollar, reaching an exchange rate of R$2.34 per US$1.00 by the end of 2008. In 2009, due to the
recovery of the Brazilian economy at a faster rate than the global economy, the real once again
appreciated 25% against the U.S. dollar, reaching an exchange rate of R$1.74 per U$1.00 by December
31, 2009. This recovery also happened in 2010, the real increased 3.4% in comparison to U.S. dollar,
reaching the exchange rate of R$1.67 per U$1.00 in December 31, 2010. In 2011, the dollar reached its
lower price on July 26, when it reached the level of R$1.53 per US$1.00, or an appreciation of 7.1% in
the year. Yet, at the end of the year it showed a devaluation of 13.6% in the year, reaching an exchange
rate of R$1.66 per U$1.00 on December 31.
The depreciation of the real against the U.S. dollar could create additional inflationary pressures in the
Brazilian economy and lead to increase the interest rates, which could negatively impact Brazilian
economic growth as a whole, as well as the Companys financial condition and results of operations,
besides limiting access to international financial markets and lead to governmental interventions, which
could include the introduction of recessive policies. In the context of the current slowdown in global
economic activity, the depreciation of the real against the U.S. dollar could also trigger a drop in
consumer spending, as well as create deflationary pressures and result in lower economic growth. On the
other hand, the appreciation of the real in comparison to the U.S. dollar and other foreign currencies in
turn lead to deterioration in the Brazilian balance of payments and a drop in export-based growth.
Depending on the circumstances, the depreciation or appreciation of the real could have a material
adverse effect on the countrys economic growth, as well as on the Companys business and the market
value of the Companys shares.
Events and the perception of risk in other countries, especially the United States and
emerging market countries, may adversely affect the market price of Brazilian securities,
including that of the Companys shares.
The market price of securities issued by Brazilian companies is affected to varying degrees by economic
and market conditions in other countries, including the United States and other Latin American and
emerging market countries. Therefore, investors reactions to developments in these other countries may
have an adverse effect on the market value of securities of Brazilian issuers. Crisis in other emerging
market countries may reduce investor interest in securities issued by Brazilian companies, including those
issued by the Company.
In the past, the development of adverse economic conditions in other emerging market countries
resulted, in general, in capital flight and, as a consequence, in a decrease in the value of foreign
investments in the country. The financial crisis originated in the United States during the third quarter of
2008 triggered a recession of global scale. This adversely affected the Brazilian economy and Brazilian
capital markets, both directly and indirectly, and led to, among other things, fluctuations in the trading
prices of securities issued by publicly owned companies, scarcity of credit, cut in expenditures, slowdown
in the global economy, exchange rate volatility, and inflationary pressures. Any of these factors may
negatively affect the market value of the Companys shares and make it more difficult for it to access
capital markets and finance its operations in the future on acceptable terms, or at all.
The demand for the Companys services is directly linked to the volume of public investment
in the engineering, construction and infrastructure sectors.
The public sector is generally involved in the implementation of large engineering and infrastructure
projects in Brazil, either by means of direct investment in such projects or through financing agreements.
For example, over the coming years, the Company expects that approximately R$955 billion will be
invested between the 2011 to 2014 period to fund public construction projects linked to the Brazilian
23
governments PAC 2 program. According to estimates from BNDES, the public and private sectors are
expected to invest R$3.3 trillion between 2011 and 2014, of which R$ 1.0 trillion in the industry and
R$401 billion in infrastructure. The planned direct investments for the 2014 FIFA World Cup and the 2016
Olympic Games totaled R$47 billion by 2014, of which approximately R$11.5 billion for urban mobility,
R$5.6 billion for stadiums and R$4.8 billion for airports, according to Minister of Sports. The Company
believes that the involvement of the public sector will be the key in the viability of such enterprises and in
the execution of such new projects.
In Brazil, public investments have historically been influenced by macroeconomic, political and legal
factors, which are all beyond of the Companys control. Such factors could determine, among other
things, the suspension or cancelation of projects that require the involvement of the public sector. Any
such suspension or cancellation could have a material adverse effect on the Companys clients operations
and on the demand for its services. If estimates regarding the level of future investments in construction
and infrastructure are not correct, or if such investments are not made, the Companys clients operations
(and, consequently, the Companys financial condition and operations) may be adversely affected.
The nature of the services rendered by the Company requires to make significant financial
and technical investments before knowing whether or not it will be hired.
Due to the nature of the services the Company provides, it is required to make substantial initial
investments in the development of new processes, the provision of constant training to its employees
and, in particular, the acquisition of machinery and equipment to be used in the provision of its services.
Some of these investments are carried out before the Company knows whether its services will be used
on a continuous, successive basis and it is exposed to the risk that significant initial investments will not
generate the returns that are anticipated. The Company is particularly vulnerable to a sudden decrease in
the level of demand for its services that would result in an increase in its spare capacity and leave its
revenue-generating assets idle, which could have an adverse affect on its financial condition and results
of operations.
All of the Companys business divisions face significant competition in the markets in which
they operate.
The Company faces strong competition in all of the segments in which it operates. Moreover, the
Company may be exposed in the future to additional competition from new market players, as well as
from foreign competitors entering the Brazilian market. The Company operate in a fragmented market
which demonstrates considerable potential for growth and is served by a substantial number of
companies offering less sophisticated and, therefore, less cost services. The Companys clients decision to
hire a particular service provider is influenced by a number of factors, including the quality of the services,
the reliability of the contractor and its ability to offer innovative solutions, and the price charged for the
services required. The Companys competitors are making substantial efforts to improve their market
positions and the Company may lose certain clients to these competitors, including long-standing clients
that regularly employ its services.
Certain competitors of the Industrial Services division have more experience and greater scale in the
provision of certain industrial maintenance services, and may have greater financial resources. If the
Company is unable to effectively compete against these companies, its market share could decrease,
which would adversely affect the Companys financial condition and results of operations.
In addition, if construction companies and companies operating in the oil and gas sector create new inhouse departments to complement their core operations, so as to no longer require the Companys
services (or even to compete with the Company), it may experience a reduction in the demand for its
services, and a potential increase in competition, which may adversely affect its financial condition and
results of operations.
24
The development of engineering solutions and technological innovations which add value to
the Companys services is critical to the protection of its leading market position and to the
expansion of its business.
Due to the nature of the Companys business, it must remain abreast of the latest engineering solutions
and technological innovations in its industry. The Company must employ qualified personnel, maintain an
adequate infrastructure, and expand relationships with suppliers that have a successful track record.
Should the Company fail to provide value-added engineering solutions, or to buy or license new
technologies developed by third-parties on acceptable terms, the services rendered by the Company could
become outdated or obsolete in comparison to the services offered by its competitors. Any failure to
remain at the technological forefront of the industry would adversely affect its relationship with clients
and, consequently, its financial condition and results of operations.
h.
Costs related to laws and workplace safety regulations as well as those third-party
professionals. Such costs can be relevant and impact adversely the Companys results.
As of December 31, 2011, the Company had 4,541 employees, most of them either based at its
equipment warehouses or engaged in the assembly of equipment used in the Industrial Services division
and in the provision of services offered by such division. Due to the nature of the services provided, both
the Companys employees and employees of third parties face risks when executing its projects, which
could result in serious injury or death. In accordance with existing labor laws and regulations, the
Companys required to provide and ensure the use of safety equipment for its employees and other
individuals working on its projects, under the Companys responsibility. If the Company fail to provide all
necessary safety equipment and ensure its proper use, or if it works with companies that are not
sufficiently committed to ensuring the safety of their staff, the Company could be deemed responsible for
any accidents that take place at the worksites where it provides services. Any accidents at the worksites
where it provides its services could potentially reduce the number of able bodied employees available to
carry out its operations and would expose the Company to the payment of fines and penalties.
Any changes to existing safety regulations may impose additional obligations on the Company and result
in an increase in its expenses with respect to safety equipment and procedures. The Company cannot
predict whether any such changes would have a significant impact on its operations. For example,
changes imposing a reduced work day, for safety reasons, could result in a drop in employee productivity,
therefore forcing the Company to hire additional staff. Similarly, provisions requiring the Company to install
additional safety components could increase the cost of its equipment and, therefore, adversely impact its
operating costs and results.
In addition, the Company engaged a third-party labor provider to hire temporary employees during periods
of rapid increases in the demand for the Companys services, particularly for the Companys Industrial
Services division. As a result, the Company could be considered responsible for meeting any employment
obligations relating to such professionals, or deemed to be their employer under the terms of existing laws
and regulations, and would be subject to potential costs associated with failure to comply with workplace
safety regulations with respect to such professionals. Besides, the editing of stricter legal and regulatory
provisions regarding the use of outsourced personnel, or of provisions imposing additional obligations on
the contractor of outsourced services, could increase the Companys labor costs and have a negative
effect on its financial condition and results of operations.
The technical requirements and the use of the Companys equipments, as well as, the way
which the Company renders its services, may suffer relevant changes due to the incident of
drastic climate change. Moreover, the Companys inability to adapt to climate change may
adversely affect its business and financial results. Additionally, the Company is subjected to
several environmental laws and regulations that may become stricter in the future, as a
response to the drastic climate changes, and may result in higher duties and greater capital
investment.
25
Climate change, including flooding or erosion caused by increased rainfall, could adversely affect the
technical requirements in the projects and equipments to which the Company is subjected to, the way in
which the Company uses its equipment and the way it render its services. For instance, increased rainfall
could interfere with the Companys ability to perform industrial painting services. In addition, variations in
weather caused by climate change may lead to postponements in project schedules, which in turn may
lead to a decrease in the demand for the Companys services. The Companys inability to adapt its
operations to such climate change and maintain its quality standards from our equipment and services,
may lead to a decrease in its market share, adversely affecting its business and financial results.
The Companys operations are subject to several federal, state and municipal environmental laws and
regulations, including protocols and international treaties to which Brazil is party. Such regulatory
framework may become more stringent in the future due to, among other things, climate change.
Compliance with the provisions of these laws and regulations is monitored by certain governmental bodies
and agencies that are responsible for applying administrative sanctions in the event of the breach of any
relevant provisions. These sanctions may consist of fines ranging from R$500 to R$50,000,000, result in
the cancelation of our licenses and, ultimately, the temporary or permanent suspension of the Companys
operations, among other penalties. Environmental laws and regulations may become stricter in the future,
which may require the Company to make additional investments in compliance and, as a result, affect its
existing investment program. Such changes may cause an adversely affect to its financial condition and
results of operations. Besides, the failure to comply with such laws and regulations, such as operating
without the necessary environmental licenses and permits, or failing to adequately dispose of residues
arising from the Companys painting and equipment maintenance services, may result in the application of
criminal and administrative sanctions, as well as the obligation to repair the alleged harm or pay penalties
for any potential damage to the environment. Criminal sanctions may include, among other things, the
arrest of the persons responsible for the breach, the revocation or restriction of tax incentives and the
cancelation or suspension of credit facilities provided by public financial institutions. The Company could
also be prohibited from providing services to the public sector. The application of any of these sanctions
could have an adverse effect on the Companys revenues and prevent us from being able to raise capital
in the financial markets. The introduction of additional environmental obligations in the future as a result
of legal or regulatory changes or as a consequence of an increase in the environmental impact of the
Companys operations, or failure to obtain any necessary environmental licenses and permits, may result
in additional and substantial compliance costs and have an adverse effect on its business, financial
condition and results of operations.
i.
The Company is part of a judicial and administrative proceedings in the civil, tax and social security, labor
and environment, as described below. The Companys contingency provisions are recorded in the financial
statements for the total amount of probable losses. On December 31st, 2011, the total value of cases
involving contingent liabilities was R$52.4 million and the total value involved in processes with probable
loss, according to its assessment and its legal counsel, was R$12.8 million, as indicated below:
26
Proceeding/Contingency
2009
2011
1,547
803
772
430
2,349
440
Possible losses
Probable losses
9,582
5,617
11,501
7,296
13,743
9.902
Labor claims
Possible losses
Probable losses
10,787
1,420
12,649
1,672
9,004
1,396
18
687
1,741
5,000
1,096
Provisions
8,527
11,139
12,834
Judicial deposits
5,960
7,328
7,666
Civil proceedings
Possible losses
Probable losses
Tax and social security proceedings
Other
Possible losses
Probable losses
The Company believes that its provisions for legal and administrative contingencies are sufficient to cover
probable losses. The Company describes below the main legal and administrative proceedings in which it
is involved.
Civil Proceedings
The Company is defendant in 75 proceedings concerning civil liability and indemnification payments,
regarding, above all, contract terminations and indemnification payments, whose total value was of R$
2.8 million on December 31, 2011. Based on the advice of the Companys external legal counsel, as of
December 31, 2011 it has recorded provisions of R$0.4 million to cover probable losses arising from these
proceedings.
Federal Justice
Instance
1st Instance
Date of filing
03/21/2006
27
Chances of loss
Analysis of impact in the case of losing
the suit
Process n 2007.51.01.505428-0
Jurisdiction
Federal Justice
Instance
1st Instance
Date of filing
06/07/2006
Chances of loss
If the claim is held to be invalid, the Company will have to pay the tax
liability disputed, in the adjusted amount of R$826 thousand (until
December 31, 2010). Since this is an isolated fact, which is not a
habitual practice of the Company, the Company does not believe that
an unfavorable decision would have a material adverse effect on its
financial situation or on its operating results.
Process n 2006.51.01.011682-5
Jurisdiction
Federal Justice
28
Instance
1st Instance
Date of filing
06/07/2006
Chances of loss
Analysis of impact in the case of losing
the suit
Process n 2008.51.01.505089-8
Jurisdiction
Instance
1st Instance
Date of filing
June/25/2008
Main facts
Chances of loss
Analysis of impact in the case of losing
the suit
If the claim is held to be invalid, the Company will have to pay the tax
liability, in the adjusted amount of R$2.1 million (December 31, 2011).
Since this is an isolated fact, which is not a habitual practice of the
Company, the Company does not believe that an unfavorable decision
would have a material adverse effect on its financial situation or on its
operating results.
-
Process n 18471.001569/2006-13
29
Jurisdiction
Instance
2nd Instance
Date of filing
December/15/2006
Chances of loss
Analysis of impact in the case of losing
the suit
NFLD n 35.739.838-6
Jurisdiction
Instance
1st Instance
Date of filing
May/23/2005
Chances of loss
Analysis of impact in the case of losing
the suit
30
1st Instance
Date of filing
May/23/2005
Chances of loss
Analysis of impact in the case of losing
the suit
1st Instance
Date of filing
May/23/2005
Chances of loss
Analysis of impact in the case of losing
the suit
31
Instance
2nd Instance
Date of filing
December/10/2001
Chances of loss
Analysis of impact in the case of losing
the suit
Process n 2005.51.01.026197-3
Jurisdiction
Federal Justice
Instance
2nd Instance
Date of filing
September/21/2005
Chances of loss
Analysis of impact in the case of losing
the suit
Labor Claims
The Company is defendant in 208 labor claims, and with the advisory of an external legal counsel, the
Company has recorded provisions on the amount of R$1.4 million on December 31, 2011, to cover
probable losses resulting from the labor claims filed against the Company.
32
The labor claims filed against the Company relate to the following matters: (i) payment of
indemnifications for material damages; (ii) payment of risk, hazard, transfer and night shift allowances;
(iii) length of lunch and shift breaks; (ix) payment of equal pay for equal work; (v) workplace accidents;
(vi) re-hiring as a result of the development of professional illness; (vii) recognition of employment
relationships; and (viii) existence of subsidiary (or joint and several) responsibility between the Company
and its services providers, with respect to outsourced workers employed by such providers and allocated
to providing services for the Company. Below, the Company included a structured summary of the major
labor claims that it is part:
Action n 01316.2007.009.19.00.7
Jurisdiction
Instance
2nd Instance
Date of filing
November/08/2007
Plaintiff: S.R.F.
Defendant: Mills Estruturas e Servios de Engenharia Ltda. and
Braskem S/A.
R$ 990,000.00 (12/31/2011)
Main facts
Chances of loss
Possible
Considering the denial by the lower court, and the possibility of loss,
we do not see any greater impact on the Company. However, if there
is any reversal in the Appellate Labor Court of the judgment entered by
the lower court, the Company will have to pay the plaintiff some R$1.0
million.
Action n 0143400-71.2008.5.17.0009
Jurisdiction
Instance
2st Instance
Date of filing
December/19/2008
R$ 200 thousand
Main facts
This is a public civil action filed by the Labor Prosecution office with a
plea for preliminary injunction seeking the suspension of business in
the workplace (City of Serra, State of Esprito Santo), under penalty of
payment of a daily fine of R$50,000.00, an award against Mills for the
payment of collective moral damages, on account of the purported
33
Probable
Instance
1st Instance
Date of filing
October/24/2005
R$437,0 thousand
Main facts
Chances of loss
Possible
In the event of loss, the Company will have to pay the amount in
dispute and will have to extend the number of employees that suffer
from deficiency, under penalty of fine. According to the external
consulting lawyer, the estimated value for the condemnation would be
R$ 340 thousand (in 12/31/2011).
34
4.4
Judicial, administrative or arbitral awards, which are not under confidentiality, in
which the company or its subsidiaries are part and whose appellees are administrators or
former administrators, owners or ex-owners or investors of the company or its subsidiaries.
Not applicable to the Company.
4.5
To the present date, the Company is not part of any confidential lawsuit.
4.6
Judicial, administrative or arbitral lawsuits, repetitive or related, non confidential and
based on similar legal facts and causes, which are not under confidentiality and which
together, are relevant.
Not applicable to the Company.
4.7
The Company is part of a police investigation initiated by the Bureau of Environment Protection of the
State of Rio de Janeiro on July 5, 2006, for violation of Articles 54 and 60 of the Environmental Crimes
Act, on grounds of alleged improper disposal of solid waste and liquids in Rio de Janeiro.
The investigation is not complete, but the Company is carrying out works to remedy the deficiencies
pointed out and ask for the environmental licensing of activities on site.
The Delegacia de Meio Ambiente e produtos controlados of Osasco (Environment and controlled products
Police) initiated the police inquiriy, based on the Police report dated October 18, 2011, to investigate the
alleged practice of crime against the environment, provided for in Article 56 of Law 9.605/98, due to (i)
irregularities in the artesian well, (ii) irregular use and storage of chemicals and (iii) irregular disposal of
waste in the Company's subsidiary in Osasco/SP. The investigation has not been concluded yet, but the
Company is now taking all measures to search, verify and correct the deficiencies pointed out, together
with the police authority and the environmental agencies of the State of So Paulo.
4.8
Rules of the country of origin of foreign issuer and rules of the country in which the
foreign Company's securities are held in custody, if different from the country of origin.
Not applicable to the Company.
35
5.
36
MARKET RISKS
5.1
Debt
Description
Scenario I
Scenario II
Scenario III
(probable)
+25%
+50%
R$ (thousand)
BNDES - TJLP
Leasing - CDI
Debentures - CDI
Promissory Notes CDI
22,134
22,138
22,142
52,159
53,607
55,058
34,889
35,023
35,155
276,598
297,783
318,849
27,210
412,990
27,885
436.436
28,561
459.765
5.7%
11.3%
23,447
46,776
Total
Variation
Cumulative effect on income
and
stockholders
equity,
respectively
The sensitivity analysis presented above considers changes in relation to the particular risk, maintaining
constant other variables, associated with other risks.
Scenario I
Reference
Rate
Scenario II
Scenario III
Maintenance
+25%
+50%
CDI (%)
11.00%
13.75%
16.50%
TJLP (%)
6.00%
7.50%
9.00%
1 Regarding interest risk, the Company's management considered as likely premise (scenario I) for its financial instruments to the maintenance of the Selic
rate, consequently, the CDI rate also, since there is a direct relationship between the rates, and a rate increase as premise for the other two scenarios.
2 For financial liabilities related to loans and financing - BNDES, the Company's management considered as likely premise (scenario I) would be the
maintenance of the TJLP for the next three months, since there is no evidence of a change in the short term, and a rate increase as a premise for the other two
scenarios.
37
Inflation risk
The Company seeks to reflect inflation rates in the prices that are charged for its products and services.
However, Brazilian laws and regulations provide that long-term agreements may only be adjusted for
inflation once every 12 months. The main inflation indexes used by the Company to adjust prices under
long-term agreements are IGP-M and IPCA. In addition, the Companys payroll is affected by salary
increases negotiated under collective bargaining agreements, which are usually in line with increases in
the main Brazilian inflation indexes.
During 2010, the IGP-M index calculated by FGV was of 5.1%, while the IPCA index announced by IBGE
was of 6.5%.
Instrument/operation
Description
Commercial commitments*
NDF
(probable)
Total
Instrument/operation
Description
Exchange rate
(EURO)
Commercial commitments *
NDF
38
+50%
(69,253)
(86,566)
(103,879)
1,295
18,608
35,921
(67,958)
(67,958)
(67,958)
0%
0%
(206)
(257)
(308)
(0)
51
102
Variation
Risk
+25%
Total
(206)
(206)
Variation
*
(206)
0%
0%
Commercial commitments of equipment purchased in foreign currency, but not accounted for.
The swap contracts are signed to exchange 100% of the risk of foreign currency (USD) to national currency (R$).
The sensitivity analysis presented above considers changes in relation to the particular risk, maintaining
constant other variables, associated with other risks.
Scenario I
Rate
Scenario II
Scenario III
Maintenance
+25%
+50%
US$ (R$/US$)
1.88
2.34
2.81
Euro (R$/Euro)
2.43
3.04
3.65
Reference
, : The Company's management considered as likely premise (scenario I) the maintenance of the exchange rate for the next three months and a rate
increase as premise for the other two scenarios.
Heavy Construction
Division
Industrial Services Division
Jahu Division
Equipment Rental
Events Division*
Total
2011
Trade
Receivables
Allowanc
e for
doubtful
debts
Trade
Receivable
s
Allowanc
e for
doubtful
debts
Trade
Receivable
s
Allowanc
e for
doubtful
debts
34,729
3,625
47,960
4,042
40,934
9,214
27,826
7,608
7,002
7,500
84,665
1,504
1,246
363
1,029
7,767
45,550
19,143
16,616
6,563
135,832
1,705
1,285
1,231
1,030
9,293
49,755
31,844
34,708
5,627
162,868
1,644
2,721
6,037
1,030
20,646
39
*Value to receive for the sale of the fixed asset from the Division events that was discontinued in 2008.
5.2
a.
The Companys activities are exposed to several financial risks (including risks of interest rate, inflation,
exchange rate, price fluctuation from raw materials and imported equipment and credit risk). The risk
management program focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the Company's financial performance. The Company uses derivative financial
instruments to hedge against certain risk exposures and has a policy not to participate in any trading of
derivatives for speculative purposes.
Risk management is carried out by the Finance department, under policies approved by the Board of
Directors. The Finance department identifies, evaluates and protects the Company from financial risks in
co-operation with the Company's operating units. The Finance department establishes principles for
overall risk management, as well as for specific areas, such as foreign exchange risk, interest rate risk,
credit risk, use of derivative financial instruments and non-derivative financial instruments, and
investment of housing surplus.
b.
The Company intends on using financial derivative instruments locally and abroad to manage the
exchange and interest rate fluctuation risks. In accordance with the accounting principles generally
accepted in Brazil, the derivative contracts are going to be recorded to the balance sheet based on the
fair market value recognized in the revenues statements, unless in cases when the specific hedging
criteria are met. The market value estimations are going to be held on a specific date, usually based on
the mark-to-market.
c.
In order to protect equity from exposure to foreign currency commitments, the Company developed a
strategy to mitigate the market risk. When applied, the objective of the strategy is to reduce the volatility
of the desirable cash flow, maintaining the planned disbursement of resources. The Company considers
management of these risks essential to support its growth strategy without potential financial losses
reducing its operating income, as the Company does not seek financial gains from derivatives. Foreign
currency risk management is carried out by the Financial Management and Directors, who assess the
potential exposure to risks and establish guidelines for measurement, monitoring and management of the
risks of the Company's operations. Based on this objective, the Company contracts derivative operations,
normally swaps and NDF (Non Deliverable Forwards), with prime financial institutions (brAAA credit rating
- national scale, Standard & Poor's or similar), to guarantee the commercial value agreed on ordering the
item to be imported. Similarly, swap or NDF contracts should be contracted to guarantee the payment
flow (amortization of principal and interest) of foreign currency financing. Under the Company's by-laws,
any contract or assumption of obligation in excess of R$ 10,000 (ten million reais) must be approved by
the Board, unless foreseen in the Business Plan. It is not necessary to contract hedge operations for
amounts of less than R$ 100 (one hundred thousand reais), with maturities of less than 90 days. Other
commitments should be protected against foreign exchange exposure.
Swap and NDF transactions are carried out to translate future foreign currency financial commitments into
reais. By contracting these operations, the Company minimizes the foreign exchange risk by leveling both
the amount of the commitment and the exposure period. The cost of contracting the derivative is tied to
the interest rate, normally to the CDI (Interbank deposit certificate) percentage. Swaps and NDFs
maturing before or after the final maturity of the commitments may, in time, be renegotiated so that their
final maturities are the same as - or close to - the final maturity of the commitment. In this way, on the
settlement date, the result of the swap and the NDF may offset part of the impact of the exchange
variation of the foreign currency against the real, assisting stabilization of the cash flow.
40
As derivatives, the monthly position is calculated by the fair value methodology, calculating the present
value by applying the market rates that are impacted on the determination dates. This widely used
methodology may result in monthly distortions in relation to the curve of the derivative contracted,
however, the Company is of the opinion that this is the best methodology to use, as it measures the
financial risk in the event of the need for early settlement of the derivative. By monitoring the
commitments assumed and the monthly valuation of the fair value of the derivatives, it is possible to
monitor the financial results and the impact on the cash flow and to ensure that the original objectives are
achieved. The calculation of the fair value of the positions is provided monthly for management
supervision. The derivative instruments contracted by the Company are intended to protect its equipment
import operations against fluctuations in the exchange rate in the interval between placing the order and
the corresponding formal receipt in Brazil. They are not used for speculative purposes. As of December
31, 2011, the Company had equipment purchase orders with foreign suppliers amounting approximately
to US$ 36.9 million and EUR 84,300 (in 2009, such orders amounted to US$ 72.8 million and EUR
127,500), all of them with payments expected during 2012.
In order to reduce the Companys exposure to exchange rate fluctuations between the date of the order
and the date of the settlement of these obligations, the Company hired derivative instruments
represented by swap contracts in the aggregate amount of R$68.0 million, which fair value on December
31, 2011, totalized R$2.8 million, as presented in the table below.
Tipo
Notional
Value
Fair
Value
Receivable/ Payable
Values
134,712
(7,003)
Fair
Value
Receivable/
Payable Values
NDF
Dollar Term Puchase
Contracted rate: 1.70 to 1.94
(USD)
Contracted rate: 1.64 to 1.94
(USD)
Euro Term Purchase
Contracted rates : 2.22 (EURO)
Contracted rates : 2.44 (EURO)
Total
Notional
Value
(7,003)
238
134,950
(7,003)
(7,003)
67,958
2,842
2,842
206
68,164
(1)
2,841
(1)
2,841
The derivatives are evaluated by the market rate present value, in the base data of future flow
determined by the application of contractual rates until maturity. For contracts with limiter or double index
were considered, in addition, the embedded option in the swap contract.
The Companys hedge operations are realized in order to seek protection against fluctuations in foreign
currency of its equipments and machines importations. Such operations are classified as hedge
accounting.
The company ensures it effectiveness of these instruments with the Dollar offset methodology, which is
commonly used by derivative market participants, and consists in comparing the present value, net of
foreign currency exposure and Company commitments with the derivatives hired for such hedge.
On December 31, 2011, there was no inefficiency in the results of the hedge operations of the Company.
Considering the fact that the Company ensures the effectiveness of the realized hedge accounting
operations, the gains and losses observed in these derivative operations are recognized in counterpart of
the hedged asset (fixed asset) as part of the initial cost of the asset in the same moment of the
accounting. In December 31, 2011, the amount of R$0.3 million was transferred from the net equity and
deducted in equipments initial cost.
41
d.
Regarding the exchange rate risk, The Company's policy is to not be exposed to any commitments in
foreign currency. For the interest rate risk, the Companys policy is to operate with floating interest rates,
since their revenues also grow along with inflation. The Company does not use protection against the
inflation risk caused by momentary mismatch between its revenues and costs.
e.
If the Company uses various financial instruments with various objectives for
asset protection (hedge) and what these objectives goals are
The Company operates financial instruments in order to maintain the price of imported equipments and,
consequently with foreign currency prices, in Brazilian reais.
f.
The risk control politics and procedures are defined directly through the Companys Board of Directors and
are implemented by the Companys board of Executive Officers. The Board of Directors are also
responsible for monitoring the fulfillment of these practices.
g.
Adequacy of the operational structure and internal controls to verify the effectiveness
of the adopted policy
The Companys Board of Directors analyzes its operational structure and intern controls, and believes that
the policies and procedures of adopted controls are appropriate to the Companys operational structure.
In fiscal years ended in December 31, 2009, 2010 and 2011, the opinion of independent auditors did not
identify deficiencies in those controls.
5.3
In the fiscal years ended December 31, 2009, 2010 and 2011, there were no events that could
significantly change the main market risks to which the Company is exposed.
5.4
42
6.
43
COMPANY HISTORY
6.1
The Company was established on December 1, 1980 as a limited liability company. On January 29, 2009,
the Companys shareholders approved a corporate transformation of the Company, which became a
privately held corporation. The first company of Mills group, named Aos Firth Brown SA was established
in 1952 in the city of Rio de Janeiro, State of Rio de Janeiro, in the form of privately held corporation.
6.2
Company Lifetime
Undetermined.
6.3
The Company was formed in 1952 by the Nacht family, as a scaffold and shoring company which provided
services to the civil construction sector. Mr. Andres Cristian Nacht was a member of the Companys
management team from 1969 to 1998, being president director from 1978 till 1998. In 1998, Mr. Andres
Cristian Nacht became Chairman of the Board of Directors of the Company, position that occupies till this
Reference Forms date.
In the 70s and 80s, the Company had substantial growth due to the significant civil construction and
industrial sectors expansion in Brazil. Among its activities from this period can be highlighted the
construction of the Rio-Niteroi Bridge (1971), the Itaipu Hydroelectric Plant (1979) and the first Brazilian
oil drilling platform (1983), among other projects.
During this period the Company made important partnerships with international companies that
cooperated with the Companys development. From 1974 to 1986, GKN plc, a large British conglomorate,
was the Companys shareholder, strengthening the beginning of good governance and credibility. In 1980,
the Company signed a partnership with the Canadian company Aluma Systems Inc., the Aluma Systems
Concrete Forms and Formwork Ltda., which had as main objective the introduction of aluminum forms in
the civil construction sector in Brazil which lasted until 2001.
In the 90s, while seeking to expand the Companys portfolio of services, it made new strategic
partnerships. In 1996, the Company entered into a licensing contract with the German company NOESchaltechnik Georg Meyer-Keller GmbH, to produce and supply modular steel and aluminum panels
formwork to the Brazilian civil construction market. In 1997, the Company entered into a joint venture
partnership with the American company JLG Industries, Inc., to begin activities in the equipment rental
sector in Brazil.
In 2001, the Argentine company Sullair Argentina S.A., replaced JLG Industries, Inc. as the Companys
partner in the in the industrial equipment rental venture, and subsequently acquired its stake in 2003.
In 2007, the private equity funds, Peninsula FIP, managed by IP, and the Natipriv Global L.L.C., managed
by the Axxon Group, became the Companys shareholders, acquiring, each one, 10% of the Company for
R$20 million. The resources from these investments were used, mainly, to acquire equipment.
In 2008, the Company returned to its activities in the rental segment in an organic way, with the
establishment of the Rental Division, and suspended the operations of its Events Division, which was
responsible for providing temporary structures, such as such as outdoor stages and grandstands for the
sports and entertainment segment, as an objective to focus on the segments where it has competitive
advantages. Also in 2008, the Company acquired Jahu Indstria e Comrcio Ltda., which became the Jahu
Division, focused on providing engineering services to the residential and commercial civil construction
industry, complementing its activities in the Heavy Construction segment.
44
The Companys IPO was on April 2010, with a transaction totaling R$685 million, of which R$411 million
related to the primary offering that, consequently, were used to enable its growth plan. Shortly after the
offer, the Companys free float were of 48%.
In October 2010, after the expiration from the lock-up period, due to the IPO, the private equity funds,
Peninsula FIP and Natipriv Global L.L.C., sold the joint participation of 6.2% of the Companys capital,
increasing its free float to 57.2%.
On January 19, 2011, the Company entered into a purchase and sales agreement to acquire 25.0% of the
voting and total capital stock of Rohr S/A Estrutura Tubulares (Rohr), a privately held company specialized
in access engineering and solutions for civil construction, for R$90.0 million. This strategic acquisition will
enable the Company to broaden its exposure to the sectors it serves, especially in the areas of
infrastructure and the oil and natural gas industry. In September 2011, there was a rise in the stake held
in Rohr to 27.5%, resulting from the repurchase by Rohr of 9% of its shares held as treasury stock.
In May 2011, the Company entered into a purchase and sales agreement to acquire 100% of the voting
and total capital stock of GP Sul, one of the largest players in the suspended scaffold rental market to
residential and commercial construction in the state of Rio Grande do Sul, for R$5.5 million, which was
merger into the Company in August 2011. This strategic acquisition, according to Managements opinion,
enabled the Company to become the leader in the suspended scaffold rental market in the state of Rio
Grande do Sul and to broaden its exposure to the residential and commercial construction market in the
South region, in line with the geographic expansion plan of Jahu - Residential and Commercial
Construction division.
6.4
Corporate Restructuring
Between 2008 e 2009, the Company underwent a corporate restructuring, that included the conversion of
the Company into a Brazilian corporation (on January 29, 2009); and the merger of the Companys
subsidiaries Mills Indstria e Comrcio Ltda., Mills Andaimes Tubulares do Brasil S.A. and Itapo
Participaes S.A. into the Company (on January 30, 2009).
45
On January from 2011, the Company entered into a purchase and sale agreement to acquire 25.0% of
the voting and total capital of Rohr S/A Estrutura Tubulares (Rohr), company specializing in access
engineering and the provision of construction solutions, for R$90.0 million. With this strategic acquisition,
the Company, expands its exposure to the sectors it serves, mainly in infrastructure and oil & gas
industry.
On February 28th, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$4,227.33 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes- Programa de Outorga de Opes 1/2010"). There was issuance of 339 new common stocks.
On April 2nd, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, totalizing on the amount of R$112,171.78 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes- Plano Especial TopMills "). There was issuance of 47.131 new common stocks.
On April 24, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, totalizing on the amount of R$4,613,384.16 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes- Programa de Outorga de Opes 1/2010"). There was issuance of 371.448 new common stocks.
Also on April 24, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$892,862.10 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes- Programa de Outorga de Opes 1/2011"). There was issuance of 44.421 new common stocks.
On August 9, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$886,108.00 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2010"). There was issuance of 70,550 new common stocks.
Also on August 9 , 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$20,000.00 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2011"). There was issuance of 1,600 new common stocks.
Also on August 9, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$1,633,370.82 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2011"). There was issuance of 80,422 new common stocks.
48
Company
Not applicable.
6.7
49
7.
50
COMPANYS ACTIVITIES
146,210
35,995
24.6%
154,270
39,882
25.9%
131,638
20,066
15.2%
141,412
3,241
2.3%
195,396
12,569
6.4%
214,783
3,204
1.4%
62,177
17,364
27,9%
105,151
26,041
24.8%
155,761
28,188
18.1%
54,934
11,555
95,067
24,791
175,410
39,373
51
Net margin(1)
21%
26.1%
22.4%
________________________________
52
The Company believes that the favorable long-term macroeconomic fundamentals in Brazil and the need
for investments in large infrastructure projects, including investments under the Brazilian governments
PAC program and those related to the 2014 FIFA World Cup and 2016 Olympic Games, as well as future
projects with the objective of overcoming the bottleneck of Brazilian infrastructure deficiencies, represent
a major opportunity for future growth.
The chart below, presents the financial information for the Heavy Construction Division on the indicated
periods:
2009
146,210
73,651
50.4%
2011
131,368
57,823
44.0%
__________________________________________________________
(1) EBITDA is a non-GAAP measurement adopted by the Company. The calculation of the EBITDA consists of our operating results
before financial expenses, from the depreciation and goodwill. The EBITDA is not a Brazilian, IFRS or US GAAP measure, have no
standardized meaning and our definition may not be comparable to that used by other companies. The Company uses the EBITDA
to measure its performance. The EBITDA should not be considered as alternatives to net income, as an indicator of our operating
performance, or as alternatives to cash flow as an indicator of liquidity or debt payment capability.
(2) EBITDA from the Division divided by its net revenue.
The chart below, presents the financial information for the Industrial Services Division on the indicated
periods:
2009
141,412
20,815
14.7%
2011
214,783
20,727
9.7%
__________________________________________________________
(1) EBITDA is a non-GAAP measurement adopted by the Company. The calculation of the EBITDA consists of our operating results
before financial expenses, from the depreciation and goodwill. The EBITDA is not a Brazilian, IFRS or US GAAP measure, have no
standardized meaning and our definition may not be comparable to that used by other companies. The Company uses the EBITDA
to measure its performance. The EBITDA should not be considered as alternatives to net income, as an indicator of our operating
performance, or as alternatives to cash flow as an indicator of liquidity or debt payment capability.
(2) EBITDA from the Division divided by its net revenue.
Jahu Division
While the Heavy Construction Division is focused on large engineering and infrastructure projects, the
Jahu Division attends, primarily, the residential and commercial construction contractors, developing
projects and providing services of concrete formwork, scaffolding, shoring and access equipment. The
Company also provides engineering services in connection with building refurbishing and maintenance,
primarily through the provision of suspended scaffolding. Inside of this Division's activities, the Company
provides planning, project development, technical supervision, equipment and related services.
With outstanding performance in the sector for over 50 years and being one of the major leaders for ten
years in net revenue terms, Jahu is a strong, well-established brand in the residential and commercial
construction markets, acquiring an extensive client base along its history. Due to that, as part of its
expansion and diversification strategy, the Company invested, in June 2008, R$60.1 million so that Jahu
could be incorporated in the group, becoming one of the business Divisions. Since then the Company has
been improving Jahus performance by introducing the concrete formwork in the product portfolio,
increasing significantly the equipment inventory, capitalizing on the strong brand names of both Jahu
and Mills and therefore increasing its client base.
The residential and commercial construction sector in Brazil is fragmented. When compared to the Heavy
Construction market, the projects from this division, are generally dispersed within cities, are smaller in
size and have shorter durations, being the average contract term of four and a half months. The
recognized reputation on the Brazilian market is a really important factor for the Companys success in the
activities from this division. Its main competitive advantage is the extensive presence at a large number of
worksites, which enables it, together with its clients, to analyze the job needs and to supply the requested
services and equipment on demand.
Its main clients are the largest real estate companies, such as AGRA Empreendimentos Imobilirios S.A,
Emcamp Residencial S.A., Gafisa S.A., JFE 2 Empreendimentos Imobilirios Ltda, PDG Realty S.A, Queiroz
Galvo Master Desenvolvimento Ltda.
The Jahu divisions operations are concentrated in the Southeast and South regions of Brazil, which are
the most economically developed and densely populated in the country. However, the Brazilian
government is introducing initiatives such as the low income housing program Minha Casa, Minha Vida to
reduce the Brazilian housing deficit and increase the number of homes available in the North and
Northeast regions of the country. In order to join this expansion program and take advantage of the
expected public investments in this market, in 2009 the Jahu division began an expansion plan, which
launched one branch in 2009, eight in 2010 and one in 2011.
The Company believes that the growth perspectives for the Jahu Division are positive in the long-term
outlook, as a result of the projected growth of the Brazilian real estate industry, the expansion of the
mortgage financing, the recent fundraising by several large Brazilian real estate developers, the large
public housing programs, such as the Brazilian governments program Minha Casa, Minha Vida and the
55
tendency of the major developers to contract the services from large nationwide suppliers, such as the
company.
The chart below, presents the financial information for the Jahu Division on the indicated periods:
Diviso Jahu
Net revenue (in thousands of R$)
EBITDA (in thousands of R$)(1)
EBITDA margin(2)
2009
62,177
31,846
51.2%
2011
155,761
65,978
42.4%
__________________________________________________________
(1) EBITDA is a non-GAAP measurement adopted by the Company. The calculation of the EBITDA consists of our operating results
before financial expenses, from the depreciation and goodwill. The EBITDA is not a Brazilian, IFRS or US GAAP measure, have no
standardized meaning and our definition may not be comparable to that used by other companies. The Company uses the EBITDA
to measure its performance. The EBITDA should not be considered as alternatives to net income, as an indicator of our operating
performance, or as alternatives to cash flow as an indicator of liquidity or debt payment capability.
(2) EBITDA from the Division divided by its net revenue.
Rental Division
The Company is one of the largest providers of motorized access equipment, in Brazil, supplying aerial
work platforms and telescopic handlers, to lift people and cargo to considerable heights, based on data
published in the O Empreiteiro magazine in 2011. The equipment enables safe, fast, versatile and
precise access for professionals to perform tasks safely and efficiently at heights from two to 48 meters.
The handlers allows materials weighing up to 4,500 kg to be lifted, transported and delivered to heights
of over 17 meters, at a job site or within an industrial plant.
The Rental division serves the same sectors as the other divisions, such as heavy or residential and
commercial construction and industrial construction and maintenance, as well as other economic sectors,
as the automotive, retail and logistics sectors, among others. Therefore, its client base is diverse,
including clients from the other divisions, such as Camargo Corra S.A., Construtora OAS Ltd., Construtora
Norberto Odebrecht S.A., Construtora Queiroz Galvo S.A., UTC Engenharia S.A. and etc. Generally, the
Company rents equipment on a monthly basis, being the average contract length from two to three
months, although 18-month or even longer contracts.
The Company introduced the large-scale use in Brazil of motorized access equipment specific for height
purposes in 1997, when it entered into a joint venture agreement with the American company JLG
Industries Inc., world leader in access equipment manufacturing, to rent aerial platforms and telescopic
handlers, the first joint venture in JLGs history.
In 1999, the Company introduced the large-scale use of telescopic handlers in the Brazilian market. This
motorized equipment can be used to transport loads to various heights and replaces a number of other
pieces of equipment traditionally used at construction sites, such as cranes, munck trucks and service lifts,
among other equipment. In 2001, Sullair, an Argentine equipment rental company, replaced JLG as the
Companys partner. In 2003, due to unfavorable market conditions in Brazil and the lack of capital
necessary to carry out essential investments, the Company suspended its equipment rental operations
and transferred the joint venture to Sullair.
In December 2007, as part of its diversification strategy and based on favorable market and credit
conditions, the Company established its Rental division and began renting aerial platforms and telescopic
handlers again.
According to the Companys estimates, based on data of 2011 from Terex and Brazilian import statistic of
2011, there are currently 13,812 aerial platforms and 1,965 telescopic handlers in Brazil. In comparison,
614,000 aerial platforms and 175,000 telescopic handlers are available in the United States based on data
56
provided by Yengst Associates. The Company believes that this gap, together with the current favorable
economic conditions in Brazil, indicates that this rental market is incipient in Brazil, offering significant
opportunities for expansion in the segment. The Company believes that its scale, specific industrial sector
expertise, reliability and safety record have been the primary factors driving the growth of the Rental
division since the beginning of its activities in 2008.
In addition, the Company may benefit from the introduction of stricter technical norms and procedures, in
particular with respect to safety regulations for work performed at significant heights or in areas that are
difficult to access. Among other provisions, Regulatory Norm 18 establishes that workers must be lifted
with the use of motorized access equipment, rather than manual equipment, which has resulted in an
expansion of the potential market for rental of its equipment. The Company believes that the long-term
outlook for the Rental division is strong as a result of favorable macroeconomic conditions in Brazil,
including exchange rate stability, considerable infrastructure construction investments under the Brazilian
governments PAC program, the Brazilian governments low income housing program and the overall
growth of the real estate industry in Brazil, anticipated industrial plant expansions (including major
investments in the oil and gas sector), investments related to the 2014 FIFA World Cup and 2016 Olympic
Games, and the multitude of other projects that will require safe working conditions at elevated heights.
The chart below, presents the financial information for the Rental Division on the indicated periods:
Diviso Rental
Net revenue (in thousands of R$)
EBITDA (in thousands of R$)(1)
EBITDA margin(2)
2009
54,394
31,338
57.6%
2011
175,410
93,628
53.4%
__________________________________________________________
(1) EBITDA is a non-GAAP measurement adopted by the Company. The calculation of the EBITDA consists of our operating results
before financial expenses, from the depreciation and goodwill. The EBITDA is not a Brazilian, IFRS or US GAAP measure, have no
standardized meaning and our definition may not be comparable to that used by other companies. The Company uses the EBITDA
to measure its performance. The EBITDA should not be considered as alternatives to net income, as an indicator of our operating
performance, or as alternatives to cash flow as an indicator of liquidity or debt payment capability.
(2) EBITDA from the Division divided by its net revenue.
7.2
Regarding each operational segment(s) disclosed in the consolidated financial
statements for the past fiscal years
a.
Offered Equipment
The main equipment offered by the Company to the clients of the Heavy Construction division includes:
Steel Shoring Equipment. The primary shoring equipment the Company provides are Millstour
shoring posts, a versatile system capable of supporting loads ranging from 24 to over 156 tons
per post, depending on the configuration. In accordance with the Companys market perception,
its shoring equipment is considered the most flexible and versatile shoring system in Brazil. This
system provides for ease of assembly with its heaviest component parts weighing less than 13
kilograms. Each shoring post has an automatic locking element and can support loads of up to six
tons. Load-bearing capacity may be doubled or even tripled with the use of connecting trusses. In
addition, these telescopic shoring posts are fully adjustable to meet nearly any height
requirement and may be used in multiple applications. Millstour is typically used in the
construction of bridges, viaducts and dams, as well as in large-scale industrial projects.
57
Shoring Aluminium. The main equipment used is the Alu-Mills, a system of aluminum shoring with
load capacity up to 14 tons, which can be connected by trusses forming isolated towers of
different heights. This system also allows total displacement of the joint without the need for
disassembly also bringing significant labor savings. Compared to the shoring post systems or
conventional steel shoring, this system is the one with the lightest weight / resistance, saving
very much in the amount of equipment deployed in the works. The Alu-Mills can be used in
buildings and even heavy construction works reaching a wide range of application.
Trusses. The Aspen Launching Truss is a motorized horizontal truss able to transport and position
precast beams weighing up to 140 tons and spanning up to 45 meters. This truss may be used
during all stages of a construction project, from the delivery of the beams at the construction site
to positioning the beams on permanent supports. The truss may also be used to launch braces for
the construction of viaducts with a high degree of safety and minimum labor. No additional
equipment is required to launch such braces, as the Aspen Launching Truss also transports the
supports, stands and other accessories required for launching such braces. Moreover, the truss
may be operated at inclines as steep as 6% without additional components and without any
deterioration in its load-bearing capacity. The Aspen Launching Truss is typically used in the
construction of bridges, viaducts and industrial structures. The M150 Truss is a horizontal heavy
duty truss used for laying concrete. The Company believes that the M150 Truss has the highest
load-bearing capacity among similar products in the market, while remaining as light as
conventional trusses. The M150 can bear positive stress of 150 tons per meter and negative
stress of 100 tons per meter, thus requiring fewer modules than for conventional trusses and less
movement of materials, which reduces costs for labor and secondary equipment. The Company
believe that the M150 Truss is the only truss available in the market which is able to absorb
negative stress and which includes a curvature adjustment mechanism. The lower rail supports
the truss via an exclusive connecting post, eliminating the need for additional supports. The
Companys Truss can be operated either with the use of supporting structures, or through the
even distribution of weight, providing it with the capacity to be operated at significant heights
over great spans.
Reusable Steel Concrete Formwork. Formwork is used to shape concrete structures. There are
two main types of formwork: vertical formwork for casting of walls and columns, and horizontal
formwork for molding beams and slabs. The Company entered the concrete formwork market in
1980 through a joint venture with the Canadian company Aluma, which provided know-how
regarding the manufacturing of steel formwork, which is extremely light. In addition, the
Company entered into a license agreement with the German company NOE Schaltechnik in 1996,
which allowed us to manufacture and distribute NOE formwork in Brazil, using SL 2000 steel
panels. In 2005, the Company began working with ALU-L steel panels. These panels have a large
area and support a concrete pressure of up to 60 kilograms per square meter, and yet are light
enough to be moved by a single worker. The introduction of ALU-L steel panels represented a
significant innovation in the heavy construction industry. Also in 2005, the Company introduced
Deck Mills, a steel formwork system for casting concrete slabs that is extremely simple to
assemble and disassemble, which helps reduce construction time.
The Company also provides a formwork system named Aluma Light, a floating table system
designed for creating large single slabs of concrete of up to 90 square meters for use in projects
which involve the construction of a large number of identical floors, such as for the construction
of high-rise structures. The floating table system can be transported from one floor to the next
with the use of a crane and without need for disassembly, thus reducing labor costs and overall
construction time.
Prior to the development of steel formwork, the construction industry relied heavily on wood
formwork, which had a short useful life and which was very heavy and required a large number of
workers for each project. In contrast, steel formwork has a useful life of more than 10 years, is
available in a number of different sizes and shapes, and can be transported and installed either
manually or with the help of the proper equipment. Consequently, the use of steel formwork as
opposed to wood formwork allows for a significant reduction in construction costs, primarily labor
58
costs, with as much as a 70% reduction in costs according to the Companys estimates. The
Company believes that the broad range of systems offered by the Company, together with its
extensive experience in the provision of customized engineering solutions, provides a significant
advantage over its competitors in the provision of concrete formwork solutions.
Access Scaffolding. The Company offers a scaffolding system called Elite, which is a tubular metal
tower system that can be assembled into access structures of varying heights and dimensions.
Elite is a simple system composed of only three types of pieces: support posts, transverse pieces
and diagonal supports, manufactured from galvanized steel. Each post can bear loads of up to
three tons. No tools, bolts or screws are required to assemble the scaffolding system as each part
is simply slotted into each other part. On average, a single worker is generally able to assemble 15
linear meters of scaffolding per hour.
Industrial Services Division
59
Insulation. The provision of services relating to the removal and replacement of insulation is key
to the operation of companies that work with fluids, due to the high temperatures to which
volatile fluids are exposed while travelling through pipes, ducts and equipment. The Company
uses a special foam for basic insulation and external coating, the characteristics of which differ
according to the type of structure to be insulated. In most cases, the existing insulation cannot be
repaired, requiring the removal of the existing layer of foam and the application of a new layer of
insulation whenever a pipe or similar insulated equipment requires maintenance work.
Pressurized environment modules. Mills Habitat, Scottish technology, which is an advanced model
of pressurized environment, composed by non-flammable panels of PVC, flexible and modular,
with safety installation for heated works (ex. welding) in the oil and gas industries, which
presents explosion risks. This equipment allows the execution of maintenance safely, without
stopping production, providing substantial productivity gain for the customer.
Jahu Division
Offered Equipment
The Jahu Division offers specialty engineering solutions and equipment, such as concrete formwork,
access and maintenance scaffolding and shoring equipment. The Companys employees are generally
responsible for the development of engineering solutions, as well as for supervising the use of its
equipment, while its clients are usually in charge of the assembly and disassembly of such equipment.
However, for more complex projects, the Company may provide the labor for the assembly and
disassembly of equipment.
Shoring Solutions. The main shoring equipment used by the Jahu division is a system of modular
metal towers that may be pieced together through the assembly of tubular frames and kept in
place by diagonal supports, and which can bear loads of up to eight tons per tower. Additional
frames may be integrated with the structure through the use of joints, thereby increasing loadbearing capacity. In addition, specialized props and adjustable supports provide for precise
alignment of the base with the top of each tower. These props and supports contribute to a
substantial reduction in the time required for tower alignment and structure disassembly. Finally,
metal plates are used to connect the whole structure to concrete slabs, which generally
contributes to a substantial reduction in costs. An alternative shoring system for use with ribbed
slabs is assembled over props which work as support for the guides. This allows the slab to
remain shored without adjustments while the concrete formwork is removed from the ribbed
slabs. As a result, the whole horizontal and vertical shoring structure can be quickly assembled on
each successive slab, significantly reducing the costs and construction time.
Tubular Scaffolding. The access and service scaffolding offered by the Jahu division enjoys strong
brand recognition and wide use in the civil construction market, and is an integral element in the
day-to-day operations of several Brazilian construction workers and foremen. The Company
believes the use of its access and service scaffolding equipment offers a substantial operational
advantage in the execution of a residential or commercial construction project. This equipment is
easily and quickly assembled, as the scaffolding towers are pieced together by slotting tubular
frames together and are kept in place by diagonal supports fixed to the post framework through
efficient locking mechanisms. The frames used in the access and service scaffolding are safe and
versatile, having been developed based on market and technological studies. For example, the
access ladder is incorporated into the tubular frame, which contributes to its structural rigidity and
facilitates access by the worker. The frames also include porches and trusses, which make them
ideal for use in urban centers, as they allow pedestrians to pass by without being blocked by the
tubular structure.
Suspended Scaffolding. Suspended scaffolds are systems that use steel cables fixed to the facade
of the buildings. The motorized suspended scaffolding offered by the Jahu division is
recommended for the performance of rapid, automated services, as its engine, which is powerful
60
and easy to run, works at constant speeds of approximately ten meters per minute. The platforms
have non-slip flooring, can be assembled in lengths of two to eight meters, and are used with
steel cables up to 150 meters-long. The Companys light suspended scaffolding with intertwined
cable is ideal for refurbishing, painting and finishing facades, where speed and cost control are
important. The products performance and ease of operation are a result of its mechanical traction
system and modular platform, which can be assembled in lengths of up to eight meters. Finally,
the heavy suspended scaffolding is recommended for the performance of work which requires a
large effective load and must be completed at a low cost. The platform of the heavy suspended
scaffolding can be assembled in lengths of up to eight meters, and is supported by hoists installed
up to two meters apart and fixed to steel beams by wire cables. The system is flexible and
versatile enough to surround an entire building, thus allowing work to be simultaneously carried
out on all facades of the structure.
Reusable Connecting Panel Concrete Formwork. Following the establishment of the Jahu division
in 2008, the Company pioneered the use of SL 2000 NOE formwork, which was regularly used by
the Heavy Construction division, in dimensions appropriate for the construction of residential and
commercial buildings. The use of this formwork in the residential and commercial market
substantially reduces the time and cost of construction of new residential and commercial units.
Reusable Steel Concrete Formwork (used in residential construction relating to the Minha Casa,
Minha Vida program). In October 2009, the Company imported the first load of steel concrete
formwork from the Canadian company Aluma, in order to meet the needs of Homex, the largest
Mexican low-income homebuilder, which also builds homes in Brazil. In addition, the Company
entered into two other agreements with Bairro Novo, a company owned by Construtora Norberto
Odebrecht that is focused on the low-income housing market. As a result of these three
agreements, the Company is among the largest providers of steel formwork in Brazil. The
reusable steel concrete formwork system is completely manufactured in steel, which reduces its
weight considerably and allows for quick turnaround time in the mass construction of low-income
housing. Houses with a total constructed area of 45 square meters can be completed in an
average of eight days using this system. The Company believe that most of the units to be built
in the context of the Minha Casa, Minha Vida program will be constructed with the use of steel
formwork. In addition, in December 2009 the Company entered into an agreement with Aluma to
grant us exclusive rights for the manufacture and distribution of their steel concrete formwork in
Brazil.
Mills Deck Light. The Mills Deck Light is a system of forms of flat slab formworks for the
residential and commercial segment. Formed by struts, aluminum panels and "dropheads" which
allow the removal of the bottom panels from the slabs keeping them shored, the Deck System
provides the economy of a form set to the builder and also provides more speed to the
construction work.
Mast Climbing Platforms. The Mast Climbing Platforms, is automatic, delivering more speed in the
external coating of building during construction or refurbishing than the traditional scaffolding,
providing greater safety in the operations.
Rental Division
Offered Equipment
The Rental Division offers aerial platforms, which allow workers to perform tasks at different altitudes,
and telescopic handlers, which are used to lift loads to varying heights.
Boom Platforms. Offered both telescopic and articulated boom platforms, which provide access to
heights ranging from 2 to 48 meters. Offered with several options, as two or four-wheel, allterrain kits, models with a narrow or wide base, and either diesel or electric engines.
61
Scissor Platforms. Scissor platforms provide an alternative to boom platforms that allow access to
narrow spaces. These platforms have a platform extension sliding system, and are available with
either diesel or silent electric engines. These platforms are available in a number of models which
may be used in various types of terrain and provide access to heights ranging from 6.4 to 18
meters.
Telescopic Handlers. Telescopic handlers are an extremely versatile type of equipment able to lift
loads weighting up to 4,500 kilos to a height of up to 17 meters.
The Company believes that the equipment offered by the Rental division can increase its clients
productivity and reduce required time for the accomplishments of certain tasks, as well as contribute to
making their facilities safer.
b.
Revenue from the segment and its participation in the Company's net revenues
The table below indicates the net revenue from each of the divisions and its share in the total net revenue
on the indicated periods:
Division
2009
Net Revenue
% of Total
Net Revenue
Heavy Construction
Division
Industrial Services
Divisions
Jahu Division
Equipment Rental
Division
Total
146,210
36%
141,412
35%
195,396
36%
214,783
31.7%
62,177
54,394
15%
13%
105,151
95,067
19%
17%
155,761
23.0%
175,410
25.9%
404,193
100%
549,884
100%
677,592
100%
________________________________
c.
Profit or loss resulting from the segment and its participation in the Company's net
income.
The table below indicates the net income from each of the divisions and its share in the total net income
on the indicated periods:
Division
2009
Net
% of Total
Income
Net Income
Heavy Construction Division
Industrial Services Divisions
Jahu Division
Equipment Rental Division
Others
Total
35,995
3,241
17,364
11,788
68,388
53%
5%
25%
17%
100%
________________________________
7.3
Products and services that correspond to the operating segments disclosed in
item "7.2
a.
The Company outsources the entire process of production of the equipment used in their operations. See
item 7.3(e) below.
b.
62
The Company rents its equipment and provides their services according to the needs from their clients.
See previous item.
c.
(i)
The Company believes to be Brazils leading provider of specialty engineering solutions and equipment,
such as formwork, shoring and scaffolding, and in the access motorized equipment rental for the for the
Brazilian market, according to the Brazilian magazine O Empreiteiro published in 2011. The Company
also performs in the industrial services segment (access equipment, industrial painting and insulation)
being one of the major players in this market. However, there is no public information about the exact
market share of the Company and its competitors.
(ii)
Each of the Companys divisions faces significant competition in the segments in which it operates.
However, the Company believes its ability to offer innovative solutions at competitive prices and its
capacity to meet or beat client deadlines are a significant competitive advantages in the segments in
which it operates. By the Companys understandings, the considerable size and importance of the
Brazilian engineering and construction services market creates numerous business opportunities in the
segments in which it operates, which generally provides incentives for new competitors to try enter the
market.
d.
Possible seasonality
The demand for the services rendered by the Industrial Services division increases significantly during
periods when industries suspend normal operations and use such down-time to carry out maintenance
work. However, suspensions of operations are not concentrated at any particular time of the year, but
rather are determined in accordance with the operational practices adopted by each industry.
The operations of the other three divisions are not affected by seasonality.
e.
Key inputs and raw materials: (i) description of the relationships with suppliers,
including whether they are subject to governmental control or regulation, identifying the
bodies and the respective legislation; (ii) potential dependence on few suppliers; and (iii)
possible volatility in their prices
To the Heavy Construction, Industrial Services and Jahu divisions are acquired from habitual suppliers,
the raw material necessary for the manufacture of equipments offered by the Company, primarily steel
and aluminum sheets, which prices paid for such materials are directly impacted by fluctuations in
commodity prices. The Company has a large number of options when choosing its raw material suppliers
and the choice is influenced mainly by the charged price. In the fiscal year ended December 31, 2011, the
main raw material suppliers to the Companys divisions were Indstria Santa Clara, Alcoa and CBA.
After purchasing the raw materials, the Company outsources the entire manufacturing process to third
parties, as well as subsequent to the assembly. In this manner, all of the equipment manufactured is
done by third-parties. Due to the very high quality standards that are needed from the equipment, the
Company has very careful restricted selected companies to perform the manufacturing which are,
Caldren, Jesiana, and Fundiferro.
In addition, the Industrial Services division occasionally rent equipment from third-parties, in particular
from S Leone and Construservice, and enters into agreements with AGM for the provision of temporary
labor.
The Company acquires the aerial platforms and telescopic handlers offered by the Equipment Rental
division from selected third parties. The determination of which suppliers it uses is based on product
quality and post-sale customer service. The main equipment suppliers used by the Equipment Rental
division are JLG and Terex, in which the Company is dependent due to the lack of suppliers in the market.
Furthermore, it is also bought motorized components from the Cummins, Deutz and Perkins, besides the
axes bought from Dana and ZF do Brasil. Most of the equipment acquired by the Equipment Rental
division is imported.
Regarding the supplies, it is acquired regularly industrial paint used by the Industrial Services division
from Akzo Nobel and Renner, besides gasoline and diesel for the motorized equipments from the Rental
Division.
Generally, the agreements with the suppliers are short-term. The charged prices by the suppliers may
experience volatility as a result from the labor prices, and commodities that are used in the equipment
64
manufacturing, especially steel and aluminum. The Rental Divisions equipment, are impacted by the
exchange rate fluctuations.
7.4
Clients accounted for more than 10% of total net revenues of the Company
In the fiscal years ended December 31, 2011, 2010 and 2009, the Company had no clients accounting for
more than 10% of the total net revenue.
7.5
a.
The need for government authorization to exercise the activities and long-standing
relationships with the government to obtain such permits
There is no specific regulation on the activities that the Company carries. The Company does not need to
obtain permission or license in addition to those required to all commercial companies.
On July 5, 2006, environmental authorities in the state of Rio de Janeiro, the Delegacia de Proteo ao
Meio Ambiente, launched an investigation against the Company for the alleged breach of articles 54 and
60 from the Environmental Crimes Law (Lei de Crimes Ambientais) resulting from the alleged inadequate
disposal of solid and liquid waste. The investigation has not yet been completed, though the Company has
started the necessary works to remedy the irregularities appointed by the authorities and requested the
environmental licenses required for the works carried out at the construction site. For further information
regarding relevant non-confidential judicial, administrative or arbitrary lawsuits, see item 4.3 from this
Reference Form.
}The Delegacia de Meio Ambiente e produtos controlados of Osasco initiated the Police inquiry, based on
the Police report dated October 18, 2011, to investigate the alleged practice of crime against the
environment, provided for in Article 56 of Law 9.605/98, due to (i) irregularities in the artesian well, (ii)
irregular use and storage of chemicals and (iii) irregular disposal of waste in the Company's subsidiary in
Osasco/SP. The investigation is not complete, but the Company is now taking all measures to search,
verify and correct the deficiencies pointed out, together with the police authority and the environmental
agencies of the State of Sao Paulo.}
b.
environmental policy of the Company and costs incurred for compliance with
environmental regulation and, where appropriate, other environmental practices,
including adherence to international standards of environmental protection.
Considering the nature of the Companys activities, it does not adopt environmental policies and
regulations and is not subjected to specific environmental regulations.
c.
reliance on patents, trademarks, licenses, concessions, franchises, contracts,
royalties for the development of relevant activities.
In case the Company may not use its main brands, Mills and Jahu, or if such brands lose distinctiveness,
the Company may have problems in relationships with their clients to tailor their services and equipments
in the market, which may prevent the development from its activities in a satisfactory condition. The
development from its activities does not dependent on secondary brands, patents, concessions, franchises
and contracts, royalties.
7.6
65
a) revenue from the clients assigned to the host country and their participation share in
the Companys total net revenue;
The fiscal year ended on December 31, 2011, 100% of the Company's revenue came from clients located
in Brazil.
b) revenue from the clients assigned to each foreign country and their participation
share in the Companys total net revenue;
Not applicable, since, the fiscal year ended December 31, 2011, 100% of the Company's revenue came
from clients located in Brazil.
c) total revenue from foreign countries and their participation share in the Company's
total net revenue.
Not applicable, since, the fiscal year ended December 31, 2011, 100% of the Company's revenue came
from clients located in Brazil.
7.7
Not applicable.
7.8
Description of long-term relationships relevant to the Company that are not listed in
this form.
{The company does not publish sustainability report or similar. Considering the significant increase of
transparency about the sustainability issue, the Company is considering formalizing a process of analysis
(diagnosis) and action plan to improve its sustainability practices.}
7.9
66
8.
67
MILLS GRUP
8.1
a.
Share Ownership
Shares
(%)
27,421,713
21.7%
17,728,280
14.0%
6,323,300
5.0%
3,705,465
3.0%
71,220,672
56.3%
126,399,430
100%
77,543,972
61.3%
________________
(1) On October 2, 2012. According to information received officially by the Company and released to the CVM.
(2) Considers all the shares issued by the Company, except for shares held by the Direct and indirect Controlling shareholders and
administrators
The tables below show the share ownership of the Companys main shareholders until the level of
individual investor, as well as indicate the holders of direct and indirect interests in the company, where
such interests are equal to or greater than 5% from the total capital stock. The Nacht Participaes and
Snow Petrel S.L. have their respectively capital divided exclusively in shares with voting rights.
Nacht Participaes S.A.
Shareholders
Andrs Cristian Nacht .......................................... ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Jytte Kjellerup Nacht ........................................... ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Others ................................................................ ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Total .............................................................. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Snow Petrel S.L.
Shareholder
Malachite Limited ................................................ ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Total .............................................................. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Malachite Limited
Shareholders
Nicolas Nacht ...................................................... ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Helen Anne Margaret Ahrens................................ ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Others ................................................................ ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Total .............................................................. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Share Ownership
Shares
(%)
2,689,232
56.9
923,341
19.5
1,115,704
23.6
8,446,035
100.0
Share Ownership
(%)
100.0
100.0
Share Ownership
(%)
40.0
40.0
20.0
100.0
Nacht Participaes S/A, Andres Cristian Nacht and Jytte Kjellerup Nacht
Nacht Participaes is a family-held corporation organized under the laws of Brazil, whose capital is
integrally controlled by Mr. Andres Cristian Nacht, and his wife, Mrs. Jytte Kjellerup Nacht, and by other
members from the Nacht family. Nacht Participaes registered office is located at Av. das Amricas, n.
500, Bloco 14, lojas 108, 207 and 208, in the City of Rio de Janeiro, State of Rio de Janeiro.
Mr. Andres Cristian Nacht is the Companys indirect controlling shareholder and has been part of the
Companys management team since 1969, appointed as President Director from 1978 until 1998 and
currently occupying the Chairman of the Companys board of directors. Mrs. Jytte Kjellerup Nacht is the
68
wife of Mr. Andres Cristian Nacht, the other members of Nacht Participaes S.A. are also members of the
Nacht family.
Snow Petrel S, Malachite Limited, Nicolas Nacht and Helen Anne Margaret Ahrens
The Snow Petrel S.L. is a company with headquarter in Barcelona, Spain, at Calle Johann Sebastian Bach
20, 3rd floor, registered under CNPJ/MF n 14.740.333/0001-61. Snow Petrel is a part of Mills Estruturas e
Servios de Engenharia S.A.s controlling group and its entire capital stock is held by Malachite Limited, a
holding company organized under the laws of Malta and whose shares are fully held by: (i) Mr. Nicolas
Nacht, the brother of Mr. Andres Cristian Nacht; (ii) Mrs. Helen Anne Margaret Ahrens, the wife of Mr.
Nicolas Nacht; and (iii) other shareholders, also members of the Nacht family.
Shareholders' agreement of Nacht Participaes S/A
Aiming to regulate its relationship as shareholders of Mills and continue to be qualified jointly as the
controlling group of Mills, even after Nachts capital reduction, all shareholders of Nacht Participaes S.A.
on February 11, 2011, which included at the time Jeroboam Investments L.L.C and the members of the
Nacht family (Nacht Family), including Cristian Nacht and Jytte Nacht, executed a shareholders
agreement regulating the voting rights and the transfer of shares of Nacht and Mills.
The main terms of the shareholders agreement are: (a) maintenance of the Nacht Family and Jeroboam
as the group controlling shareholder, (b) joint exercise of voting rights in each and any resolution
pertaining to Mills, (c) Cristian Nacht's appointment as representative of the controlling group on the
Board of Directors and on Mills Shareholder Meetings, and (d) prohibition of sale of Mills shares of more
than 10% interest that each shareholder owns, individually, to third parties.
Due to the extinction of Jeroboam Investments L.L.C, Snow Petrel S.L., as its sole member, succeeded all
of its rights and obligations, including as a party to the Nacht Participaes S.A. Shareholders Agreement
executed on February 11, 2011.
HSBC Bank Brasil S.A. Banco Mltiplo
HSBC Bank Brasil S.A. Banco Mltiplo (HSBC) is a legal entity of private law, headquartered at the city
of Curitiba, Paran, Travessa Oliveira Bello n. 34, 4 floor, Brazil, under corporate number CNPJ
01.710.201/0001-89.
b.
c.
On January 19, 2011, the Company entered into a purchase and sales agreement to acquire 25.0% of the
voting and total capital stock of Rohr for R$90.0 million, paid fully on February 8, 2011.
Rohr is a privately held company specialized in access engineering and solutions for civil construction and
has 45 years of experience in this market. The company serves the following sectors: heavy construction
and infrastructure, residential and commercial construction, industrial maintenance and events.
The Company does not participate in Rohrs administration, once this was a strategic acquisition, in which
enables the Company to broaden its exposure to the sectors it serves - infrastructure, residential and
commercial construction, the oil and gas industry, among others. In September 2011, there was a rise in
the stake held in Rohr to 27.5%, resulting from the repurchase by Rohr of 9% of its shares held as
treasury stock.
69
d.
Not applicable
e.
Nacht
Participaes
S.A. 21.7%
Administrators
3.0%
Snow Petrel
L.L.C 14.0%
HSBC
5.0%
MILLS ESTRUTURAS E
SERVIOS DE ENGENHARIA
S.A.
8.3
Description of the restructuring operations, such as additions, mergers, splits,
incorporation of shares, corporate divestitures and acquisitions, corporate governance,
acquisitions and disposals of important assets, which may have taken place in the Group.
Date of Operation
08/01/2011
Corporate Event
Merger
Operation Description
Date of Operation
05/27/2011
Corporate Event
Acquisition.
Operation Description
Others
56.3%
02/17/2011
Corporate Event
Operation Description
Date of Operation
01/19/2011
Corporate Event
Operation Description
Date of Operation
11/30/2010
Corporate Event
Incorporation.
Operation Description
Date of Operation
09/30/2010
Corporate Event
Other.
Operations Description
Date of Operation
05/14/2010
Corporate Event
Other.
Operations Description
Date of Operation
04/16/2010
Corporate Event
Other.
Operations Description
Date of Operation
01/30/2009
Corporate Event
Incorporation.
Operations Description
Date of Operation
01/29/2009
Corporate Event
Other.
Operations Description
72
8.4
73
9.
74
RELEVANT ASSETS
9.1
Description of noncurrent relevant assets for the development of the Companys
activities
a.
Fixed assets, including those subject to rent or lease, indicating its location.
Most of the Companys revenues are generated by the rental and use of equipment, as well the provision
of services related to such equipment, including insulation, industrial painting and equipment assembly
and disassembly.
The Company also owns several fixed assets for its own use; mainly warehouses to storage the
equipment described above, offices, furniture, fixtures, and other general equipment used at the
Companys facilities.
The Companys main fixed assets are listed in the table below:
Ativos
Cost
2009
Accumulated
Depreciation
8,433
584
375,414
4,878
9,587
398,896
9,187
(674)
(469)
(123,428)
(3,406)
(4,118)
(132,095)
-
408,083
(132,095)
275,988
724,214
(173,040)
551,174
1,108,811
2011
Accumulated
Depreciation
Net
(884)
(569)
(223,549)
(4,999)
(5,924)
(235,925)
-
10,165
628
778,342
3,527
22,721
815,383
57,503
(235,925)
872,886
Constructed
Area
Status
(square
meters)
Facility
Plot Size
(square
meters)
Headquarters /
Warehouse
54,793 m2
11,032 m2
Office/Warehouse
49,620 m2
Office/Warehouse
End of Term of
Lease
City
State
Localization
Owned
Rio de Janeiro
RJ
18,841 m2
Rented
31/1/2018
Osasco
SP
7,500 m2
2,260 m2
Rented
31/5/2012
Braslia
DF
Office/Warehouse
1,500 m2
910 m2
Rented
10/12/2012
Braslia
DF
Office/Warehouse
6,975 m2
1,557 m2
Rented
12/4/2015
Camaari
BA
4,377 m2
Owned
Camaari
BA
1,286 m2
Rented
31/12/2012
Simes Filho
BA
Office/Warehouse
Office/Warehouse
4,500 m2
75
Office/Warehouse
5,257 m2
2,570 m2
Rented
Belo Horizonte
MG
Office/Warehouse
2,742 m2
1,583 m2
Rented
31/8/2015
Curitiba
PR
Headquarter/Office
293 m2
Owned
Rio de Janeiro
RJ
Headquarter/Office
216 m2
Rented
24/1/2015
Rio de Janeiro
RJ
Office
48 m2
Rented
Marechal
Deodoro
AL
Rented
1/7/2015
Serra
ES
Rented
1/12/2014
Porto Alegre
RS
Rented
29/10/2013
Belo Horizonte
MG
Warehouse
760 m2
Office/Warehouse
8,064 m2
Office/Warehouse
4,612 m2
Office/Warehouse
818 m2
120 m2
Rented
Sumar
SP
Office/Warehouse
2,869 m2
64 m2
Rented
11/1/2013
Uberlndia
MG
80 m2
Rented
Rio Grande
RS
Rented
28/2/2015
Ribeiro Preto
SP
Rented
31/8/2015
So Jos dos
Campos
SP
Office
Office/Warehouse
1,882 m2
4,764 m2
Office/Warehouse
Office/Warehouse
11,689 m2
1,849 m2
Rented
27/10/2015
Goinia
GO
Office/Warehouse
13,552 m2
4,360 m2
Rented
1/1/2016
Fortaleza
CE
Office/Warehouse
3,718 m2
297 m2
Rented
1/11/2014
Campinas
SP
Rented
1/11/2013
Parauapebas
PA
Office/Warehouse
Office/Warehouse
4,200 m2
1,200 m2
Rented
1/1/2016
Manaus
AM
Office/Warehouse
5,000 m2
2,188 m2
Rented
1/1/2016
Pernambuco
CE
Office/Warehouse
1,500 m2
650 m2
Rented
16/1/2014
Curitiba
PR
Office/Warehouse
3,600M2
940 M2
Rented
1/5/2016
Cuiab
MT
Office/Warehouse
1,100 m2
780 m2
Rented
31/8/2012
Porto Alegre
RS
Office/Warehouse
2,880 m2
1,330.91m2
Rented
09/2/2016
Itabora
RJ
Office/Warehouse
74,551.20 m2
1,000 m2
Rented
23/1/2017
Itatiaia
RJ
2,399 m2
Rented
31/12/2014
So Lus
MA
Office/Warehouse
76
All facilities used by the Company, whether they are owned or leased from third parties, are free of liens
and charges.
Description of the fixed
asset
Real property
Real property
Land
Land
Equipment for rent
(formwork, shoring and
equipment machines)
Country of Location
Brasil
Owned
IT Equipment
Facilities
Construction in progress
Brasil
Brasil
Brasil
Owned
Owned
Owned
Brasil
Brasil
Brasil
Brasil
Municipality of Location
Type of propriety
Rio de Janeiro
Camaari
Rio de Janeiro
Camaari
Type of propriety
Owned
Owned
Owned
Owned
b
Patents, trademarks, licenses, concessions, franchises and contracts for technology
transfer:
DURATION
BRAND
Coverage Territory
REGISTRATION N
UNDETERMINED
6268625
NATIONAL
UNDETERMINED
740164244
NATIONAL
UNDETERMINED
780190670
NATIONAL
UNDETERMINED
7200595
NATIONAL
UNDETERMINED
800121546
NATIONAL
UNDETERMINED
829369724
NATIONAL
UNDETERMINED
812940792
NATIONAL
UNDETERMINED
821121316
NATIONAL
UNDETERMINED
821121324
NATIONAL
UNDETERMINED
200018167
NATIONAL
UNDETERMINED
817692177
NATIONAL
UNDETERMINED
817692215
NATIONAL
UNDETERMINED
817692223
NATIONAL
UNDETERMINED
817692231
NATIONAL
UNDETERMINED
6989454
NATIONAL
UNDETERMINED
6989462
NATIONAL
UNDETERMINED
200065726
NATIONAL
UNDETERMINED
608965065
NATIONAL
UNDETERMINED
800221737
NATIONAL
UNDETERMINED
812987683
NATIONAL
UNDETERMINED
812987691
NATIONAL
UNDETERMINED
813141010
NATIONAL
UNDETERMINED
813782414
NATIONAL
UNDETERMINED
815236662
NATIONAL
UNDETERMINED
830724915
NATIONAL
UNDETERMINED
830724931
NATIONAL
UNDETERMINED
824647548
NATIONAL
UNDETERMINED
824647556
NATIONAL
DURATION
PATENT
Coverage Territory
REGISTRATION N
20 YEARS
PI 0705035-6
NATIONAL
15 YEARS
MU 7800863-8
NATIONAL
15 YEARS
MU 7801091-8
NATIONAL
15 YEARS
MU 7801367-4
NATIONAL
15 YEARS
MU 7801603-7
NATIONAL
15 YEARS
MU 7901814-9
NATIONAL
15 YEARS
MU 7902162-0
NATIONAL
15 YEARS
MU 7903337-7
NATIONAL
UNDETERMINED
830724915
NATIONAL
UNDETERMINED
830724931
NATIONAL
UNDETERMINED
824647548
NATIONAL
UNDETERMINED
824647556
NATIONAL
DURATION
c.
PATENT
Coverage Territory
REGISTRATION N
20 YEARS
PI 0705035-6
NATIONAL
15 YEARS
MU 7800863-8
NATIONAL
15 YEARS
MU 7801091-8
NATIONAL
15 YEARS
MU 7801367-4
NATIONAL
15 YEARS
MU 7801603-7
NATIONAL
15 YEARS
MU 7901814-9
NATIONAL
15 YEARS
MU 7902162-0
NATIONAL
15 YEARS
MU 7903337-7
NATIONAL
15 YEARS
MU 7903347-4
NATIONAL
15 YEARS
MU 8402798-3
NATIONAL
15 YEARS
MU 8901783-8
NATIONAL
15 YEARS
MU 8901887-7
NATIONAL
On January 19, 2011, the Company entered into a purchase and sale agreement to acquire 25% of the
voting and total capital of Rohr for R$ 90 million, paid on February 8, 2011.
Rohr is a private company specializing in access engineering and the provision of construction solutions,
with more than 45 years of experience in the market. The company operates in the heavy construction
and infrastructure, building construction, industrial maintenance and events sector.
The Company does not participate in the management of Rohr, as this is a strategic acquisition, whereby
the Company aimed to increase its presence in its areas of activity - infrastructure, residential and
commercial construction, oil and gas, etc.
(i) Company Name: Rohr S.A. Estruturas Tubulares
(ii) Headquarter: Avenida Francisco Matarazzo, 1400 Conjunto 181, cidade de So Paulo, Estado de So
Paulo, Brasil.
(iii) Activities developed: Rohr is a private company specializing in access engineering and the
provision of construction solutions, with more than 45 years of experience in the market. The company
operates in the heavy construction and infrastructure, building construction, industrial maintenance and
events sector.
(iv) Ownership: 27.5%
(v) Ownership profile: investment recorded at the cost of acquisition.
(vi) CVM registration: not applicable
(vii) Book value of participation: R$87.4 million (as of December 31, 2011)
(viii) market value of ownership according to stock price at the date of the fiscal year, when
such stocks are traded on organised markets of securities: not applicable
(ix) appreciation or depreciation of such ownership, over the last 3 fiscal years, according to
the book value: not applicable. On January 19, 2011, the Company entered into a purchase and sale
agreement to acquire 25.0% of the voting and total capital of Rohr for R$90.0 million. In September
2011, there was a rise in the stake held in Rohr to 27.5%, resulting from the repurchase by Rohr of 9.0%
of its shares held as treasury stock.
(x) appreciation or depreciation of such ownership, over the last 3 fiscal years, according to
the market value, to stock price at the date of the fiscal year, when such stocks are traded on
organised markets of securities: not applicable
78
10.
79
MANAGEMENT COMMENTS
10.1
80
In addition, the Companys operations and results of operations are directly affected by changes in (i)
inflation rates, which are used as a reference for the adjustment of the prices paid under long-term
contracts, (ii) interest rates, which affect the Companys financial obligations, (iii) fluctuating of prices of
materials consumed in the construction job or fluctuating of the prices of maintenance of the equipment
of the Company.
c. Financial commitments
The Companys EBITDA for the year ended December 31st, 2011, was R$238.1 million and its financial
expenses, net of financial revenue in the same period were R$31.8 million. Thus, the Companys EBITDA
for year ended December 31st, 2011 presented a coverage ratio of 7.5 times its net financial expenses
during the same period. Only considering its financial expenses, which amounted to R$46,6 million in the
year ended December 31st, 2011, the coverage ratio would be 5.1 times.
The Companys total indebtedness for the year ended December 31st, 2011, amounted to R$ 410.9
million, or, 1.7 times the Companys EBITDA for the year ended December 31 st, 2011. The flow of
payment from this debt will take place in a period of ten years, of which R$71.4 million in less than one
year, R$184.7 million from 1 to 2 years, R$185.8 million in a period between 3 to 5 years and R$5.0
million in more than five years. The Companys long-term debt profile has a policy for contracting loans
and financing aimed at ensuring that all financial commitments are honored, if necessary, through its cash
generation. This way, the Company's Management believes that its cash generation is sufficient to meet
its financial commitments.
In addition, on December 31st, 2011, the Company had installment of tax payments on its balance sheet
in the amount of R$ 18.7 million, which the greatest amount of payments of R$10.9 million, refers to the
Tax Recovery Program (REFIS) with a maturity of 180 months. The lengthening of the payment of the
installments within this period contributes to the Company to be able to timely make payments due.
With regard to contractual limitations for assumption of new debt, there are clauses in the Company's
bank credit contracts that require adherence to certain financial indicators, among which: the ratio
between EBITDA and net debt, the ratio of net short-term debt and total net debt, and the ratio between
net financial expenses and EBITDA. On the date of this Reference Form, the Company was within the
limits of contractual financial indicators.
On April 2011, the Company issued R$270 million in non-convertible unsecured debentures, with maturity
on April 18th, 2016. The nominal value will be amortized in three annual installments starting on the third
year of the issuance, and shall pay semi-annually interest of 112.5% of accrued variation of the CDI
interest rate. The net proceeds from the Offering were used for (a) the redemption of all commercial
papers, issued under the first public offering of the Company, totaling R$ 30 million, (b) investments
defined in the Mills expansion plan, including estimated investments of R$ 337 million in 2011, (c)
rearrangement of cash balance following disbursement of R$ 90.0 million in February 2011 in connection
with the acquisition of 25.0% of the Rohr S/A Estruturas Tubulares (Rohr) total capital stock, and (c)
general corporate purposes and expenses of the Company.
On December 7, 2011 the Company issued a single series of 3 (three) commercial promissory notes with
unit face value of R$ 9.0 million, for a total amount of R$ 27.0 million with maturity on December 1st,
2012. Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in
the average daily Domestic Demand (DI) rates, plus 1.10% per annum. Remuneration will be fully paid
upon the maturity date.
e. Potential sources of financing used for working capital and for investments in noncurrent assets.
The Companys main sources of liquidity are:
cash flow from our operations;
financing agreements and through capital market; and
increases in its capital stock.
The Companys main liquidity requirements are:
investments for maintenance and increase of the equipment inventory;
working capital needs;
investments in the Companys facilities and the technology center, which are necessary to support
its operations;
investments in the improvement of processes and controls;
investments in training and occupational safety; and
distribution of dividends and payment of interest on equity.
The Management of the Company believes that the existing resources and the cash flow to be generated
from its operations, along with its borrowing capacity, with proper leverage, will be sufficient to cover its
investment plan and the need for working capital during the same period.
2009
As of December 31,
2010
82
2011
CDI+1.1% to 4.5%
TJLP+0.2% to 7.0%
CDI + 1.0% to 4.5%
112.5% of CDI
101.5
4.3
78.1
183.9
41.9
17.8
72.9
132.6
62.1
22.1
52.2
274.6
410.9
Issue Date
Maturity Date
Original Value(1)
345.500.737
345.500.724
05.27.2008
02.27.2008
04.20.2013
01.25.2013
8.0
5.0
(1)
Outstanding as of
December 2011(1)
2.4
1.2
In millions of R$
Debentures
On April 8, 2011 approval was granted for issue by the Company of a total of 27 thousand simple nonstock-convertible debentures in the total amount of R$ 270,0 million, and unit face value of R$ 10
thousand, issued on April 18, 2011. The debentures have maturity on April 18, 2016, with remuneration
equivalent to 112.5% of the CDI rate and semi-annual payments of interest and amortization in 3 (three)
consecutive installments, with the first mature date on April 18, 2014. The transaction costs associated
with this issue, in the amount of R$ 2.4 million, are being recognized as Company funding expenses, in
accordance with the contractual terms of the issue. As at December 31, 2011 the balance of the
debentures, net of the transactions costs, is broken down to R$ 6,6 million under current liabilities and R$
270,0 million under noncurrent liabilities (R$ 6,1 million and R$ 268,4 million net of transaction costs
respectively).
Promissory Notes
On December 7, 2011 the Company issued a single series of 3 (three) commercial promissory notes with
unit face value of R$ 9.0 million, for a total amount of R$ 27.0 million with maturity on December 1 st,
2012. Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in
the average daily Domestic Demand (DI) rates, plus 1.10% per annum. Remuneration will be fully paid
upon the maturity date.
Leasing Agreements
Several leasing agreements which the Company entered are guaranteed through promissory notes. The
table below shows the promissory notes which amounts are considered relevant:
Contract
binding
569686
19340105656
176086
175796
100021789
100027813
100018086
Bank
Itauleasing
HSBC
Bradesco Leasing
Bradesco Leasing
Alfa Arrendamento Mercantil
Alfa Arrendamento Mercantil
Alfa Arrendamento Mercantil
Promissory Note
R$6.25 million
R$5.85 million
R$5.62 million
R$5.67 million
R$4.88 million
R$6.33 million
R$6.89 million
Contract binding
10.31.2008
05.25.2009
03.12.2009
09.08.2008
03.20.2008
07.01.2008
01.10.2008
Contract binding
Issue Date
12/19/2013
07/01/2014
04/04/2014
09/11/2013
03/20/2012
06/01/2012
01/10/2012
As of the date of this Reference Form, the Company is part of several leasing agreements with several
financial entities, representing obligations of R$52.2 million as of December 31st, 2011. The Company
entered into such agreements as lessee, with the purpose of leasing (or in certain cases purchasing) the
84
equipment and other assets necessary for running its operations. Upon maturity of each leasing
agreement, the Company has the option to return the equipment or assets to the respective lessor, or
exercise an option to buy such equipment or asset. The amounts owed under these leasing agreements
are repaid in monthly installments, subject to a minimum guaranteed payment corresponding to the lower
amount for which the equipment or assets could be sold to a third-party.
(iv) any restrictions imposed on the issuer, in particular, for limits of indebtedness and contracting of new
debts, the distribution of dividends, disposal of assets, the issuance of new securities or disposal of
corporate control
Some of the Companys long-term financial instruments contain obligations relating to the maintenance of
certain levels for determined financial indicators. The main conditions imposed on financial instruments
entered into by the Company are: (i) the ratio between EBITDA and net debt (total bank debt minus cash
equivalents); and (ii) the ratio between EBITDA and net financial expenses. Thus, the Company is
required to maintain a relatively low indebtedness and a satisfactory capacity to pay its financial
obligations, and the hiring of new borrowings should meet these prerequisites. On the fiscal years ended
December 31st, 2009, 2010 and 2011, the Company was in compliance with the required levels for the
indicators.
85
The Management of the Company believes that the current provisions will not significantly restrict the
ability to recruit new debt to meet its capital needs.
h.
VA
(1)
(%)
2010
VA(1) (%)
HA(2) (%)
2011
VA(1) (%)
HA (%)
404.2
100%
549.9
100%
36.0%
677.6
100%
23.2%
146.2
36.2%
154.3
28.1%
5.5%
131.6
19.4%
(14.7%)
62.2
141.4
15.4%
35.0%
105.1
195.4
19.1%
35.5%
69.0%
38.2%
155.8
214.8
23.0%
31.7%
48.2%
9.9%
54.4
13.5%
95.1
17.3%
74.8%
175.4
25.9%
84.5%
(169.6)
42.0%
(254.8)
46.3%
50.2%
(340.4)
50.2%
33.6%
Gross Profit
234.6
58.0%
295.1
53.7%
25.8%
337.2
49.8%
14.3%
Operating Revenues
(Expenses)
General and Administrative
(108.8)
26.9%
(147.6)
26.8%
35.7%
(175.2)
25.9%
18.7%
Operating Profit
125.8
31.1%
147.5
26.8%
17.2%
162.0
23.9%
9.8%
Financial Expenses
Financial Income
(25.3)
0.9
6.3%
0.2%
(24.3)
18.7
4.4%
3.4%
(4.0%)
1884%
(46.6)
14.7
6.9%
2.2%
91.6%
(21.3%)
EBTIDA
Income Tax and Social
Contribution
101.4
25.1%
141.8
25.8%
49.8%
130.1
19.2%
(8.3%)
(33.0)
8.2%
(38.5)
7.0%
16.7%
(38.0)
5.6%
(1.4%)
13.6%
(10.7%)
Year ended December 31st, 2011 compared with year ended December 31st, 2010
Revenue of Products Sold e Services Provided
In accordance with the existing accounting policies adopted in Brazil, the revenue reported in the income
statement should include only the gross inflows of economic benefits received and receivable by the
Company, when originating from their own activities. Amounts collected on behalf of third parties - such
as sales taxes, taxes on goods and services and from taxes on added value - do not generate benefits for
the Company and do not result in an increase in equity and therefore are excluded from revenue. Thus,
the comments below relating to variations between the results for the years ended December 31st, 2009,
2010 and 2011 refer only to net revenue, not to the gross revenue.
The following table shows the Companys net revenue by division for the years ended December 31st,
2010 and 2011:
86
2010
VA (%)(1)
HA (%)
(2)
154.3
28.1%
105.1
195.4
95.1
549.9
19.1%
35.5%
17.3%
100%
131.6
155.8
214.8
175.4
677.6
19.4%
23.0%
31.7%
25.9%
100%
(14.7%)
48.1%
9.9%
84.5%
23.2%
In the year ended December 31st, 2011 the Companys net revenue from sales and services totaled
R$677.6 million, a new annual record, compared with R$549.9 million in the same period in 2010, an
increase of R$127.7 million, or 23.2%. This increase comes from the incremental revenue from the
Rental, Jahu and Industrial Services divisions, partially offset by the Construction division revenues
decrease. The analysis of the Company's Management regarding the factors that led to these changes are
listed below.
Heavy Construction Division
Net revenue from the Heavy Construction Division, decreased from R$154.3 million in the year ended
December 31st, 2010 to R$131.6 million in 2011, a R$22.7 million reduction, or 14.7%. The Management
of the Company attribute that this reduction was mainly due to the weakening of demand in the Heavy
Construction segment from the end of 2010 to mid-2011.
Jahu Division
Net revenue from the Jahu Division, increased from R$105.1 million in the year ended December 31 st,
2010 to R$155.8 in 2011, an increase of R$50.7 million, or 48.1%. The Management of the Company
attributed this expansion as a result of the investments made and the success of the geographic
expansion of this division.
Industrial Services Division
Net revenues for the Industrial Services Division increased from R$195.4 million in the year ended
December 31st, 2010 to R$214.8 million in 2011, an increase of R$19.4 million, or 9.9%. On the
evaluation of the Management of the company, this revenue increase is mainly due to revenue growth in
maintenance services.
Rental Division
Net Revenue from the Rental division increased from R$95.1 million in the year ended December 31 st,
2010 to R$175.4 million in 2011, an increase of R$80.3 million, or 84.5%. On the evaluation of the
Management of the company, this increase is associated with the organic growth from this division, with
increasing fleet of equipment and geographical expansion.
Cost of Products Sold and Services Rendered and General, Administrative and Operating Expenses
87
Since 2010, the Company began to detail its costs of goods sold and general and administrative expenses
by division and by nature, and the information by division has been presented only on a consolidated
basis, excluding the effects of depreciation.
The table below shows the Companys cost of goods sold and services rendered by nature in fiscal years
ended December 31, 2010 and 2011.
Year ended December 31, 2010
Total
Direct cost
of
construction
and renting
General and
Administrati
ve Expenses
Direct cost
of
construction
and renting
General and
Administrati
ve Expenses
(122.3)
(80.0)
(202.2)
(162.3)
(89.9)
(15.0)
(20.1)
(7.0)
(0.4)
(12.7)
(13.4)
(6.2)
(30.5)
(5.4)
(8.5)
(1.7)
(0.5)
Total
Direct cost
of
construction
and renting
General and
Administrati
ve Expenses
Total
(252.3)
(40.1)
(10.0)
(50.0)
(17.4)
(24.4)
(1.9)
(2.4)
(4.3)
(0.6)
(14.0)
(1.1)
(0.2)
(1.3)
(35.3)
(4.1)
(39.3)
(10.9)
2.1
(8.9)
(16.7)
(10.0)
(9.5)
(19.4)
1.3
(4.1)
(2.8)
(14.7)
(46.6)
(8.6)
(73.0)
(11.4)
(2.5)
(20.0)
(75.5)
(2.4)
(28.1)
(2.9)
(0.8)
(5.3)
(29.0)
(0.5)
0.00
(0.7)
(0.7)
0.00
(0.2)
(0.2)
(4.0)
(4.6)
(4.6)
(0.5)
0.00
(0.5)
Third-party
(5.1)
Services
Freight
(12.4)
Construction
Material /
(24.4)
Maintenance &
Repair
Rent
(11.3)
equipment
Travel
(6.2)
Depreciation
(44.9)
Amortization of
intangible
0.00
assets
Asset
(4.0)
impairment
Allowance for
Doubtful Debts
- ADD
Stock Option
Update
provisions
Profit sharing
Other
(24.4)
Total
(254.8)
(1)
Increase (decrease) of
(1.5)
(1.5)
(11.3)
(11.3)
0.00
(9.8)
(9.8)
(0.6)
(0.6)
(3.1)
(3.1)
0.00
(2.5)
(2.5)
2.6
2.6
(1.4)
(1.4)
0.00
(4.0)
(4.0)
(7.9)
(15.4)
(175.2)
(7.9)
(41.7)
(515.6)
0.00
(1.9)
(85.6)
9.7
(2.4)
(27.6)
9.7
(4.3)
(113.2)
(17.6)
(17.6)
(13.1)
(37.4)
(26.3)
(147.6)
(402.4)
(340.4)
the total recorded from one period to another.
The table below shows the Companys cost of goods sold and services rendered and general and
administrative expenses by division in fiscal years ended December 31, 2010 and 2011. The information
provided in this table does not reflect the effects of depreciation on such costs.
2010
(%)
(1)
2010
x
2011
Var. (%)
(2)
22.7%
17.2%
47.6
12.4%
100%
(80.7)
(61.3)
(169.3)
(44.1)
(355.4)
(73.8)
(89.8)
(194.1)
(81.8)
(439.4)
16.8%
20.4%
44.2%
18.6%
100%
(8.6%)
46.5%
14.6%
85.5%
23.6%
Percentage share of the division of goods sold and services rendered and general and administrative expenses.
Percentage increase (decrease) of the total registered from one period to another.
Cost of goods sold and services rendered, excluding the effects of depreciation, went from R$209.9
million in the year ended December 31, 2010 to R$267.4 million year ended December 31, 2011, an
increase of R$57.5 million, or 27.4%, mainly due to growth of the Companys business in 2011, both in
number of transactions and contracts as geographically.
88
The item cost of goods sold and services rendered which showed the largest absolute increase between
fiscal years ended December 31, 2010 and 2011 was personnel item, which increased R$42.0 million,
mainly influenced by the growth of Industrial Services and Jahu Divisions revenue, which were
responsible for 76% of this increase.
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services
rendered increased 61.9% due to higher investments in the fiscal year ended December 31, 2011, from
R$46.6 million for the year ended on December 31, 2010 to R$75.5 million in the fiscal year ended
December 31, 2011, maintaining the average depreciation period of 10 years.
Considering the depreciation costs, the Companys cost of goods sold and services rendered totaled
R$340.4 million in the fiscal year ended December 31, 2011, compared with R$254.8 million in the fiscal
year ended December 31, 2010, representing an increase of 33.6%.
As a result of these factors, compared to net operating revenues, the total cost of goods sold and services
rendered, excluding the effects of depreciation, increased from 38.2% in the year ended December 31,
2010 to 39.4% in the year ended December 31, 2011. Including the effects of depreciation, the same
ratio increased from 46.3% in the year ended December 31, 2010 to 50.2% in the fiscal year ended
December 31, 2011.
The general and administrative expenses increased from R$147.6 million in the fiscal year ended
December 31, 2010 to R$175.2 million in the fiscal year ended December 31, 2011, an increase of R$27.6
million, or 18.7%. The main explanation for the increase was the need to develop technical and
commercial teams in the new branches from the Jahu and Rental divisions, to meet the expansion of
these divisions, which led to the hiring of new employees for this purpose.
The ratio between the Companys operating, general, and administrative expenses in relation to the net
operating income went from 26.8% in the fiscal year ended December 31, 2010 to 25.9% in the fiscal
year ended December, 2011.
Operating profit
Operating profit before financial income increased from R$147.5 million in the fiscal year ended December
31, 2010 to R$162.0 million in the fiscal year ended December 31, 2011, an increase of R$14.5 million, or
9.8%. Such increase was a consequence of the recovery of the Heavy Construction and the maturation of
the new branches from the Rental and Jahu division. Operating profit represented 23.9% of net revenues
in December 31, 2011, compared to 26.8% of net revenues in December 31, 2010.
Financial Results
Net financial expenses increased from R$5.6 million in the fiscal year ended December 31, 2010 to R$31.8
million in the fiscal year ended December 31, 2011, representing an increase of R$26.2 million. The
Company's bank debt, which was R$ 132.6 million in the fiscal year ended December 31, 2010 increased
to R$410.9 million in the fiscal year ended December 31, 2011. On April from 2011, the Company issued
its first debentures offering, a total amount of R$ 270.0 million. The Company used the net proceeds from
the issuance for (a) the redemption of all 90 days commercial papers, issued on March 2011, totaling R$
30.0 million, (b) investments defined in the Mills expansion plan, including part of estimated investments
of R$ 337.0 million in 2011, (c) rearrangement of cash balance following the acquisition of 25.0% of
Rohrs total capital stock, and (c) general corporate.
89
In the fiscal year ended December 31, 2011, the Companys deduct from its income tax and social
contribution the amount of R$8.3 million, due to the provisioning of interest on equity for distribution of
part of the annual results, while in fiscal year ended December 31, 2010 this deduction totaled R$8.6
million. Moreover, the effective rate of 2011 was 29.2% after adjustment of expenses not deductible,
compared with 27.2% in 2010.
Net Income
The net profit increased from R$103.3 million in the fiscal year ended December 31, 2010 to R$92.2
million in the fiscal year ended December 31, 2011, a decrease of R$11.1 million, or 10.8%, based on the
combined effect of the components mentioned above.
Year ended December 31st, 2010 compared with year ended December 31st, 2009
The following table shows our net sales by division for the years ended December 31st, 2009 and 2010:
2009
VA (%)(1)
HA (%)
(2)
146.2
62.2
141.4
54.4
404.2
36.2%
15.4%
35.0%
13.5%
100%
154.3
105.1
195.4
95.1
549.9
28.1%
19.1%
35.5%
17.3%
100%
5.5%
69.1%
38.2%
74.8%
36.0%
In the year ended December 31st, 2010 the Companys net revenue from sales and services totaled
R$549.9 million compared with R$404.2 million in the same period in 2009, an increase of R$145.7
million, or 36.0%. This increase comes from the increase in revenues from all divisions.
Heavy Construction Division
Net revenue from sales and services rendered by the Heavy Construction division, after deductions for
discounts and cancellations, increased 5.5%, or R$8.1 million, from R$146.2 million in 2009 to R$154.3
million in 2010. This increase was mainly due to more revenue from technical support services and sales,
which increased from R$20.9 million to R$32.4 million in 2010, partially offset by a reduction of R$3.5
million, or 2.8%, in revenue from equipment rental. The increase of volume of equipment rented
contributed to the decrease of revenue from equipment rental amounting to R$5.0 million, while the
combination of rental price and mix of rented equipment led to a reduction in rent revenue in the amount
of R$8.5 million, reflecting the weakening demand in the heavy construction segment from September
2010.
Jahu Division
Net income for the Jahu Division went from R$62.2 million in the fiscal year ended December 31, 2009 to
R$105.1 million in the fiscal year ended 2010, an increase of R$42.9 million, or 69.1% due mainly to the
increase in equipment rental revenue which contributed 55% of the total increase and the increase in
sales revenue which contributed 34% of the total increase. The remaining percentage of 11% of the
increase was due to higher revenues from technical assistance services and indemnities in the ordinary
course of operations received from customers due to equipment lost or damaged.
Between the fiscal years ended December 31, 2009 and 2010, revenue from equipment rental has
increased R$23.5 million, or 40.4%, of which the increase in volume helped to expand the rental revenue
in R$28.8 million, while the combination of rental price and mix of equipment led to a reduction in rental
revenue in the amount of R$5.3 million.
90
Cost of Products Sold and Services Rendered and General, Administrative and Operating Expenses
From 2010, the Company began to detail its costs of goods sold and general and administrative expenses
by division and by nature. The information by division has been presented only on a consolidated basis,
excluding the effects of depreciation.
The table below shows our cost of goods sold and services rendered by nature in fiscal years ended
December 31, 2009 and 2010.
Year ended December 31, 2009
Direct
cost of
constructi
on and
renting
General
and
Administr
ative
Expenses
Direct
cost of
construct
ion and
renting
Total
General
and
Administ
rative
Expenses
Total
Variation 2009-20101)
Genera
l and
Direct
Admini
cost of
strativ
construct
e
ion and
Expens
renting
es
Total
(54.5)
(137.6)
(122.3)
(80.0)
(202.2)
(39.1)
(25.4)
(64.6)
(8.8)
(13.9)
(5.1)
(15.0)
(20.1)
(0.1)
(6.1)
(6.2)
91
(6.4)
Freight .............................................................
Construction Material / Maintenance &
(13.9)
Repair ..............................................................
(0.9)
(7.2)
(12.4)
(0.4)
(12.7)
(6.0)
0.5
(5.5)
(6.8)
(20.8)
(24.3)
(6.2)
(30.5)
(10.4)
(0.7)
(9.7)
(13.7)
Rent equipment ................................................
(13.7)
(4.9)
(4.9)
8.8
8.8
(3.7)
Rent others .......................................................
(3.5)
(7.2)
(6.4)
(5.4)
(11.8)
(2.7)
(1.9)
(4.6)
(4.4)
Travel ..............................................................
(4.4)
(8.8)
(6.2)
(8.5)
(14.7)
(1.8)
(4.1)
(5.9)
(30.3)
Depreciation .....................................................
(1.2)
(31.5)
(44.9)
(1.7)
(46.6)
(14.6)
(0.5)
(15.1)
(0.3)
(0.3)
(0.4)
(0.4)
(0.1)
(0.1)
(0.3)
Asset impairment ..............................................
(0.3)
(4.0)
(4.0)
(3.7)
(3.7)
(7.5)
Sales ................................................................
(7.5)
(23.2)
(23.2)
(15.8)
(15.8)
(3.5)
(3.5)
(1.5)
(1.5)
2.0
2.0
(4.1)
(4.1)
(0.6)
(0.6)
3.5
3.5
1.5
1.5
2.6
2.6
1.1
1.1
(13.8)
(13.8)
(17.6)
(17.6)
(3.7)
(3.7)
(1.2)
Other ...............................................................
(169.6)
Total ...............................................................
(8.5)
(9.7)
(1.2)
(13.0)
(14.2)
0.1
(4.6)
(4.5)
(108.8)
(278.4)
(254.8)
(147.6)
(402.4)
(85.2)
(38.8)
(124.0)
(1)
The table below shows the Companys cost of goods sold and services rendered and general and
administrative expenses by division in fiscal years ended December 31, 2009 and 2010. The information
provided in this table does not reflect the effects of depreciation on such costs.
2009
(%)
(1)
2009
x
2010
Var. (%)
(2)
(72.6)
(30.3)
(120.6)
(23.1)
(246.5)
29.4%
12.3%
48.9%
9.4%
100%
(80.7)
(61.3)
(169.3)
(44.1)
(355.4)
22.7%
17.2%
47.6%
12.4%
100%
11.2%
102.3%
40.4%
90.9%
44.2%
Cost of goods sold and services rendered (excluding the effects of depreciation) increased by 50.7%, or
R$70.6 million, from R$139.3 million in 2009 to R$209.9 million in 2010. This increase was mainly due to
growth of our business in 2010.
The item cost of goods sold and services rendered which showed the largest absolute increase between
fiscal years ended December 31, 2009 and 2010 was personnel item, which increased R$39.1 million,
mainly influenced by the growth of Industrial Services Divisions revenue, which is workforce intensive.
The sale item, which represents the cost of equipment sold by the Company, increased R$15.8 million,
driven primarily by the increase of sales revenue and of the mix of equipment sold in 2010.
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services
rendered increased 47.8% due to higher investments in the fiscal year ended December 31, 2010, from
R$30.3 million for the year ended on December 31, 2009 to R$44.9 million in the fiscal year ended
December 31, 2010, maintained the average depreciation period of 10 years.
Considering the depreciation costs, our cost of goods sold and services rendered totaled R$254.8 million
in the fiscal year ended December 31, 2010, compared with R$169.6 million in the fiscal year ended
December 31, 2009, representing an increase of 50.2%.
As a result of these factors, compared to net operating revenues, the total cost of goods sold and services
rendered, excluding the effects of depreciation, increased from 34.4% in the year ended December 31,
2009 to 38.2% in the year ended December 31, 2010. Including the effects of depreciation, the same
92
ratio increased from 42.0% in the year ended 31 December 2009 to 46.3% in the fiscal year ended
December 31, 2010.
The general and administrative expenses increased from R$108.8 million in the fiscal year ended
December 31, 2009 to R$147.6 million in the fiscal year ended December 31, 2010, an increase of R$38.8
million, or 35.7%. This increase was due primarily to the employment of additional labor which
contributes to an increase of R$25.4 million. Our total number of employees increased from 907 at the
end of 2009 to 1,261 at the end of 2010, an increase of 39% to meet an increase in demand for our
services and the strong geographic expansion, mainly from the Rental Division and the Jahu Division.
The Companys operating general, administrative and operating Expenses compared to net operating
income were maintained at 27% in the fiscal years ended December 31, 2009 and 2010.
Operating profit
Operating profit before financial income increased from R$125.8 million in the fiscal year ended December
31, 2009 to R$147.5 million in the fiscal year ended December 31, 2010, an increase of R$21.7 million, or
17.2%. This increase was because the growth in net revenues was higher than the growth of cost of
goods sold and services rendered and general and administrative expenses. Operating profit represented
26.8% of net revenues in December 31, 2010, compared with 31.1% of net revenues in December 31,
2009.
Financial Results
Net financial expenses increased from R$24.4 million in the fiscal year ended December 31, 2009 to R$5.6
million in the fiscal year ended December 31, 2010, representing a decrease of R$18.8 million, or 77.0%.
The Company's bank debt, which was R$183.9 million in the fiscal year ended December 31, 2009
increased to R$132.6 million in the fiscal year ended December 31, 2010. In April 2010, the Company
completed its initial public offering of shares which resulted in net proceeds of R$411 million. The
Company used part of these proceeds to settle debts of higher costs.
Financial income on December 31, 2010 was benefited by the financial gain with interest of low risk
applications of The Companys cash, which totaled R$17.3 million in the fiscal year ended December 31,
2010.
Net Income
The net profit increased from R$68.4 million in the fiscal year ended December 31, 2009 to R$103.3
million in the fiscal year ended December 31, 2010, an increase of R$34.9 million, or 51%, based on the
combined effect of the components mentioned above.
Year ended December 31, 2011 compared to year ended December 31, 2010
Current Assets
93
The Companys current assets increased from R$307.9 million as of December 31, 2010 to R$224.9
million as of December 31, 2011, a decrease of R$83.0 million or 27.0%. The main reasons for such
increase, in the assessment of the Management of the Company, were:
a reduction of R$136.1 million in securities and marketable securities, the outstanding amount
was completely used during the acquisition of Rohrs share and other investments of the
Company;
an increase of R$29.0 million in cash, cash equivalents, due to proceeds from the Companys
primary offering of debentures held in April 2011;
an increase of R$17.0 million in accounts receivable, reflecting an increase in the Companys
revenue;
an increase of R$5.6 million in inventories due to the expanding activities of the Company;
Non-current Assets
The Companys non-current assets of R$23.1 million as of December 31, 2010 was increased to R$58.0
million as of December 31, 2011 an increase of R$34.9 million or 151.1%. The main variations in the noncurrent assets were:
an increase of R$27.7 million in the taxes recoverable account, referring to claims of PIS Programa de Integrao Social and COFINS - Contribuio para Financiamento da Seguridade
Social on fixed assets, given the need to change the calculation method of 1/12 to 1/48. The
Company not agreeing with the interpretation from the IRS, filed a petition for a writ of mandate
in order to continue to use the credits to a ratio of 1/12 and;
an increase of R$8.1 million in the deferred taxes account due to the increase of provisions for
losses by the reduction of the recoverable value of the receivables and since on December 31,
2011 being presented gross from deferred liabilities.
Investment
In 2011 the Company registered an investment value of R$87.4 million. In January, 2011 it acquired
25.0% of the total voting capital of Rohr for R$ 90.0 million. The Company received in 2011, R$2.6 million
of shareholder remuneration from Rohr related to previous fiscal years than 2011, and therefore was
recorded as a reduction for the acquisition investment.
Intangible assets
The Companys intangible assets increased from R$41.9 million as of December 31, 2010 to R$45.5
million as of December 31, 2011, mainly due to R$2.6 million in software acquisition and R$2.0 million of
goodwill from the acquisition of GP Andaimes Sul Locadora Ltda (GP Sul).
Current liabilities
The Companys current liabilities increased from R$160.8 million as of December 31, 2010, to R$177.7
million as of December 31, 2011, an increase of R$16.9 million. The main factors that led to this change,
according to the Managements opinion, were:
94
increase of R$18.6 million in the short-term loans and financing balance, due to the issuance of
promissory notes in December 2011, to enable the Companys investments in 2011;
decrease of R$9.6 million in the profit sharing payable account, due to the reduction of the variable
remuneration program EVA in the year of 2011, in comparison with 2010;
reduction of R$7.0 million in the Companys derivative financial instruments account, due to the
settlement of the hedge contracts and also the Dollar variations;
increase of R$6.1 million, in the short-term debentures balance, due to the debentures offering in
April 2011, in the amount of R$270 million;
increase of R$3.2 million in the trade payables account, due to the higher investment volume in 2011;
increase of R$3.7 million in salaries and payroll charges, due to the increase in payroll resulting from
the higher number of employees necessary to accommodate the increased volume of business.
Non-current liabilities
The non-current liabilities increased from R$108.2 million as of December 31, 2010 to R$374.7 million as
of December 31, 2011, an increase of R$266.5 million, or 246.3%. The main factor that led to this
variation according to the Managements opinion, was the R$268.4 million increase in the long-term
debenture account, due to the debenture issuance in April 2011, in the amount of R$270.0 million.
Additionally, the deferred tax liability started to be presented as gross.
Stockholders' equity
Shareholder's equity increased from R$655.2 million as of December 31, 2010 to R$736.1 million as of
December 31, 2011, an increase of R$80.9 million, or 12.3%, substantially due to the increase of the
Companys income reserve. As a result of the exercise of the right of withdrawal by dissident shareholder
of the deliberations of the extraordinary general meeting held on August 1, 2011, the company repaid to
the unrealized profit reserve, issuing 99,140 of its own shares, for R$535 thousand. On September 23,
2011 approval was granted by the Board of Directors to a motion to cancel all the shares.
Year ended December 31, 2010 compared to year ended December 31, 2009
Current Assets
The Companys current assets increased from R$104.5 million as of December 31, 2009 to R$307.9
million as of December 31, 2010, an increase of R$203.5 million or 194.6%. The main reasons for such
increase were:
an increase of R$140.8 million in cash, cash equivalents and marketable securities due to the
proceeds from the primary public offering of shares of the Company held in April 2010;
increase of R$50.6 million in its trade receivables, reflecting an increase in its revenues;
an increase of R$7.3 million in other assets due to the increase in advances to suppliers account
in the amount of R$5.3 million, the number of imports of equipment and the loans and benefit to
employees account amounting to R$1.5 million;
an increase of R$4.2 million in inventories due to the expanding activities of the Company;
95
Non-current Assets
The Companys non-current assets of R$20.6 million as of December 31, 2009 were increased to R$23.1
million as of December 31, 2010 an increase of R$2.5 million or 12.1%. The main changes in its noncurrent assets were:
an increase of R$3.8 million in taxes recoverable account, referring to claims of PIS - Programa de
Integrao Social and COFINS - Contribuio para Financiamento da Seguridade Social on fixed
assets that was reclassified from short-term to long term;
an increase of R$1.4 million in the judicial deposits account due to the monetary update of
historical value of deposits recorded that was made on December 31, 2010, and;
reduction of R$2.0 million in the deferred tax account, affected by the amortization of R$1.5
million on deferred taxes of a tax credit previously held by Itapo Participaes Ltda. as a result
of its merger by the Company.
Intangible assets
The Companys intangible assets increased from R$39.3 million as of December 31, 2009 to R$41.9
million as of December 31, 2010. The main component of its intangible asset is the balance of goodwill
accounted on acquisition of Kina Participaes Ltda and Jahu Industria e Comercio Ltda. Under accounting
rules in force, goodwill recorded in this acquisition is no longer amortized by book value, but only for tax
purposes, being subject only to tests of impairment.
Current liabilities
The Companys current liabilities increased from R$119.4 million as of December 31, 2009, to R$160.8
million as of December 31, 2010, an increase of R$41.4 million. The main factors that led to this change
were:
Increase of R$21 million, in its accounts payable, due to the higher volume of investment in 2010;
Increase of R$11.9 million in dividends and interest on shareholders equity payable due to the
increase in net profit in 2010 compared to 2009, maintaining the policy of distributing
shareholders 25% of these results, with some adjustments;
Decrease of R$10.1 million in its outstanding short-term loans and financing due to the utilization
of the initial public offering funds to advance higher costs debts;
Increase of R$8.1 million in other current liabilities, due to the increase in its derivative financial
instruments account, the Company contracted derivative financial instruments in order to protect
transactions carried out in foreign currency,
Increase of R$6.5 million in salaries and social charges payable, due to the increase in payroll
resulting from the higher number of employees necessary to accommodate the increased volume
of business;
96
Increase of R$3.7 million in its account of profit sharing payable, due to the increase in net profit
in fiscal 2010, compared to 2009;
Non-current liabilities
The Companys Non-current liabilities were reduced from R$148.2 million at December 31, 2009 to
R$108.2 million at December 31, 2010, a decrease of R$40.1 million or 27%. The main factors that led to
this change were:
Decrease of R$41.2 million in its long-term loans and financing account, due to the utilization of
the initial public offering funds to advance higher costs debts;
Increase of R$2.6 million in its account of provision for contingencies, mainly due to the inclusion
in 2010 of contingency related to the Fator Acidentrio Previdencirio - FAP in the amount of
R$2.1 million and inclusion of new cases in the civil area of R$0.7 million;
Reduction of R$1.0 million into the account the Tax Recovery Program - REFIS, mainly due to the
low of R$2.7 million related to PIS and COFINS, partially offset by the rate of Special System for
Settlement and Custody ("Sistema Especial de Liquidao e Custdia - SELIC") updating the value
of R$1.0 million.
Stockholders' equity
Shareholder's equity increased from R$172.6 million as of December 31, 2009 to R$655.2 million as of
December 31, 2010, an increase of R$482.5 million, or 279%, substantially due to the increase of
Companys share capital as a result of the initial public offering of shares in April 2010.
CASH FLOW
2009
140.6
(359.4)
247.8
29.0
(76.4)
(76.4)
14.5
(61.9)
(348.5)
19.4
(329.1)
(430.3)
(90.0)
2.6
(5.5)
(523.2)
29.5
(493.7)
a.
material; and (iv) freight costs relating to the transportation of equipment between its branches and to its
clients. Costs related to the execution of its projects represented 94.4%, 87.0% and 78.5% of its principal
costs of sales and services rendered in the years ended December 31, 2009, 2010 and 2011, respectively.
On the evaluation of the company's Management, this reduction was due to the expansion of equipment
sales costs, mainly in the Jahu and Rental divisions. In addition, the Company incurred in (i) costs
deriving from the sale of equipment; (ii) depreciation of equipment rented; (iii) expenses with equipment
storage, as from and including 2011; and (iv) cost of write-offs (derecognition) of assets.
The cost of products sold and services rendered by its Heavy Construction, Jahu and Rental divisions
tends to grow less than their net revenues, as some components of these costs do not grow at the same
rate of the revenue. As for the Industrial Services Division, which by the nature of its activities require the
use of more workforce, variation tends to be directly related to the change in net revenue.
Financial Results
The Companys financial results consist of its financial expenses, net of financial revenues. The Companys
main financial expenses include interest payments on loans, leasing operations, and costs associated with
discounting to present value certain long-term receivables derived from the sale of equipment owned by
its former Events division. Its main financial revenues consist of income from its financial investments and
interest in connection with late payments by its clients.
b.
Changes attributable to changes in prices, volume changes and introduction of new
products and services.
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The Companys revenues have a direct correlation with changes in price and volume of equipment rented
to clients. Introduction of new products and services also directly impact revenue. As for inflation, the
correlation of its revenue is indirect, in the extent that the adjustments take place only in the renewal or
closing of new contracts, reflecting the past inflation. As regards to the exchange rate fluctuation,
currently there is no correlation to its revenue, except that the Rental division's equipment are imported
and hence have their acquisition cost in foreign currency. Consequently, in the future, the rental revenue
from this division may be influenced by possible in exchange rates variations. In terms of volume, the
revenue variation for the Heavy Construction division was affected by the volume decrease from the end
of 2010, and only recovering at the second half of 2011. The increased revenue from the Jahu and Rental
divisions over the past three years are the result of the increase in the volume of rented equipment and
sales, given favorable market conditions and its geographic expansion.
c.
Impact of inflation, price variations of main inputs and products, exchange rate and
interest rate on operating profit and the issuer's financial result
The Companys expenses are subject to impact of inflation via wage increases for employees, a raise in
the cost of the hired services, such as freight, and inputs used in the provision of services, such as paints
and materials for thermal insulation. Moreover, the equipment the Company invests in to use at its
services are also subject to increases due to inflation and changes in commodity prices, mainly steel and
aluminum. In the case of Rental division, the prices of the equipment the Company uses can increase
according to the fluctuation of the exchange rate.
10.3
a.
The Company did not introduce or disposed any operating segment in the analyzed period.
b.
Acquisition of GP Sul
On May 27, 2011, the Company entered into a purchase and sale agreement to acquire 100% of the
voting and total capital of GP Sul for R$ 5.5 million.
GP Sul, is a privately held company, located in Porto Alegre, and one of the largest players in the
suspended scaffold rental market to residential and commercial construction in the state of Rio Grande do
Sul.
On the evaluation of the Management of the Company, this strategic acquisition enabled the Company to
become the leader in the suspended scaffold rental market in the state of Rio Grande do Sul and to
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broaden its exposure to the residential and commercial construction market in the South region, in line
with the geographic expansion plan of Jahu Residential and Commercial Construction division.
On August 1st, 2011, was approved, in Extraordinary Shareholders Meeting, the merger of GP Sul by the
Company, in its protocol and merger justification terms. The objectives of the merger were (i) optimize
and centralize the activities developed by GP Sul in the Companys management, therefore, rationalizing
the operations and consequently reducing costs; and (ii) take advantage of the tax benefit resulting from
the amortization of R$ 4.7 million generated in its acquisition of at least five years, as from the 2011 fiscal
year.
c.
Over the past three financial years there were no unusual transactions or events.
10.4
As part of the Improvements to the IFRS issued in 2010, IFRS 3 was changed in order to clarify that the
option of appraising minority equity interests as of the acquisition date will only be available in the case of
minority equity interests that represent current minority equity interests granting such stockholders the
right to proportional stakes in the entitys net assets in the event of liquidation.
All other types of minority equity interests are appraised at fair value as of the acquisition date, unless
other standards require use of another basis for appraisal. Moreover, IFRS 3 was modified to provide
more guidelines on the recording of share-based compensation rights held by the employees of the
business acquired. Specifically, the modifications required that transactions involving payments based on
shares of the business acquired that are not replaced are to be measured according to IFRS 2 Sharebased Payment (equivalent to CPC 10(R1)) as of the acquisition date (marked to market measurement).
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The Companys Management believes that the adoption of this modification did not affect the Company,
since GP Sul (the company acquired in 2011, see Note 1 of the Financial Statements), did not have any
minority shareholders and nor did it offer its employees share-based payment.
(iii)
The alterations in this international accounting standard deal with the classification of certain rights
denominated in foreign currency, such as equity instruments or financial liabilities. According to the
changes made, the rights, options or bonuses issued by an entity in order for the holders thereof to be
able to acquire a fixed quantity of the entitys equity instruments for a fixed amount in any currency are
to be classified as equity instruments in the entitys financial statements, provided that the offer is made
proportionally to all the existing holders of the same class of non-derivative equity instruments. Prior to
the changes made in IAS 32, the rights, options or bonuses for acquisition of a fixed quantity of an
entitys equity instruments for a fixed amount in foreign currency were classified as derivatives. The
changes require retrospective adoption. In any event, the adoption of these modifications by the
Company did not affect the amounts reported in the current and previous years, since Mills did not issue
instruments of this kind.
(iv)
The changes determine when refunds or reductions of future contributions should be considered as
available under IAS 19.58; how minimum funding requirements may affect the availability of the
reductions in future contributions; and when minimum funding requirements may result in a liability. With
the modifications, the standard began to permit recognition of an asset in the form of pre-payment of
minimum funding requirements. The Companys Management expects the application of the changes will
not have a material effect on the financial statements.
(v)
This Interpretation provides guidelines on recording the extinction of a financial liability through issue of
equity instruments. Directors Specifically, under IFRIC 19 the equity instruments issued with such a
transaction are to be measured at fair value and any difference between the carrying value of the
extinguished liability and the effective payment for the equity instruments issued is to be recognized in
results. On the evaluation of the Company's Management, the adoption of IFRIC 19 did not affect the
amounts reported in the current and previous year since the Company has not carried out any
transactions of this nature.
New and revised interpretations already issued and not yet adopted
The Company has not adopted the following new and revised IFRS that have already been issued:
Modifications in IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
Modifications in IAS 1
IFRS 7
The changes in IFRS 7 increase the disclosure requirements for transactions involving financial assets.
Such alterations intend to provide greater transparency to exposures to risks when financial assets are
transferred but the transferor continues retaining a certain level of exposure due to the asset. The
alterations also require disclosure of the transfer of financial assets when they are not equally distributed
over the period.
The Companys Management does not expect that these modifications in IFRS 7 will have a significant
effect on its disclosures in relation to the transfers of receivables previously affected. Nonetheless, in the
event Mills undertakes other types of transfers of financial assets in the future, the disclosures relating to
such transfers may be affected.
IFRS 9
IFRS 9 Financial Instruments, which was issued in November 2009 and altered in October 2010,
introduced new requirements for the classification, measurement and derecognition of financial assets
and liabilities.
IFRS 9 establishes that all financial assets recognized that are covered by the scope of IAS 39
Financial Instruments: Recognition and Measurement (equivalent to CPC 38) be subsequently measured
at amortized cost or fair value. Specifically, debt instruments that are held according to a business model
aimed at receiving contractual cash flows and which have contractual cash flows that refer exclusively to
payments of the principal and interest on the principal due are generally measured at the amortized cost
at the end of the subsequent reporting periods. All other debt instruments and investments in equity
instruments are measured at fair value at the end of the subsequent reporting periods.
The most significant effect of IFRS 9 related to the classification and measurement of financial liabilities
refers to the recording of changes in the fair value of a financial liability (designated at fair value through
profit and loss - FVTPL) attributable to changes in the credit risk of such liability. Specifically, under IFRS
9, in relation to financial liabilities recognized at FVTPL, the amount of the change in the fair value of the
financial liability attributable to changes in the credit risk of such liability is recognized under Other
comprehensive income, unless recognition of the changes in the liabilitys credit risk under Other
comprehensive income results in or increases the accounting dissolution in income. Changes in the fair
value attributable to the credit risk of a financial liability are reclassified in income. Previously, under IAS
39 and CPC 38, the total amount of the change in the fair value of a financial liability recognized at FVTPL
was recognized under results.
IFRS 9 is applicable to annual periods beginning on or after January 1, 2013.
Company Management expects IFRS 9 to be adopted in the financial statements for the annual period
beginning January 1, 2013 and that adoption of this new standard will not have a material effect on the
reported balances of its financial assets and liabilities. Nonetheless, it is not possible to provide a
reasonable estimate of such effect until such time as a detailed review is conducted.
Consolidation rules, participation agreements, affiliates and disclosures, including IFRS 10, IFRS 11, IFRS
12, IAS 27 (revised in 2011) and IAS 28 (revised in 2011).
In May of 2011 a package of five standards for consolidation, joint arrangements, associates and
disclosures was issued: IFRS 10, IFRS 11, IFRS 12, IAS 27 (revised in 2011) and IAS 28 (revised in 2011).
The main requirements of these five standards are as follows.
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IFRS 10 substitutes the parts of IAS 27 Consolidated and Separate Financial Statements that deal with
consolidated financial statements. SIC-12 Consolidation Special Purpose Companies was withdrawn
with the issue of IFRS 10. According to IFRS 10, there is only one base for consolidation, that is, control.
In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an
investee; (b) exposure or rights to variable returns from its interest in the investee and (c) capacity for
using its power over the investee to affect the amounts of the returns to the investor. Comprehensive
guidelines have been included in IFRS 10 to deal with complex scenarios.
IFRS 11 substitutes IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement
where to or more parties have joint control is to be classified. SIC-13 Joint Ventures Non-Monetary
Contributions of Investors was withdrawn with the issue of IFRS 11. Under IFRS 11, joint arrangements
are classified as combined or joint ventures according to the rights and obligations of the parties to the
joint arrangements. On the other hand, under IAS 31 there are three types of joint arrangements: jointly
held entities, jointly controlled assets and jointly controlled operations.
In addition, under IFRS 11 joint ventures are to be recorded under the equity accounting method,
whereas jointly held entities, according to IAS 31, can be recognized under the equity accounting method
or the proportional accounting method.
IFRS 12 is a disclosure standard applicable to entities that have interests in subsidiaries, joint
arrangements, associates and/or unconsolidated structured entities. By and large, the disclosure
requirements under IFRS 12 are more comprehensive than the current standards.
These five standards are applicable to annual periods beginning on or after January 1, 2013.
Management believes that these five norms will be adopted for the Companys financial statements for
the annual period beginning January 1, 2013, although it does not expect significant effects.
IFRS 13
IFRS 13 presents a single source of orientation for measurement of fair value and disclosures regarding
fair value measurements. The standard defines fair value, presents a fair value measurement structure
and requires disclosures of the fair value measurements. The scope of IFRS 13 is comprehensive,
applying to items of financial and non-financial instruments for which other IFRSs require or permit fair
value measurements and disclosures of fair value measurements, except in determined cases. For
example, quantitative and qualitative disclosures based on the fair value hierarchy of three levels,
currently employed for financial instruments only under IFRS 7 Financial Instruments: Disclosures, will be
complemented by IFRS 13 so as to include all assets and liabilities in its scope.
IFRS 13 is applicable to annual periods beginning on or after January 1, 2013.
Management expects IFRS 13 to be adopted in the Companys financial statements for the annual period
beginning January 1, 2013 and that adoption of the new standard may result in amounts being reported
in the financial statements and more comprehensive disclosures in the financial statements.
IAS 1
The changes to IAS 1 permit presentation of income and other comprehensive income in a single
statement or in two separate and consecutive statements. Even so, the changes to IAS 1 require
additional disclosures in other comprehensive income, such that the items of other comprehensive income
are grouped in two categories: (a) items that will not be reclassified later in income, and (b) items that
will be reclassified later according to determined conditions. The income tax on the items of other
comprehensive income will be dealt with likewise.
The modifications in IAS 1 are applicable to annual periods beginning on or after July 1, 2012.
Presentation of the items of other comprehensive income will be modified appropriated as the changes
are adopted in future reporting periods.
104
IAS 12
The changes to IAS 12 involve an exception to the general principles of IAS 12 in the sense that
measurement of deferred tax assets and liabilities is to reflect the tax effects resulting from the manner in
which the entity expects to recover the carrying value of an asset. Specifically, according to the changes,
it is expected the investment properties measured based on the fair value model under IAS 40 Investment
Property be recovered through sale for purposes of measuring deferred taxes, unless the premises are
invalidated in determined circumstances.
The modifications in IAS 12 are applicable to annual periods beginning on or after January 1, 2012.
Management has not yet conducted a detailed analysis of the impact of applying these Standards, though
it does not expect the effects thereof to be material.
b.
There was no change in significant accounting practices, methods of calculation, judgments, estimates
and accounting assumptions in the financial statements of the company for the fiscal years ended
December 31, 2011, December 31, 2010 and December 31, 2009.
c.
There were no qualifications or points relating to financial statements on the opinion issued by the
independent auditor.
10.5 The management shall indicate and comment on critical accounting policies adopted
by the issuer, by exposing mainly the accounting estimates made by management on
uncertain and relevant questions for description of the financial situation and the results,
which require subjective or complex judgments, such as: provisions, contingencies,
recognition of revenue, fiscal credits, long-term assets, useful life of non-current assets,
pension plans, conversion adjustments in foreign currency, recovery environmental costs,
standards for testing the recovery of assets and financial instruments.
The main assumptions relating to sources of uncertainties in the future estimates and other importance
sources of uncertainty in estimates as of the reporting date, involving significant risk of causing a major
change in the carrying value of assets and liabilities in the next financial year, are as set out below:
Impairment of non-financial assets
Transactions with payments based on shares
Taxes
Fair value of financial instruments
Provisions for tax, civil and labor risks
Useful life of fixed assets
Revenue recognition
Following, the Companys Management presents a discussion about what they consider relevant as
accounting practices for the presentation of Companys financial information.
(i) Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the respective instrument.
Financial assets and liabilities are initially measured at fair value. Transaction costs directly attributable to
the acquisition or issuance of financial assets and liabilities (except financial assets and liabilities
recognized at fair value in results) are added to or deducted from the fair value of the financial assets or
liabilities, if applicable, after initial recognition. Transaction costs directly attributable to the acquisition of
financial assets and liabilities appraised at fair value through profit and loss (FVTPL) are recognized
immediately in results.
(ii) Current and deferred income tax and social contribution
The Companys expenses on the federal corporate income tax (IRPJ) and social contribution on net
income (CSLL) encompass both current and deferred taxes. Such income taxes are recognized in the
income statement, except in the proportion in which they are related to items recognized directly under
stockholders equity or comprehensive income. In this case, the tax is also recognized in one of the latter
two captions.
The current IRPJ and CSLL expense is calculated according to the legal tax bases effective in Brazil as of
the reporting date, namely 15% plus a surcharge of 10% for taxable income in excess of R$ 240 for
income tax and 9% on taxable results for social contribution purposes. The Companys Board periodically
evaluates the positions adopted in relation to tax issues that are subject to interpretation and recognizes a
provision when there are expectations for payment of IRPJ and CSLL on the tax bases.
The deferred IRPJ and CSLL are calculated on temporary differences between the bases for calculation of
taxes on assets and liabilities and the carrying values recognized in the financial statements. The rates
for such taxes as currently defined for determination of such deferred credits are 25% for income tax and
9% for social contribution.
Deferred tax assets are recognized to the extent that it is probable that future taxable income will be
available for use in offsetting the temporary differences, based on projections for future results drawn up
106
and grounded on internal premises and on future economic scenarios that may therefore be subject to
alterations.
The recoverability of the balance of deferred tax assets is reviewed at the end of each reporting period
and, when it is no longer considered probable that future taxable income will be available to permit
recovery of all such assets, or part of them, the balance thereof is adjusted to the amount that it is
expected will be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would follow from the manner in which the
Companys Board expects, at the end of the reporting period, the Company to recover or settle the
carrying amount of its assets and liabilities.
For purposes of calculating the IRPJ and CSLL, the Company adopted the Transition Tax System (RTT),
pursuant to Law No. 11.941/09, that is to say, in determining the taxable income, Management
considered the accounting criteria under Law No. 6.404/76 (the previous Brazilian corporation law), prior
to the alterations imposed by the new corporation Law (No. 11.638/07).
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred tax assets and liabilities are related
to the income taxes levied by the same taxing authority on the taxable entity or different taxable entities
when there is the intent to settle the balances on a net basis.
Current and deferred taxes are recognized in results, except when they correspond to items recorded
under Other comprehensive income, or directly under Stockholders equity, in which case the current and
deferred taxes are also recognized under Other comprehensive income or directly under Stockholders
equity, respectively. When current and deferred taxes result from the initial recognition of a business
combination, the tax effect is considered in recording the business combination.
(iii)
Property, plant and equipment for rental and operational use provides the better part of its revenues,
either through simple rental, or rental combined with assembly/dismantling services.
The PP&E for Company use consists principally of the installations for equipment storage, offices,
betterments, furniture, fixtures and equipment required for functioning of the installations.
The items of PP&E is valued at historic cost, less accumulated depreciation and impairment losses, which
includes expenditures directly attributed to the acquisition of such fixed assets.
Subsequent costs are incorporated into the residual value of the PP&E or recognized as a specific item, as
appropriate, only if the economic benefits associated with such items are probable and the amounts
thereof can be reliably measured. The residual balance of the replaced item is derecognized. Other
repair and maintenance work is recognized directly in results when incurred.
Depreciation is recorded under the straight-line method, at the rates presented in Note 11 of the financial
statements, which take into consideration the estimated useful economic life of the assets. Land is not
depreciated.
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Assets maintained through finance leases are depreciated based on their expected useful life, just as the
Companys own assets, or for a shorter period, if applicable, as per the terms of the lease agreement in
question.
Gains and losses on disposals are determined by comparing the values of the sale with the carrying value
and are included in operating results.
The residual value and estimated useful life of the assets are reviewed each year and the effect of any
changes in the estimates is recognized on a forward-looking basis.
(iv)Goodwill
The goodwill resulting from a business combination is recognized at cost as of the business combination
date, net of any accumulated impairment losses.
The goodwill is allocated to cash generation units (CGUs) for impairment testing purposes. Allocation is
made to CGUs or groups of CGUs that should benefit from the business combination from which the
goodwill arose, and such units/groups are identified per business segment.
(v)
Impairment of assets
PP&E and other noncurrent assets, including goodwill and intangible assets, are reviewed annually to
identify evidence of impairment, or further, whenever events or changes in circumstances indicate that
the carrying values thereof may not be recoverable. When such is the case, the recoverable amount is
calculated to check whether there is a loss. When there is, it is recognized at the amount by which the
carrying value of the asset exceeds is recoverable amount, which is the greater of the net sale price and
the value of the asset in use. For impairment testing purposes, assets are grouped into the lowest levels
for which separately identifiable cash flows exist (CGUs). Non-financial assets, except goodwill, that have
become impaired are reviewed for analysis of possible reversal of the impairment as of the reporting date.
(vi)Provisions
Provisions are recognized when the Company has a present, legal or non-formalized obligation as a result
of past events and it is probable that an outflow of funds will be needed to settle the obligation and a
reliable estimate of the amount thereof can be made.
The provisions for tax, civil and labor risks are recorded in the amount of probable losses, with due heed
being paid to the nature of each provision (according to Note 18 of the financial statement). Based on the
opinion of legal counsel, the Companys Management believes that the provisions set up are sufficient to
cover any losses on cases underway. The provisions are measured at the present value of the
expenditures that should be needed to settle the obligation, with use of a pre-tax rate that reflects current
market appraisals of the time value of money and the specific risks of the obligation. The increase in the
obligation as a result of the passage of time is recognized as an expense.
A provision for onerous contracts is recognized when the expected benefits to be derived from the
contract are lower than the inevitable cost of meeting the contractual obligations. The provision is
measured at the present value of the lower of the expected cost for terminating the contract and the
expected net cost of continuing with the contract.
(vii)
Stock-based remuneration
Mills offers its employees and executives a remuneration plan based on stock options that are convertible
into common shares, whereby the Company receives their services as consideration for the stock
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purchase options. For further information, see item 13 of this Reference Form.The fair value of the
options granted is recognized as an expense during the period in which the rights vest, during which the
specific terms for the vesting rights are to be met. At the reporting date the Company revises its
estimates of the quantity of options that are to be vested based on such terms, in order to recognize the
impact of the revision of the initial estimates, if any, on the income statement, with a contra entry in the
capital reserve under stockholders equity.
The amounts received, net of any directly attributable transaction costs, are credited to the capital stock
upon exercise of the options.
(viii)
Revenue recognition
Revenue from the performance of services is recognized based on the measurement of the stages for
performance of the services carried out through the reporting date.
Revenue from the sale of merchandise is recognized when the significant risks and benefits of ownership
of the merchandise are transferred to the buyer. Accordingly, the Company adopts the date on which the
product is delivered to the buyer as the basis for its revenue recognition policy.
Leasing revenue is recognized on a prorated basis in monthly results on a straight-line basis, according to
the equipment lease agreements.
The Company separates the identifiable components of a single contract or group of contracts in order to
reflect the substance thereof, recognizing the revenue from each one of the elements in a manner that is
proportional to their fair value. Accordingly, the Companys revenue is divided into leasing, technical
assistance, sales and indemnities/recoveries of expenses.
Interest income is recognized in a manner proportional to time, taking into consideration the outstanding
principal and the effective interest rate over the period to maturity, at which time it is determined that
such revenue will be appropriated to the Company.
The revenues from dividends from investments made by Mills is recognized when the shareholders right
to receive such dividends is established, provided that it is probable that the future economic benefits will
flow to the Company and the amount of such revenues can be reliably measured.
Revenues, expenses and assets are recognized net of the taxes levied on sales.
10.6 Regarding the internal controls adopted to ensure the preparation of reliable financial
statements, the management shall comment on:
a.
Efficiency of such controls, and any flaws and steps taken to correct them
Our management is responsible for establishing and maintaining adequate internal control over financial
through a process designed to provide reasonable comfort for the reliability of financial reporting and the
preparation of financial statements.
b.
Weaknesses and recommendations on internal controls present in the report of the
independent auditor
No deficiencies or recommendations were submitted by the independent auditors in their report about the
effectiveness of internal controls adopted by the Company.
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10.7 Management comments on the use of resources from public offerings for distribution
of securities
In April, 2010, the Initial Public Offering of shares of the Company provided net proceeds of R$411
million, which enabled the Company to expand its investments in all divisions to meet the growing
demand in markets where it operates and to settle higher cost debts.
In the fiscal years ended December 31st, 2010 and 2011, the Company invested R$348.5 million and
R$430.4 million, respectively, mainly in equipment acquisition.
The Company also invested the amount of R$95.5 million in acquisitions in 2011. On January 19th, 2011,
the Company entered into a purchase and sale agreement to acquire 25.0% of the voting and total capital
of Rohr, a private company specializing in access engineering and the provision of construction solutions,
for R$90.0 million. On May 27th, 2011, the Company entered into a purchase and sale agreement to
acquire 100% of the voting and total capital of GP Sul, one of the largest players in the suspended
scaffold rental market to residential and commercial construction in the state of Rio Grande do Sul, for R$
5.5 million.
To obtain sufficient resources for such investments, the Company used the resources from its Initial Public
Offering, cash generation and debt issuance.
On March 29th, 2011, the Company conducted its first issue of 30 promissory notes, each with par value
of R$1.0 million, totaling R$30.0 million.
On April 18th, 2011, the Company conducted its first issue of 27,000 debentures, each with par value of
R$10,000.00, totaling of R$270.0 million.
In terms of their deed of issuance, it was established the following destination for net resources of this
offering (a) the redemption of commercial papers of 90 days issued in March 2011, totaling R$30 million,
(b) the investments defined in the expansion plan of Mills, including estimated investments of R$ 337
million in 2011, (c) rearrangement of cash balance following disbursement of R$90.0 million in February
2011 in connection with the acquisition of 25.0% of the Rohr total capital stock, and (d) general corporate
purposes and expenses of the Company.
On December 7th, 2011 the Company issued a single series of 3 (three) commercial promissory notes
with unit face value of R$ 9.0 million, for a total amount of R$ 27.0 million with maturity on December 1 st,
2012. Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in
the average daily Domestic Demand (DI) rates, plus 1.10% per annum. Remuneration will be fully paid
upon the maturity date.
The resources used for strategic acquisitions until December 31st, 2011, totaled R$95.5 million, R$61.7
million, or 39%, less than the amount estimated at the date of the prospectus for Initial Public Offering
shares issued by the Company.
10.8 Managements comments on significant items not included in the balance sheet and
their effects on the consolidated financial statements
In the evaluation of the Management, there are no significant items not included in the balance sheet of
the Company.
10.9
In the evaluation of the Management, there are no significant obligations not included on the financial
statements of the Company.
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10.10 Management shall indicate and comment on key elements of the Company's business,
specifically exploring the following topics:
a.
Investments, including: (i) quantitative and qualitative description of investments in
progress and forecasted investments; (ii) financing sources of investments and (iii) relevant
alienations in progress and forecasted alienations
The Company plans its investment policy in accordance with its cash flow and credit availability in the
market. The Companys internal policy is to maintain its leverage around 1.0x Net Debt to EBITDA. To
ensure the necessary amount of capital for the implementation of its investment plan, the Company
constituted a statutory reserve, of which the shareholders may allocate up to 75% of net income,
provided that such reservation does not exceed the limit of 80% of the capital. The Management presents
below major investments made in the course of the years ended December 31, 2009, 2010 and 2011, and
highlight the investment budget for fiscal year 2012.
Jahu Division
Over the past three fiscal years ended by December, 31 st, 2009, 2010 and 2011, the Jahu Division
invested mainly in acquisition of shoring equipment, formwork and suspended scaffolding and
industrialized steel and aluminum formwork, having disbursed R$16.0 million in 2009, R$104.0 million in
2010, R$185.0 million in 2011. In 2011, there was the acquisition of GP Sul by R$5.5 million, amouting to
R$190.5 million.
Rental Division
In 2009, despite the world macroeconomic scenario being unfavorable for most of the year, the Company
continued to implement its strategy of expanding its portfolio of aerial work platforms and telescopic
handlers, investing approximately R$30 million in the acquisition of such equipment. In 2010 and 2011,
the Company continued to implement its plan of geographic expansion, investing approximately R$130.6
million in 2010 and R$162.8 million in 2011 in the acquisition of new rental equipment.
Acquisition of Rohr
On January 19, 2011, the Company entered into a purchase and sale agreement to acquire 25.0% of the
voting and total capital of Rohr, a private company specializing in access engineering and the provision of
construction solutions, for R$90.0 million. This strategic acquisition enabled the Company to broaden its
exposure to the sectors it serves infrastructure, residential and commercial construction, oil & gas
industry, among others.
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Acquisition of GP Sul
On May 27, 2011, the Company entered into a purchase and sales agreement to acquire 100% of the
voting and total capital stock of GP Sul, which the Companys Management believed to be one of the
largest players in the suspended scaffold rental market to residential and commercial construction in the
state of Rio Grande do Sul, by the time of the acquisition, for R$5.5 million. This strategic acquisition, as
evaluated by the Management, enabled the Company to become the leader in the suspended scaffold
rental market in the state of Rio Grande do Sul and to broaden its exposure to the residential and
commercial construction market in the South region, in line with the geographic expansion plan of Jahu
Residential and Commercial Construction division.
The Company intends to finance its investments through (i) cash generated from its own activities, and
(ii) indebtedness.
Project
Investments
(in millions of R$)
Jahu Division
28
Rental Division
53
Corporation
17
22
b.
Since it has already disclosed, indicate the purchase of plants, equipment, patents or
other assets that should materially affect the productive capacity of the Company
The Company has in its estimated budget the continued expansion of its operations, through the purchase
of equipment for part of which orders have already been made.
112
c.
New products and services, by indicating: (i) description of researches in progress
already disclosed; (ii) total amounts paid by the issuer in researches for development of new
products or services; (iii) projects under development already disclosed and (iv) total
amounts paid by the issuer for the development of new products or services
The Companys management believes that providing innovative solutions is a constant mark of its
activities and a key aspect to retain its customers. However the Company doesnt realize internally
research and development. The Company visits the main national and international fairs of the industrial
equipment and construction annually to meet the major technological innovations available to the industry
in which the Company operates. Furthermore, the Companys representatives visit the factories of leading
national and international manufacturers of equipment and construction sites around the world to assess
the functioning and operation of advanced equipment available for purchase.
The Company does not develop new products and services, so it doesnt incur expenses related to the
research and development. All the technology and innovation present in its equipment and offered to its
clients come from its suppliers. For this, the Company seeks to acquire or license new technologies from
third parties on acceptable terms in the domestic and international market, preferably with usual suppliers
with whom the Company seeks to establish long term partnerships. As an example of such partnerships,
the Company entered into a licensing contract in 1996 with the German company NOE Schaltechnik, to
produce and supply modular steel and aluminum panel formwork (replacing the wood) for the Brazilian
construction market, an innovation in the Brazilian market.
In January 2012, the Company has entered into a exclusive cooperation agreement with Beerenberg
Corp. AS (Beerenberg) to produce, sell and install its Benarx product line in the Brazilian market.
10.11 Management is expected to discuss and analyze other material factors that influenced
operating performance, which were not discussed under previous items in this section.
There are no other factors to comment on.
113
11.
114
PROJECTIONS
11.1
Identification of projections
Projection monitoring
115
12.
116
12.1
Administrative Structure
a.
BOARD OF DIRECTORS
The Board of Directors is a decision-making body responsible for both formulating and monitoring the
implementation of the general guidelines and policies of its business, including long-term strategies, and
appointing and supervising the Executive Officers.
In accordance with the Companys bylaws, the Board of Directors shall be comprised of a minimum of five
and a maximum of 11 members, shareholders or not, residing in the Country, in accordance with the
Novo Mercado Listing Rules. Members of the Board of Directors are to be elected for a continuous twoyear term at the General Shareholders meeting. Further, such members may be reelected and removed
from office at any time by a decision of the Companys shareholders, at the General shareholders
meeting.
Pursuant to the Brazilian corporate law and CVM Instruction No. 282, dated June 26, 1998, the minimum
percentage of voting capital required to adopt cumulative voting in publicly-held companies is 5%. If the
adoption of cumulative voting is not required, the directors will be elected by a majority vote of the
shareholders that are present, or represented by proxy. The CVM Board elected by majority on November
8, 2005 established that shareholders who, individually or collectively, represent at least 10% of the total
capital of publicly-held companies, are entitled to appoint a director and its substitute in separate voting.
All members of the Board of Directors must a sign a Consent Agreement of the Administrators, in which
their respective position will depend on the signing of the document. Through the Consent Agreement,
the Companys new members of the Board of Directors are personally responsible to act in accordance
with the Contract of Novo Mercado, Regulation of the Market Arbitration Chamber and the Rules of the
Novo Mercado.
Currently the Companys Board of Directors is comprised of seven members (without any substitutes), of
which were elected at Ordinary Shareholders Meeting held on April 20, 2012. The members were elected
for a two-year term expiring in the next Ordinary General Meeting. The table below indicates the name,
age and title of the board of directors.
Date of
Las
Election
Date of
Office
Term of
Office
Other
Titles
Elected by
the
Controlling
Shareholder
Name
Age
Profession
CPF
Title
Andres
Cristian
Nacht
69
Business
Administration
098.921.337
/49
Chairman
4.20.2012
4.20.2012
2 years
No
Yes
Elio Demier
61
Bachelor of
Social
Communication
260.066.507
-20
Vice Chairman
4.20.2012
4.20.2012
2 years
Yes
Yes
Diego Jorge
Bush
68
Business
Administration
060.903.038
-87
Director
4.20.2012
4.20.2012
2 years
No
Yes
Nicolas
Wollak
50
Executive
057.378.217
-22
Director
4.20.2012
4.20.2012
2 years
No
Yes
Pedro
Chermont
38
Engineer
023.120.657
-70
Director
4.20.2012
4.20.2012
2 years
No
Yes
Pedro Malan
69
Economist
028.897.227
-91
Independent
Director
4.20.2012
4.20.2012
2 years
No
Yes
Jorge M. T.
Camargo
57
Geologist and
Physicist
114.400.151
-04
Independent
Director
4.20.2012
4.20.2012
2 years
No
Yes
According to the Novo Mercado Listing Rules and the Companys bylaws, the companys board of directors
must have at least 20% independent members. Whenever the percentage of 20% mentioned above
117
results in fractional number of members, the number shall be rounded to reach a whole number: (i)
immediately above, if fractional number is equal to or higher than 0.5; or (ii) immediately below, if fractional
number is lower than 0.5. Since the Companys Board of Directors is composed of seven members, it should
have at least one independent director. The Independent director should be identified as such in the
minutes of the General Shareholders meeting that elects him. Currently Mr. Pedro Malan and Mr. Jorge
Camargo are the Companys Independent Directors.
The decisions of the Companys Board of Directors are taken by a majority vote of the members that are
present. Under Brazilian corporate law, members of the board of directors are prohibited to vote in any
meeting ou General Meeting, on any matter or intervene in any transaction that would create a conflict of
interest between the Company and that board member.
EXECUTIVE BOARD
The Companys Executive Officers are responsible for the management of daily operations of the business
and for implementing the general policies and guidelines established by the Board of Directors.
The Brazilian corporate law provides that executive officers must reside in Brazil and that they may or
may not be shareholders of the company in which they serve. In addition, up to one-third of the members
of a companys Board of Executive Officers may also serve as members of the Board of Directors.
The members of the board of executive officers are elected by the Companys board of directors for oneyear term and they may be reelected. Any executive officer may be removed by the board of directors
before the expiration of his or her term. According to the Companys bylaws, the board of executive
officers must be comprised of four to 11 officers, including one chief executive officer, one chief financial
officer and the remaining without specific designation.
All the members of the Board of executive officers must a sign a Consent Agreement of the
Administrators, in which their respective position will depend on the signing of the document. Through the
Consent Agreement, the Companys new members of the Board of executive officers are personally
responsible to act in accordance with the Contract of Novo Mercado, Regulation of the Market Arbitration
Chamber and the Rules of the Novo Mercado.
The table below indicates the name, age and title of the board of executive officers.
Name
Age
Profession
CPF
Title
Date of
Last
Election
Date of
Office
Ramon
Nunes
Vazquez
59
Engineer
336.997.80759
Chief Executive
Officer
2.9.2012
2.9.2012
Erik Wright
Barstad
55
Engineer
2.9.2012
2.9.2012
Roberto
Carmelo de
Oliveira
57
Engineer
2.9.2012
Frederico
tila Silva
Neves
54
Engineer
Alessandra
Eloy
Gadelha
37
Engineer
Heavy
012.491.708- Construction and
93
Jahu divisions
Officer
Industrial
399.935.827Services Division
00
Officer
Chief Financial
595.166.407and
10
Administrative
Officer
021.092.59736
Investor
Relations Officer
Term
of
Office
Until
OSM
2013
Other
Titles
Elected by the
Controlling
Shareholder
Yes
Yes
Until
OSM
2013
No
Yes
2.9.2012
Until
OSM
2013
No
Yes
2.9.2012
2.9.2012
Until
OSM
2013
No
Yes
2.9.2012
2.9.2012
Until
OSM
2013
No
Yes
FISCAL COUNCIL
Under the Brazilian Corporate Law, the Fiscal Concil is responsible for: (i) reviewing, by any of its members, the
actions of management and verify compliance with its legal and statutory duties; (ii) opine on management's
118
annual report, including in its opinion the additional information it deems necessary or useful to the General
Meeting decision; (iii) give their opinion on the administrations proposals, to be submitted to the General
Meeting, relating to changes in capital, issuance of debentures or warrants, capex plans or capital budget,
capital distribution, dividend distribution, transformations, incorporations, merger or split up; (iv) report, by any
of its members, to the administrators or, if they do not take the necessary action to protect the interests of the
company, to the general meeting, the mistakes, fraud or crimes they find out, and suggest necessary
measures to the company; (v) convene the ordinary shareholder meeting, if the administrative bodies delay for
more than one month calling, and extraordinary, whenever there are serious or urgent matters, including in
the agenda the subjects they deem relevant; (vi) analyze, at least quarterly, the balance sheet and other
financial statements periodically prepared by the company; (vii) review and give an opinion on the financial
statements of the fiscal year; and (viii) exercise those powers during the settlement, in view of the special rules
that govern it.
According to the Company's Bylaws, the Fiscal Council works on a permanent basis, and consists of three
members and an equal number of alternates, shareholders or not, resident in Brazil and elected at the General
Meeting, when will determine their remuneration. The Chrairman of the Fiscal Council is elected at the General
Meeting.
All new members of the Fiscal Council must sign a Fiscal Council Compliance Statement, conditioned on
possession in their respective offices the signing of this document. Through the Compliance Agreement, new
members of its Board of Directors are personally responsible to act in accordance with the Novo Mercado, with
the Rules of the Arbitration Chamber and the Novo Mercado Listing Rules.
At the the Ordinary and Extraordinary General Meeting held on April 19, 2011, the Company's shareholders
requested the installation of the Fiscal Council and elected three members and three alternates. At the
Extraordinary General Meeting held on April 20, 2012 the Fiscal Council became a permanent body.
The table below presents name, age and title of the Fiscal Council members:
Name
Age
Professi
on
61
Lawyer
32
Lawyer
32
Lawyer
34
Lawyer
CPF
Title
Date of Last
Election
Date of
Office
Office
Term
Other
Titles
Elected by
the
120.049.10763
080.968.46752
082.613.21703
886.793.57715
President
4.20.2012
4.20.2012
1 year
No
Yes
Substitute
4.20.2012
4.20.2012
1 year
No
Yes
Member
4.20.2012
4.20.2012
1 year
No
Yes
Substitute
4.20.2012
4.20.2012
1 year
No
Yes
50
Engineer
709.925.507-00
Member
4.20.2012
4.20.2012
1 year
No
No
40
Administr
ator
168.126.648-20
Substitute
4.20.2012
4.20.2012
1 year
No
No
ADVISORY COMMITTEE
With the goal of improving the decision-making process, sustaining the execution of our growth plan, and
supporting it in its functions, the Board of Directors has approved the creation of the Human Resources
and Strategy Committees, in line with the best practices of corporate governance.
The Human Resources Committee is responsible for: (a) supervision and support during the development,
planning and execution of strategies that enable the company to attract and retain talent, as well as the
improvement of the work environment, and (b) proposals for the remuneration of Mills executive officers
for analysis and approval by the Board of Directors.
The current members of the Human Resources Committee are Elio Demier (Vice-Chairman of Mills Board
of Directors), Ramon Nunes Vazquez (Mills CEO) and Jos Felipe Vieira de Castro.
119
The Strategic Committee is responsible for: (a) supervision and support during the development, planning
and execution of strategic projects of significant impact in the future development of the Company, and
(b) other related matters defined by the Companys Board of Directors from time to time.
The members of the Strategic Comittee are Nicolas Wollack (member of the Board of Directors), Jorge M.
T. Camargo (member of the Board of Directors) and Ramon Vazquez (CEO).
Committees of this type are non-permanent and therefore can be either created or extinguished anytime
by the Board of Directors.
The table below presents the names, ages and positions of the Human Resources and Strategic
Committees members:
Human Resources Commitee
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
Name
Age
Profession
CPF
Title
Date of Last
Election
Ramon
Nunes
Vazquez
Elio Demier
59
Engineer
336.997.807
-59
Member
05.22.2012
05.22.2012
1 year
Yes
Yes
61
Bachelor of Social
Communication
260.066.507
-20
Member
05.22.2012
05.22.2012
1 year
Yes
Yes
59
Economist
402.760.747
-34
Member
05.22.2012
05.22.2012
1 year
No
Yes
Age
Profession
CPF
Title
Date of Last
Election
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
50
Executive
Member
09.12.2012
12.9.2012
1 year
Yes
Yes
57
Geologist and
Physicist
057.378.217
-22
114.400.151
-04
09.12.2012
12.9.2012
1 year
Yes
Yes
59
Engineer
09.12.2012
12.9.2012
1 year
Yes
Yes
Jos Felipe
Vieira de
Castro
Strategic Committee
Name
Nicolas
Wollack
Jorge M. T.
Camargo
Ramon
Nunes
Vazquez
b.
336.997.807
-59
Member
Member
The Companys Board of Directors approved, in a meeting held on September 15, 2010, the establishment
of the Human Resources Committee, to support in its functions, aiming to improve the decision making
process and to sustain the execution of the Companys growth plan. Two members of the Human
Resources Committee were reelected at the Board of Directors Meeting held on May 22, 2012, Elio Demier
and Ramon Nunes Vazquez, and a new one was elected, Jos Felipe Vieira de Castro.
As a request of the Companys shareholders, the Fiscal Council was installed and its members and
respective alternates were elected at the Ordinary and Extraordinary General Meeting held on April 19,
2011. At the Extraordinary General Meeting held on April 20, 2012, the Fiscal Council became a
permanent body.
The Companys Board of Directors approved, in a meeting held on September 12, 2012, the establishment
of the Strategic Committee. The purpose of the Committee shall be to monitor and advise the elaboration,
planning and execution of strategic projects of great impact in the future development of the Company
and other related matters defined by the Companys Board of Directors from time to time.
120
c.
The activities of the Executive Officers are supervised and evaluated by the Board of Directors, whose
performance is an object of appreciation by its shareholders.
Until the end of 2010, the Company did not adopt mechanisms or pre-set avaliation methods to measure
the performance of its Administration. In 2011 a Performance Management Program was established,
aiming to map the competence gaps and guide the development programs to improve the attributes that
lead to high performance, and establish and evaluate individual goals.
For compensation and calculation purposes of the aggregated economic value that will determine the
output participation, the organs of its Administration are, jointly with its employees, evaluated based on
the results obtained by the Company.
Each member of the Committee shall be entitled to compensation equivalent to 50% (fifty percent) of the
Board of Directors monthly payment. The members of the Committee who are Executive Officers or
employees of the Company shall not be entitled to any compensation.
d.
Is the responsibility of the Chief Executive Officer: (i) to convene and chair meetings of the Executive
Officers meetings; (ii) to maintain permanent coordination between the Executive Board and the Board of
Directors; (iii) To Comply with and enforce, within his authority, these Articles provisions and the
resolutions made by the Executive Board, Board of Directors and Shareholders Meetings.
The Director of Investor Relations is responsible: (i) release and inform CVM and BM&FBOVESPA, if
necessary, any act or relevant fact occurred or related to the Companys business. As well as, ensure the
immediate dissemination, simultaneously in all markets where such securities are negotiated, besides
other duties established by the Board of Directors; (ii) provide information to the investors; and (iii) keep
the registration of the Company in accordance with the applicable rules of the CVM.
The remaining Directors will have the assignments that may be established by the Board of Directors
upon his election, as set forth in the Company's Bylaws.
e.
Mechanisms for evaluating the performance of the Board of Directors, committees and
the Executive Board
See item 12.1(c).
12.2
a.
Notification
Brazilian Corporate Law for listed companies requires that all general shareholders meetings are convened
after three publications of the same in the Federal Gazette (Dirio Oficial da Unio) or of the State in
which the company is based, as well as in another newspaper with a wide circulation. The Companys
publications are currently placed in the Rio de Janeiro State Gazette (Dirio Oficial do Rio de Janeiro), the
official means of communication used by the state government of Rio de Janeiro, as well as in the daily
newspaper in Rio de Janeiro, Valor Econmico, with the first call made at least 15 days before the
meeting, and the second eight days before, as stipulated in its bylaws. However, the CVM can, in
specified circumstances, determine that the first call for a general shareholders meeting be made with 30
days prior notification from the date on which the documents related to the issues to be decided upon are
made available to shareholders. The Company, when possible, seeks to antecipate the term of the first
convocation of the General Assembly, allowing shareholders having informations of the General Meeting in
advance to that required by law.
121
b.
Powers
Without prejudice to the other matters provided for by law, General Shareholders Meeting solely shall:
Appreciation of the Managements Report, the Managements accounts, the Companys Financial
Statements and the independent auditors report;
Approval of the capital budget;
Approval of the Managements Proposal for the Allocation of Net Income;
Make amendments to the By-Laws;
Establishment of the remuneration of the Senior Management of the Company;
assign bonus shares and decide on possible share reverse splits and splits;
Elect and dismiss members of the Board of Directors;
Elect and dismiss members of the Fiscal Council, if installed;
Establish plan for granting call option or subscription for shares to directors and employees of the
Company and its subsidiaries;
resolve on the cancellation of open capital company registration before the Brazilian Securities and
Exchange Commission, under Chapter VII of the By-Law;
Resolve, under Chapter VII of the By-Law, on the delisting from the Novo Mercado; and
select among the companies indicated in a triple list by the Board of Directors, a specialized company
to be responsible for elaborating an appraisal report of the company shares in the event of cancellation
of company registration with the CVM and its delisting from the Novo Mercado.
d.
See item 16.3 for a description of the mechanisms the Company uses to avoid and mitigate conflicts of
interest.
e.
Requests for power of attorney and proxy are based on the legal and regulatory requirements. To date,
its management has never made any public request for power of attorney or proxy.
f.
Necessary formalities to accept powers-of-attorney granted for shareholders,
indicating if the Company receives powers from shareholders electronically
122
Subject to the provisions of Article 126 of Law 6404/76, to shareholders who are represented by proxy,
are requested to deliver at the Companys headquarter the documents that prove the powers of the legal
representative, preferably with advance of 2 (two) days from the date of the Meeting.
As defined in the Companys bylaws, shareholders may be represented at General Meetings of the
Company by a proxy appointed less than 1 year, who is a shareholder or officer of the Company, attorney
or financial institution. The supporting document evidencing his commission shall be filed with the
Companys registered office within the maximum period of 48 hours before the date scheduled for each
General Meeting.
The Company does not accept powers of attorney granted by electronic means.
g.
The Company does not keep Internet forums and pages for shareholders to receive and share comments.
h.
i.
12.4
2010
Publicated Newspaper
Date(s) of
Newspaper
publication
Publicated
Newspaper
2009
Date(s) of
Newspaper
publication
Publicated
Newspaper
3/21/2012
DOE-RJ
Valor Econmico RJ
3/18/2011
4/25/2012
DOE-RJ
Valor Econmico RJ
6/15/2011
3/6/2012
DOE-RJ
Valor Econmico RJ
3/17/2011
DOE-RJ
Valor
Econmico
RJ
DOE-RJ
Valor
Econmico
RJ
DOE-RJ
Valor
Econmico
RJ
4/16/2010
DOE-RJ
Monitor
Mercantil
3/5/2010
DOE-RJ
Monitor
Mercantil
The Board of Directors shall consist of a minimum of five (5) and a maximum of eleven (11) members, all
shareholders, of which 20% shall be independent, elected at a General Meeting for a unified 2 (two)-year
term of office and who may be reelected. In the event of a fractional number of directors as a result, due
to the compliance with this percentage, the fractional number shall be rounded off to: (i) the next higher
whole number, where the fraction is equal or higher than 0.5 (five tenths); or (ii) next lower whole
number, where the fraction is lower than 0.5 (five tenths).
123
a.
Frequency of meetings
The Board of Directors holds ordinary meetings once a month, and extraordinary meetings, whenever
corporate interests so require.
b.
Shareholder provisions establishing voting restrictions on members of the Board of
Directors
Does not exist
c.
Board of Directors
The Companys Board of Directors is currently comprised of seven members, elected at the Ordinary
Shareholders Meeting held on April 20, 2012. The members were elected for a two-year term expiring in
the next Ordinary General Meeting. The table below indicates the name, age and title of the board of
directors.
Date of
Las
Election
Date of
Office
Term of
Office
Other
Titles
Elected by
the
Controlling
Shareholder
Name
Age
Profession
CPF
Title
Andres
Cristian
Nacht
69
Business
Administration
098.921.337
/49
Chairman
4.20.2012
4.20.2012
2 years
No
Yes
Elio Demier
61
Bachelor of
Social
Communication
260.066.507
-20
Vice Chairman
4.20.2012
4.20.2012
2 years
Yes
Yes
Diego Jorge
Bush
68
Business
Administration
060.903.038
-87
Director
4.20.2012
4.20.2012
2 years
No
Yes
Nicolas
Wollak
50
Executive
057.378.217
-22
Director
4.20.2012
4.20.2012
2 years
No
Yes
Pedro
Chermont
38
Engineer
023.120.657
-70
Director
4.20.2012
4.20.2012
2 years
No
Yes
Pedro Malan
69
Economist
028.897.227
-91
Independent
Director
4.20.2012
4.20.2012
2 years
No
Yes
Jorge M. T.
Camargo
57
Geologist and
Physicist
114.400.151
-04
Independent
Director
4.20.2012
4.20.2012
2 years
No
Yes
124
Title
Date of
Last
Election
Starting
Date
Term of
Office
Until
2013
Sharehol
ders
Meeting
Until
2013
Sharehol
ders
Meeting
Until
2013
Sharehol
ders
Meeting
Until
2013
Sharehol
ders
Meeting
Until
2013
Sharehol
ders
Meeting
Name
Age
Profession
CPF
Ramon Nunes
Vazquez
58
Engineer
336.997.807-59
Chief Executive
Officer
2.9.2012
2.9.2012
Erik Wright
Barstad
55
Engineer
012.491.708-93
Heavy
Construction and
Jahu division
Officer
2.9.2012
2.9.2012
Roberto
Carmelo de
Oliveira
57
Engineer
399.935.827-00
Industrial
Services division
Officer
2.9.2012
2.9.2012
Frederico
tila Silva
Neves
54
Engineer
595.166.407-10
Chief Financial
Officer
2.9.2012
2.9.2012
Alessandra
Eloy Gadelha
37
Engineer
021.092.597-36
Investor
Relations Officer
2.9.2012
2.9.2012
Other
Positio
ns
Elected by
the
Controller
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
Fiscal Council
At the the Ordinary and Extraordinary General Meeting held on April 19, 2011, the Company's shareholders
have requested the installation of the Fiscal Council and elected three members and three alternates. At the
Erdinary General Meeting held on April 20, 2012 the Fiscal Council became a permanent body.
The table below presents name, age and title of the Fiscal Council members:
125
Name
Rubens Branco da
Silva
Daniel Oliveira
Branco Silva
Eduardo Botelho
Kiralyhegy
Maria Cristina
Pantoja da Costa
Faria
Maurcio Rocha Alves
de Carvalho
Peter Edward Cortes
Marsden Wilson
Age
61
32
32
Professi
on
Lawyer
Lawyer
Lawyer
Lawyer
34
50
Engineer
40
Administ
rator
CPF
120.049.10763
080.968.46752
082.613.21703
886.793.57715
709.925.50700
168.126.64820
Title
President
Substitute
Date of Last
Election
4.20.2012
4.20.2012
Date of
Office
4.20.2012
Office
Term
Other
Titles
1 year
No
4.20.2012
1 year
Member
4.20.2012
4.20.2012
1 year
Substitute
4.20.2012
4.20.2012
1 year
Elected
by the
Yes
Yes
No
Yes
No
No
Yes
Member
4.20.2012
4.20.2012
1 year
No
No
Substitute
4.20.2012
4.20.2012
1 year
No
No
12.7 Provide information mentioned in item 12.6 related to the members of the statutory
committees, as well as audit, risk financial and remuneration committees even if such
committees or structures are not statutory
Human Resources Committee
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
Name
Age
Profession
CPF
Title
Date of Last
Election
Ramon
Nunes
Vazquez
Elio Demier
59
Engineer
336.997.807
-59
Member
05.22.2012
05.22.2012
1 year
Yes
Yes
61
Bachelor of Social
Communication
260.066.507
-20
Member
05.22.2012
05.22.2012
1 year
Yes
Yes
59
Economist
402.760.747
-34
Member
05.22.2012
05.22.2012
1 year
No
Yes
Age
Profession
CPF
Title
Date of Last
Election
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
50
Executive
Member
09.12.2012
12.9.2012
1 year
Yes
Yes
57
Geologist and
Physicist
057.378.217
-22
114.400.151
-04
09.12.2012
12.9.2012
1 year
Yes
Yes
59
Engineer
09.12.2012
12.9.2012
1 year
Yes
Yes
Jos Felipe
Vieira de
Castro
Strategic Committe
Name
Nicolas
Wollack
Jorge M. T.
Camargo
Ramon
Nunes
Vazquez
336.997.807
-59
Member
Member
12.8 Summary of the business experience, activities and areas of expertise of members of
administration and Fiscal Council
12.8.1 Board of Directors
Andres Cristian Nacht has been the Chairman of the Companys board of directors since 1998. The son of
Mr. Jose Nacht, one of the founders of the Company, Mr. Nacht has a degree in Engineering from
Cambridge University, England. In 1965, Mr. Nacht joined GKN, a British engineering company, where he
worked for three years, holding engineering posts in the UK. In 1967, has worked for one year as
Engeneer in Echafaudages Tubulaires Mills from France. Mr. Nacht became a director of the company in
1969 and was appointed managing director in 1978, a position he held until 1998 when he became the
Chairman of the Board of Directors.
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Elio Demier is a graduate of Social Communication from the Fluminense Federal University. He also holds
an MBA from the Institute of Post-Graduation and Research in Administration of the Rio de Janeiro
Federal University. He served as the Companys chairman from 1998 to 1999 and has been a member of
the Companys board of directors since 1998. Mr. Demier was President of the Bomtexto Publisher,
company in the book publishing business located in Rio de Janeiro.
Diego Jorge Bush is a graduate in Business Administration from Yale University in 1967 and also holds an
MBA from Harvard Business School in 1971. Having worked as Chairman of the Boston Finance, Boston
Distributor and Boston Leasing, companies connected to the Bank Boston, an office he held until 1973.
After leaving Boston bank, Mr. Bush founded a specialist finance brokerage company, Edim Comercial e
Imobiliria Ltda., which he manages to-date. Between 1988 and 1996 he has been Chairman of So Paulo
Alpargatas S.A. Mr. Bush has been a member of the Companys Board of Directors since 1998.
Nicolas Wollak has been a member of the Companys Board of Directors since 2007. Graduated from
Harvard University, Mr. Wollack is a founder of the Axxon Group in Brazil, where is Managing Partner
since 2001. Mr. Wollak has nearly 20 years of private equity investment experience having already been a
partner of BISA fund (Argentina) prior to founding the Axxon Group. Current chairman of the board of
directors from Guerra S.A (manufacturer of road implements), member of Luxxon S.A., which controls
Aspro Ltda (manufacturer of compressed natural gas), director of MV Investimentos S.A. (investment
vehicle which controller of the franchise network of Mundo Verde), and also a member of the Deliberative
Board of the Brazilian Private Equity Association (ABVCAP). In the past five years, Mr. Wollack has been
(i) managing partner of the Axxon Group in Brazil, as one of the responsible for its investments in their
Investment Funds, (ii) Chairman of the Board of Director from Guerra S.A (as described above) since July
2008 until the present date, (iii) director in MV Investimentos S.A. (as described above) since August
2009 until the present date, (iv) member of the Deliberative Board from ABVCAP since March 2010 until
the present date, (v) member of the Board of Directors from Luxxon S.A (as described above) since
December 2007 until the present date, and (vi) member of the Board of Directors from Lupatech S.A.
(equipment and services supplier mainly for the oil and gas industry) sinde March 2005 until October
2007.
Pedro Chermont has a degree in Civil Engineering from PUC-RJ and is the funding partner and portfolio
manager of Leblon Equities Gesto de Recursos funds. Mr. Chermont has 15 years of experience in the
Brazilian equity market, having worked 13 years at Investidor Profissional, one of the first independent
asset management companies in Brazil, where he managed funds that amounted to approximately U.S $
1.5 billion. Current chairman of the Board of Directors of BR Home Centers, retail company in the building
material sector, and a member of the Board of Directors of Companhia Brasileira de Distribuio (CBD),
which is the holding company of Po de Acars group. Mr. Chermont has served as a member of the
Companys Board of Directors between July 9, 2007 and August 20, 2008, returning as a member in 2010.
In the last five years, Mr. Chermont has been: (i) co-founder of Leblon Equities, being responsible for the
investments of its funds (since September 2008), (ii) partner of Investidor Profissional, where he was also
responsible for investments its investment funds, (iii) member of the Board of Directors of BR Home
Centers (from May 2009 onwards), and (iv) member of the Board of Directors of the Companhia Brasileira
de Distribuio, described above (from August 2009 until the present date), beyond the participation of
the Board of Directors from Globex and Ponto Frio.com.
Pedro Malan obtained a degree in electrical engineering in 1965 from Polytechnic School at Pontifical
Catholic University of Rio de Janeiro (PUC-RJ). He holds a Ph.D. in economics from the University of
Berkeley. Mr. Malan is a professor at the Department of Economics at PUC-RJ, has published essays and
articles in economic journals and books, both in Brazil and abroad and is a member of the Board of
Trustees of the IFRS Foundation. He served as Brazils Minister of Finance from 1995 to 2002. President
of the Central Bank of Brazil from 1993 to 1994. Special Counsel and Chief External Debt Negotiator of
the Ministry of Finance from 1991 to 1993. Executive Director of the World Bank from 1986 to 1990, and
again from 1992 to 1993. Executive Director of the Inter-American Development Bank from 1990 to 1992.
Director of the Center of Transnational Corporations in New York from 1983 to 1984. Director of the UN
Department of International Economic and Social Affairs in New York from 1985 to 1986. Mr. Malan has
been an independent member of the board of director since March 2010. In the last five years, Mr. Malan
has been a member of the board of directors of Souza Cruz S.A. (since March 2010), chairman of the
127
advisory board of Unibanco-Itau (since august 2009), member of the board of directors of OGX (since
2008), member of the board of directors of EDP Energias do Brasil (since 2004), has been a member of
the board of directors of Globex Ponto Frio (since 2004) and Chairman of the board of directors of
Unibanco (from 2004 until 2008).
Jorge M. T. Camargo has been for 36 years in the oil industry. Obtained a degree in geology from the
University of Brasilia and masters degree in geophysics from the University of Texas, worked 27 years in
Petrobras in Brazil and abroad, holding various technical and management positions in the Exploration
Department, as well as Superintendent of the Rio Grande do Norte and Cear Exploration Districts,
General Manager of Petrobras in the UK and a member of the Executive Board as Director of the
International Sector. Over the past eight years, worked for Statoil, initially as Vice-President at the
headquarter in Stavanger, Noruega, and later as president of Statoil in Brazil. In 2010 redirected his
professional activities to consulting, corporate boards, serving currently as consulting in Satatoil and in the
boards of Karoon Oil and Gas, Deepflex, Energy Ventures, Iposeira O&G and the Brazilian Oil Institute
(IBP).
Over the past five years, none of the members of our Board of Directors has suffered any (a) criminal
conviction; (b) conviction in an administrative proceeding of CVM; or (c) any conviction that has become
final in the judicial or administrative area, that has suspended or disqualified our members of the practice
of professional or commercial activity whatsoever.
12.8.2 Board of Executive Officers
Ramon Nunes Vazquez has been the Companys Chief Executive Officer since 2009, returning to the
Company in 2007 as the Rental Division Director, after more than six years serving as Chief Executive
Officer of Solaris Equipamentos e Servios Ltda, an equipment rental company. Mr. Vazquez has over 30
years of experience in our business sector, graduated in Civil Engineering from the Rio de Janeiro Federal
University (UFRJ) and with a degree in Marketing from Pontifcia Universidade Catlica do Rio de Janeiro
(PUC/RJ). Mr. Vazquez also holds an MBA in Marketing from PDG/RJ. Over the past five years, Mr.
Vazquez was CEO of Solaris, whose activities are stated above (until 2007), served as our Rental Division
Director (2007 to 2009) and the Companys Chief Executive Officer (from 2009 to the present date).
Erik Wright Barstad has been executive officer responsible for the Heavy Construction and Jahu divisions
since 1998 and has over 33 years experience in this market. He has a degree in Civil Engineering from the
Mackenzie Presbyterian Faculty of So Paulo and a degree in Marketing from PUC/RJ. Mr. Barstad also
holds an MBA from PDG/RJ. On the past five years, Mr. Barstad was our Construction Division Officer, and
since 2008 responsible for our Jahu Division.
Roberto Carmelo de Oliveira has been the executive officer responsible for the Industrial Services division
since 1999. He has a degree in Civil Engineering from Souza Marques University. Mr. de Oliveira holds an
Executive MBA from PDG/IBMEC and obtained a specialization diploma from the Trevisan Business School
of So Paulo. For two years Mr. Oliveira worked at Ecia Irmos Arajo Engenharia e Comrcio Ltda,
followed by five years at the technical division of Construtora Norberto Odebrecht S.A. In 1981, Mr.
Carmelo de Oliveira began working at the company as an engineer and today he has 30 years of
experience in that sector. In the last five years, Mr. Oliveira Mr. Oliveira has been an Officer of the
Company, responsible for the Industrial Services Division, formerly Division Maintenance, renamed
Industrial Services Division since 2008.
Frederico tila Silva Neves has a degree in Civil Engineering from the Rio de Janeiro Federal University
and in 1984 was awarded a Masters Degree in Business Administration by the Institute of PostGraduation and Research in Administration (COPPEAD) of the Federal University of Rio de Janeiro. Mr.
Neves worked for six years at large multinational companies in the industrial and financial sectors, before
before joining Ceras Johnson Ltda. as controller in 1990. Mr. Neves also became the Companys Chief
Financial Officer, and until 2010, he was also the Investor Relations Offiver.
Alessandra Eloy Gadelha has a bachelors degree in chemical engineering from the Universidade Federal
do Rio de Janeiro (UFRJ) and a masters degree in Business Administration from Rensselaer Polytechnic
128
Institute, located in the state of New York, in the US. In the past five years, Mrs. Gadelha worked in the
Investors Relations department at Vale S.A., before coming to the Company to become the Investor
Relations Officer since July 2010.
Over the past five years, none of the members of our Board of Executive Officers has suffered any (a)
criminal conviction; (b) conviction in an administrative proceeding of CVM; or (c) any conviction that has
become final in the judicial or administrative area, that has suspended or disqualified our members of the
practice of professional or commercial activity whatsoever.
12.8.3 Fiscal Council
Rubens Branco da Silva obtained a degree in Law from the Federal University of Rio de Janeiro (UFRJ)
and in Accounting by the Accounting and Administrative School Moares Junior. He worked professionally
at Arthur Andersen for 29 years, being 20 years as an associate responsible for the Tax and Legal area.
Currently a member of the Advisory Board of the SR-Rating, the American Chamber of Commerce for
Brazil-Rio de Janeiro, and the Board of Mediation and Arbitration of Rio de Janeiro. He is also a member
of the Brazilian Institute of Financial Executives (IBEF), Brazilian Association of Financial Law (ABDF) and
the International Fiscal Association (IFA), the Chamber of Commerce and Industry Brazil-Germany (AHK),
Business Council of Commerce Association of RJ (ACRJ) and a vowel from the Board of Commerce of the
State of Rio de Janeiro. He is currently a partner at the Branco Consultores Tributrios Ltda.
Eduardo Botelho Kiralyhegy graduated in Law from the Candido Mendes University, a member of the
Brazilian Lawyers Association, and founding partner of the Negreiro Office, Medeiros & Kiralyhegy
Lawyers, in Rio de Janeiro, specializing in Tax Law, Administrative and Regulatory. Currently a member of
the Special Committee of Tax Issues of the Brazilian Lawyers Association, the Special Committee of the
Federal Justice of the Brazilian Lawyers Association, the Brazilian Academy of Tax Law, and the Brazilian
Association of Financial Law and the International Fiscal Association.
Mauricio Rocha Alves de Carvalho is a graduate in Mechanical Engineering from Pontifical Catholic
University of Rio de Janeiro (PUC) and master in business administration from the Wharton School University of Pennsylvania, with certifications in CFA, CNPI and IBGC. Member of the Board of Directors of
Network 1 and Tupy S.A., vice-president of CFA Society of Brazil, technical director of Apimec-SP and
member of IBGC.
Daniel Oliveira Branco Silva graduated in law from the Pontifical Catholic University of Rio de Janeiro
(PUC) in 2004 and has a postgraduate degree in Corporate Law, specialization in tax Law at the fundao
Getlio Vargas (FGV). Mr. Daniel is a legal manager at Branco Consultores Tributrios and a member of
Branco Advogados since 2003.
Maria Cristina Pantoja da Costa Faria graduated in law from the Pontifical Catholic University of Rio de
Janeiro (PUC), specializing in corporate finance for lawyers by the Foundation Institute of Management
from the University of So Paulo, and earned her masters degree in executive management of insurances
at IBMEC. Member of the Brazilian Lawyers Association. Currently a member of the Negreiro Office and
Medeiros & Kiralyhegy Lawyers.
Peter Edward Cortes Marsden Wilson is a graduate in business administration from the Getulio Vargas
Foundation (So Paulo) and Master in Economics, Business Administration and Finance from the Getlio
Vargas Foundation (So Paulo). Worked as an analyst, trader, controller, and a portfolio manager in the
Banque Nationale group of Paris. He was a portfolio manager for Globalvest Management LP / Latinvest
Asset Management for two years, and Ourinvest Asset Management Ltd. for another two years. Was
investment director of the Dartley Bank & Trust (Nassau) for a year. Currently a member of the Board of
Directors from PHI Capital Management, specializing in portfolio management and corporate finance.
129
a.
b.
(i) members of the Board of Directors, Executive Board and Fiscal Council and (ii)
members of management of entities controlled by the Company, either directly or indirectly
There is no marital relationship, stable union or any kind of relationship up to the second degree between
the Administrators of the Company and any of the persons indicated in items (a) and (b) above.
c.
(i) members of management of entities controlled by the company, either directly or
indirectly; and (ii) Companys direct or indirect controlling shareholders
Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the Company or Controlled Company: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Jytte Kjellerup Nacht/ CPF: 289.858.347-20
Corporate name of the issuer company, controlled or controlling: Nacht Participaes S.A. / CNPJ:
27.109.446/0001-05
Title: Director and shareholder
Type of relationship: Husband/Wife
-------------------------------------Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer or controlled company: Mills Estruturas e Servios de Engenharia
S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling Company and shareholder
Type of relationship: brother
d.
(i) members of the Board of Directors, Executive Board and Fiscal Council and (ii)
Millss direct or indirect controlling shareholders
Administrator of the Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
130
Corporate name of the issuer or controlled company: Mills Estruturas e Servios de Engenharia
S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling company and shareholder
Cargo: shareholder
Type of relationship: brother
Additionally, Mr. Andres Cristian Nacht is the Chairman of the Board of Directors of the Company since
1998 and is a shareholder of Nacht Participaes S.A..
12.10 Subordination, rendering of services or control relationships for the previous three
fiscal years between directors/officers and:
a.
b.
Mr. Rubens Branco, through the partnership of Branco Consultores Tributrios Ltda., has provided over
the last three fiscal years legal advisory services, accounting and taxation to Mr. Andres Cristian Nacht
and Nacht Participaes S.A..
Mr. Daniel Oliveira Silva White, through the partnership of Branco Consultores Tributrios Ltda., has
provided over the last three fiscal years legal advisory services, accounting and taxation to Mr. Andres
Cristian Nacht and Nacht Participaes S.A.
c.
In case its relevant, supplier, client, debtor or creditor of the Company or its
controlled or controlling shareholders
Not applicable, as there is no information about relationships of subordination, provision of service or
control over the past three fiscal years, between the Administrators of the Company and any of the
persons indicated in items (a) to (c) above.
12.11 Directors Insurance
The Company has held civil responsibility insurance since 2009, for administration and proxy holders
acting on behalf of them, with full cover for fines and civil penalties, statutory responsibilities, regulatory
risks, responsibility for errors and omissions, among others, excluding intentional acts, complaints arising
from acts known about prior to the policy date, responsibilities associated with product failures (already
covered by civil responsibility insurance), among other events.
The policy contract was renewed for the period December 31, 2011 until December 31, 2012.
131
132
133
13.
134
13.1 Description of the compensation policy or practices for the Executive Board, the
Statutory and Non-Statutory Boards, the Fiscal Committee, the Statutory Committees and
the Audit, Risk, Finance and Compensation Committees, covering the following topics:
a.
Board of Directors
For the Board of Directors of the Company, the total remuneration is fixed in amount discretionary
determined by the general meeting with no regarding with the remuneration policy applicable to officers
and other employees of the Company and therefore there is no goal at the policy or remuneration
practice of this body.
As part of total remuneration discretionary approved by the general meeting, there is a fixed component
and a variable component, according to the results of the Company. The Company believes that the
variable remuneration of the members of the Board is a way to encourage them to successfully lead the
Company's business by aligning the interests of members of the Board of Directors with those of
shareholders.
Statutory Directors and Non-Statutory Directors
For statutory directors and non-statutory directors of the Company, the remuneration policy aims to
enable it to hire and guarantee that the qualified professionals required remain in management positions
and have a proper remuneration. The fixed amount of the remuneration of the Directors includes the
salary and direct and indirect benefits tailored for statutory directors and non-statutory directors. In
addition to the fixed compensation, there is a variable component, which includes profit-sharing in the
Companys results and the granting of stock options or subscribing to shares issued. The Company
believes that the profit-sharing and stock option programs benefiting statutory directors and non-statutory
directors is a way to motivate them to carry out the Companys business in its best interest, thus
stimulating an entrepreneurial and results orientated culture in line with the interests of both shareholders
and management.
Fiscal Council:
The Fiscal Council was installed at the Ordinary Shareholders Meeting held on April 19, 2011. At the
Extraordinary Shareholders Meeting held on April 20, 2012, was approved the proposal to transform the
Fiscal Council on a permanent body, with three members and their alternates. Members of the Fiscal
Council are entitled to remuneration equivalent to 10% of the average remuneration of the statutory
board, corresponding to the minimum set by law. In this way, their remuneration is not correlated to the
remuneration policy applicable to officers and other employees of the Company and therefore there is no
objective of the policy or practice of remuneration for that body.
Human Resources Committee:
The members of the Human Resources Committee will be entitled to remuneration equivalent to 50% of
the monthly remuneration of the members the Board of Directors. The Committee members who are
directors, officers or employees of the Company shall not be entitled to remuneration. The remuneration
of members of the Committee may be amended at any time by the Board. The purpose of this
remuneration policy is adequately compensate Committee members for time spent in office, except by
those who are already paid by the Company to its directors or employees.
The Human Resources Committee members will be entitled to remuneration equivalent to 50% of the
monthly remuneration of members of the Board of Directors. Committee members who are directors,
officers or employees of the Company are not entitled to remuneration. The remuneration of members of
committees may be amended at any time by the Board of Directors. The purpose of this remuneration
135
policy is adequately compensate Committee members for time spent in office, except by those who are
already paid by the Company to its directors or employees.
b.
Composition of compensation packages: (i) description of the different elements of
the compensation packages and the objectives of each of them; (ii) proportion of each
element to make up the total compensation package; (iii) the method for calculating and
adjusting each of the elements in the compensation packages; and (iv) reasons for the
composition of remuneration
(i) Description of the different elements of the compensation packages:
Salary and pro-labore.
The fixed remuneration of statutory directors and non-statutory directors is designed to recognize and
reflect the value of the job position internally and externally, considering the competitors of the Company
and companies of similar size in terms of their gross sales. The comparison with the market remuneration
is carried out by market research conducted by consulting firm hired or through database purchased from
a consultant. In 2010 and 2011, the Company conducted market research with companies Saliby RH and
Towers Watson, respectively. Additionally, the Company uses the database with market remuneration
from the consulting company Mercer.
For the Board of Directors of the Company (and the Human Resources Committee), the remuneration,
fixed and/or variable (the last as bonus), is discretionary determined by the general meeting with no
regarding with the remuneration policy applicable to officers and other employees of the Company and
therefore there is no goal at the policy or remuneration practice of this body. Members of the Fiscal
Council are entitled to remuneration equivalent to 10% of the average remuneration of the statutory
board, corresponding to the minimum set by law. In this way, their remuneration is not correlated to the
remuneration policy applicable to officers and other employees of the Company and therefore there is no
aim of policy or practice of remuneration for that body.
136
Board of Directors
Executive Officers
Human Resources Committee
Fiscal Council
Pro-labor
and wage
84.5%
67.4%
100%
100%
Total
100%
100%
100%
100%
(iii) The method for calculating and adjusting each of the elements in the compensation packages:
The fixed portion of compensation paid to statutory directors and non-statutory directors is determined
based on market standards, and thus readjusted annually at the normal levels to account for the loss in
currency value.
In terms of the profit-sharing program granted to statutory directors and non-statutory directors, and
bonus, granted to members of Board of Directors, this plan is based on the aggregate economic value,
which consists of the adjusted net profit deducted from shareholder obligations. If positive, 25% of the
Economic Value Added (EVA) will be distributed to Management and employees, and whose share will be
defined in an increasing manner in accordance with their hierarchical level in the Company and results
obtained by their respective divisions. i.e. in a proportion of 50% based on the divisions results that the
manager or employee in question is linked to and 50% based on the result of our Company as a whole.
For the employees of corporate areas, the program considers the total result of the company. In 2010 the
Company distributed R$13.8 million related to 2009 results, in 2011 the Company distributed R$17.5
million related to the results of 2010, and in 2012 were distributed R$7.9 million for the results of 2011.
As from 2012, from 20% to 30% of the EVA can be distributed to Management and employees of the
Company, being determined by the Board of Directors the percentage to be applied each year. The share
will continue to be increasingly defined according to their hierarchical level and according to the results
obtained by their respective Division, however in the ratio of 75% on the result of the Division to which
the Management or employee concerned belongs, and 25% on the outcome of the Company as a whole.
For the employees of corporate areas, the program will continue considering the total result of the
company.
Regarding the Stock Option plan to purchase or subscribe shares, granted to the statutory directors and
non-statutory directors, the number of options granted is proportional to the investment in the Company's
shares with resources obtained from the profit sharing program described above. Additionally, the Board
of Directors may distribute stock options or subscription of discretionary shares to statutory directors and
non-statutory directors, that is, independent of the investment in the Company's shares with resources
obtained from the profit sharing program described above, based on performance merit and/or outcome.
For the Board of Directors of the Company (and the Human Resources Committee), the remuneration is
discretionary determined by the general meeting with no regarding with the remuneration policy
applicable to officers and other employees of the Company and therefore there is no goal at the policy or
137
remuneration practice of this body. Members of the Fiscal Council are entitled to remuneration equivalent
to 10% of the average remuneration of the statutory board, corresponding to the minimum set by law. In
this way, their remuneration is not correlated to the remuneration policy applicable to officers and other
employees of the Company and therefore there is no aim of policy or practice of remuneration for that
body. So, there is no method of calculation and adjustment of each element of remuneration.
(iv) Reasons for the composition of remuneration:
For the statutory directors and non-statutory directors, the policy aims the remuneration of professionals
based on the responsibilities inherent in their job positions, market practices and the Companys level of
competiveness.
For the Board of Directors, the Human Resources Committee and the Fiscal Council, the remuneration
paid by the Company is fixed, in amount discretionary determined by the general meeting, in case of
Board of Directors (and the Human Resources Committee), and according to the law, in case of Fiscal
Council. The remuneration of the member of these bodies has no regard with the remuneration policy
applicable to officers and other employees of the Company and therefore there is no goal at the policy or
remuneration practice of this body.
For the statutory directors and non-statutory directors and the member of the Board of Directors, the
variable portion is justified by the Companys focus on results and the aim of aligning management
interests with those of the Company.
c.
Main performance indicators that are taken into consideration when determining each
element of the compensation package
The main performance indicator used to determine the variable component of management remuneration
is the Companys Economic Value Added (EVA), which is calculated from the net profit of the Company,
deducting from this remuneration the capital invested in the Company at capital invested in the Company
at book value multiplied by the weighted average of each capital of the Company. The variable portion of
remuneration is determined from the economic value generated in the Company and in the division,
under its responsibility.
d.
How the compensation package is structured to reflect the development of the
performance indicators
The remuneration consists of a significant variable portion, represented by profit-sharing in the
Companys results, and the values to be distributed are directly proportionate to the Companys Economic
Value Added (EVA), calculated annually in accordance with the formula described in item (c) above.
e.
How the compensation policy is aligned with the Companys short-, medium- and
long-term interests
The remuneration paid monthly to statutory directors and non-statutory directors is in line with the shortterm interests of the Company to attract and retain qualified professionals. The profit-sharing and stock
options plan is aligned with the medium-to-long-term interests of the Company to motivate management
to carry out the Companys business, stimulating an entrepreneurial and results-orientated culture, to the
extent that both shareholders and directors benefit from improvements in the results and increases in the
price of the shares.
For the Board of Directors of the Company (and the Human Resources Committee), the remuneration is
fixed in amount discretionary determined by the general meeting with no regarding with the remuneration
policy applicable to officers and other employees of the Company and therefore there is no goal at the
policy or remuneration practice of this body. Members of the Fiscal Council are entitled to remuneration
equivalent to 10% of the average remuneration of the statutory board, corresponding to the minimum set
by law. In this way, their remuneration is not correlated to the remuneration policy applicable to officers
138
and other employees of the Company and therefore there is no aim of policy or practice of remuneration
for that body.
For the Board of Directors, the bonus, which is based on profit-sharing, is in line with the Companys mid
and long term best interest of stimulating an entrepreneurial and results orientated culture.
f.
Existence of compensation supported by subsidiaries, and direct or indirect affiliates
or holding companies
Not applicable. There isnt any remuneration supported by subsidiaries, and direct or indirect affiliates or
holding companies.
g.
Existence of any compensation or benefits connected to the occurrence of a given
corporate event, such as the sale of the Companys controlling interest
Not applicable. There is no remuneration or benefits connected to the occurrence of a given corporate
event, such as the sale of the Companys controlling interest.
13.2 With respect to compensation acknowledged in the results of the last 3 accounting
reference periods and the estimated compensation for the current accounting reference
period for the Executive Board, the Statutory Board and the Fiscal Council:
Estimated for Current Fiscal Year
Board of Executive
Officers
5
1,136,700
4,345,000
260,700
5,742,400
660,000
660,000
100,000
100,000
249,300
1,430,000
85,000
1,764,300
750,000
750,000
Profit share
Compensation for participation in
meetings
Commissions
2,000,000
2,000,000
Other
Post-employment benefits
Employment cessation
benefits
Stock-based compensation
Board of Directors
Number of members
Fiscal Council
Total
15
Total Compensation
1,700,000
1,700,000
2,236,000
10,135,000
345,700
12,716,700
Fiscal Council
Total
14.75
6.75
Board of Executive
Officers
5
850,800
3,038,949
120,000
4,009,749
354,261
354,261
65,000
65,000
183,160
1,087,908
24,000
1,295,068
Board of Directors
Number of members
Annual fixed compensation
Salaries or pro-labore fees
Direct and indirect benefits
Compensation for participation in
Committees
Other
Variable Compensation
139
Bonus
Profit share
Compensation for participation in
meetings
Commissions
Other
Post-employment benefits
Employment cessation
benefits
Stock-based compensation
Total Compensation
168,162
168,162
523,747
523,747
33,632
33,632
1,121,894
1,121,894
1,300,754
6,126,759
144,000
7,571,513
(1) According to maximum total remuneration of R$9,100,000.00 for the Board of Directors and Executive Officers approved at the Ordinary General
Meeting of April 19, 2011, excluding stock based compensation.
(2) Based on salary or pro-labor average of the Executive Officers in April 2011.
(3) Includes one month of occupation of the position of member of the Board of Directors by Gustavo Felizolla, who resigned in January 2011, and
eight months in the same position occupied by Jorge Camargo, who took office in May 2011.
Board of Executive
Officers
4.5
639,520
2,628,940
3,268,460
445,814
445,814
35,000
35,000
906,679
906,679
133,952
133,952
Profit share
Compensation for participation in
meetings
Commissions
1,859,254
1,859,254
Other
Post-employment benefits
Employment cessation
benefits
Stock-based compensation
353,734
353,734
808,472
6,194,421
7,002,893
Fiscal Council
Total
Board of Directors
Number of members
Annual fixed compensation
Salaries or pro-labore fees
Direct and indirect benefits
Compensation for participation in
Committees
Other
Fiscal Council
Total
11.5
Variable Compensation
Bonus
Total Compensation
Board of Executive
Officers
4
248,320
2,269,800
2,518,120
49,664
49,664
246,400
246,400
1,615,110
1,615,110
22,568
22,568
Board of Directors
Number of members
Annual fixed compensation
Salaries or pro-labore fees
Direct and indirect benefits
Compensation for participation in
Committees
Other
Variable Compensation
Bonus
Profit share
Compensation for participation in
meetings
Commissions
Other
Post-employment benefits
140
Employment cessation
benefits
Stock-based compensation
Total Compensation
2,522,000
2,522,000
566,952
6,406,910
6,973,862
13.3 With respect to variable compensation in the last 3 accounting reference periods and
compensation estimated for the current accounting reference period for the Board of
Directors, the Board of Executive Officers and the Fiscal Council:
Estimated for Current Fiscal Year
Board of Directors
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Amount actually
acknowledged in the formal
results
Profit share
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
15
Fiscal Council
Total
Board of Executive
Officers
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Amount actually
acknowledged in the formal
results
Profit share
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Amount actually
acknowledged in the formal
results
6,75
14,75
25,0% do EVA
25,0% do EVA
168,2
168,2
25,0% do EVA
25,0% do EVA
141
523,7
523,7
Fiscal Council
Total
Board of Executive
Officers
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Amount actually
acknowledged in the formal
results
Profit share
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Amount actually
acknowledged in the formal
results
Minimum amount estimated
by compensation plan
1
4,5
11,5
25,0% do EVA
25,0% do EVA
134,0
134,0
25,0% do EVA
25,0% do EVA
1.859,3
1.859,3
Considers the hiring, in July, 2010, of Mrs. Alessandra Eloy Gadelha for the position of Investor Relations Officer of the Company.
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Amount actually
acknowledged in the formal
results
Profit share
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Amount actually
acknowledged in the formal
results
Minimum amount estimated
by compensation plan
25,0% do EVA
25,0% do EVA
246,4
246,4
25,0% do EVA
25,0% do EVA
1.615,3
1.615,3
142
13.4 With respect to the stock-based compensation plan for the Executive Board and the
Board of Executive Officers, which was in force in the last accounting reference period and
which is estimated for the current accounting reference period:
143
e. How the plans promote the alignment between management and the Company interests at short,
mid and long term:
The plan aligns the interests of management, the Company, and shareholders by means of the benefits
offered to the beneficiaries based on the performance of shares in the Company. Through this plan, the
Company seeks to stimulate expansion, the scope and implementation of the Companys social objectives
and the retention of the beneficiaries, looking ahead to gains made through their commitment to longterm results and short-term performance.
f.
The stock options granted within the scope of this plan confer the rights to acquire up to 5% of shares in
our capital stock. In addition, the aim of the plan is to grant share purchase options in an amount that
does not exceed 1.5% of shares in our total capital every year, as verified on the date the plan was
approved.
As part of the 1/2010 Program, 538,714 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2011, 51,251 options have been exercised.
As part of the 1/2011 Program, 392,046 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2011, no options have been exercised.
Until April 20, 2012, the price of the ordinary shares to be acquired by the beneficiaries, by exercising
their option rights were determined by the Companys Board of Directors or committee based exclusively
on the average share price on the BM&FBOVESPA, weighted by the trading volume in the month or the
two months prior to the granting of the stock option, monetarily adjusted by the inflation index IPCA
(ndice de Preos ao Consumidor Amplo), and deducting the value of dividends and interest on equity
per share paid by the Company as from the stock option date. On April 20, 2012, according to the
resolution of the General Meeting held on that date, the criterion for fixing the exercise price of the
options that have as a counterpart the acquisition of shares by its beneficiary was changed and was
defined as the equity value of the shares on the last day of the subsequent fiscal year. This change does
not affect the options granted prior to that General Meeting and the new criterion does not apply to
options granted that have no counterpart of the acquisition of shares by the beneficiary, which continues
to be applied the criterion of market price, described above.
For the 1/2010 Program, the exercise price of the options will be based on the value of the shares issued
at the Companys Initial Public Offering (R$11.50), monetarily adjusted by the inflation according to the
IPCA, deducting the value of dividends and interest on equity per share paid by the Company as from the
144
stock option date. Regarding the 1/2011 Program, the exercise price of the options will be (i) the average
share price acquired according to brokerage invoice sent by the beneficiary to the Board of Directors or
Human Resources Committee of the Company (R$ 19.28), (ii) monetarily adjusted by the inflation
according to the IPCA, disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by
another index determined by the Board of Directors or committee, according to the case, from the date of
conclusion of the stock option agreement until the date the option is exercised, (iii) deducting the value of
dividends and interest on equity per share paid by the Company as from the stock option date.
j.
The options granted under the terms of this plan will be subject to grace periods of up to 72 (seventy
two) months for the conversion of options into shares.
k. Form of liquidation/settlement
The shares resulting from the exercising of purchase options will be integrated and/or acquired by their
respective beneficiaries in cash, in current national currency.
l.
Until the exercise price is fully paid, the shares acquired through exercising the option rights under the
terms of the Plan cannot be sold to third parties, except with the prior authorization of the Board, based
on the hypothesis that the product of the sale will preferably be used to settle any debt the beneficiary
has with the Company.
Based on the terms of the respective Option Contract, no beneficiary will be allowed to trade the shares
acquired for a period of 5 (five) years, observing the following rules:
(i)
after a period of one year after signing the respective Option Contract, beneficiaries will be free to
trade up to 25% of the shares acquired;
(ii)
after a period of one year after the term defined in item i, beneficiaries will be free to trade an
additional 25% of the shares acquired;
(iii)
after a period of one year after the term defined in item ii, beneficiaries will be free to trade an
additional 25% of the shares acquired; and
(iv)
after a period of one year after the term defined in item iii, beneficiaries will be free to trade the
outstanding balance of the shares acquired.
m. criteria and events that, when verified, will lead to the suspension, alteration or extinction of the
plan
The stock option rights granted under the terms of the Plan will automatically all be cancelled in the
following cases: (i) on the complete and full exercising of the same; (ii) after the option term has expired;
(iii) through the mutual rescission of the stock option; (iv) if the Company is dissolved, liquidated or files
for bankruptcy; or (v) if the beneficiary fails to observe the trading restriction rules described in item n
below.
In addition, in the event the beneficiary is laid off, with or without just cause, resigns or steps down from
their job, retires, or suffers from permanent disability, or dies, the option rights granted can either be
cancelled or modified, as described in item n below.
n. Effects generated by the Company`s Board and Committee Manager`s departure upon his/her
rights as provided by the stock-based compensation plan
If at any time during the validity of the 2010 Stock Options Plan, the beneficiary:
145
(i)
resigns voluntarily from the Company or leave their management role: (i) the rights not exercised
in accordance with the respective Option Contract on the date they leave the Company will automatically
all be cancelled, with no need for any prior warning or notification, and with no right to any indemnity;
and (ii) the rights already exercised in accordance with the respective Option Contract on the date they
leave the Company may be exercised within a period of 30 days from the same date, after which all rights
will automatically all be cancelled, with no need for any prior warning or notification, and with no right to
any indemnity;
(ii)
leaves the Company as a result of being fired for just cause, or failure to fulfill their duties
adequately as a manager, all the right (exercised and not exercised) in accordance with the respective
Option Contract on the date they leave the Company will automatically all be cancelled, with no need for
any prior warning or notification, and with no right to any indemnity;
(iii)
leaves the Company as a result of being fired with no just cause, or failure to fulfill their duties
adequately as a manager: (i) the rights not exercised in accordance with the respective Option Contract
on the date they leave the Company will automatically all be cancelled, with no need for any prior
warning or notification, and with no right to any indemnity; except if the Board decides to anticipate the
grace period term for some or all of these rights, and the beneficiary leaves the Company within a period
of up to 12 (twelve) months after the change in share control in the Company all the unexercised rights in
accordance with the respective Option Contract on the date they leave the Company may be exercised
within a period of 30 days from the same date, after which all rights will automatically all be cancelled,
with no need for any prior warning or notification, and with no right to any indemnity, will have their
grace period anticipated; and (ii) the rights already exercised in accordance with the respective Option
Contract on the date they leave the Company may be exercised within a period of 30 days from the same
date, after which all rights will automatically all be cancelled, with no need for any prior warning or
notification, and with no right to any indemnity;
(iv)
on retiring from the Company: (i) the rights not exercised in accordance with the respective
Option Contract on the date they leave the Company will automatically all be cancelled, with no need for
any prior warning or notification, and with no right to any indemnity, except if the Board decides to
anticipate the grace period term for some or all of these rights; and (ii) the rights already exercised in
accordance with the Options Contract on the date of leaving the Company will have their grace period
anticipated, allowing the Beneficiary to exercise the respective stock option, as long as this is within a
period of 12 (twelve) months from the date of retirement, after which all the remaining rights will
automatically all be cancelled, with no need for any prior warning or notification, and with no right to any
indemnity;
(v)
leaving the Company due to death or permanent disability: (i) the rights not exercised in
accordance with the respective Option Contract on the date they leave the Company will automatically all
be cancelled, with no need for any prior warning or notification, and with no right to any indemnity,
except if the Board decides to anticipate the grace period term for some or all of these rights; and (ii) the
rights already exercised in accordance with the Options Contract, on the date of passing away, can be
exercised by the Beneficiarys legal successors, as long as this is done within a period of 12 (twelve)
months from the aforementioned date, after which all the remaining rights will automatically all be
cancelled, with no need for any prior warning or notification, and with no right to any indemnity.
Over and above the above item, the Board or Committee (whichever is the case) can, at their exclusive
criteria, whenever they deem social interests are better met by this approach, chose not to abide by the
rules stipulated above, and treat a determined beneficiary in a differentiated and individual manner.
13.5 Number of stocks or direct or indirect stock holdings, either in Brazil or overseas, and
other securities that might be converted into stock or quotas, issued by the Company, direct
or indirect affiliates, subsidiaries or companies under common control, by members of the
Executive Board, of the Board of Executive Officers or the Fiscal Board, grouped per board or
committee, on the closing date of the last accounting reference period:
146
The table below indicates the number of our shares held directly by our administrators and the
percentage that their direct individual contributions represent of the total number of shares issued by our
Company, in the last fiscal year, December 31st, 2011.
On December 31st of 2011
Number of Shares
Percentage (%)
Board of Directors
5,119,954
4.1%
1,336,161
1.1%
Fiscal Council
2010
3
2011
-
2012
-
269,726(2)
269,726
R$1.99(4)
R$2.08(4)
R$911.826(5)
0.31%
R$2.18(4)
-
0.22%
1. All options of the plan have been granted. There were no stock options granting in 2010 and 2011 and no stock options granting in 2012.
2. 88,436 options regarding the first grant on 01/01/2008 and 88,436 options regarding the second grant on 07/01/2008.
3. Initial public offering of distribution of shares conducted by the Company in April 2010.
4. Book value for the fiscal year ended 12.31.2008, corrected by the IPCA since January 2008.
5. Fair value of R$9.82 per share. Calculation premises available in item 13.9(b).
6. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that
considers the total shares of the Company's capital at beginning of year. At the end of fiscal year 2009, the amount of shares were 87,420,577
and
at
the
end
of
fiscal
year
2010,
the
total
number
of
shares
was
equal
to
125,495,309.
2009
-
147
2011
5
2012
5
404,035
83,428
269,357
218,106
51,251
R$11.65
R$12.22
R$1,911,611
R$238,694
R$ 12.05
-
0.40%
0.03%
0.39%
0.39%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and
total amount of redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. Fair value of R$3.86 per share for the first grant and R$5.49 per share for the second grant. Calculation premises available in item 13.9(b).
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers
the total shares of the Company's capital at beginning of year. At the end of fiscal year 2010, the amount of shares were 125,495,309 and at the end
of fiscal year 2011, the total number of shares was equal to 125,656,724.
1/2011 Program
Number of Members of the Board of Executive Officers
Grant Date
Number of granted options
Number of non-redeemable options
Number of redeemable options()
2009
2010
2012
5
294,035
98,011
R$19.77
0.31%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years
ended and total amount of redeemable options at end of period less the total amount of redeemable options exercised in years previous to
the current year.
2. Fair value of R$6.57 per share. Calculation premises available in item 13.9(b).
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year
that considers the total shares of the Company's capital at beginning of year. At the end of fiscal year 2011, the total number of shares
was equal to 125,656,724.
13.7 With respect to outstanding options for the Board of Directorsand the Board of
Executive Officers at the closing of the last accounting reference period
1/2010 Program
1/2011 Program
Total
Non-Outstanding options
Number
455,286
392,046
847,332
Until 2014
05.31.2016
04.16.2017
04.16.2017
R$3,313,572
R$1,842,616
R$5,156,188
83,428
83,428
05.31.2016
05.31.2016
R$12.05
R$12.05
R$607,227
R$607,227
148
R$3,920,799
R$1,842,616
R$5,763,415
Board of Directors
Board of Directors has no stock-based compensation.
13.8 With respect to redeemed and delivered options for the Board of Directors and the
Board of Executive Officers, in the past three accounting reference periods
Number of Members
Redeemable Options
Number of shares
Pondered average price within accounting reference period
Total value of the difference between the exercise value and market
value of shares related to options exercised1
Shares Granted
Number of granted shares
Pondered average price of acquisition
Total value of the difference between the exercise value and market
value of shares related to options exercised 1
51,251
R$12.05
R$281,881
51,251
R$12.05
R$281,881
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 17.55 at the end of 2011.
Number of Members
Total
119.782
269.726
389.508
R$2,18
R$2,18
R$2,18
R$2.200.395
R$4.954.867
R$7.155.262
119.782
269.726
389.508
R$2,18
R$2,18
R$2,18
R$2.200.395
R$4.954.867
R$7.155.262
Redeemable Options
Number of shares
Pondered average price within accounting reference period
Total value of the difference between the exercise value and market
value of shares related to options exercised1
Shares Granted
Number of granted shares
Pondered average price of acquisition
Total value of the difference between the exercise value and market
value of shares related to options exercised 1
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 20.55 at the end of 2010.
There were no option exercised by the Executive Officers in the fiscal year ended in December 31st, 2009.
Board of Directors
a. Pricing model
In pricing the equity component cost of the plan the applicable volatility, risk-free rates and stock prices
were determined for each plan, based on valuations of 6.6 times EBITDA, less net debt in the plan
period. The Black-Sholes-Merton Model was used to calculate the fair values.
149
The Company classified the plans granted in 2009 as compound instruments, as they include a debt
component (right/possibility of receiving payment in cash if there is no public offer) and a capital
component (right/possibility of receiving payment by an equity instrument in the event of a public offer)
in which the settlement choice is beyond the control of the Company and the beneficiary. Calculation of
the fair value of the debt amount took into account how much the Company would disburse, the current
value, according to the EBITDA multiple mentioned above, weighted by the probability of the occurrence
of a public share offer. The resulting amount is recorded in long-term liabilities. The public offer took
place on April 14, 2010, and there is therefore no debt amount as from that date.
The plans granted from 2010 onwards were classified as equity instruments, which the weighted average
fair value of options is determined using the Black-Scholes valuation model using as premises: (a)
weighted average share price, (b) exercise price, (c) volatility, (d) dividend yield, (e) expected option life
and (f) annual risk-free interest rate.
The equity portion is priced only at the grant date and the fair value is not remeasured on every reporting
date. The portions of equity and debt are appropriated plan by plan, taking into consideration the
respective lock up periods (period in which shares are blocked for trading), based on management's best
estimate as to their end dates.
Composed of loans and short and long term financing, net cash and cash equivalents
R$11.50
R$11.95
31%
1,461
1.52%
6.60%
R$3.86
R$11.65
R$20.55
34.92%
1,247
1.71%
6.08%
R$10.49
R$12.22
R$17.55
38.68%
882
1.06%
4.81%
R$7.27
R$11.50
R$14.10
31%
1,461
1.28%
6.37%
R$5.49
R$11.59
R$20.55
34.92%
1,282
1.71%
6.08%
R$10.56
R$12.16
R$17.55
38.68%
917
1.06%
4.83%
R$7.37
150
c. Method used and assumed premises to incorporate the effects from expected early exercise
There was no early exercise.
Board of Directors
Number of members
Highest individual compensation value
Lowest individual compensation value
Average individual compensation value
2
328,476
238,476
283,476
7
179,236
90,000
115,496
6,75
261,336
180,732
192,704
4
3,412,435
841,613
1,525,534
4,5
1,974,725
1,067,751
1,376,566
5
2,009,980
687,584
1,232,078
N/A
N/A
N/A
N/A
N/A
N/A
3
48,000
48,000
48,000
_______________________________________________
(1)
In 2009, the Board members Andres Cristian Nacht, Nicolas Wollack and Gustavo Felizzola renounced to their compensation. This way, only
two members were paid by the Company in 2009.
151
(2)
(3)
Compensation paid for Executive Officer which occupied the position for the 12 months of the year. In July 2010 the Company hired
Alessandra Eloy Gadelha as Investor Relations Officer.
Not applicable because the fiscal council was installed in April 2011
2009
20%
-
2011
16%
-
13.14 With respect to the last three accounting reference periods, disclose the amounts as
acknowledged in the Company results for compensation paid to members of the Executive
Board, of the Board of Executive Officers or the Fiscal Board, grouped by board or committee,
for any purpose other than the function they perform, such as commissions, consulting or
advisory services.
Balance on December 31,
Consulting
2009
2010
2011
(em R$ mil)
Board of Directors
95.0
125.0
Fiscal Council
13.15 Compensation of Executive Officers and Fiscal Council members recognized in the
results of controlling companies, direct or indirect, of companies under common control of
subsidiaries of the issuer
Not Applicable. There were no compensation of Executive Officers and Fiscal Council members recognized
in the results of controlling companies, direct or indirect, of companies under common control of
subsidiaries of the issuer in the fiscal years ended in 2009, 2010 and 2011.
13.16 Other relevant information
There are no additional relevant information than the ones mentioned above.
152
14.
HUMAN RESOURCES
153
14.1
a.
the number of employees (total, by groups based on activity and by geographic
location)
The chart below shows the number of our employees in the financial years ended December 2008, 2009
and 2010:
Year ended December 31,
2009
2010
2011
521
572
534
2,474
3,006
2,777
308
460
687
103
222
294
1
130
208
249
3,537
4,469
4,541
On December 31 of 2011, all employees were allocated in Brazil. The table below indicates the location of
the employees of the Company, considering the divisions and departments to which they belong, as
indicated below:
2011
States
Employees
Amazonas
Bahia
Cear
Distrito Federal
Esprito Santo
Goias
Mato Grosso
Minas Gerais
Par
Paran
Pernambuco
Rio de Janeiro
Rio Grande do Sul
So Paulo
Total
Heavy
Construction
38
76
19
36
144
1
220
534
Industrial
Services
927
38
103
421
416
283
589
2,777
Heavy
Construction
57
67
17
1
1
161
235
539
Industrial
Services
1.309
248
570
870
2.997
Jahu
8
48
17
89
23
24
8
59
44
31
112
56
168
687
2010
States
Rental
19
6
6
9
41
29
13
24
47
11
89
294
Corporate
23
1
5
3
6
12
159
1
39
249
Total
8
1,055
24
176
73
24
8
228
29
57
524
878
352
1,105
4,541
Corporate
29
3
1
4
124
28
189
Total
1.470
121
17
365
43
1
45
1.002
1.295
4.359
Employees
Bahia
Distrito Federal
Esprito Santo
Minas Gerais
Paran
Pernambuco
Rio Grande do Sul
Rio de Janeiro
So Paulo
Total
Jahu
44
51
13
54
36
37
108
102
445
Rental
31
3
42
7
7
39
60
189
2009
States
Employees
Heavy
Construction
Industrial
Services
Jahu
Rental
154
Events
Corporate
Total
2009
States
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Paran
Rio Grande do
Sul
Distrito Federal
Total
Employees
Heavy
Construction
137
262
19
30
50
498
Industrial
Services
769
599
133
963
2,464
Jahu
82
84
41
-
Rental
25
33
16
14
-
53
18
278
88
Events
1
1
Corporate
94
19
5
18
-
Total
1.107
998
214
1,025
-
3
2
141
56
70
3,470
b.
the number of outsourced employees (total, by groups based on activity and by
geographic location)
The Company has outsourced certain activities which are not directly related to its core business, such as
janitorial services, security, transport, meal preparation, and IT support, among others. In addition, the
Company signs short-term employment contracts in accordance with the fluctuation in demand for their
services. In December 31, 2011, the Company had 172 outsourced workers, as detailed below:
2011
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do
Sul
Distrito Federal
Gois
Par
Manaus
Total
Janitorial
services
14
24
5
2
4
1
3
-
Security
15
20
12
4
3
5
2
5
Transport
3
-
Catering
-
IT Support
8
5
1
1
2
1
2
1
Total
40
49
18
7
9
7
7
6
10
1
64
4
4
83
1
22
11
5
4
172
Catering
IT Support
5
4
1
Total
27
35
10
2010
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do
Sul
Distrito Federal
Gois
Par
Total
Janitorial
services
10
16
2
Security
12
15
7
1
1
4
1
2
1
35
44
Transport
5
2
1
7
1
12
91
2009
State
Rio de Janeiro
So Paulo
Janitorial
services
Security
Transport
Catering
IT Support
Total
8
7
6
9
2
2
0
1
3
2
19
21
155
Minas Gerais
Esprito Santo
Bahia
Paran
Rio Grande do
Sul
Distrito Federal
Total
c.
1
1
0
0
4
0
2
0
0
0
0
0
0
0
0
0
0
0
0
0
5
1
2
0
0
2
19
0
2
23
0
0
4
0
0
1
0
0
5
0
4
52
The index of employee turnover (churn) in financial years ending in 2011, 2010 and 2009 was 5.5%,
5.9% and 4.8%, respectively, considering the employees allocated in the Industrial Services division.
The turnover rate of professionals who assemble and disassemble equipment is significantly higher than
the Company average, and reached 6.6% in 2011. This is a consequence of the short-term employment
contracts signed to meet the fluctuation in demand for the Industrial Services division. Excluding this
effect, the turnover rate in 2011, 2010 and 2009 would be 3.6%, 4.3% and 3.4% respectively.
d.
a.
The Company believes one of its key competitive advantages is the quality of its skilled labor. The
Company has developed, over the years, a human resources development culture based on achievement,
employee participation and transparency. The Company also has profit sharing programs and offer
opportunities for professional development. The Company believes this culture promotes the loyalty,
engagement and enthusiasm of the employees, which leads to a historically low rate of substitution of
skilled labor (turnover) and increases our ability to provide quality services to our customers.
The Companys compensation policy includes the payment of salaries consistent with those in the market.
Additionally, the Company offers the Profit Sharing Program to all its employees.
b.
Benefits policy
As a standard policy, the Company offers its employees the following benefits and facilities, which may
change due to contracts executed with its clients:
health insurance with coverage for hospital stays: employees contribute part of the cost of this
benefit (15% to 35%, according to their salary);
156
c.
Characteristics of compensation plans based on stock options of non-administrator
employees
The Company has two stock option plans that benefit their employees, namely, " Plano Especial Top Mills
and Plano de Opes de Compra de Aes 2010, previously granted purchase options remaining.
Exercise price
The price of common shares to be acquired by beneficiaries through the exercise of options was R$1.88
per share, restated by the IPCA, calculated from January 2008 to the date of exercise of the option is
exercised.
d. Exercise terms
The term for exercising the options will expire four years after the IPO, on April 15, 2014.
e. Number of shares in the plan
Up to 782,027 common shares issued by the Company, of which 512,301 are allocated to employees.
So far, options were awarded to the employees which, when exercised, should be converted into 142,580
common shares of the Company.
157
158
Until April 20, 2012, the price of the ordinary shares to be acquired by the beneficiaries, by exercising
their option rights were determined by the Companys Board of Directors or committee based exclusively
on the average share price on the BM&FBOVESPA, weighted by the trading volume in the month or the
two months prior to the granting of the stock option, monetarily adjusted by the inflation index IPCA
(ndice de Preos ao Consumidor Amplo), and deducting the value of dividends and interest on equity
per share paid by the Company as from the stock option date. On April 20, 2012, according to the
resolution of the General Meeting held on that date, the criterion for fixing the exercise price of the
options that have as a counterpart the acquisition of shares by its beneficiary was changed and was
defined as the equity value of the shares on the last day of the subsequent fiscal year. This change does
not affect the options granted prior to that General Meeting and the new criterion does not apply to
options granted that have no counterpart of the acquisition of shares by the beneficiary, which continues
to be applied the criterion of market price, described above.
For the 1/2010 Program, the exercise price of the options will be based on the value of the shares issued
at the Companys Initial Public Offering (R$11.50), monetarily adjusted by the inflation according to the
IPCA, deducting the value of dividends and interest on equity per share paid by the Company as from the
stock option date. Regarding the 1/2011 Program, the exercise price of the options will be (i) the average
share price acquired according to brokerage invoice sent by the beneficiary to the Board of Directors or
Human Resources Committee of the Company (R$ 19.28), (ii) monetarily adjusted by the inflation
according to the IPCA, disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by
another index determined by the Board of Directors or committee, according to the case, from the date of
conclusion of the stock option agreement until the date the option is exercised, (iii) deducting the value of
dividends and interest on equity per share paid by the Company as from the stock option date.
The price of the common shares to be acquired by the beneficiaries through the exercise of options shall
be set by our Board of Directors or committee, based on the average trading price of our shares on the
BM&FBOVESPA, weighted by the trading volume in the month or two months prior to the grant, adjusted
for inflation using the IPCA, less any dividends and interest on equity per share paid by us as of the grant
date. Exceptionally for the first grant, the exercise price of the options will be based on the IPO issue
price (R$11.50), adjusted for inflation using the IPCA, less any dividends and interest on equity per share
paid by us as of the date of grant.
The options granted under this plan will be subject to vesting periods of up to 72 months for the
conversion of options into shares.
c.
In the 2010/1 Program: Up to 1,475,234 common shares issued by the Company, which 936,520
designated to non-administrators employees. By December, 31, 142,678 shares were exercised.
In the 2011/1 Program: Up to 1,184,229 common shares issued by the Company, which 792,183
designated to non-administrators employees.
14.4
At December 31, 2011, approximately 3.9% of the Companys employees were represented by a trade
union, especially the Civil Construction Trade Union and the Commerce Union. The Company has
agreements with each trade union, and renegotiates them every year.
The Company maintains a good relationship with the main trade unions its employees are represented by.
Even so, the Company has had strikes in the Industrial Services Division for past three years in Rio de
Janeiro, Minas Gerais, Esprito Santo and Bahia, triggered by disagreements with the trade unions
regarding the collective bargaining agreements, totaling a downtime of 57 days, and reaching only part of
the workforce. Additionally, the Companys employees were involved in strikes at clients sites.
159
15.
160
OWNERSHIP
15.1/15.2
Controling Group:
The table below presents the ownerhip structure of company to date, emphasizing the quantity of shares
of capital stock held by direct controlling and administrators on October 2nd, 2012:
Quantity of
common
shares
%
Capita
l Stock
27,421,713
21.7%
17,728,280
14.0%
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
4/18/2011
Entity
27.109.446/0001-05
Brazilian
7/20/2012
Entity
14.740.333/0001-61
Spanish
Yes
Yes
10/2/2012
Entity
01.701.201/0001-89
Brazilian
No
No
6,323,300
5.0%
Administrators
10/2/2012
Individual
No
No
3,705,465
3.0%,
Others
10/2/2012
No
No
71,220,672
56.3%
Quantity of
common
shares
%
Capita
l Stock
Name
UF
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
4/18/2011
Individual
098.921.337-49
Argentino
4/18/2011
Individual
289.858.347-20
Danish
Outros
4/18/2011
Individual
Name
UF
Participat
es in
Controlli
sharehold
ng
er
sharehol
agreemen
der
t
Yes
Yes
2,689,232
56.9%
Yes
Yes
923,341
19.5%
Yes
Yes
1,115,704
23.6%
Quantity of
common
shares
%
Capita
l Stock
Name
Malachite Limited
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
3/14/2012
Entity
N/A
Malta
UF
Participat
es in
Controlli
sharehold
ng
er
sharehol
agreemen
der
t
Yes
Yes
100%
Malachite Limited
Name
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
734.150.811-68
Argentino
UF
Participat
es in
Controlli
sharehold
ng
er
sharehol
agreemen
der
t
Yes
Yes
Quantity of
common
shares
%
Capita
l Stock
Nicolas Nacht
3/14/2012
Entity
2,000
40%
3/14/2012
Entity
Yes
Yes
2,000
40%
Outros
3/14/2012
Entity
Yes
Yes
1,000
20%
161
15.3
511
525
26
20/4/2012
77,543,972
% free float
15.4
61.3%
Date: 02.11.2011
c.
Term: 12.31.2012
d.
Description of the clauses relating to the exercise of voting rights and control power. The vote of
the parties with respect to any resolutions pertaining to the Company, whether in general meetings or
other corporate events, must be set by agreement between the parties. The shareholder Andrs Cristian
Nacht, for this purpose, either in general meetings or board of directors meetings, will always represent
the parties.
e.
Description of the clauses relating to the appointment of administrators. See item d. No other
provisions for the appointment of directors, in addition to the prediction that the parties will be
represented on the board by Mr. Andrs Cristian Nacht.
f.
Description of the clauses concerning the transfer of shares and the preference for buying them.
The shareholder agreement forbids the transfer of shares to persons outside the family connection
162
consanguinity between the control group in excess of 10% of the shares held by each party to the
shareholders agreement.
g.
Description of the clauses restricting or binding the voting rights of members of the board. See
item d. No other provisions for the restriction or binding vote of the directors, in addition to the
prediction that the parties will be represented on the board by Mr. Andrs Cristian Nacht.
15.6 Significant Changes in the shareholdings of Members of the Control Group and
directors of the Company in the last 3 financial years
163
The Company with some of its shareholders promoted primary public offering of 37,037,037 shares issued
by the Company and secondary public offering of 14,814,815 shares held by selling shareholders. The
Offer Shares have been traded on the Novo Mercado segment of BM&FBOVESPA since April 16, 2010.
On May 14, 2010, the leading coordinator of the public offer fully exercised the option of placing
additional 7,777,777 common shares owned by certain selling shareholders. The shares subject to such
allotment will be traded on the Novo Mercado segment of BM&FBOVESPA on May 19, 2010. There was no
increase in the capital of the Company due to the exercise of the over-allotment option.
On November 12, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$ 463,838.37 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2010"). There was issuance of 37,029 new common stocks.
Also on November 12, 2012 was approved, in the Board of Directors Meeting, the increase of the
Companys capital stock, totalizing on the amount of R$982,280.40 due to the exercise of stock option,
according to the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de
Outorga de Opes - Programa de Outorga de Opes 1/2011"). There was issuance of 48.151 new
common stocks.
164
On August 9, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$886,108.00 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2010"). There was issuance of 70,550 new common stocks.
Also on August 9 , 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$20,000.00 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2011"). There was issuance of 1,600 new common stocks.
Also on August 9, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$1,633,370.82 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Programa de Outorga de Opes 1/2011"). There was issuance of 80,422 new common stocks.
On July 2nd, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, totalizing on the amount of R$31,276.80 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes - Plano Especial TopMills). There was issuance of 13,032 new common stocks.
th
On June 21 , 2012 was approved, in the Board of Directors Meeting, the removal of 4,000 registered
common shares with no par value, held in treasury, as a result of the appraisal rights extended to
dissenting shareholders in connection with the resolutions passed at the shareholders meeting held on
th
April 20 , 2012.
On April 24, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, totalizing on the amount of R$4,613,384.16 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes- Programa de Outorga de Opes 1/2010"). There was issuance of 371.448 new common stocks.
Also on April 24, 2012 was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, totalizing on the amount of R$892,862.10 due to the exercise of stock option, according to
the Companys Stock Option Plan, archived in the Companys headquarters ("Programa de Outorga de
Opes- Programa de Outorga de Opes 1/2011"). There was issuance of 44.421 new common stocks.
According to Ofcio circular/CVM/SEP/n 007/2011, the number of shares free-float reported in item 15.3
refers to the changes described above.
Additional information regarding item 15.3
Shareholders Meeting on April 20, 2012
Number of individual shareholders
511
525
26
4/20/2012
72,452,383
% free float
57.6%
165
On October 2, 2012
Number of individual shareholders
588
650
25
4/20/2012
61.3%
687
674
33
4/20/2012
61.3%
166
16.
167
16.1
The business and transactions with related parties of the Company are always performed by observing price and usual market conditions and they
do not generate any benefit or detriment to the Company or any other party.
Under the Companys bylaws, the Board must approve any transaction with any of the Company's shareholders.
16.2
Name of
related
party
Relationship
with the
Company
Elio Demier
16.3
Board of Directors
Member
Date of
Transaction
Purpose of
the contract
10/1/2009
Consulting IPO
Amount (R$
thousand
Oustanding on
December 31 of
2012
(R$ thousand)
(R$ thousand)
175,000
Amount of
related
party(R$
thousand)
Guaranties
and insurance
Duration
(months)
Conditions of
termination or
expiration
175,000
04/30/2010
The Company adopts corporate governance practices and those recommended and/or required by applicable regulations including those set out in
Novo Mercado regulations. The Board of Directors must approve the policies and make necessary arrangements for directors and shareholders to
not be involved in conflict of interest situations. Additionally, pursuant to the Companys by-laws, the Board of Directors must approve any
transaction with any of the Company's shareholders.
The transactions described in Item 16.2 above were conducted by administrator who had no conflict of interest with the Company, as it was
evidenced by the instruments that guided these operations.
17.
169
SHARE CAPITAL
17.1
17.2
Resolution
Date
Issue
Date
Total amount of
the increase
Type of
Increase
Shares
issued
Subscription
/ previous
capital
Issue
price
Rate
Unit
Criteria used to
determine the
issue price
The issue price
was determined
based on the
equity value of
the Companys
shares.
The issue price
was determined
based on the
equity value of
the Companys
shares.
Form of
Payment
1/30/2009
General
Meeting
1/30/2009
R$27,178,575.61
Private
Subscription
20,096,393
40.4899
R$1.35
R$ Unit
10/1/2009
General
Meeting
10/1/2009
R$134,423.51
Private
Subscription
199,853
0.1541
R$0.67
R$ Unit
3/12/2010
General
Meeting
R$16,200,604.68
Without
Share
Issuance
R$ Unit
R$ Unit
Cash
3/12/2010
General
Meeting
3/12/2010
R$323,828.12
Private
Subscription
153,690
170
0.3998
R$2.11
Goods
Cash
4/14/2010
Board of
Directors
4/14/2010
R$425,925,926.00
Public
Subscription
37,037,037
436.7241
R$11.50
R$ Unit
11/30/2010
Board of
Directors
11/30/2010
R$ 1,670,424.84
Private
Subscription
884,005
0.3191
R$1.89
R$ Unit
07/27/2011
Board of
Directors
07/27/2011
R$1,548,424.09
Private
Subscription
128,287
0.2949
R$
12.07
R$ Unit
09/23/2011
Board of
Directors
09/23/2011
R$110,495.40
Private
Subscription
48,028
0.0210
R$ 2.30
R$ Unit
09/23/2011
Board of
Directors
09/23/2011
R$14,142.18
Private
Subscription
18,598
0.0027
R$ 0.76
R$ Unit
10/24/2011
Board of
Directors
10/24/2011
R$790,329.68
Private
Subscription
65,642
0.1498
R$
12.04
R$ Unit
171
Cash
Cash
Cash
Cash
Cash
Cash
01/24/2012
Board of
Directors
01/24/2012
R$398,490.09
Private
Subscription
32,583
0.0755
R$12.23
R$ Unit
02/28/2012
Board of
Directors
02/28/2012
R$ 4,227.33
Private
Subscription
339
0.0008
R$12.47
R$ Unit
04/2/2012
Board of
Director
04/02/2012
R$ 112,171.78
Private
Subscription
47,131
0.0212
R$2.38
R$ Unit
04/24/2012
Board of
Director
4/24/2012
R$ 4,613,384.16
Private
Subscription
371,448
0.8736
R$
12.42
R$ Unit
04/24/2012
Board of
Director
4/24/2012
R$ 892,862.10
Private
Subscription
44,421
0.1691
R$
20.20
R$ Unit
172
(Oct/2011)
The price is based
on the issue price
of Mills shares
during the IPO,
adjusted
monetarily by the
IPCA, as from the
option contract
date
(05/31/2011),
deducted from
the dividend and
interest on capital
values per share
paid by Mills, until
the fiscal date
(Jan/2012)
The price is based
on the issue price
of Mills shares
during the IPO,
adjusted
monetarily by the
IPCA, as from the
option contract
date
(05/31/2011),
deducted from
the dividend and
interest on capital
values per share
paid by Mills, until
the fiscal date
(Feb/2012)
The price is based
on the Companys
stock option plan
corrected
monetarily by the
agreedment with
the IPCA, from
January 2008
until the option
contract date
The price is based
on the issue price
of Mills shares
during the IPO,
adjusted
monetarily by the
IPCA, as from the
option contract
date
(05/31/2011),
deducted from
the dividend and
interest on capital
values per share
paid by Mills, until
the fiscal date
(April/2012)
The exercise price
of options
granted under
this programme is
equal to (i) the
average price of
shares purchased
as brokerage note
sent by the
beneficiary to the
human resources
Department of
the company, (ii)
restated
Cash
Cash
Cash
Cash
Cash
07/02/2012
Board of
Director
07/02/2012
R$ 31,276.80
Private
Subscription
13,032
0.0059
R$ 2.40
R$ Unit
08/09/2012
Board of
Director
08/09/2012
R$886,108.00
Private
Subscription
70,550
0.1660
R$12.56
R$ Unit
08/09/2012
Board of
Director
08/09/2012
R$20,000.00
Private
Subscription
1,600
0.0037
R$12.50
R$ Unit
08/09/2012
Board of
Director
08/09/2012
R$1,633,370.82
Private
Subscription
80,422
0.3056
R$20.31
R$ Unit
11/12/2012
Board of
Director
11/12/2012
R$ 445,178.37
Private
Subscription
35,529
0.0830%
R$12.53
R$ Unit
173
according to the
IPCA, from the
date of
The price is based
according to the
Companys stock
option plan
(Special TopMills
Plan, Special
Plan)
The price is based
on the issue price
of Mills shares
during the IPO,
adjusted
monetarily by the
IPCA, as from the
option contract
date
(05/31/2011),
deducted from
the dividend and
interest on capital
values per share
paid by Mills, until
the fiscal date
(2010/1 Plan)
The price is based
on the issue price
of Mills shares
during the IPO,
adjusted
monetarily by the
IPCA, as from the
option contract
date
(05/31/2011),
deducted from
the dividend and
interest on capital
values per share
paid by Mills, until
the fiscal date
(2010/1 Plan)
The price is based
on the issue price
of Mills shares
during the IPO,
adjusted
monetarily by the
IPCA, as from the
option contract
date
(05/31/2011),
deducted from
the dividend and
interest on capital
values per share
paid by Mills, until
the fiscal date
(2010/1 Plan)
The price is based
on the issue price
of Mills shares
during the IPO,
adjusted
monetarily by the
IPCA, as from the
option contract
date, deducted
from the dividend
and interest on
capital values per
share paid by
Mills, until the
fiscal date
Cash
Cash
Cash
Cash
Cash
(2010/1 Plan)
11/12/2012
Board of
Director
11/12/2012
R$ 18,660.00
Private
Subscription
1,.500
0.0035%
R$12.44
R$ Unit
11/12/2012
Board of
Director
11/12/2012
R$ 982,280.40
Private
Subscription
48,151
0.1830%
R$20.40
R$ Unit
17.3
Cash
Cash
The table below details the reduction of the Companys capital approved on June 30, 2009:
Capital Reductions
Resolution
Date
Reduction
Date
06/30/2009
06/30/2009
Body
Resolution
Shareholder
Meeting
Value
Reduction
Canceled
Shares
Refund per
Share
Percentual
Reduced(1)
Reasons for
the Reduction
R$13,434,306.72
14.2%
Loss Reduction
_____________________________
Represents the percentage of the capital reduction relative to the capital immediately prior to the reduction.
17.5
Additionally, at the Extraordinary General Meeting held on January 30, 2009, the Companys shareholders
approved the conversion of 23,990,948 common shares into the same number of class A preferred
shares. On February 8, 2010, the Companys shareholders approved at the Extraordinary General Meeting
the conversion of all of the Companys class A preferred shares into common shares at a ratio of one new
common share for each class A preferred share converted. At the Ordinary and Extraordinary General
174
Meeting held on April 19, 2011, it was approved the amendment of the caput of Article 5 of the
Company's Bylaws, to adjust it to the deliberations of the Board of Directors taken on April 14, 2010 and
November 30, 2010, which approved the increase of capital stock within the limit of authorized capital.
At the Extraordinary General Meeting held on April 20, 2012, it was approved the amendment of the
caput of Article 5 of the Company's Bylaws, to adjust it to the deliberations of the Board of Directors
taken on July 27, 2011, September 23, 2011, October 24, 2011, January 24, 2012 and February 28, 2012,
which approved the increase of capital stock within the limit of authorized capital, passing the relevant
article to henceforth as the following wording
"5th Article The capital stock, which is fully subscribed and paid in, is R$ 527,989,915.31 (five hundred
twenty-seven million, nine hundred eighty-nine thousand, nine hundred and fifteen reais and thirty-one
centavos), represented by 125,689,646 (one hundred twenty-five million, six hundred eighty-nine
thousand, six hundred and forty-six) book entry common shares without par value."
175
18.
176
SECURITIES
18.1
177
relating to securities convertible into shares, or that give the right to their subscription or acquisition, as
applicable, which comes to result in the sale of Control of the Company, and (b) in the case of a transfer
of control of company(ies) holding the Power of Control of the Company, in which case, the Selling
Controlling Shareholder shall be obliged to declare to the BM&FBOVESPA the value assigned to the
Company in such transaction and provide supporting documentation.
18.3 Description of exceptions and suspensive clauses relative to ownership or
political rights set forth in the bylaws
Not applicable, as there are no exceptions or suspensive clauses relative to ownership or political rights
set forth in the Companys bylaws.
18.4 Information on the volume of trading as well as minimum and maximum values
for securities traded on the stock exchange or the over-the-counter market, in each of the
quarters in the last 3 fiscal years.
Quarter
ended
Securities
03/31/2010
Type
Class
Total financial
volume traded
(Reais)
Highest
price
(Reais)
Shares
Common
Stock
Exchange
09/30/2010
Shares
Common
Stock
Exchange
12/31/2010
Shares
Common
Stock
Exchange
03/31/2011
Shares
Common
Stock
Exchange
06/30/2011
Shares
Common
Stock
Exchange
09/30/2011
Shares
Common
Stock
Exchange
12/31/2011
Shares
Common
Stock
Exchange
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
Factor
price
(Reais)
205,417,537
13.99
10.10
R$ per
unit
181,735,768
17.13
13.40
R$ per
unit
660,681,560
25.30
16.65
R$ per
unit
389,456,322
23.27
17.13
R$ per
unit
393,427,101
23.49
18.06
R$ per
unit
273,785,519
23.77
16.56
R$ per
unit
337,269,490
18.95
14.49
R$ per
unit
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
a Identification of securities
b Quantity
30 commercial papers
c Total amount
R$30,000,000.00
d Issue date
Deadline
Lowest
price
(Reais)
Not applicable, as the company did not have securities traded on stock exchange or over-the-counter market in that period.
06/30/2010
18.5
Administrative
Authority
Market
178
e
f
Restrictions on trading
Convertibility
The Commercial Papers were the object of a public distribution offer with restricted
placement efforts, targeted at qualified investors, as defined in Article 4 of CVM Rule 476, on
a firm guarantee basis.
Not applicable. The first issue of promissory notes are not convertible into shares issued by
the company.
g Possibility of redemption:
Each commercial note of first issue was subject to early repayment, in whole, at any time
from the date of issue, at the discretion of the company, provided that its holder is notified
within 5 (five) working days in advance of the date set for the rescue. Additionally, the
(i) hypotheses of redemption
Company was obliged to redeem all the notes in advance of the first issue on the date of
subscription of the debentures of the first issue, described below. Therefore, all commercial
notes of first issue were fully redeemed on April 28, and are no longer in circulation.
The amount to be paid by the Company to the holder of each commercial note first issued
(ii) Assumptions and method of corresponded to their nominal value plus the remuneration, calculated pro rata temporis
calculating the redemption value
since the date of issue until the date of effective payment, but without payment of prize or
penalty.
h if debt securities, indicate where
applicable:
Maturing on June 27, 2011. The notes were redeemed when the Company issued
debentures, on April 28, 2011.
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare
early maturity of the obligations under the Commercial Paper, and may demand immediate
payment of the Nominal Amount plus the remuneration, the occurrence of any of the
following events, provided in addition to other cartouches and those provided by law (each
event, an "Event of Default"): (i) declaration of acceleration of any other Commercial Paper;
(ii) default by the Company of any monetary obligation due under the Commercial Paper;
(iii) default by the Company of any non-pecuniary obligation due under the Commercial
Paper; (iv) sale, assignment or pledge any form of transfer or promise to transfer to third
parties in whole or in part, by the Company of any of the Obligations, without the prior
consent in writing of the Holder; (v) transformation of the Company into a privately held
Company or any other social arrangement; (vi) approval of any corporate reorganization
involving the Company, without the prior consent in writing of the Holder; (vii) change in the
Company's Control; (viii) Changing the corporate purpose, unless such change does not
result in changing the company's main activity; (ix) acceleration of any financial obligation of
the Company and/or any Subsidiary of the Company, the value of which, individually or in
aggregate, be less than R$ 5,000,000.; (x) default by the Company due to mandatory early
redemption of subscription and payment of the Debentures, as provided under "Early
Redemption" above, or (xi) the Company does not use the net proceeds of the offering as
described under "Use of Proceeds" in the cartouche.
The nominal value of each commercial note of first issue was not subject to monetary
correction.
On the nominal value of each note were added remuneration interest focused corresponding
to the variation of accumulated 105% (one hundred and five per cent) of the DI rate
(Remuneration), from the date of issue until the date of the effective payment of their
commercial note, and followed the criteria for calculating the Trade Notes formulas and
Obligations CETIP21, which is available on the Web (www.cetip.com.br).
(ii) interest
The remuneration was paid in full on the date of early redemption, subject to the terms and
conditions provided for in each commercial note first issued.
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment .
(iii)
guarantee and, if in
the
form
of
collateral,
Not applicable
description of the goods used as
collateral
(iv.)
in the absence of a
guarantee, if the credit is The credit represented by each commercial note of first issued were unsecured.
secured or subordinate
179
i
j
(v)
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable
The amendment of any rights conferred by each commercial note first issued depends on
approval of the holder.
None
a Identification of securities
b Quantity
3 Commercial Notes
c Total amount
d Issue date
December 7, 2011
Maturity date
e
Restrictions on trading
f
Convertibility
December 1, 2012
The commercial notes were the subject of public distribution with restricted placement
efforts, pursuant to CVM Instruction 476, under the firm commitment and, consequently, can
only be traded between qualified investors. The trading restriction period laid down in article
13 of that 90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
(ii) Assumptions and method of Not applicable. The Company may not redeem the promissory notes in advance.
calculating the redemption value
h if debt securities, indicate where
applicable:
Regular maturity on December 1, 2012, when should be paid the value of the principal and
the remuneration (interest).
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare
early maturity of the obligations under the Commercial Paper, and may demand immediate
payment of the Nominal Amount plus the remuneration, the occurrence of any of the
following events, provided in addition to other cartouches and those provided by law (each
event, an "Event of Default"): (i) declaration of acceleration of any other Commercial Paper;
(ii) default by the Company of any monetary obligation due under the Commercial Paper; (iii)
default by the Company of any non-pecuniary obligation due under the Commercial Paper;
(i) maturity date, including (iv) sale, assignment or pledge any form of transfer or promise to transfer to third parties in
conditions for acceleration
whole or in part, by the Company of any of the Obligations, without the prior consent in
writing of the Holder; (v) transformation of the Company into a privately held Company or
any other social arrangement; (vi) approval of any corporate reorganization involving the
Company, without the prior consent in writing of the Holder; (vii) change in the Company's
Control; (viii) Changing the corporate purpose, unless such change does not result in
changing the company's main activity; (ix) acceleration of any financial obligation of the
Company and/or any Subsidiary of the Company, the value of which, individually or in
aggregate, be less than R$ 5,000,000.; (x) default by the Company due to mandatory early
redemption of subscription and payment of the Debentures, as provided under "Early
Redemption" above, or (xi) the Company does not use the net proceeds of the offering as
described under "Use of Proceeds" in the cartouche.
The nominal value of the promissory note will not be updated monetarily.
(ii) interest
Over the nominal value of each note there will be remuneration interest of 100% of
180
accumulated variation of the DI rate plus spread 1.10% per annum from the date of issue
until the date of the effective payment of their commercial note.
The remuneration shall be paid in full by the due date or the date of any anticipated
payment.
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
(iii)
guarantee and, if in
the
form
of
collateral,
description of the goods used as
collateral
(iv)
in the absence of a
guarantee, if the credit is
secured or subordinate
v.
possible restrictions
imposed on the issuer
the
dividend
distribution
i
j
Not applicable. The second issue of promissory notes does not have collateral or surety.
Not applicable.
The amendment of any rights conferred by each commercial note of second issuance
depends on the holders approval.
a Identification of securities
b Quantity
30 Commercial Notes
c Total amount
d Issue date
Maturity date
e
Restrictions on trading
f
Convertibility
December 3, 2012
The commercial notes were the subject of public distribution with restricted placement
efforts, pursuant to CVM Instruction 476, under the firm commitment and, consequently, can
only be traded between qualified investors. The trading restriction period laid down in article
13 of that 90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
Regular maturity on December 3, 2012, when should be paid the value of the principal and
the remuneration (interest).
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare
early maturity of the obligations under the Commercial Paper, and may demand immediate
181
payment of the Nominal Amount plus the remuneration, the occurrence of any of the
following events, provided in addition to other cartouches and those provided by law (each
event, an "Event of Default"): (i) declaration of acceleration of any other Commercial Paper;
(ii) default by the Company of any monetary obligation due under the Commercial Paper;
(iii) default by the Company of any non-pecuniary obligation due under the Commercial
Paper; (iv) sale, assignment or pledge any form of transfer or promise to transfer to third
parties in whole or in part, by the Company of any of the Obligations, without the prior
consent in writing of the Holder; (v) transformation of the Company into a privately held
Company or any other social arrangement; (vi) approval of any corporate reorganization
involving the Company, without the prior consent in writing of the Holder; (vii) change in the
Company's Control; (viii) Changing the corporate purpose, unless such change does not
result in changing the company's main activity; (ix) acceleration of any financial obligation of
the Company and/or any Subsidiary of the Company, the value of which, individually or in
aggregate, be less than R$ 5,000,000.; (x) default by the Company due to mandatory early
redemption of subscription and payment of the Debentures, as provided under "Early
Redemption" above, or (xi) the Company does not use the net proceeds of the offering as
described under "Use of Proceeds" in the cartouche.
The nominal value of the promissory note will not be updated monetarily.
Over the nominal value of each note there will be remuneration interest of 100% of
accumulated variation of the DI rate plus spread 4.9% per annum from the date of issue
until the date of the effective payment of their commercial note.
The remuneration shall be paid in full by the due date or the date of any anticipated
payment.
(ii) interest
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
(iii) .
guarantee and, if in
the form of collateral, description
of the goods used as collateral
(iv)
in the absence of a
guarantee, if the credit is secured
or subordinate
(v)
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable. The second issue of promissory notes does not have collateral or surety.
The credit of the promossory note is unsecured.
Not applicable.
None
Debentures
Identification of securities
Issue date
182
Maturity date
Quantity
27,000
Total amount
270,000,000.00
Restrictions on trading
yes
The debentures were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Convertibility
Not applicable
Possibility of redemption
Not applicable
Conditio
ns for acceleration
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue are maintained, in the occurrence of any of the events summarized below: I.
Default by non-payment of the Nominal Value, of Remuneration, premium, or any other
amounts owed to the debenture holders; V. assignment or pledge any form of transfer or
promise of transfer to third parties in whole or in part by the Company, any of its obligations
under the Deed, without the prior consent in writing of Debenture Holders representing at least
75% of the outstanding; VI. invalidity, unenforceability or invalidity of the deed and / or the
Distribution Agreement, is not remedied within 10 days from the date of the respective event;
VII. (a) bankruptcy of the Company, and /or any of its subsidiary or controlling Company; (b)
voluntary bankruptcy application made by the Company and / or any of its subsidiary or
controlling Company; (c) bankruptcy filing by the Company, and /or any of its subsidiary or
controlling Company, formulated by others, not elided within legal; (d) petition for judicial or
extrajudicial recovery of the Company and /or any of its subsidiary or controlling Company,
regardless of approval of the request; or (e) liquidation, dissolution or extinction of the
Company, and /or any of its subsidiary or controlling Company, unless the liquidation,
dissolution and / or extinction during the course of a corporate transaction which does not
constitute an Event of Default; VIII. changing the company into a limited liability company,
pursuant to articles 220 to 222 of Law No. 6,404/76;IX. approval of incorporation, merger or
split of the company or sale, by the company, of all or substantially all of its assets or its mining
properties, with some exceptions: (a) if the transaction has been approved in advance by the
Debenture Holders representing at least 75% of the outstanding Debentures; or (b) if the
Debenture Holders that wish to do so, be assured that, during the minimum period of six
months from the date of publication of the minutes of corporate acts in the transaction, the
redemption of the Debentures held by them, by paying the outstanding balance of the Nominal
Value, plus Remuneration, calculated pro rata from the Issue Date or the date of payment of
compensation immediately preceding, whichever is applicable until the date of actual
paymentse; or (c) by the incorporation of the Company (so that the Company is the remaining
entity), of any Subsidiary; or (d) if the operation is carried out solely between Subsidiaries; X.
capital reduction, except if previously approved by Debenture Holders representing at least 75%
of the outstanding Debentures, pursuant to Article 174, paragraph 3, of Law No. 6,404/76; XI.
change or transfer of control (as defined under Article 116 of Law No. 6,404/76), direct or
indirect, of the Company, from any Controlling Company and / or any Subsidiary, except if
previously approved by Debenture Holders representing at least 75% of the outstanding
Debentures; XV. early maturity of any financial obligation of the Company and / or any
Subsidiary, which amount, individual or aggregate, is equal to or greater than R$ 5,000,000.00
or its equivalent in other currencies, and/or occurrence of any event or default of any obligation
which, after the expiration of any period provided in their document, or in other cases, within
10 days from the date of their default, give rise to the declaration of acceleration any financial
obligation of the Company and / or any Subsidiary, which amount, individual or aggregate, is
183
The face value of the debentures of the first issue will not be monetarily updated.
Interest paid semi-annually will account for 112.5% of the accumulated variation of the interest
rate of CDI.
ii.
Interest
The remuneration provided above shall be paid every six months from the date of issue, being
the first payment on October 18, 2011, and the last payment of the maturity date, or on the
date of any settlement.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
iii.
guarantee and, if in the
form of collateral, description of
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured
or subordinate
v.
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable. The first issue of debentures does not have collateral or surety.
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No.
6,404/76.
184
Remuneration: The performance of duties and tasks assigned to compete in accordance with
the law and its deed of issue, the fiduciary agent, or the institution which will replace him in
that capacity, he shall receive a remuneration: (i) R$13,000.00 per year, due from the
company, being the first instalment of remuneration payable within 30 days from the date of
conclusion of the deed of issue, and the other, on the same day of subsequent years; (ii)
Additionally, in the event of a close-out netting of obligations of the company under the
debentures of the first emission, equivalent to R$500.00 per hour-working man devoted to
activities related to the issue and the debentures, to be paid within 5 days from the date of
attestation of delivery by the trustee and approval by the company, of the report, concerning
hours of activities (a) advice to debenture holders in the process of renegotiation required by
the company; (b) attendance at formal meetings with the company eou debentureholders eou
general meetings of debenture holders; and (c) implementation of the decisions taken by the
debenture holders (iii) brought out yearly since the date of payment of the first annual
instalment by the change in the general price index-market, published by Fundao Getlio
Vargas, or by any other that eventually is replaced, calculated pro rata temporis, if necessary;
(iv) plus the sales tax of any kind TAXES, contributing to the Social Integration Programme
PIS, Social contribution on net income CSLL, contributing to the financing of Social Security
COFINS and any other taxes that may relate to the remuneration payable to the trustee, except
for tax on income and proceeds of Any Nature GOunder existing rates for the dates of each
payment; (v) due to maturity, redemption or cancellation of debentures of the first issue, and
even after its maturity, redemption or cancellation in the event of actions of the trustee in
charge of any defaults on bonds not remedied by the company, in cases where the
remuneration payable to the trustee shall be calculated in proportion to the months of operation
of the fiduciary agent, based on the value specified in item i, readjusted as the paragraph iii;
and (vi) plus, where lives in your payment, regardless of notice, judicial or extrajudicial
notification or notification, on the valores arrears, (a) fine 2 moratorium; and (b) interest on
arrears of 1 month, calculated pro rata temporis since the date of default until the payment
date.
Reimbursement of expenses: the Trustee shall be repaid by the company for all reasonable
costs incurred that have proven to protect the rights and interests of the debenture holders or
to perform their claims within 30 (thirty) days from the delivery of the evidentiary documents
accordingly, provided that, where possible, the costs have been approved in advance by the
company, which shall be deemed to be approved if the company does not appear within 2 (two)
working days from the date of receipt of their request by fiduciary agent.
Obligations. The fiduciary agent, as provided for in the deed of issue, will have the functions
laid down in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission, and use of any action to protect rights or defend interests of the
debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial or
extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer of
the debentures of the first issue, proceed with the replacement of the trustee and the indication
of his replacement, general meeting of debenture holders especially convened for this purpose;
(ii) if the Trustee is unable to continue to perform their duties by supervening circumstances to
the deed of issue, shall immediately communicate the fact to debentureholders, requesting his
replacement and convene a general meeting of debenture holders for this purpose; (iii) if the
fiduciary agent, renounces functions, should remain in the exercise of their duties until a
replacement is indicated by the institution and approved by general meeting of debenture
holders, and assume their functions effectively; (iv) shall be performed, within the maximum
period of 30 (thirty) days from the date of the event that determine, general meeting of
debenture holders, for choosing the new fiduciary agent; (v) replacement, on a permanent
basis, the fiduciary agent (a) shall be subject to prior notification to the CVM and its
manifestation on the attendance to the requirements provided for in article 9 of CVM Instruction
No. 28, November 23, 1983, as amended, and (b) shall be subject to the addition to the deed of
issue; payments to the trustee replaced shall be effected in accordance with the proportionality
to the period of effective service delivery; (vi) the trustee will be entitled to the same salary
replacement perceived by the previous, if (a) the company has not agreed with the new value
of the remuneration of the trustee proposed by general meeting of debenture holders, or (b)
the general meeting of debenture holders does not act on the matter; (vii) the fiduciary agent
should substitute, immediately after his appointment, communicate it to the company and to
debentureholders; and (viii) shall apply to cases of substitution of Trustee the norms and
precepts from the Securities and Exchange Commission.
185
During deliberations of the General Meetings of debenture holders for each of the series, for
each outstanding Debenture one vote will be granted, permitting the establishment of proxy,
whether Debenture holder or not. Except for the provisions below, all deliberations to be taken
in the General Meeting of debenture holders will depend on approval of debenture holders
representing
at
least
75%
of
outstanding
Debentures.
conditions for amendment of the
Not included in the quorum above are: I. quorums expressly provided for in other clauses of the
rights
conferred
by
such
deed of issue; and II. changes, which should be approved by debenture holders representing
securities
at least 90% of outstanding Debentures: (a) of the provisions of this clause; (b) of the quorums
for approval provided for in the Deed of issue; (c) the remuneration, except as provided in
Clause of the Deed of issuance; (d) any dates for payment of any amounts provided for in the
Deed of issuance; (e) of the term of the Debentures; (f) of the type of Debentures; (g) creation
of a repricing event; (j) of any Event of Default.
other relevant characteristics
None
Securities
Debentures
Identification of securities
Issue date
Maturity date
Quantity
16,094
Total amount
R$ 160,900,000.00
Restrictions on trading
Yes
The debentures were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment to the placement of 20,000
debentures, and under the best-efforts placement in relation to the remaining debentures. The
debentures can only be traded between qualified investors and after a 90 days period from the
date of subscription or purchase according to the articles 13 and 15 of CVM Instruction 476,
and compliance by the Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Not applicable
ns for acceleration
Conditio
Payment of the nominal value of each first series debenture in 2 (two) successive yearly
installments, each one corresponding to matured 50% (fifty percent) of nominal value of each
of the debentures of the first series, being the first installment due in August 15, 2016 and the
second installment on the maturity date of the first series.
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue.
The remuneration of each of the First Series Debentures will be as follows:
I. Monetary Adjustment: The nominal value of the debentures of the first issue will not be
monetarily updated.
ii.
Interest
II. Compensatory Interests: On the nominal value of each of the First Series Debentures will
incur interest corresponding to 100% of the cumulative variation of the DI rate plus surcharge
of 0.88% (eighty-eight per cent) per year.
Notwithstanding the payments due to early redemption of the First Series Debentures and/or
acceleration of the obligations under the Debentures, pursuant to the Deed of Issue, the First
Series Compensation will be paid semiannually from the Issue Date, with the first payment on
February 15, 2013 and the last, on the maturity date of the First Series.
186
iii.
guarantee and, if in the
form of collateral, description of
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured
or subordinate
v.
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable. The second issue of debentures does not have collateral or surety.
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No.
6,404/76.
Not included in the quorum above are: (i) quorums expressly provided for in other clauses of
conditions for amendment of the the deed of issue; and (ii) changes, which should be approved by debenture holders of the first
rights
conferred
by
such series representing at least 90% of outstanding first series debentures and by debenture
securities
holders of the second series representing at least 90% of outstanding second series
debentures, (a) of the provisions of this clause; (b) of the quorums for approval provided for in
the Deed of issue; (c) the remuneration, except for changes resulting from extinction, limitation
and / or non-disclosure of the DI rate or IPCA, as provided in Clause of the Deed of issuance;
(d) any dates for payment of any amounts provided for in the Deed of issuance; (e) of the term
of the Debentures; (f) of the type of Debentures; (g) creation of a repricing event; (h) the
provisions relating to optional early redemption; (i) the provisions relating to early amortization
(j) of any Event of Default.
other relevant characteristics
Securities
Debentures
Identification of securities
Issue date
Maturity date
Quantity
10,906
Total amount
R$ 109,100,000.00
Restrictions on trading
Yes
The debentures were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment to the placement of 20,000
debentures, and under the best-efforts placement in relation to the remaining debentures. The
debentures can only be traded between qualified investors and after a 90 days period from the
date of subscription or purchase according to the articles 13 and 15 of CVM Instruction 476,
and compliance by the Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Not applicable
187
ns for acceleration
Conditio
Payment of the nominal value of each second series debenture in 3 successive yearly installments, in the
following order: (a) 2 installments, each corresponding to matured 33.33% of nominal value of each of
the debentures of the second series monetarily adjusted, due to August 15, 2018 and August 15, 2019; and
(b) 1 installment, in the amount of the outstanding amount of nominal value of each of the debentures of
the second series monetarily adjusted, due to the maturity date of second series debenture.
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue.
The remuneration of each of the Second Series Debentures will be as follows:
ii.
Interest
I. Monetary Adjustment: The nomeinal of each Second Series Debentures will be adjusted by
the National Index of Consumer Prices Broad, released by the Brazilian Institute of Geography
and Statistics ("IPCA"), since the Issue Date until the date of actual payment, being the update
incorporated into the Nominal value of each Second Series Debentures automatically ("Second
Series Monetary Adjustment"). Notwithstanding the payments due to early redemption of the
Debentures and/or acceleration of the obligations under the Debentures, pursuant to the Deed
of Issue, the Second Series Monetary Adjustment will be paid on the same dates and the same
amount of amortization of nominal value of each Second Series Debentures, as provided in the
Deed of Issue.
II. Compensatory Interests: On the outstanding amount of the nominal value of each Second
Series Debentures, updated by the Second Series Monetary Adjustment, will incur interest
corresponding to 5.50% per year, on a 252 (two hundred and fifty-two) working days base.
Notwithstanding the payments due to early redemption of the Debentures and/or acceleration
of the obligations under the Debentures, pursuant to the Deed of Issue, the Second Series
Compensation will be paid annually from the Issue Date, with the first payment on August 15,
2013 and the last, on the maturity date of the Second Series.
iii.
guarantee and, if in the
form of collateral, description of
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured
or subordinate
v.
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable. The second issue of debentures does not have collateral or surety.
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No.
6,404/76.
Not included in the quorum above are: (i) quorums expressly provided in other clauses of the
conditions for amendment of the deed of issue; and (ii) changes, which should be approved by debenture holders of the first
rights
conferred
by
such series representing at least 90% of outstanding first series debentures and by second series
securities
debenture holders representing at least 90% of outstanding second series debentures, (a) of
the provisions of this clause; (b) of the quorums for approval provided for in the Deed of issue;
(c) the remuneration, except for changes resulting from extinction, limitation and / or nondisclosure of the DI rate or IPCA, as provided in Clause of the Deed of issuance; (d) any dates
for payment of any amounts provided for in the Deed of issuance; (e) of the term of the
Debentures; (f) of the type of Debentures; (g) creation of a repricing event; (h) the provisions
relating to optional early redemption; (i) the provisions relating to early amortization (j) of any
Event of Default.
other relevant characteristics
188
18.6 Description of the Brazilian markets where the company's securities are admitted
for trading
Shares
The Companys common shares are traded at the BM&FBOVESPA.
Commercial Paper
The Companys first, second and third issuance of commercial paper, described in table 18.5 of this
Reference Form, were registered for trading in the secondary market, through CETIP21 - Ttulos e Valores
Mobilirios, managed and operated by CETIP, trading being settled through CETIP and electronical
custody of the commercial paper by CETIP. The first issue of commercial papers were already fully
redeemed on April 28, 2011.
Debentures
The debentures issued by the Company, first and second issuance, described at table 18.5 of this
Reference Form, were registered for trading in the seconday market and electronic custody SND Mdulo
Nacional de Debntures, managed and operated by CETIP.
18.7
Not applicable, as the Company does not have securities admitted to trading in foreign markets.
18.8 Description of the public offerings made by the Company or by third parties, including
controlling companies and subsidiaries, relating to the Companys securities
Public offerings of distribution of commercial promissary notes and debentures, with restricted placement
efforts
Promissory notes of first, second and third issue and the debentures of the first issue were subject of
public offerings, with restricted efforts of placement, in accordance with CVM Instruction No. 476, of
January 16, 2009, intended exclusively for qualified investors. The promissory notes of first issuance were
settled on April 28, 2011. All relevant characteristics of these securities are described in section 18.5 of
this Reference Form.
18.9
Description of takeover bids made by Company for shares issued by third parties
189
Not applicable, as the Company did not make takeover bids for shares issued by third parties.
18.10 Other information which the Company deems relevant
a Identification of securities
b Quantity
30 commercial papers
c Total amount
R$30,000,000.00
d Issue date
Deadline
e
Restrictions on trading
f
Convertibility
g Possibility of redemption:
Each commercial note of first issue was subject to early repayment, in whole, at any time
from the date of issue, at the discretion of the company, provided that its holder is notified
within 5 (five) working days in advance of the date set for the rescue. Additionally, the
(i) hypotheses of redemption
Company was obliged to redeem all the notes in advance of the first issue on the date of
subscription of the debentures of the first issue, described below. Therefore, all commercial
notes of first issue were fully redeemed on April 28, and are no longer in circulation.
The amount to be paid by the Company to the holder of each commercial note first issued
(ii) Assumptions and method of corresponded to their nominal value plus the remuneration, calculated pro rata temporis
calculating the redemption value
since the date of issue until the date of effective payment, but without payment of prize or
penalty.
h if debt securities, indicate where
applicable:
Maturing on June 27, 2011. The notes were redeemed when the Company issued
debentures, on April 28, 2011.
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare
early maturity of the obligations under the Commercial Paper, and may demand immediate
payment of the Nominal Amount plus the remuneration, the occurrence of any of the
following events, provided in addition to other cartouches and those provided by law (each
event, an "Event of Default"): (i) declaration of acceleration of any other Commercial Paper;
(ii) default by the Company of any monetary obligation due under the Commercial Paper;
(iii) default by the Company of any non-pecuniary obligation due under the Commercial
Paper; (iv) sale, assignment or pledge any form of transfer or promise to transfer to third
parties in whole or in part, by the Company of any of the Obligations, without the prior
consent in writing of the Holder; (v) transformation of the Company into a privately held
Company or any other social arrangement; (vi) approval of any corporate reorganization
involving the Company, without the prior consent in writing of the Holder; (vii) change in the
Company's Control; (viii) Changing the corporate purpose, unless such change does not
result in changing the company's main activity; (ix) acceleration of any financial obligation of
the Company and/or any Subsidiary of the Company, the value of which, individually or in
aggregate, be less than R$ 5,000,000.; (x) default by the Company due to mandatory early
redemption of subscription and payment of the Debentures, as provided under "Early
Redemption" above, or (xi) the Company does not use the net proceeds of the offering as
described under "Use of Proceeds" in the cartouche.
The nominal value of each commercial note of first issue was not subject to monetary
correction.
(ii) interest
On the nominal value of each note were added remuneration interest focused corresponding
to the variation of accumulated 105% (one hundred and five per cent) of the DI rate
(Remuneration), from the date of issue until the date of the effective payment of their
commercial note, and followed the criteria for calculating the Trade Notes formulas and
Obligations CETIP21, which is available on the Web (www.cetip.com.br).
The remuneration was paid in full on the date of early redemption, subject to the terms and
190
i
j
(iii)
guarantee and, if in
the
form
of
collateral,
description of the goods used as
collateral
(iv.)
in the absence of a
guarantee, if the credit is
secured or subordinate
(v)
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable
The credit represented by each commercial note of first issued were unsecured.
Not applicable
The amendment of any rights conferred by each commercial note first issued depends on
approval of the holder.
None
a Identification of securities
b Quantity
3 Commercial Notes
c Total amount
d Issue date
December 7, 2011
Maturity date
e
Restrictions on trading
f
Convertibility
December 1, 2012
The commercial notes were the subject of public distribution with restricted placement
efforts, pursuant to CVM Instruction 476, under the firm commitment and, consequently, can
only be traded between qualified investors. The trading restriction period laid down in article
13 of that 90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
(ii) Assumptions and method of Not applicable. The Company may not redeem the promissory notes in advance.
calculating the redemption value
h if debt securities, indicate where
applicable:
Regular maturity on December 1, 2012, when should be paid the value of the principal and
the remuneration (interest).
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare
(i) maturity date, including early maturity of the obligations under the Commercial Paper, and may demand immediate
conditions for acceleration
payment of the Nominal Amount plus the remuneration, the occurrence of any of the
following events, provided in addition to other cartouches and those provided by law (each
event, an "Event of Default"): (i) declaration of acceleration of any other Commercial Paper;
(ii) default by the Company of any monetary obligation due under the Commercial Paper; (iii)
default by the Company of any non-pecuniary obligation due under the Commercial Paper;
191
(iv) sale, assignment or pledge any form of transfer or promise to transfer to third parties in
whole or in part, by the Company of any of the Obligations, without the prior consent in
writing of the Holder; (v) transformation of the Company into a privately held Company or
any other social arrangement; (vi) approval of any corporate reorganization involving the
Company, without the prior consent in writing of the Holder; (vii) change in the Company's
Control; (viii) Changing the corporate purpose, unless such change does not result in
changing the company's main activity; (ix) acceleration of any financial obligation of the
Company and/or any Subsidiary of the Company, the value of which, individually or in
aggregate, be less than R$ 5,000,000.; (x) default by the Company due to mandatory early
redemption of subscription and payment of the Debentures, as provided under "Early
Redemption" above, or (xi) the Company does not use the net proceeds of the offering as
described under "Use of Proceeds" in the cartouche.
The nominal value of the promissory note will not be updated monetarily.
Over the nominal value of each note there will be remuneration interest of 100% of
accumulated variation of the DI rate plus spread 1.10% per annum from the date of issue
until the date of the effective payment of their commercial note.
(ii) interest
The remuneration shall be paid in full by the due date or the date of any anticipated
payment.
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
(iii)
guarantee and, if in
the
form
of
collateral,
description of the goods used as
collateral
(iv)
in the absence of a
guarantee, if the credit is
secured or subordinate
v.
possible restrictions
imposed on the issuer
the
dividend
distribution
i
j
Not applicable. The second issue of promissory notes does not have collateral or surety.
Not applicable.
The amendment of any rights conferred by each commercial note of second issuance
depends on the holders approval.
a Identification of securities
b Quantity
30 Commercial Notes
c Total amount
d Issue date
Maturity date
December 3, 2012
Restrictions on trading
The commercial notes were the subject of public distribution with restricted placement
efforts, pursuant to CVM Instruction 476, under the firm commitment and, consequently, can
only be traded between qualified investors. The trading restriction period laid down in article
13 of that 90 days after the statement expired date of issue
192
Convertibility
Not applicable. The second issue of promissory notes are not convertible into shares issued
by the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
The remuneration shall be paid in full by the due date or the date of any anticipated
payment.
In case of payment after the deadline of any amount due in respect of any obligation under
the Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
(iii) .
guarantee and, if in
the form of collateral, description
of the goods used as collateral
(iv)
in the absence of a
guarantee, if the credit is secured
or subordinate
(v)
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable. The second issue of promissory notes does not have collateral or surety.
The credit of the promossory note is unsecured.
Not applicable.
193
None
Debentures
Identification of securities
Issue date
Maturity date
Quantity
27,000
Total amount
270,000,000.00
Restrictions on trading
yes
The debentures were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Convertibility
Not applicable
Possibility of redemption
Not applicable
ns for acceleration
Conditio
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue are maintained, in the occurrence of any of the events summarized below: I.
Default by non-payment of the Nominal Value, of Remuneration, premium, or any other
amounts owed to the debenture holders; V. assignment or pledge any form of transfer or
promise of transfer to third parties in whole or in part by the Company, any of its obligations
under the Deed, without the prior consent in writing of Debenture Holders representing at least
75% of the outstanding; VI. invalidity, unenforceability or invalidity of the deed and / or the
Distribution Agreement, is not remedied within 10 days from the date of the respective event;
VII. (a) bankruptcy of the Company, and /or any of its subsidiary or controlling Company; (b)
voluntary bankruptcy application made by the Company and / or any of its subsidiary or
controlling Company; (c) bankruptcy filing by the Company, and /or any of its subsidiary or
controlling Company, formulated by others, not elided within legal; (d) petition for judicial or
extrajudicial recovery of the Company and /or any of its subsidiary or controlling Company,
regardless of approval of the request; or (e) liquidation, dissolution or extinction of the
Company, and /or any of its subsidiary or controlling Company, unless the liquidation,
dissolution and / or extinction during the course of a corporate transaction which does not
constitute an Event of Default; VIII. changing the company into a limited liability company,
pursuant to articles 220 to 222 of Law No. 6,404/76;IX. approval of incorporation, merger or
split of the company or sale, by the company, of all or substantially all of its assets or its mining
properties, with some exceptions: (a) if the transaction has been approved in advance by the
Debenture Holders representing at least 75% of the outstanding Debentures; or (b) if the
Debenture Holders that wish to do so, be assured that, during the minimum period of six
months from the date of publication of the minutes of corporate acts in the transaction, the
redemption of the Debentures held by them, by paying the outstanding balance of the Nominal
Value, plus Remuneration, calculated pro rata from the Issue Date or the date of payment of
194
The face value of the debentures of the first issue will not be monetarily updated.
Interest paid semi-annually will account for 112.5% of the accumulated variation of the interest
rate of CDI.
ii.
Interest
The remuneration provided above shall be paid every six months from the date of issue, being
the first payment on October 18, 2011, and the last payment of the maturity date, or on the
date of any settlement.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice,
notification or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata
from the date of default to the date of actual payment, (i) fines of 2% (two percent), and (ii)
interest of 1% (one percent) per month or fraction of a month, calculated pro rata from the
date of default until the date of actual payment
iii.
guarantee and, if in the
form of collateral, description of
the goods used as collateral
iv.
in the absence of a
guarantee, if the credit is secured
or subordinate
v.
possible restrictions
imposed on the issuer
the
dividend
distribution
Not applicable. The first issue of debentures does not have collateral or surety.
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No.
6,404/76.
195
Remuneration: The performance of duties and tasks assigned to compete in accordance with
the law and its deed of issue, the fiduciary agent, or the institution which will replace him in
that capacity, he shall receive a remuneration: (i) R$13,000.00 per year, due from the
company, being the first instalment of remuneration payable within 30 days from the date of
conclusion of the deed of issue, and the other, on the same day of subsequent years; (ii)
Additionally, in the event of a close-out netting of obligations of the company under the
debentures of the first emission, equivalent to R$500.00 per hour-working man devoted to
activities related to the issue and the debentures, to be paid within 5 days from the date of
attestation of delivery by the trustee and approval by the company, of the report, concerning
hours of activities (a) advice to debenture holders in the process of renegotiation required by
the company; (b) attendance at formal meetings with the company eou debentureholders eou
general meetings of debenture holders; and (c) implementation of the decisions taken by the
debenture holders (iii) brought out yearly since the date of payment of the first annual
instalment by the change in the general price index-market, published by Fundao Getlio
Vargas, or by any other that eventually is replaced, calculated pro rata temporis, if necessary;
(iv) plus the sales tax of any kind TAXES, contributing to the Social Integration Programme
PIS, Social contribution on net income CSLL, contributing to the financing of Social Security
COFINS and any other taxes that may relate to the remuneration payable to the trustee, except
for tax on income and proceeds of Any Nature GOunder existing rates for the dates of each
payment; (v) due to maturity, redemption or cancellation of debentures of the first issue, and
even after its maturity, redemption or cancellation in the event of actions of the trustee in
charge of any defaults on bonds not remedied by the company, in cases where the
remuneration payable to the trustee shall be calculated in proportion to the months of operation
of the fiduciary agent, based on the value specified in item i, readjusted as the paragraph iii;
and (vi) plus, where lives in your payment, regardless of notice, judicial or extrajudicial
notification or notification, on the valores arrears, (a) fine 2 moratorium; and (b) interest on
arrears of 1 month, calculated pro rata temporis since the date of default until the payment
date.
Reimbursement of expenses: the Trustee shall be repaid by the company for all reasonable
costs incurred that have proven to protect the rights and interests of the debenture holders or
to perform their claims within 30 (thirty) days from the delivery of the evidentiary documents
accordingly, provided that, where possible, the costs have been approved in advance by the
company, which shall be deemed to be approved if the company does not appear within 2 (two)
working days from the date of receipt of their request by fiduciary agent.
Obligations. The fiduciary agent, as provided for in the deed of issue, will have the functions
laid down in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission, and use of any action to protect rights or defend interests of the
debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial or
extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer of
the debentures of the first issue, proceed with the replacement of the trustee and the indication
of his replacement, general meeting of debenture holders especially convened for this purpose;
(ii) if the Trustee is unable to continue to perform their duties by supervening circumstances to
the deed of issue, shall immediately communicate the fact to debentureholders, requesting his
replacement and convene a general meeting of debenture holders for this purpose; (iii) if the
fiduciary agent, renounces functions, should remain in the exercise of their duties until a
replacement is indicated by the institution and approved by general meeting of debenture
holders, and assume their functions effectively; (iv) shall be performed, within the maximum
period of 30 (thirty) days from the date of the event that determine, general meeting of
debenture holders, for choosing the new fiduciary agent; (v) replacement, on a permanent
basis, the fiduciary agent (a) shall be subject to prior notification to the CVM and its
manifestation on the attendance to the requirements provided for in article 9 of CVM Instruction
No. 28, November 23, 1983, as amended, and (b) shall be subject to the addition to the deed of
issue; payments to the trustee replaced shall be effected in accordance with the proportionality
to the period of effective service delivery; (vi) the trustee will be entitled to the same salary
replacement perceived by the previous, if (a) the company has not agreed with the new value
of the remuneration of the trustee proposed by general meeting of debenture holders, or (b)
the general meeting of debenture holders does not act on the matter; (vii) the fiduciary agent
should substitute, immediately after his appointment, communicate it to the company and to
debentureholders; and (viii) shall apply to cases of substitution of Trustee the norms and
precepts from the Securities and Exchange Commission.
196
During deliberations of the General Meetings of debenture holders for each of the series, for
each outstanding Debenture one vote will be granted, permitting the establishment of proxy,
whether Debenture holder or not. Except for the provisions below, all deliberations to be taken
in the General Meeting of debenture holders will depend on approval of debenture holders
representing
at
least
75%
of
outstanding
Debentures.
conditions for amendment of the
Not included in the quorum above are: I. quorums expressly provided for in other clauses of the
rights
conferred
by
such
deed of issue; and II. changes, which should be approved by debenture holders representing
securities
at least 90% of outstanding Debentures: (a) of the provisions of this clause; (b) of the quorums
for approval provided for in the Deed of issue; (c) the remuneration, except as provided in
Clause of the Deed of issuance; (d) any dates for payment of any amounts provided for in the
Deed of issuance; (e) of the term of the Debentures; (f) of the type of Debentures; (g) creation
of a repricing event; (j) of any Event of Default.
other relevant characteristics
None
Debentures
Identification of securities
Issue date
Maturity date
Quantity
27,000
Total amount
R$ 270,000,000.00
Restrictions on trading
yes
The debentures were subject of public distribution with restricted placement efforts, pursuant to
CVM Instruction 476, under the firm commitment to the placement of 20,000 debentures, and
under the best-efforts placement in relation to the remaining debentures. The debentures can
only be traded between qualified investors and after a 90 days period from the date of
subscription or purchase according to the articles 13 and 15 of CVM Instruction 476, and
compliance by the Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Not applicable
ns for acceleration
Conditio
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue.
Maturity date of the second series on August 15, 2020.
Payment of the nominal value of each second series debenture in 3 successive yearly
installments, in the following order: (a) 2 installments, each corresponding to matured 33.33%
of nominal value of each of the debentures of the second series monetarily adjusted, due to
August 15, 2018 and August 15, 2019; and (b) 1 installment, in the amount of the outstanding
amount of nominal value of each of the debentures of the second series monetarily adjusted,
due to the maturity date of second series debenture.
197
The obligations may be declared mature in advance, on the terms and conditions set forth in
the Deed of Issue, in the occurrence of any of the events summarized below: I. Default by the
Company of any financial obligation on the Debentures, due under the Deed of Issue, at the
date of payment provided for in the Deed of Issue; II. Default by the Company of any nonfinancial obligation on the Debentures foreseen in the Deed of Issue (a) that is not properly
solved within specific remedy; or (b) not having specific term remediation, if it is not properly
solved within 15 days from the date of such default, being the period provided in this subsection
does not apply to obligations to which it has a deadline stipulated or specific cure for which the
period of cure has been expressly excluded; III. judicial questioning by the Company for any
controlling company, directly or indirectly (controlling as defined in article 116 of the Corporate
Law) of the Company (Controlling), and / or controlled company (controlled as defined in
article 116 of the Corporate Law) by the Company (Controlled), of the Issue of Deed; IV.
judicial questioning by any person not mentioned in section III above, the Issue of Deed,
suspended or not remedied within 15 days from the date on which the Company becomes
aware of the judging of such legal challenge; V. assignment or pledge any form of transfer or
promise of transfer to third parties in whole or in part by the Company, any of its obligations
under the Deed, without the prior consent in writing of Debenture Holders representing at least
75% of the outstanding; VI. invalidity, unenforceability or invalidity of the Deed and/or the
Distribution Agreement, is not remedied within 15 days from the date of the respective event;
VII. (a) bankruptcy of the Company, and/or any of its subsidiary or controlling Company; (b)
voluntary bankruptcy application made by the Company and / or any of its subsidiary or
controlling Company; (c) bankruptcy filing by the Company, and/or any of its subsidiary or
controlling Company, formulated by others, not suppressed within the legal deadline; (d)
petition for judicial or extrajudicial recovery of the Company and /or any of its subsidiary or
controlling Company, regardless of approval of the request; or (e) liquidation, dissolution or
extinction of the Company, and/or any of its subsidiary or controlling Company, unless the
liquidation, dissolution and/or extinction during the course of a corporate transaction which
does not constitute an Event of Default, pursuant to section IX below; VIII. changing the
company into a limited liability company, pursuant to articles 220 to 222 of Law No. 6,404/76;
IX. approval of incorporation, merger or split of the company or sale, by the company, of all or
substantially all of its assets or its mining properties, with some exceptions: (a) if the
transaction has been approved in advance by the Debenture Holders representing at least 75%
of the outstanding Debentures; or (b) if the Debenture Holders that wish to do so, be assured
that, during the minimum period of 6 months from the date of publication of the minutes of
corporate acts in the transaction, the redemption of the Debentures held by them, by paying
the outstanding balance of the Nominal Value, plus Remuneration, calculated pro rata from the
Issue Date or the date of payment of compensation immediately preceding, whichever is
applicable until the date of actual payments; or (c) by the incorporation of the Company (so
that the Company is the remaining entity), of any Subsidiary; or (d) if the operation is carried
out solely between Subsidiaries; X. capital reduction, except if previously approved by
Debenture Holders representing at least 75% of the outstanding Debentures, pursuant to Article
174, paragraph 3, of Law No. 6,404/76; XI. change or transfer of control (as defined under
Article 116 of Law No. 6,404/76), direct or indirect, of the Company, from any Controlling
Company and / or any Subsidiary, except if previously approved by Debenture Holders
representing at least 75% of the outstanding Debentures; XII. amendment of the Company's
purposes and / or any Subsidiary, as provided in its bylaws or social contract as applicable, in
effect on the Issue Date, unless such amendment: (a) if the transaction has been approved in
advance by the Debenture Holders representing at least 75% of the outstanding Debentures;
(b) does not lead to a change in the principal activity of the Company or its Subsidiary; XIII.
non-renewal, cancellation, revocation or suspension of licenses and permits, including
environmental, required by the competent bodies to carry out regular activities of the Company,
since its effects have not solved or suspended within 15 days from the date of its non-renewal,
cancellation, revocation or suspension respective (s) permit (s) or license (s); XIV. occurrence of
any event that causes (a) in relation to the Company, (i) any material adverse effect on the
condition (financial or of any nature), business, property, results of operations and/or prospects;
(ii) any adverse effect on the powers or legal capacity and/or economic-financial to fulfill any of
the obligations under the Deed of Issue, and/or (iii) any event or condition that, after the
deadline, formal notice, or both, may result in a Default event, or (b) with respect to Deed of
Issue, any adverse effect on (i) the proper execution, legality, validity and / or enforceability of
the obligations documents, and / or (ii) the rights contained in the Debenture Deed of Issue,
since it has not solved its effects or suspended within 15 days from the date of knowledge of
event the Company ("Material Adverse Effect"); XV. non maintenance by the Company and/or
any Subsidiary, insurance, as the current best practices in the market segment of the Company
with respect to its material operating assets, not solved within 15 days from whatever happens
first: (a) the date on which the Company becomes aware of the event, and promptly notifies the
Fiduciary Agent or (b) the date on which the Company receives written notice from the
198
Fiduciary Agent; XVI. early maturity of any financial obligation of the Company and/or any
Subsidiary, which amount, individual or aggregate, is equal to or greater than R$
10,000,000.00, annually updated, from the Issue Date, by the positive variation of the IPCA, or
its equivalent in other currencies, and / or the occurrence of any event or default of any
obligation which, after the expiration of any cure period provided for in the respective
document, may give rise, immediately the declaration of acceleration of any financial obligation
of the Company and/or any Subsidiary, which amount, individual or aggregate, is equal to or
greater than R$ 10,000,000.00, annually updated, from the Issue Date, by the positive variation
of the IPCA, or its equivalent in other currencies XVII. securities protest against the Company
and / or any Subsidiary, which amount, individual or aggregate, is equal to or greater than R$
10,000,000.00(ten million reais), annually updated, from the Issue Date, by the positive
variation of the IPCA, or its equivalent in other currencies, unless, within 10 (ten) days from the
date of their protest has been proven that (a) the protest has been made in error or bad faith of
the third and was taken to the appropriate judicial order restraining or cancellation of their
effects; b) the protest was canceled, or (c) the value (s) of title (s) protested (s) was deposited
in court; XVIII. default by the Company and / or any subsidiary of any decision or final court
judgment or any judgment or arbitral award not subject to appeal against the Company and / or
any Subsidiary, which amount, individual or aggregate, is equal to or greater than R$
10,000,000.00, annually updated, from the Issue Date, by the positive variation of the IPCA, or
its equivalent in other currencies, not paid within the stipulated payment for their decision or
judgment XIX. attachment or sequestration of assets of the Company and / or any Subsidiary,
which amount, individual or aggregate, is equal to or greater than R$ 10,000,000.00, annually
updated, from the Issue Date, by the positive variation of the IPCA, or its equivalent in other
currencies, unless, within ten days from the date of their arrest or abduction, has been proven
that the arrest or abduction was challenged or replaced by other security; XX. expropriation,
confiscation or any other measure of any governmental entity in any jurisdiction that results in
loss by the Company and / or any Subsidiary of the property and / or the direct or indirect
ownership of a substantial portion of its assets; XXI. sale, assignment, or alienation in any form
or constitution of mortgage, pledge, lien, Fiduciary assignment agreement, usufruct, trust,
promise to sell, purchase option, right of first refusal, charge, encumbrance or onus, judicial or
extrajudicial, voluntary or involuntary, or any other action which has the practical effect similar
to any of the above expressions ("Onus"), whether in a single transaction or a series of
transactions, related or not, on assets of the Company and/or any subsidiary amounting more
than 15% of the total assets of the Company, based on the latest Company's Consolidated
Financial Statements (as defined in Section 7.1 of Deed of Issue), unless (a) if the transaction
has been approved in advance by the Debenture Holders representing at least 75% of the
outstanding Debentures; or (b) the establishment of liens on any asset acquired by the
Company or any Subsidiary, provided that the lien consists exclusively on assets acquired and to
finance the acquisition of such asset; XXII. verifying that any of the statements made by the
Company in the Issue Deed and / or the Underwriting Agreement is false, inconsistent,
inaccurate, incomplete, insufficient or incorrect in any material respect, not cured within ten
(10) days from the earlier of (a) the date upon which the Company is aware of the
incorrectness or (b) the date upon which the Company receives written notice from the
Fiduciary Agent; XXIII. non-use by the Company, the net resources obtained of the Issue
strictly in terms the Deed of Issue; XXIV. distribution and/or payment by the Company of
dividends, interest on capital or other distributions of profits to shareholders, if the Company is
in default of any of its obligations under the Issuance Deed, except for the payment of dividend
must not exceed 25% of net income under Article 202 of the Corporations Act, except for the
payment of the mandatory dividend of no more than 25% of net income under Article 202 of
the Law No. 6,404/76, and XXV. non-compliance by the Company of any financial ratios below
("ndices Financeiros"), to be determined by the Company under the Deed of Issue and verified
by the Fiduciary agent within 10 days from the date of receipt by the Fiduciary agent, the
information referred to the Deed of Issue based on the Consolidated Financial Statements of the
Company for each quarter of the calendar year, from and including the Consolidated Financial
Statements of the Company on December 31, 2012: (a) the financial index due to the quotient
of dividing Net Debt (as defined in the Issue Deed) to EBITDA (as defined in the Issue Deed),
which must be less than or equal to 3 and (b) the financial index due to the quotient of dividing
EBITDA by Net Financial Expenses (as defined in the Issue Deed), which should be equal or
higher than 2.
The remuneration of each of the First Series Debentures will be as follows:
ii.
Interest
I. Monetary Adjustment: The nominal value of the debentures of the first issue will not be
monetarily updated.
II. Compensatory Interests: On the nominal value of each of the First Series Debentures will
incur interest corresponding to 100% of the cumulative variation of the DI rate plus surcharge
of 0.88% (eighty-eight per cent) per year.
199
Notwithstanding the payments due to early redemption of the First Series Debentures and/or
acceleration of the obligations under the Debentures, pursuant to the Deed of Issue, the First
Series Compensation will be paid semiannually from the Issue Date, with the first payment on
February 15, 2013 and the last, on the maturity date of the First Series.
The remuneration of each of the Second Series Debentures will be as follows:
I. Monetary Adjustment: The nomeinal of each Second Series Debentures will be adjusted by
the National Index of Consumer Prices Broad, released by the Brazilian Institute of Geography
and Statistics ("IPCA"), since the Issue Date until the date of actual payment, being the update
incorporated into the Nominal value of each Second Series Debentures automatically ("Second
Series Monetary Adjustment"). Notwithstanding the payments due to early redemption of the
Debentures and/or acceleration of the obligations under the Debentures, pursuant to the Deed
of Issue, the Second Series Monetary Adjustment will be paid on the same dates and the same
amount of amortization of nominal value of each Second Series Debentures, as provided in the
Deed of Issue.
iii.
guarantee and, if in the
form of collateral, description of Not applicable. The first issue of debentures does not have collateral or surety.
the goods used as collateral
iv.
in the absence of a
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No.
guarantee, if the credit is secured
6,404/76.
or subordinate
v.
possible restrictions
imposed on the issuer
the
dividend
distribution
200
days from the date of receipt of their request by the Fiduciary Agent.
Obligations. The Fiduciary Agent, as provided for in the deed of issue, will have its duties
established in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission of Brazil (CVM), and use of any action to protect rights or defend
interests of the debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial or
extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer, to
proceed with the replacement of the fiduciary agent and the indication of its replacement at
general meeting of debenture holders especially convened for this purpose; (ii) if the fiduciary
agent is unable to continue to perform its duties by supervening circumstances to the deed of
issue, shall immediately communicate the fact to debenture holders, requesting its replacement
and convene a general meeting of debenture holders for this purpose; (iii) if the fiduciary agent,
renounces its functions, should remain in the exercise of its duties until another institution is
indicated by the Company fot its replacement and approved by general meeting of debenture
holders, and assume their functions effectively; (iv) shall be performed, within the maximum
period of 30 days from the date of the event that determine, general meeting of debenture
holders, for choosing the new fiduciary agent, that may be called by the fiduciary agent to be
replaced, by the Company, by debenture holders of the first series representing at least 10% of
the debentures of the first series in circulation, or for debenture holders of the second series
representing at least 10% of the second series ' debentures in circulation, or by CVM; in the
event of convocation notice do not occur within 15 days before the expiration of the time limit
here predicted, it will be up to the Company making it, being sure that the CVM may appoint
interim replacement pending consummating the process of choosing the new trustee; (v)
replacement, on a permanent basis, of the fiduciary agent (a) shall be subject to prior notice to
the CVM and its manifestation on the attendance to the requirements provided for in article 9 of
CVM Instruction No. 28, November 23, 1983, as amended, and (b) shall be subject to the
addition to the deed of issue; (vi) payments to the fiduciary agent replaced shall be effected in
accordance with the proportionality to the period of effective service delivery; (vii) the fiduciary
agent will be entitled to the same compensation of the perceived by the previous, if (a) the
company has not agreed with the new value of the remuneration of the fiduciary agent
proposed by general meeting of the debenture holders, referred to in item iv above, or (b) the
general meeting of debenture holders referred to in item iv above does not act on the matter;
(vii) the fiduciary agent should replace, immediately after his appointment, communicate it to
the company and to debenture holders; and (viii) shall apply to cases of substitution of fiduciary
agent the norms and precepts from the brazilian Securities and Exchange Commission (CVM).
During deliberations of the General Meetings of first series debenture holders and General
Meetings of second series debenture holders, for each outstanding Debenture one vote will be
granted, permitting the establishment of proxy, whether Debenture holder or not. Except for the
provisions below, (i) all deliberations to be taken in the General Meeting of debenture holders
will depend on approval of debenture holders of the first series representing at least 75% of
outstanding First Series Debentures; and (ii) all deliberations to be taken in the General Meeting
of debenture holders will depend on approval of debenture holders of the second series
representing
at
least
75%
of
outstanding
Second
Series
Debentures;.
conditions for amendment of the
Not included in the quorum above are: (i) quorums expressly provided for in other clauses of
rights
conferred
by
such
the deed of issue; and (ii) changes, which should be approved by debenture holders of the first
securities
series representing at least 90% of outstanding first series debentures and by debenture
holders of the second series representing at least 90% of outstanding second series debentures,
(a) of the provisions of this clause; (b) of the quorums for approval provided for in the Deed of
issue; (c) the remuneration, except for changes resulting from extinction, limitation and / or
non-disclosure of the DI rate or IPCA, as provided in Clause of the Deed of issuance; (d) any
dates for payment of any amounts provided for in the Deed of issuance; (e) of the term of the
Debentures; (f) of the type of Debentures; (g) creation of a repricing event; (h) the provisions
relating to optional early redemption; (i) the provisions relating to early amortization (j) of any
Event of Default.
other relevant characteristics
None
201
19.
202
19.1
As of December 31, 2011 the Company didnt have a share buyback plan.
19.2
As a result of the exercise of the right of withdrawal by dissident shareholder of the deliberations of the
extraordinary general meeting held on August 1, 2011, the company repaid to the unrealized profit
reserve, issuing 99,140 of its own shares, for R$535 thousand, and these shares were subsequently
cancelled, as the approval of the Board of Directors on September 23, 2011.
203
20.
204
20.1 Description of the Companys policy for trading of securities by major shareholders,
direct or indirect, directors, members of the Board of Directors, or of any body with
consultative or technical functions, created by any statutory provision
a. Date of approval
February 8, 2010
b. Related parties
The Company, the Controlling Shareholder, the Administrators, members of the Fiscal Council, employees
(when they have insider information regarding the Company) and any person who adopted this trading
policy (Securities Trading Policy) due to their title, job or position in companies that control or are
controlled by the Company (Persons Bound to the Trading Policy).
c. Main characteristics
The main characteristics of the Trading Policy are:
prohibiting the trading of securities issued by the Company by Bound Persons who have material
information about the Company;
prohibiting the trading of securities issued by the Company by Bound Persons who leave board
positions, for the period of six months after they leave the position or until the material information
is disclosed;
prohibiting the trading of securities issued by the Company by Related Parties whenever a
purchase or sale of shares issued by the Company is in progress, or execution of any agreement or
contract for the transfer of Companys share control, existence of intention of promoting
amalgamation, total or partial spin-off, transformation or corporate restructuring involving the
Company. This restriction only applies to controlling shareholders, direct or indirect, and
administrators when the ongoing purchase or sale of shares of the Company by the Company; and
prohibiting on trading in securities issued by the Company by persons linked to negotiating policy
within fifteen days prior to the release of quarterly and annual required by the CVM.
The full version of Mills Securities Trading Policy can be obtained in the following address:
http://mills.infoinvest.com.br/static/enu/arquivos/Politica_de_Negociacao_MILL_RCA_2010_02_08_i.pdf
205
21.
206
DISCLOSURE POLICY
207
issued by the Company or related thereto, the the Investor Relations Officer should inquire persons with
access to Material Information, in order to establish whether they are aware of information that must be
disclosed to the market.
The administrators and employees inquired in item above, should respond to the request of the Investor
Relations Officer immediately. If not able to meet personally or talk on telephone with the Investor
Relations Officer on the same day of the request, administrators and employees in question should send
an email with the information to the address ri@mills.com.br regarding the information relevant to.
The disclosure of any Material information, should be simultaneously to CVM and Market entities, and
shall take place before the opening or after the closing of trading on the Stock Exchanges, and in case of
hour incompatibility with other markets, the Brazilian market trading hours shall prevail.
If, exceptionally, it is imperative that the communication of Material information occurs during trading
hours, the Investor Relations Officer when disclosing the Material information, may simultaneously
request the Market entities in Brazil and abroad, the suspension of trading of securities issued by the
Company or related thereto, the time necessary to properly disclose their information. The Investor
Relations Officer must prove to Brazilian Market entities that the requested suspension of trading also was
accomplished in foreign Market entities.
The Company can disclose to the market expectations of future performance (guidance), for short and
long term, especially with regard to financial and operational figures of their businesses, by decision of
the board of directors, noted that such guidance shall be in accordance with CVM regulations, paragraph
4 of article 13 of CVM Instruction No. 358/02.
In the event that disclosure of such expectations, should be subject to the following assumptions:
(i)
(ii)
(iii)
208
(iv)
21.2 Disclosure policy for relevant events or facts adopted by the issuer, indicating the
procedures for maintaining secrecy about relevant information not disclosed
The Companys policy on Disclosure of Material information is based on the following principles and
objectives:
(i)
(ii)
(iii)
to allow equity access to public information on the Company by every shareholder and
investor;
(iv)
(v)
to contribute to the stabilization and fostering of the Brazilian capital market; and
(vi)
The controlling shareholder, directors, members of the board of directors and the fiscal council, as well as
other employees and agents of the Company, shall preserve the confidentiality of the information
pertaining Material Information to which they have privileged access due to the position they hold, until
their actual release to the market and ensure that subordinates and third parties they trust to do the
same, being jointly responsible with them in case of noncompliance.
For the purpose of maintaining confidentiality referred to in item 6.1 above, the individuals mentioned
therein shall observe and ensure observance of the following, without prejudice to the adoption of other
measures that are appropriate in front of each situation:
(i)
disclose the confidential information strictly to those people who absolutely need to know
it;
(ii)
not discuss confidential information in the presence of third parties who are not aware of
such information, though if expected that third party cannot understand the meaning of
the conversation;
209
(iii)
not to discuss confidential information in conference calls in case one cannot be sure of
who actually will participate in it;
(iv)
(v)
create documents and electronic files related to confidential information always with
password protection systems;
(vi)
(vii)
not to send confidential documents through facsimile, unless there is certainty that only
authorized personnel to take notice of such information will have access to the receiver,
and
(viii)
When confidential information needs to be disclosed to any employee of the Company or other person
holding title, function or position in the Company, its controlling shareholders, subsidiaries or affiliates,
other than a director, member of the Board of directors or the Fiscal Council of the Company, the
individual responsible for the transmission of information should make sure that the person receiving it is
aware of the Policy Disclosure of Material Information of the Company, requiring even to sign the Policy
Disclosure of Material Information before providing access to information.
21.3 Administrators responsible for implementation,
supervision of the information disclosure policy
maintenance,
evaluation
and
The full version of Mills Policy on Disclosure of Material Information can be obtained in the following
address:
http://mills.infoinvest.com.br/fck_temp/12_1//Politica_de_Divulgacao_MILLS_RCA_2010_02_08_i.pdf
210
22.
211
EXTRAORDINARY BUSINESS
22.1 Acquisition or disposal of any significant asset which does not belong to the normal
operations of the Company
There was no acquisition or disposal of any significant assets which does not belong to the normal
operations of the Company.
22.2
212