Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes ______ No ___X___
Indicate by check mark whether by furnishing the information contained in this Form,
the Registrant is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes ______ No ___X___
If “Yes” is marked, indicate below the file number assigned
to the registrant in connection with Rule 12g3-2(b): N/A
GAFISA S.A.
Corporate Taxpayer’s ID (CNPJ/MF) No. 01.545.826/0001-07
Corporate Registry (NIRE) No. 35.300.147.952
Publicly-held Company
MANAGEMENT PROPOSAL
ANNUAL GENERAL MEETING
APRIL 28, 2017
1
INDEX
proposAL FOR THE ANNUAL GENERAL MEETING |
3 |
APPENDIX I – MANAGEMENT COMMENTS |
5 |
APPENDIX II – FISCAL COUNCIL CANDIDATES’ PROFILE |
36 |
appendix III – management compensation |
40 |
2
GAFISA S.A.
Corporate Taxpayer’s ID (CNPJ/MF) No. 01.545.826/0001-07
Corporate Registry (NIRE) No. 35.300.147.952
Publicly-held Company
Dear Shareholders,
Below we present for your appreciation the management proposal for the matters on the agenda of the Company’s Annual General Meeting to be held on April 28, 2017:
1. Review the management accounts and examine, discuss and vote on the financial statements relative to the fiscal year ended December 31, 2016.
We propose that the management accounts and financial statements for the 2016 fiscal year, as disclosed on March 23, 2017 on the websites of the Brazilian Securities and Exchange Commission ("CVM") and the BM&FBOVESPA S.A. - São Paulo Securities, Commodities and Futures Exchange ("BM&FBovespa”) via the Periodic Information System (IPE) and on March 24, 2017 in the newspapers O Estado de São Paulo and Official Gazette of the State of São Paulo (“Financial Statements”) be approved without reservations.
Since the Company recorded net loss in the fiscal year ended December 31, 2016, there is no proposal for allocation of net income, and the reporting required by Exhibit 9-1-II of CVM Instruction No. 481 of December 17, 2009 (“CVM Instruction 481/09”) is harmed. For this same reason, this is not the case of mentioning distribution of dividends.
As per Article 9, paragraph III of CVM Instruction 481/09, the Management’s comments on the Company’s financial situation are detailed in Appendix I of this proposal.
In compliance with the provisions of Article 9, V and sole paragraph, III of CVM Instruction 481/09, the opinion of the Fiscal Council and the Audit Committee are available at the Company’s headquarters, on its Investor Relations website (www.gafisa.com.br/ri/) and on the websites of the BM&FBOVESPA S.A. – São Paulo Stock, Commodities and Futures Exchange (www.bmfbovespa.com.br) and the Brazilian Securities and Exchange Commission (www.cvm.gov.br).
2. Establishment of Management’s overall compensation for the 2017 fiscal year.
We recommend that the Management’s overall compensation for the 2017 fiscal year should be established at the limit of up to R$18,739,227.00 for current fiscal year, from January to December 2017.
We clarify that according to Article 152 of Law No. 6.404/76, this amount includes the fixed and short-term variable compensation for the management, any benefits provided or supported by the Company. Social security charges or expenses associated with the recognition of the fair value of stock options that may be granted by the Company this year, which are recognized gradually during grace period (usually three years) with accounting and non-financial effects under the CPC 10 and derive from the Stock Option Plan previously approved by the Company's shareholders at the General Meeting.
The short-term variable compensation program maintained by the Company is connected to achievement of specific goals that are established, agreed upon and approved by the Board of Directors each year. For the 2016 fiscal year, a series of goals was established, which were partially achieved, this is the main reason of difference between the total amount of compensation approved for 2016 compared to the amount effectively paid. Therefore, the Annual General Meeting held in 2016 approved an overall limit of Management compensation of up to R$19,823,318.01 and the effective payment estimated would be approximately R$12.6 million, noting that this amount still has been verified.
Pursuant to Article 12 of CVM Instruction 481/09, the information necessary to analyze the Management compensation proposal is detailed in Appendix III hereto.
3. Installation and establishment of the number of members that should compose the Company's Fiscal Council.
Considering that the term of office has ended, we propose the installation of the Company's Fiscal Council. Once installed, in compliance with the provisions of Article 40 of the Company's Bylaws, we propose that the Company's Fiscal Council be composed of 3 (three) sitting members with an equal number of alternates.
3
4. Considering that the term of office has ended, election of the members of the Company’s Fiscal Council
We propose the election of the following members and their respective alternates for a term of office that will end on the date of the 2018 Annual General Meeting, to wit, as sitting members: (i) Olavo Fortes Campos Rodrigues Junior, Brazilian, business administrator, married, identity card (RG) No. 9.369.027 issued by SSP/SP and enrolled with the individual taxpayer register (CPF/MF) under no. 769.488.977-20, resident and domiciled in São Paulo, São Paulo State at Rua Jesuíno Arruda 541, apto 1, CEP 04553-081, (ii) Peter Edward Cortes Marsden Wilson, Brazilian, economist, married, identity card (RG) No. 08.424.379-9 issued by IFP/RJ and enrolled with the individual taxpayer register (CPF/MF) under no. 168.126.648-20, resident and domiciled in São Paulo, São Paulo State at Rua Princesa Isabel 347, apartment 92, Campo Belo, CEP 046001-001, and (iii) Laiza Fabiola Martins de Santa Rosa, Brazilian, economist, single, identity card (RG) No. 32.677.183-9 issued by SSP/SP and enrolled with the individual taxpayer register (CPF/MF) under no. 294.953.408-29, resident and domiciled in São Paulo, São Paulo State with offices at Avenida Paulista 2.300, 11º andar and as alternates: (i) Marcello Mascotto Iannalfo, Brazilian, economist, married, identity card (RG) No. 16.994.226-0 issued by SSP/SP and enrolled with the individual taxpayer register (CPF/MF) under no. 101.947.028-39, resident and domiciled in the city of Campinas, São Paulo State at Rua Bacabá, 48, Alphaville, Campinas - CEP 13098-339, (ii) Marcelo Martins Louro, Brazilian, business administrator, married, identity card (RG) No. 19.994.703 issued by SSP/SP and enrolled with the individual taxpayer register (CPF/MF) under no. 118.319.918-02, resident and domiciled in São Paulo, São Paulo State at Rua Iaiá 127, CEP 04542-060; and (iii) Alessandro de Oliveira Nascimento, Brazilian, Brazilian Federal Savings Bank employee, single, identity card (RG) No. 44350969-4 issued by SSP-SP and enrolled with the individual taxpayer register (CPF/MF) under No. 335.489.628-07, resident and domiciled in the City and State of São Paulo, with office at Avenida Paulista, 2300,11o andar.
As per Article 10 of CVM Instruction 481/09, the information relative to the candidates to the position of member of the Fiscal Council supported by the Company is detailed in Appendix II of this proposal.
5. Establishment of overall compensation of Members of the Fiscal Council for the 2017 fiscal year
We propose that the overall compensation of Fiscal Council members for the 2017 fiscal year be established in up to R$260,640.00.
We clarify that according to Article 152 of Law No. 6.404/76, this amount includes the social security charges besides the fixed compensation of Fiscal Council members.
As per Article 12 of CVM Instruction 481/09, the information necessary for analysis of the Management compensation proposal can be found in detail in Appendix III of this proposal.
6. Additional Information and Where to Find It
The documents provided for by CVM Instruction 481/09 were submitted to CVM on this present date, via the Periodic Information System (IPE), pursuant to Article 6 of referred Instruction and are available to shareholders, at the Company’s headquarters, at its Investor Relations website (www.gafisa.com.br/ri/), and at the websites of BM&FBovespa (www.bmfbovespa.com.br) and CVM (www.cvm.gov.br). The documents may be consulted and examined at the Company’s headquarters, and if shareholders are interested, they shall schedule date and time with the Investor Relations Department.
Shareholders may exercise their remote voting right, by completing the remote voting form for the Annual General Meeting made available by the Company. Shareholders opting for exercising their voting right via the Remote Voting Form shall comply with the rules and formalities described in the Remote Voting From and item 12.2 of the Company’s Reference Form (Rules, policies and practices referring to general meetings), available at the website of CVM (www.cvm.gov.br).
São Paulo, March 27, 2017.
The Management
Gafisa S.A.
4
APPENDIX I
(As per Appendix 24, item 10 of CVM Instruction no. 480 of December 17, 2009)
10. MANAGEMENT COMMENTS
10.1.
a) general financial and equity conditions |
The Management believes that Company is one of the leading players in the real estate development market, operating nationally with a focus on high-quality residential undertakings targeting all income brackets.
The Company’s revenue is largely derived from the development and sale of real estate projects. The Company recognizes the revenue from these real estate projects during the construction period, based on a financial calculation related to the value of the project on completion, and not when the sales contracts are signed. On a smaller scale, the Company also generates revenue from the provision of real estate services, such as construction, technical and real estate management, to third parties. The Company structures some of its projects through its subsidiaries or jointly controlled affiliates, set up as specific purpose enterprises (SPE).
The Company’s current working capital is sufficient for its present requirements and its cash position, including loans to third parties, and enough to meet the financing of all its activities and cover its capital requirement, for at least the next 12 months.
The Management understands that the Company has sufficient financial and equity conditions to implement its business plan and comply with its short-to-medium-term obligations.
We point out that, due to the Company’s release of material fact dated December 14, 2016, informing on the signature of agreement to sell up to 30% shares issued by Tenda, and in line with CPC 31 – Non-Current Asset Held for Sale and Income from Discontinued Operation, the income statement information as of December 31, 2016, 2015 and 2014 was restated for comparison purposes. Hence, the income from discontinued operation is reported as a single amount in the income statement, envisaging total income after income tax of these operations less impairment loss. The assets and liabilities of discontinued assets group are reported in single lines under assets and liabilities for the fiscal year ended December 31, 2016.
The year of 2016 was marked by continued macroeconomic challenges as the political and economic crisis significantly impacted the Brazilian real estate market. At Gafisa, our conservative new product development strategy and the focused business model on the metropolitan regions of São Paulo and Rio de Janeiro allowed us to partially offset the headwinds we experienced during this period. Launches ended the 4th quarter of 2016 at R$299.4 million, consolidating R$920.8 million in 2016 launches. Net sales totaled R$355.8 million in 4Q16 and R$810.5 million in 2016. 2016 was a year marked by recession in Brazil. In view of negative economic effects during the year, adjusted gross margin ended 2016 at 4.7% compared to 36.9% in 2015.
In view of uncertainties in Brazilian economy in 2016, Gafisa assumed a most conservative position, prioritizing higher liquidity cushion in its businesses, achieving a relevant cash performance during 2016. Gafisa recorded an operating cash generation of R$300.9 million in 2016, reaching free cash flow of R$70.0 million in 2016.
In 2016, the Company maintained its conservative position always working with a balanced capital structure. At the end of the year, the Company was impacted by the accounting effect of Tenda discontinued operation, and net debt/equity ratio reached 71.8%. Excluding project financing, the net debt/equity ratio recorded a ratio of 3.2%.
5
On December 31, 2016, the Company’s cash position was R$253,180 thousand. On the same date, net debt totaled R$1,385,624 thousand and net debt-to-equity ratio stood at 71.8%.
On December 31, 2015, the Company’s cash position was R$712,311 thousand. On the same date, net debt totaled R$1,443,377 thousand and the net debt-to-equity ratio stood at 46.6%.
On December 31, 2014, the Company’s cash position was R$1,157,254 thousand. On the same date, net debt totaled R$1,440,300 thousand and the net debt-to-equity ratio stood at 47.1%.
In 2016, the Company’s adjusted EBITDA margin was -26.6%, 15.8% in 2015, and 18.8% in 2014, due to the effects of the spin-off of Gafisa and Tenda transaction and the pricing adjustments to inventory units, related to current market prices level and to historical cost update at market value in some lots of our landbank. Excluding these effects, 2016 adjusted EBITDA margin was 9.1%.
On a consolidated basis, net revenues for 2016, recognized by the “PoC” method, decreased 36.6% year-over-year, totaling R$915.7 million, impacted especially by the following: (i) lower operating volume; (ii) lower speed of inventory sales, which records higher contribution to revenues, (iii) higher volume of dissolutions and, (iv) result of assets pricing market conditions. Due to a recessive environment and its negative impact on business development, gross margin stood at -12.4%, in 2016, compared to 26.4% in 2015 and 26.3% in 2014, decrease especially affected by higher volume of dissolutions and pricing adjustments of units sold in view of market conditions.
The liquidity ratio in 2016 was 1.49, compared to 2.11 in 2015 and 2.07, in 2014.
As per Material Fact released on December 14, 2016, the Company entered into a stock purchase agreement with Jaguar Growth Asset Management, LLC, to acquire up to 30% of shares issued by Tenda, at the price of R$8.13 per share, representing within the context of operation, cash receivable for Gafisa of R$231.7 million, with total valuation of R$539.0 million for full payment of Tenda’s capital stock.
It is worth mentioning that the completion of referred transaction is subject to certain conditions precedent, amongst them we point out:
(i) Tenda’s capital stock reduction, without cancelation of shares, with refund to Gafisa, currently, its sole shareholder, of R$100.0 million, adjusted by SELIC interest rate, of which (a) R$50.0 million with payment until December 31, 2018; and (b) the balance payable until December 31, 2019, with possibility of anticipation in view of certain financial covenants provided for in the agreement;
(ii) Gafisa’s capital stock reduction with distribution effects to its shareholders of shares corresponding to 50% of Tenda’s capital stock; and
(iii) the conclusion of exercise by Gafisa’s shareholders of preemptive right to acquire shares for the price per share referred to in the operation, noting that, within this context, Gafisa will offer its shareholders, 50% of shares representing Tenda’s capital stock owned thereby, and not only the 30% purpose of the offer received from Jaguar, considering its decision of selling these shares, even if in multiple operations.
Over the last year, Gafisa and Tenda managed to strengthen and improve their operational and financial cycles, ensuring greater stability and preparation, given the challenges of 2017. The Gafisa segment continues with its consistent and balanced operation, improving the level of capital employed, while the Tenda segment is ready to increase the volume of new projects, based on the good results verified in the projects launched in the mew model. The Company continues working guided by capital discipline, towards profitability goals and shareholder value generation, seeking continuous result improvements over the year to come.
6
b) capital structure |
The table below shows the total amount used by the Company to finance its operations (total capitalization) and the segregation of such amounts between debt capital and equity capital (both in real terms and as a percentage) for each fiscal year, as follows:
|
Fiscal Year ended December 31 | ||
2016 |
2015 |
2014 | |
|
(in thousands of Reais) | ||
Total debt capital |
3,279,636 |
3,663,096 |
4,147,449 |
Total equity capital |
1,930,453 |
3,097,236 |
3,058,403 |
Total capitalization |
5,210,089 |
6,760,331 |
7,205,852 |
|
|
| |
Debt capital/total capitalization ratio |
62.9% |
54.2% |
57.6% |
Equity capital/total capitalization ratio |
37.1% |
45.8% |
42.4% |
On December 31, 2016, the Company’s cash position was R$253,180 thousand. On the same date, net debt totaled R$1,385,625 thousand and the net debt-to-equity ratio stood at 71.8%.
On December 31, 2015, the Company’s cash position was R$712,311 thousand. On the same date, net debt totaled R$1,443,377 thousand and the net debt-to-equity ratio stood at 46.6%.
On December 31, 2014, the Company’s cash position was R$1,157,254 thousand. On the same date, net debt totaled R$1,440,300 thousand and the net debt-to-equity ratio stood at 46.7%.
c) capacity for payment in relation to the financial commitments assumed |
On December 31, 2016, the Company’s net debt was R$1,385,624 thousand, and the cash position and cash equivalents amounted to R$253,180 thousand, compared to a total debt of R$1,638,805 thousand, a net debt-to-equity ratio of 71.8%.
Additionally, the Company had a total of R$2,197,046 thousand of real estate receivables and R$631,833 thousand gross amount considering impairment, of unsold finished units, representing R$592,616 thousand in PSV, compared to R$493,783 thousand of properties payable and R$446,337 thousand of costs to be incurred. When considering the sum of the total receivables and inventory of unsold finished units, this exceeds 1.25 times the sum of Net Debt, properties payable and costs to be incurred.
Furthermore, of the Company’s R$1,638,805 thousand of total debt, R$1,022,038 thousand relates to Brazil’s Housing Finance System contracts, which use funds to finance the construction of real estate projects, and counts on fiduciary assignment or pledge of the real estate receivables of each project, which mostly mature upon the project’s delivery. Therefore, when finalizing the projects, the resources from the settlement of the outstanding balance by clients are obligatorily used to amortize the balance of the Company’s contracts. Out of total indebtedness of the Company, 80.8% are related to the finance of construction of real estate projects.
7
On December 31, 2015, the Company’s net debt was R$1,443,337 thousand, and the cash position and cash equivalents amounted to R$712,311 thousand, compared to a total debt of R$2,155,688 thousand with a net debt-to- equity ratio of 46.6%.
Additionally, the Company had a total of R$2,595,332 thousand of real estate receivables and R$333,036 thousand gross amount considering impairment, of unsold finished units, representing R$591,797 thousand in PSV, compared to R$570,191 thousand of obligations related to purchase of real estate and R$453,897 thousand of costs to be incurred. When considering the sum of the Total Receivables and Inventory of unsold finished units, this exceeds 2.25 times the sum of Net Debt, Obligations Related to Construction and Costs to be Incurred.
Furthermore, of the Company’s R$2,155,688 thousand of total debt, R$1,161,707 thousand relates to Brazil’s Housing Finance System contracts, which use funds to finance the construction of real estate projects, and counts on fiduciary assignment or pledge of the real estate receivables of each project, which mostly mature upon the project’s delivery. Therefore, when finalizing the projects, the resources from the settlement of the outstanding balance by clients are obligatorily used to amortize the balance of the Company’s contracts. Out of total indebtedness of the Company, 84.2% are related to the finance of construction of real estate projects.
On December 31, 2014, the Company’s net debt was R$1,440,300 thousand, and cash and cash equivalents amounted to R$1,157,254 thousand, compared to a total debt of R$2,597,554 thousand, with a net debt/ equity ratio of 47.1%.
Additionally, the Company’s real estate receivables amounted to R$2,889,352 thousand, while completed and unsold units amounted to R$260,808 thousand, gross amount considering impairment, representing R$568,506 thousand in PSV, compared to a total of R$570,506 thousand of real estate payables, and R$628,751 thousand of costs incurred. When considering the sum of the total receivables and completed and unsold units, it exceeds 2.62 times the sum of net debt, real estate payables and costs incurred.
Furthermore, of the Company’s total debt, corresponding to R$2,597,554 thousand, R$1,128,514 thousand is related to SFH contracts to finance the construction of real estate projects that have fiduciary assignments or pledges of the real estate receivables for each project, which, in most cases, are due on the delivery of the project. When concluded, the funds from the settlement of the balance due by the clients should be used in the amortization of the balance of the Company's contracts. Out of the Company's total indebtedness, 77.8% are related to the finance of construction of real estate projects.
Considering the Company's indebtedness profile, its most liquid assets against its obligations, reflected or not reflected in the Balance Sheet, the officers believe there is sufficient liquidity to meet the current contractual obligations on this date.
If needed, the Company has capacity to take out additional loans to finance investments and operations.
8
d) sources of financing for working capital and investments in non-current assets used |
As and when allowed, the Company takes out debt for all projects it develops with Brazil’s Housing Finance System (SFH/SFI), which offers lower interest rates than traditional working capital facilities, with security interest and amortization connected with the settlement by clients through the transfer of clients’ receivables to banks. Using this credit facility, the Company intends to cover the cash exposure for each project, which is not covered by monthly payments received. In 2016, the Company did not conduct SFI financing operations, but 52 SFH financing operations were contracted, totaling R$626,754 thousand. In 2015, the Company did not conduct SFI financing operations, but 67 SFH financing operations were contracted, totaling R$805,742 thousand. In 2014, the Company contracted 34 SFH financing operations, totaling R$566,444 thousand, and signed one SFI contract in the amount of R$194,000 thousand.
The increase in SFH/SFI financing operations reflects the Company’s pursuit of a capital structure in line with its operating cycle, prioritizing fundraising through debt instruments aligned to its projects’ flow of receivables. Therefore, over the past three years, the Company has given priority to financing sources directly linked to the projects portfolio. As a result, 79.3% of the Company’s total debt in 2016 was related to debt linked to real estate project finance, a regression compared to 84.2% recorded in 2015 and 77.8% in 2014.
Additionally, the Company used credit assignment and securitization instruments when it perceived a market demand for real estate receivables, and privileged definitive assignment structures with no right to withdraw. The transactions are subject to resolutive conditions, the main of which being the complete formalization of the guarantee to the assignee by the assignor, and the current amount of these transactions is recorded in the Company’s liabilities up to the resolution of the guarantee. In 2016, the Company held a securitization operation in the nominal amount of R$79,313 thousand. In 2015, the Company held a securitization operation in the nominal amount of R$32,192 thousand and in 2014, the Company also held a securitization operation in the nominal amount of R$15,200 thousand.
In 2016 and 2015, the Company did not issue debentures, and in 2014 raised the total amount of R$185,000 thousand with two private issues of debentures, both with security interest.
Finally, also in 2016, the Company issued bank bill of credit (CCB) totaling R$65,000 thousand, with a view to complementing its financing strategy, without funding of this type in 2015 and 2014.
The Company does not make investments in non-current assets.
e) sources of financing for working capital needs and investments in non-current assets intended to be used to cover liquidity shortfalls |
The Company currently has a liquidity level and cash generation prospects that allows for it to not use additional funding for its operations. But this does not eliminate the possibility to structure or take out new working capital facilities according to the instruments available and market conditions at the time of contracting, as indicated in items 10.1.c and 10.1.d.
f) levels of indebtedness and debt characteristics |
i) significant loan and financing agreements
The Company's officers show in the table below the Company’s total amount of debt of any consolidated nature, which is equal to the sum of total Current Liabilities and total Non-current Liabilities on December 31, 2016, 2015 and 2014:
9
|
Fiscal Year ended December 31 | ||
2016 |
2015 |
2014 | |
|
(in thousands of Reais) | ||
Total current liabilities |
2,275,550 |
2,048,968 |
2,270,869 |
Total non-current liabilities |
1,004,086 |
1,614,128 |
1,876,580 |
Total amount of debt of any nature |
3,279,636 |
3,663,096 |
4,147,449 |
Below, the Company’s officers show some key features of consolidated financings and loans of the Company, grouped by type, on December 31, 2016, 2015 and 2014:
|
|
|
Fiscal Year ended December 31 | ||
Average cost |
Maturity |
2016 |
2015 |
2014 | |
|
(in thousands of Reais) |
|
| ||
Project Financing (SFH/SFI) |
TR + 8.30% to 14% / 120% and 129% CDI |
February 2017 to August 2021 |
1,022,038 |
1,161,707 |
1,128,514 |
FGTS Debentures |
10.38% + TR |
December 2017 |
302,363 |
654,445 |
891,650 |
Debentures |
1.90% + CDI / 8.22 + IPCA |
July 2018 to January 2020 |
148,905 |
203,513 |
297,449 |
Working capital |
125% of CDI / 0.59% to 4.25% + CDI / INCC |
June 2017 to June 2019 |
164,262 |
131,128 |
268,911 |
Obligations with Investors |
CDI + 0,59% |
June 2016 to June 2017 |
1,237 |
4,895 |
11,030 |
Total Debt |
1,638,805 |
2,155,688 |
2,597,554 |
Project Financing (SFH and SFI)
Project financing is represented by loans from national commercial banks to raise the necessary funds to develop the real estate projects of the Company and its subsidiaries and affiliates. These contracts have security interest represented by the land’s mortgage and by the fiduciary assignment or pledge of receivables, and the funds are released upon proof of physical and financial development of the construction works; amortization begins after the construction works purpose of the contract are completed. During the amortization of the contract, the proceeds from the settlement of the outstanding balance by clients are used to amortize the debt. One of the SFI contracts, in line with the Company’s risk strategy, was linked to the contract of a hedge instrument to mitigate the risk of a fixed rate to CDI percentage, aiming at leveling the debt remuneration against the use of funds available by Treasury.
FGTS Debentures
These refer to the Company’s 7th Issue which relies on FGTS resources, and the proceeds are used to fund the construction works of the projects given as guarantee. For further information on these issues, please refer to item 18.5 of the Reference Form.
Debentures
On December 31, 2016, these refer to the 9th Issue and 10th Issue of the Company, and the proceeds are allocated, respectively, to the Company’s working capital and to the development of selected real estate projects. In line with the Company’s risk strategy, the 9th and the 10th Issue of the Company were linked to the contract of hedge instruments to mitigate the risk of a CDI rate + to CDI percentage and IPCA to CDI percentage, respectively, aiming at leveling the debt remuneration against use of funds available by Treasury. For further information on these issues, please refer to item 18.5 of the Reference Form.
10
Working Capital
It consists of Bank Credit Notes (CCB) and other banking instruments that represent debt, and the proceeds are allocated to the Company’s working capital. These instruments may have security interests or sureties, and feature covenants that may result in the early maturity of the obligations if not complied with. Due to the impacts of sale of subsidiary Tenda S.A., for a provisional period, the Company defaulted one of the financial covenants provided for in one of CCBs issued. However, the Company received, on March 22, 2017, a formal consent on such restrictive covenant, by means of which creditor deliberated not to declare the acceleration in view of referred default, thus, maintaining the Company’s performance with its contractual liabilities.
Obligations with Investor
These are structured transactions that involved the restructuring of Company subsidiaries to capture the distribution of results from the development of selected real estate projects the investor holds an interest in. These investments feature clauses of return on capital after a certain period and priority in the distribution of results, reason why they are recorded under “Obligations with Investors” in the Company’s financial statements. For further information, please refer to item 6.5 of this Reference Form.
ii) other long-term arrangements with financial institutions
There are no other long-term arrangements with financial institutions but those detailed in this item.
iii) degree of Company debt subordination
For the fiscal years ended December 31, 2016, 2015 and 2014 the Company's debts, contracted as financing and loans with financial institutions, can be segregated according to the nature of their guarantees, as follows:
|
Fiscal Year Ended December 31 | ||
2016 |
2015 |
2014 | |
|
(in thousands of Reais) | ||
Total debt with Security Interest |
1,348,957 |
1,416,648 |
1,391,412 |
Total debt with Floating Guarantee |
302,363 |
654,445 |
891,650 |
Total Unsecured Debt |
122,468 |
84,595 |
314,492 |
Total Debt |
1,773,798 |
2,155,688 |
2,597,554 |
There is no degree of contractual subordination among the unsecured debts. The Company’s debts with actual and floating guarantee have the preferences and prerogatives provided for by the law. Therefore, in the event of collective insolvency proceedings: (i) the debts with security interest have payment priority over the Company's other debts, up to the value of encumbered asset and (ii) the debts with floating guarantee have priority over unsecured debts.
iv) restrictions imposed to the issuer, especially with regards to indebtedness limits, taking of new loans, distribution of dividends, disposal of assets, issuance of new securities, and sale of controlling interest as well as if issuer has been complying with these restrictions;
11
The Company is party to agreements that set minimum and maximum limits on specific topics, in addition to restricting the Company regarding the taking of some actions. Noncompliance with the agreed ratios or restrictions may result in the early maturity of the agreements.
The financial instruments’ major restrictions in the fiscal years ended December 31, 2016, 2015 and 2014, are as follows:
· request of any judicial or extrajudicial reorganization plan to any creditor or class of creditors, regardless of a judicial approval having been requested or obtained for said plan; or file a court request for judicial reorganization;
· change in the direct or indirect control of the Issuer, under article 116 of Law 6,404 of December 15, 1976, as amended (“Brazilian Corporate Law”), that result in a downgrade in the Company’s risk rating to a lower level than that at the time of the issue or, in some cases, to a rating lower than A- or equivalent in national scale by the leading rating agencies;
· payment by the Company of dividends, interest on equity, or any other profit sharing provided for in the Company’s bylaws, whenever it is in arrears regarding the issues in effect at the time the event is declared, except for the payment of the minimum compulsory dividend provided for in article 202 of the Brazilian Corporate Law;
· declaration of early maturity of any financial obligation and debts of the Company and/or its Relevant Subsidiaries, in the domestic or international market;
· amendment to or change in the Company’s business purpose so that the Company no longer operates as a real estate developer and construction Company;
· change in the corporate nature of the Company to limited liability, under articles 220 through 222 of the Brazilian Corporate Law;
· spin-off, or merger of the Company into another Company, unless such transaction is approved by the holders of debt securities or holders are granted the right to withdraw;
· reduction in the Company’s capital stock that results in a capital stock lower than ninety-five percent (95%) of the existing capital stock, except (i) in the case the capital reduction is carried out to absorb losses under article 173 of the Brazilian Corporate Law, or (ii) it is previously approved by the holders of debt securities;
· Disposal, expropriation, seizure, or any other form of disposal of fixed assets by the Company in equivalent amount, as determined in indentures or contracts, and that may affect the Company’s financial capacity.
The restrictions described above may not fully apply to all agreements in effect on this date, and different limits may be determined to each agreement.
The Company has also committed to keeping the following financial indicators within the limits set. The formulas and maximum and minimum limits, as well as their indicators are presented below:
12
|
December 31 | ||
2016 |
2015 |
2014 | |
7th issue |
|||
Total accounts receivable plus inventories must be less than zero or higher than 2.0 times net debt minus project debt (3). |
53.98 times |
-14.12 times |
-9.33 times |
Total debt, minus project debt (3), minus cash and cash equivalents (1), should not exceed 75% of shareholders’ equity plus non-controlling interest. |
3.11% |
-12.2% |
-19.3% |
Total receivables plus revenues to be recognized plus inventory of finish units must be higher than 1.5 times the net debt +obligations related to construction + costs to be incurred. |
2.15 times |
2.25 times |
2.10 times |
|
|
| |
9th issue |
|||
Total accounts receivable plus total inventory must be less than zero or higher than 2.0 times net debt |
2.34 times |
3.71 times |
3.86 times |
Net debt should not exceed 100% of shareholders’ equity plus non-controlling interest. |
71.71% |
46.4% |
46.7% |
|
|
| |
10th issue |
|||
Total accounts receivable plus inventory of finish units must be less than zero or higher than 2.0 times net debt minus project debt (3). |
53.98 times |
-14.12 times |
n/a |
Total debt, minus project debt (3), minus cash and cash equivalents (1), should not exceed 75% of shareholders’ equity plus non-controlling interest. |
3.11% |
-12.2% |
n/a |
CCBs and Other Instruments |
|
|
|
Total accounts receivable plus inventory of finish units must be less than zero or higher than 2.0 times net debt minus project debt (3) |
33.62 times |
-7.73 times |
-5.32 times |
Net debt should not exceed 70% of shareholders’ equity plus non-controlling interest. |
71.71% |
n/a |
n/a |
Total accounts receivable plus inventory of finish units must be less than zero or higher than 2.0 times net debt minus project debt. |
33.62 times |
-7.73 times |
-5.32 times |
Total debt, minus project debt, minus cash and cash equivalents (1), should not exceed 75% of shareholders’ equity plus non-controlling interest. |
3.11% |
-12.2% |
-19.3% |
|
|
|
|
(1) (1) Cash refers to cash and cash equivalents and marketable securities. | |||
(2) (2) Total receivables, whenever mentioned, refers to the amount reflected in the Balance Sheet plus the amount not stated in the Balance Sheet. | |||
(3) Project debt and debt with security interest refers to the Housing Finance System (SFH) debt, defined as the sum of all loans contracts disbursed whose funds derive from the Housing Finance System (SFH), and also the debt related to the seventh issuance |
On December 31,2016, the Company was complying with restrictive covenants, except for a financial covenant of a CCB, pursuant to item (i) above.
g) limits of contracted financing and percentages already used |
In the fiscal years ended December 31, 2014, 2015 and 2016, the proceeds of construction financing contracted from national institutions considered by the Company as prime institutions in the National Financial System are exclusively allocated to the construction works of the relative projects. The funds are released to the Company according to the physical/financial development of the construction works. Besides, the Company also used other sources of funding, such as Debentures, Housing Financing System and Bank Credit Notes and these funds are released to the Company upon execution.
On December 31, 2016, the Company had contracted a total of R$3,243 million; of this amount, R$2,556 million had already been released, accounting for use of 68,04% of funds raised. Of this amount, the Company’s total indebtedness corresponds to R$1,047 million, of which R$805 million refer to SFH contracts.
13
h) significant alterations in each item of the financial statements |
Due to the Company’s release of material fact dated December 14, 2016, informing on the signature of agreement to sell up to 30% shares issued by Tenda, and in line with CPC 31 – Non-Current Asset Held for Sale and Income from Discontinued Operation, the information of the income statement as of December 31, 2016, 2015 and 2014 was restated for comparison purposes. Hence, the income from discontinued operation is reported as a single amount in the income statement, envisaging total income after income tax of these operations less impairment loss. The assets and liabilities of discontinued assets group are reported in single lines under assets and liabilities for the fiscal year ended December 31, 2016.
CONSOLIDATED STATEMENT OF INCOME FOR THE FISCAL YEAR
2016 |
Vertical Analysis % 2016 |
2015 |
Vertical Analysis % 2015 |
2014 |
Vertical Analysis % 2014 |
Chg. |
Chg. | |
Net operating revenue |
915,698 |
100% |
1,443,357 |
100% |
1,580,861 |
100% |
(527,659) |
(137,504) |
Operating costs |
|
|
|
|
|
|
|
|
Real estate development and sale |
(1,029,213) |
-112% |
(1,061,921) |
-74% |
(1,164,997) |
-74% |
32,708 |
103,076 |
|
|
|
|
|
|
|
| |
Gross (loss) operating profit |
(113,515) |
-12% |
381,436 |
26% |
415,864 |
26% |
(494,951) |
(34,428) |
|
|
|
|
|
|
|
| |
Operating income (expense) |
(362,747) |
-40% |
(295,595) |
-20% |
(324,211) |
-21% |
(67,152) |
28,616 |
Selling expenses |
(94,946) |
-10% |
(97,949) |
-7% |
(95,063) |
-6% |
3,003 |
(2,886) |
General and administrative expenses |
(106,585) |
-12% |
(97,442) |
-7% |
(124,833) |
-8% |
(9,143) |
27,391 |
Equity pick-up on investments Investments |
(48,332) |
-5% |
40,015 |
3% |
38,405 |
2% |
(88,347) |
1,610 |
Depreciation and amortization |
(33,892) |
-4% |
(32,585) |
-2% |
(63,607) |
-4% |
(1,307) |
31,022 |
Other income/(expenses), net |
(78,992) |
-9% |
(107,634) |
-7% |
(79,113) |
-5% |
28,642 |
(28,521) |
|
|
|
|
|
|
|
| |
Income/(loss) before financial income and expenses and income tax and union dues |
(476,262) |
-52% |
85,841 |
6% |
91,653 |
6% |
(562,103) |
(5,812) |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Financial expenses |
(84,118) |
-9% |
(127,728) |
-9% |
(114,371) |
-7% |
43,610 |
(13,357) |
Financial income |
58,439 |
6% |
77,306 |
5% |
98,121 |
6% |
(18,867) |
(20,815) |
|
|
|
0 |
|
|
|
| |
Income (loss) before income tax and union dues |
(501,941) |
-55% |
35,419 |
2% |
75,403 |
5% |
(537,360) |
(39,984) |
|
|
|
|
|
|
|
| |
Current income tax and social contribution |
(10,722) |
-1% |
(14,763) |
-1% |
(25,304) |
-2% |
4,041 |
10,541 |
Deferred income tax and social contribution |
(89,358) |
-10% |
14,105 |
1% |
16,355 |
1% |
(103,463) |
(2,250) |
|
|
|
|
|
|
|
| |
Total income tax and union dues |
(100,080) |
-11% |
(658) |
0% |
(8,949) |
-1% |
(99,422) |
8,291 |
|
|
|
|
|
|
|
| |
Net income (loss) from continued operations |
(602,021) |
-66% |
34,761 |
2% |
66,454 |
4% |
(636,782) |
(31,693) |
|
|
|
|
|
|
|
| |
Net income (loss) from discontinued operations |
(559,704) |
-61% |
36,218 |
3% |
(110,179) |
-7% |
(595,922) |
146,397 |
|
|
|
|
|
|
|
| |
Net income (loss) for the year |
(1,161,725) |
-127% |
70,979 |
5% |
(43,725) |
-3% |
(1,232,704) |
114,704 |
|
|
|
|
|
|
|
| |
(-) Income / (loss) attributable: |
|
|
|
|
|
|
|
|
To non-controlling interest |
1,871 |
0% |
(3,470) |
0% |
(1,176) |
0% |
5,341 |
(2,294) |
To parent company |
(1,163,596) |
-126% |
74,449 |
5% |
(42,549) |
-3% |
(1,238,045) |
116,998 |
14
Operating Results for the Fiscal Years ended December 31, 2016 compared to 2015
Net Revenue from Sales and/or Services
Consolidated net revenue for 2016, recognized by the “PoC” method came to R$915.6 million, down 36.6% year-over-year, especially impacted by: (i) lower operating volume; (ii) lower speed of inventory sales, which records the highest contribution to revenue, (iii) higher volume of dissolutions and, (iv) result of assets pricing market conditions.
Cost of Development and Sale of Property
Cost of development and sale of property and physical swap agreements totaled R$1.0 billion in 2016, down 3.1% over the R$1.1 billion recorded in 2015, result of lower operating and sales volume in 2016.
Gross Profit
Gross profit reported in 2016 came negative at R$113.5 million, compared to R$381.4 million in 2015. As a result of a recessive environment and its effects on the business development, gross margin was -12.4%, in 2016, compared to 26.4% in 2015 and 26.3% in 2014, a decrease especially impacted by higher volume of dissolutions and pricing adjustments of units sold in view of current market conditions.
Selling expenses
Selling expenses totaled R$94.9 million in 2016, down 3.1% over R$97.9 million in 2015. Selling expenses in 2016 accounted for 10.4% of its net operating revenue, compared to 6.8% in 2015. The nominal variation is a result of lower net sales volume in the period, in relation to net revenue, the variation is an effect of lower revenue volume in 2016.
General and Administrative Expenses, and Stock Option Plan Expenses
General and administrative expenses totaled R$106.6 million in 2016 compared to R$97.4 million in 2015, up 9.4%, or R$9.1 million, especially impacted by the last quarter of the year due to the following factors: (i) R$2.7 million due to severance pay and indemnity expenses as part of a year-end corporate restructuring; (ii) R$2.9 million referring to final expenses related to the separation of the Gafisa and Tenda units’ IT structure; and (iii) net effect of R$9.3 million related to reversal of provision for profit sharing recorded in 2015.
Depreciation and Amortization
Depreciation and amortization totaled R$33.9 million in 2016, up 4.0% over R$32.6 million recorded in 2015, reflecting current Gafisa segment’s business volume, with a volume of launches close to R$1.0 billion over the past four years.
Other Operating Expenses
In 2016, our results reflected a negative impact of R$79.0 million, compared to R$107.6 million in 2015, due to lower expenses with litigation in the period.
Financial income
The financial income decreased R$18.9 million, totaling R$58.4 million in 2016, due to lower balance of cash and cash equivalents in the period.
15
Financial expenses
Financial expenses totaled R$84.1 million in 2016, compared to R$127.7 million in 2015, down 34.1% year-over-year, due to decreased gross indebtedness in the period.
Provision for Income Tax and Social Contribution and Deferred Income Tax
Income tax, social contribution and deferred taxes totaled R$100.1 million in 2016, compared to R$0.7 million in 2015, impacted by R$90.3 million due to the reversal of tax credits previously recorded, in view of impact of the result from discontinued operation (Tenda) over net income for the year.
Net income (loss) from discontinued operations
Result from discontinued operations was a loss of R$559.7 million in 2016, compared to a net income of R$36.2 million in 2015. This variation is due to impairment of assets recorded in the amount of R$610.1 million, related to the measurement at the lower of carrying amount and fair value less costs to sell, based on the value of R$8,13 per share, according to the contract executed for the sale of Tenda’s shares.
Non-Controlling Interest
The non-controlling interest (minority shareholders of subsidiaries in which the Company holds investment) came to R$1.9 million compared to a negative result of R$3.5 million in 2015, due to variation of the Company’s associated companies’ results.
Net Income (Loss)
Gafisa ended 2016 with a net loss of R$1.2 billion, compared to a net income of R$74.4 million in 2015. Net result for the year was impacted by accounting effects generated by the execution of the stock purchase agreement with Jaguar Growth Asset Management, LLC. The total effect amounted to R$680.2 million, and was comprised by the following factors: (i) the price per share of Tenda, R$8.13, establishes a valuation of R$439.0 million for 100% of the share capital of Tenda, lower than Tenda’s shareholders’ equity (R$1.049 billion) and thus generating an impairment of R$610.1 million and; (ii) reversal of R$90.3 million as tax credits, previously recorded, due to the impact of the net result from this operation over the net income for the year.
Additionally, inventory and landbank adjustments which totaled R$159.9 million also impacted net result.
Operating Results related to the Fiscal Years ended December 31, 2015 compared to 2014
Net Revenue from Sales and/or Services
Consolidated net revenue for 2015, as recognized by the “PoC” method came to R$1.4 billion, down 8.7% year-over-year, impacted by lower projects under development and higher contribution from new projects to compose revenue.
Cost of Development and Sale of Property
Cost of development and sale of property and physical swap agreements totaled R$1.1 billion in 2015, down 8.8% over the R$1.2 billion recorded in 2014, substantially impacted by lower construction costs and new land, due to lower volume Gafisa’s launches over the past three years.
16
Gross Profit
Gross profit reported in 2015 came to R$381.4 million, compared to R$415.9 million in 2014. The variation is mainly due to the constancy seen in Gafisa segment’s results and projects profitability of Gafisa segment projects concentrated in São Paulo and Rio de Janeiro. Gross margin stood at 26.4% in 2015, compared to 26.3% in 2015.
Selling expenses
Selling expenses totaled R$97.9 million in 2015, an increase of 3.0% compared to R$95.1 million in 2014. Selling expenses in 2015 accounted for 6.8% of its net operating revenue, compared to 6.0% in 2014. This variation is due to additional and necessary efforts to increase sales volume, considering more challenging macroeconomic scenario.
General and Administrative Expenses, and Stock Option Plan Expenses
General and administrative expenses totaled R$97.4 million in 2015 compared to R$124.8 million in 2014, down 21.9%, or R$27.4 million, due to a lower volume of old projects and the adequacy of the Company’s operating expenses structure to current market conditions. Aditionally:
(1) salaries and payroll charges were down by R$5.3 million or 6.6% year-over-year;
(2) provision and profit sharing decreased R$9.5 million or 27.1% year-over-year, totaling R$25.5 million in 2015; and
(3) services expenses were down R$6.2 million, or 20.3% year-over-year.
Depreciation and Amortization
Depreciation and amortization totaled R$32.6 million in 2015, down 48.8%, over R$63.6 million recorded in 2014, reflecting the Company’s lower business volume, with average volume of launches close to R$1.0 billion over the past three years.
Other Operating Expenses
In 2015, our results reflected a negative impact of R$107.6 million, compared to R$79.1 million in 2014, mainly due to increase in expenses with litigation, a consequence of the large volume of deliveries related to delivery of old projects in 2012, 2013 and 2014.
Financial income
The financial income was down R$20.8 million, totaling R$77.3 million in 2015, due to lower balance of cash and cash equivalents in the period.
Financial expenses
Net financial expenses totaled R$127.7 million in 2015, compared to R$114.4 million in 2014, down 11.7% year-over-year, due to reduced gross indebtedness in the period.
Provision for Income Tax and Social Contribution and Deferred Income Tax
Income tax, social contribution and deferred taxes totaled R$0.7 million, compared to R$9.8 million in 2014.
The variation is mainly due to the recognition of income tax and social contribution credit of approximately R$7.2 million, as a result of an update of the study on the Company's business plan, which shows the total recovery capacity of the tax loss inventory and temporary differences over the upcoming years.
17
Non-controlling interest
The increased non-controlling interest (minority shareholders of subsidiaries the Company holds investment), from R$1.2 million to R$3.5 million in 2015, was due to the results variation of the Company’s associated companies.
Net Income (Loss)
Gafisa ended 2015 with a net income of R$74.4 million, compared to a net loss of R$43.4 million in 2014, reflecting the improvements implemented over the past years. The Company achieved higher efficiency in its operating cycle, by reducing construction period and a better financial management of its projects. In addition, higher speed in the transfer process contributed to a positive net result.
CONSOLIDATED BALANCE SHEET
2016 |
Vertical Analysis % 2016 |
2015 |
Vertical Analysis % 2015 |
2014 |
Vertical Analysis % 2014 |
Chg. R$000 2016 x 2015 |
Chg. | |
Assets |
||||||||
Current |
||||||||
Cash and cash equivalents |
29,534 |
1% |
82,640 |
1% |
109,895 |
2% |
(53,106) |
(27,255) |
Securities |
223,646 |
4% |
629,671 |
9% |
1,047,359 |
15% |
(406,025) |
(417,688) |
Accounts receivable from development and services provided |
722,640 |
14% |
1,395,273 |
21% |
1,440,498 |
20% |
(672,633) |
(45,225) |
Properties for sale |
1,122,724 |
22% |
1,880,377 |
28% |
1,695,817 |
24% |
(757,653) |
184,560 |
Receivables from related parties |
57,455 |
1% |
95,118 |
1% |
142,732 |
2% |
(37,663) |
(47,614) |
Assets from discontinued operations |
1,189,011 |
23% |
- |
0% |
- |
0% |
1,189,011 |
- |
Land for sale |
3,306 |
0% |
105,857 |
2% |
110,563 |
2% |
(102,551) |
(4,706) |
Prepaid expenses |
2,548 |
0% |
7,171 |
0% |
15,442 |
0% |
(4,623) |
(8,271) |
Other receivables |
49,336 |
1% |
120,657 |
2% |
128,905 |
2% |
(71,321) |
(8,248) |
Total current assets |
3,400,200 |
65% |
4,316,764 |
64% |
4,691,211 |
65% |
(916,564) |
(374,447) |
|
|
|
|
|
|
|
| |
Non-current |
|
|
|
|
|
|
|
|
Accounts receivable from development and services provided |
271,322 |
5% |
407,091 |
6% |
384,821 |
5% |
(135,769) |
22,270 |
Property for sale |
592,975 |
11% |
750,240 |
11% |
816,525 |
11% |
(157,265) |
(66,285) |
Receivables from related party transactions |
25,529 |
0% |
109,193 |
2% |
107,067 |
1% |
(83,664) |
2,126 |
Derivatives |
9,030 |
0% |
0 |
0% |
0 |
0% |
9,030 |
- |
Other receivables |
58,917 |
1% |
82,880 |
1% |
112,241 |
2% |
(23,963) |
(29,361) |
957,773 |
18% |
1,349,404 |
20% |
1,420,654 |
20% |
(391,631) |
(71,250) | |
|
|
|
|
|
|
|
| |
Investments |
799,911 |
15% |
993,122 |
15% |
968,393 |
13% |
(193,211) |
24,729 |
Property, plant and equipment |
23,977 |
0% |
49,176 |
1% |
48,691 |
1% |
(25,199) |
485 |
Intangible assets |
28,228 |
1% |
51,866 |
1% |
76,903 |
1% |
(23,638) |
(25,037) |
852,116 |
16% |
1,094,164 |
16% |
1,093,987 |
15% |
(242,048) |
177 | |
|
|
|
|
|
|
|
| |
Total non-current assets |
1,809,889 |
35% |
2,443,568 |
36% |
2,514,641 |
35% |
(633,679) |
(71,073) |
|
|
|
|
|
|
|
| |
Total assets |
5,210,089 |
100% |
6,760,332 |
100% |
7,205,852 |
100% |
(1,550,243) |
(445,520) |
18
2016 |
Vertical Analysis % 2016 |
2015 |
Vertical Analysis % 2015 |
2014 |
Vertical Analysis % 2014 |
Chg. |
Chg. | |
Liabilities |
||||||||
Current |
||||||||
Loans and financing |
669,795 |
13% |
672,365 |
10% |
550,058 |
8% |
(2,570) |
122,307 |
Debentures |
314,139 |
6% |
389,621 |
6% |
504,387 |
7% |
(75,482) |
(114,766) |
Obligations for property purchases and advances to clients |
205,388 |
4% |
361,420 |
5% |
490,605 |
7% |
(156,032) |
(129,185) |
Material and service providers |
79,120 |
2% |
57,335 |
1% |
95,131 |
1% |
21,785 |
(37,796) |
Taxes and contributions |
51,842 |
1% |
102,057 |
2% |
114,424 |
2% |
(50,215) |
(12,367) |
Salaries, payroll charges and profit sharing |
28,880 |
1% |
60,102 |
1% |
65,039 |
1% |
(31,222) |
(4,937) |
Minimum mandatory dividends and interest on equity |
- |
0% |
17682 |
0% |
- |
0% |
(17,682) |
17,682 |
Provision for court claims |
79,054 |
2% |
100,312 |
1% |
103,034 |
1% |
(21,258) |
(2,722) |
Payables to credit assignment |
34,698 |
1% |
23,482 |
0% |
24,135 |
0% |
11,216 |
(653) |
Payables to related party transactions |
85,611 |
2% |
87,100 |
1% |
156,503 |
2% |
(1,489) |
(69,403) |
Financial instruments |
5,290 |
0% |
14,056 |
0% |
3,340 |
0% |
(8,766) |
10,716 |
Other liabilities |
69,921 |
1% |
163,437 |
2% |
164,213 |
2% |
(93,516) |
(776) |
Liabilities over assets from discontinued operation |
651,812 |
13% |
- |
0% |
- |
0% |
651,812 |
- |
Total current liabilities |
2,275,550 |
44% |
2,048,969 |
30% |
2,270,869 |
32% |
226,581 |
(221,900) |
Non-current |
||||||||
Loans and financing |
516,505 |
10% |
620,470 |
9% |
847,367 |
12% |
(103,965) |
(226,897) |
Debentures |
137,129 |
3% |
468,337 |
7% |
684,712 |
10% |
(331,208) |
(216,375) |
Obligations for property purchases and advances to clients |
90,309 |
2% |
248,514 |
4% |
101,137 |
1% |
(158,205) |
147,377 |
Deferred income tax and social contribution |
100,405 |
2% |
16,489 |
0% |
34,740 |
0% |
83,916 |
(18,251) |
Provision for court claims |
83,904 |
2% |
142,670 |
2% |
136,540 |
2% |
(58,766) |
6,130 |
Payables to credit assignment |
64,332 |
1% |
35,811 |
1% |
31,994 |
0% |
28,521 |
3,817 |
Payables to related party transactions |
- |
0% |
41,002 |
1% |
- |
0% |
(41,002) |
41,002 |
Derivatives |
- |
0% |
7,618 |
0% |
4,833 |
0% |
(7,618) |
2,785 |
Other liabilities |
11,502 |
0% |
33,216 |
0% |
35,257 |
0% |
(21,714) |
(2,041) |
Total non-current liabilities |
1,004,086 |
19% |
1,614,127 |
24% |
1,876,580 |
26% |
(610,041) |
(262,453) |
|
|
|
|
|
|
|
| |
Shareholders’ equity |
|
|
|
|
|
|
|
|
Capital stock |
2,740,662 |
53% |
2,740,662 |
41% |
2,740,662 |
38% |
- |
- |
Treasury shares |
(32,524) |
-1% |
(25,980) |
0% |
(79,059) |
-1% |
(6,544) |
53,079 |
Capital reserve and stock option grant |
81,948 |
2% |
76,834 |
1% |
69,897 |
1% |
5,114 |
6,937 |
Legal reserve |
- |
0% |
35,316 |
1% |
31,593 |
0% |
(35,316) |
3,723 |
Statutory reserve |
- |
0% |
268,659 |
4% |
292,252 |
4% |
(268,659) |
(23,593) |
Profit reserve (and accumulated losses) |
(861,761) |
-17% |
- |
0% |
- |
0% |
(861,761) |
- |
1,928,325 |
37% |
3,095,491 |
46% |
3,055,345 |
42% |
(1,167,166) |
40,146 | |
|
|
|
|
|
|
|
| |
Non-controlling interest |
2,128 |
0% |
1,745 |
0% |
3,058 |
0% |
383 |
(1,313) |
Total shareholders’ equity |
1,930,453 |
37% |
3,097,236 |
46% |
3,058,403 |
42% |
(1,166,783) |
38,833 |
|
|
|
|
|
|
|
| |
Total liabilities and shareholders’ equity |
5,210,089 |
100% |
6,760,332 |
100% |
7,205,852 |
100% |
(1,550,243) |
(445,520) |
19
Balance Sheet for the Fiscal Year Ended December 31, 2016 compared to 2015
Current assets
Cash and Equivalents – Cash and Banks, Marketable Securities
The Company’s cash and cash equivalents on December 31, 2016 totaled R$253.2 million, compared to R$712.3 million on December 31, 2015, a decrease of R$459.1 million, or 64.5%. This decrease is mainly due to the reduced consolidated indebtedness of the Company. Payments of R$1.4 billion were made in 2016, thus allowing a net amortization of debt in the amount of R$651.7 million.
Accounts receivable from development and services provided – Current and Non-Current
The following tables show the client accounts receivable from development and the sale of the Company’s properties, as well as the receivables to be appropriated, and the maturity of the Company’s portfolio:
(in R$ million) |
On December 31 | ||
Real estate development and sales clients |
2016 |
2015 |
2014 |
|
|
|
|
Current |
723 |
1,395 |
1,440 |
Non-current |
271 |
407 |
385 |
|
994 |
1,802 |
1,825 |
(in R$ million) |
On December 31 | ||
Receivables for appropriation |
2016 |
2015 |
2014 |
|
|
|
|
|
525 |
516 |
928 |
|
|
|
|
Total receivables |
1,519 |
1,839 |
2,413 |
Current and non-current amounts expire in the following fiscal years:
|
|
Maturity |
|
|
|
Overdue |
204 |
2017 |
544 |
2018 |
111 |
2019 |
120 |
2020 |
45 |
2021 onwards |
15 |
|
1,039 |
( - ) Present value adjustment |
(26) |
( - ) Allowance for doubtful accounts and cancellations |
(19) |
|
994 |
On December 31, 2016, the balance of clients by real estate development totaled R$993.9 million, compared to R$1.8 billion on December 31, 2015. Such reduction reflects the compliance with CPC 31 – Non-Current Asset Held for Sale and Discontinued Operation, classifying the Tenda segment as asset held for sale.
All the balances of accounts receivable presented herein are adjusted to present value, as required by Technical Pronouncement CPC 12 “Present Value Adjustment.”
Property for Sale – Current and Non-Current
The balance of property for sale was comprised as follows in the periods indicated:
|
12/31/2016 |
12/31/2015 |
12/31/2014 |
|
|
|
|
Land bank |
823,516 |
1,443,460 |
1,311,847 |
( - ) Provision for loss on realization of land |
(43,505) |
- |
- |
( - ) Provision for goodwill based on inventory surplus |
(62,343) |
- |
- |
( - ) Present value adjustment |
(8,781) |
(16,771) |
(5,503) |
Property under construction |
509,049 |
857,619 |
905,190 |
Cost of property in recognition of provision for cancellations |
- |
21,764 |
52,309 |
Finished units |
557,426 |
333,036 |
260,808 |
( - ) Provision for loss on the realization of properties for sale |
(59,663) |
(8,491) |
(12,309) |
|
1,715,699 |
2,630,617 |
2,512,342 |
|
|
|
|
Current |
1,122,724 |
1,880,377 |
1,695,817 |
Non-current |
592,975 |
750,240 |
816,525 |
20
On December 31, 2016, the balance of properties for sale, both current and non-current, totaled R$1.7 billion, compared to R$2.6 billion on December 31, 2015. At the end of 2016, 36.8% of total inventory was represented by finished units, while units under construction accounted for 43.0% of total inventory. The Company remains focusing on inventory reduction.
Other accounts receivable – Current and Non-Current
The balance of other accounts receivable held by the Company on December 31, 2016 stood at R$108.3 million, 46.8% lower than the balance of same period in 2015, a result of lower volume of escrow deposits.
Intangible assets
On December 31, 2016, the balance of intangible assets reached R$28.2 million, compared to R$51.9 million on December 31, 2015, evidencing the alignment between additions and write-offs/amortization of intangible assets in the year.
Assets from discontinued operations
The amount of R$1,189.0 million is related to Tenda’s discontinued operation assets, net of consolidation elimination items and impairment of R$610.1 million, which is presented in a single line, according to CPC 31 – Non-current Assets Held for Sale and Discontinued Operations.
Liabilities
Loans, Financing and Debentures - Current and Non-Current
The Company’s total level of indebtedness on December 31, 2016 came to R$1.6 billion, a decrease of 23.9% over the balance of R$2.2 billion on December 31, 2015, reflecting the Company’s conservative position concerning its capital discipline, and reduced gross indebtedness.
The table below shows the development of net indebtedness and obligations with investors in the Company:
Total Debt
(in R$ thousand) |
|
Balance in | ||
Transaction Type |
Rate |
2016 |
2015 |
2014 |
Bank Credit Note – CCB |
125% of CDI - 0.59% / 3.00% / 3.95% / 4.25% + CDI - INCC |
1,022,038 |
1,161,707 |
268,911 |
Housing Finance (SFH) |
8.30%
to 14.00% + TR |
164,262 |
131,128 |
1,128,514 |
|
|
1,186,299 |
1,292,835 |
1,397,425 |
Current |
|
669,795 |
672,365 |
550,058 |
Non-current |
|
516,505 |
620,470 |
847,367 |
Debentures
|
|
|
Consolidated | |||
Program/Issuances |
Principal - R$ |
Annual Compensation |
Due Date |
2016 |
2015 |
2014 |
|
|
|
|
|
| |
7th issue |
450,000 |
TR + 9.8205% |
December 2017 |
302,363 |
452,568 |
502,033 |
8th issue/1st issue |
- |
CDI + 1.95% |
October 2015 |
- |
- |
147,640 |
8th issue/2nd issue |
5,787 |
IPCA + 7.96% |
October 2016 |
- |
8,395 |
15,185 |
9th issuance |
132,026 |
CDI + 1.90% |
July 2018 |
79,693 |
130,394 |
134,624 |
10th issuance |
55,000 |
IPCA + 8.22 |
January 2020 |
69,212 |
64,724 |
- |
1st issuance (Tenda) |
200,000 |
TR + 9.25% |
October 2016 |
- |
201,877 |
389,617 |
|
|
|
|
451,268 |
857,958 |
1,189,099 |
|
|
|
|
|
| |
Current |
|
|
|
314,139 |
389,621 |
504,387 |
Non-current |
|
|
|
137,129 |
468,337 |
684,712 |
21
Obligations for property purchases and advances to clients – Current and Non-Current
On December 31, 2016, the Company’s obligations for the purchase of property and client advances totaled R$295.7 million, down 51.5% year-over-year. This variation is mainly due to higher liabilities with development client advances and services.
The following table shows the development of obligations for the purchase of properties and client advances, as well as its distribution between the short and long terms.
Balance of obligations for the acquisition of property and client advances
|
12/31/2016 |
12/31/2015 |
12/31/2014 |
Current |
205,388 |
361,420 |
490,605 |
Non-current |
90,309 |
248,514 |
101,137 |
Total |
295,697 |
609,934 |
591,742 |
Material and service providers
On December 31, 2016, the balance of payables due to material and service providers came to R$79.1 million, up 38.0% over the balance of R$57.3 million on December 31, 2015. This increased liability is chiefly due to the change in the Company’s payment policy.
Taxes and contributions - Current
The balance of taxes and social contributions (current) on December 31, 2016 totaled R$51.8 million, down 49.2% over the R$102.1 million recorded on December 31, 2015. This decrease derives from higher current results and their acquittance during 2016, with income tax and social contribution previously withheld.
Deferred income tax and social contribution – current and non-current
The balance of deferred income tax and social contribution totaled R$100.4 million on December 31, 2016, up 508.9% over the R$16.5 million recorded on December 31, 2015, impacted by the effect of R$90.3 million refering to a reversal of a tax credit provision previously recorded, which was reversed in view of the significant impact of Tenda’s purchase and sale operation on the net income for the period, thus, not allowing to maintain such amount of deferred tax asset in the Company’s balance sheet.
Provision for Contingencies - Current and Non-Current
The Company and its subsidiaries are parties in legal actions and administrative processes in various courts and with several government bodies, as a result of normal business operations, involving tax, labor, and civil matters, among other issues. The Company, based on information from its legal advisers, analysis of the pending lawsuits and labor claims, based on its previous experience in terms of the amounts claimed, made a provision considered sufficient to cover the estimated losses as a result of the claims being made.
The table below shows the evolvement of the Company’s provisions for contingencies.
Consolidated |
Civil |
Tax |
Labor |
Total |
Balance on December 31, 2014 |
157,842 |
414 |
81,318 |
239,574 |
Supplementary provision (Note 23) |
68,976 |
12,156 |
37,317 |
118,449 |
Payments and reversal of unutilized provision |
(77,197) |
(12,170) |
(25,674) |
(115,041) |
Balance on December 31, 2015 |
149,621 |
400 |
92,961 |
242,982 |
Supplementary provision (Note 23) |
68,042 |
3,009 |
20,975 |
92,026 |
Payments and reversal of unutilized provision |
(88,627) |
(237) |
(38,235) |
(127,099) |
Operation held for sale |
(30,599) |
(48) |
(14,304) |
(44,951) |
Balance on December 31, 2016 |
98,437 |
3,124 |
61,397 |
162,958 |
|
|
|
|
|
Current |
53,867 |
1,369 |
23,818 |
79,054 |
Non-current |
44,570 |
1,755 |
37,579 |
83,904 |
22
Consolidated |
Civil |
Tax |
Labor |
Total |
Balance on December 31, 2014 |
157,842 |
414 |
81,318 |
239,574 |
Supplementary provision (Note 23) |
68,976 |
12,156 |
37,317 |
118,449 |
Payments and reversal of unutilized provision |
(77,197) |
(12,170) |
(25,674) |
(115,041) |
Balance on December 31, 2015 |
149,621 |
400 |
92,961 |
242,982 |
Reclassification for discontinued operation |
(29,982) |
(180) |
(25,554) |
(55,716) |
Supplementary provision (Note 23) |
49,872 |
2,965 |
17,959 |
70,796 |
Payments and reversal of unutilized provision |
(71,332) |
(61) |
(23,711) |
(95,104) |
Balance on December 31, 2016 |
98,179 |
3,124 |
61,655 |
162,958 |
|
|
|
|
|
Current |
53,867 |
1,369 |
23,818 |
79,054 |
Non-current |
44,570 |
1,755 |
37,579 |
83,904 |
The provision for contingencies related to civil proceedings on December 31, 2016 totaled R$18.3 million (R$42.3 milion in 2015) in which the Company was included as defendant with personal liability for collection of court and out-of-court debts in which the original debtor is a former shareholder of the Company, Cimob Companhia Imobiliária (“Cimob”), or involving other entities of same economic group of Cimob. In these lawsuits, the claimant alleges the Company should answer for Cimob’s debts, according to understanding that the requirements for disregard of Cimob corporate entity to affect the Company would exist (corporate succession, co-mingling of assets and/or the creation of same economic group involving the Company and Cimob Group). This reduction in the provision is related to an unfavorable court decision, which was settled with judicial deposit and with no additional disbursement of cash by the Company
The Company does not agree with the grounds through which it has been included in these lawsuits and is still questioning in court its personal liability for third party company’s debts, as well as the collection amount submitted by claimants. The Company already obtained favorable and unfavorable court decisions related to this issue, reason that it is not possible to estimate a consistent outcome for all lawsuits. The Company also seeks in lawsuit filed against Cimob and its former and current controlling shareholders the recognition that it should not be held liable for Cimob’s debts, as well as the refund of amounts already paid by the Company in lawsuits collecting debts only due by Cimob.
Other accounts payable – Current and Non-current
On December 31, 2016, the balance of other accounts payable came to R$81.4 million, down 58.6% over the R$196.7 million on December 31, 2015. This decrease is due lower volume of provisions and fines for construction work delays, long-term suppliers and obligations with investors.
Liabilities over assets from discontinued operation
The amount of R$651.8 million is related to Tenda’s discontinued operations liabilities, net of consolidation elimination items, which is presented in a single line, according to CPC 31 – Non-current Assets Held for Sale and Discontinued Operations.
23
Shareholders’ equity
As at December 31, 2016, the Company’s shareholders’ equity balance came to R$1.9 billion, compared to R$3.1 billion in 2015. Such reduction reflects the compliance with CPC 31 – Non-Current Assets Held for Sale and Discontinued Operation, classifying the Tenda segment as asset held for sale.
Other accounts
Other accounts on the Company’s balance sheet not discussed in this analysis varied in the normal course of the Company’s business or are of little importance in terms of the consolidated balance sheet.
Balance Sheet for the Fiscal Year Ended December 31, 2015 compared to 2014
Current assets
Cash and Equivalents – Cash and Banks, Marketable Securities
The Company’s cash and cash equivalents on December 31, 2015 totaled R$712.3 million, compared to R$1.2 billion on December 31, 2014, a decrease of R$444.9 million, or 38.4%. This decrease is mainly due to the reduced consolidated indebtedness of the Company. Payments of R$1.4 billion were made in 2015, thus allowing a net amortization of debt in the amount of R$799.1 million.
Accounts receivable from development and services provided – Current and Non-Current
The following tables show the client accounts receivable from development and the sale of the Company’s properties, as well as the receivables to be appropriated, and the maturity of the Company’s portfolio:
(in R$ million) |
On December 31 | ||
Real estate development and sale clients |
2015 |
2014 |
2013 |
|
|
|
|
Current |
1,395 |
1,440 |
1,910 |
Non-current |
407 |
385 |
314 |
|
1,802 |
1,825 |
2,224 |
(in R$ million) |
On December 31 | ||
Receivables for appropriation |
2015 |
2014 |
2013 |
|
|
|
|
|
516 |
928 |
1,609 |
|
|
|
|
Total receivables |
1,839 |
2,413 |
3,272 |
Current and non-current amounts expire in the following fiscal years:
|
|
Maturity |
|
|
|
Overdue |
492 |
2016 |
949 |
2017 |
325 |
2018 |
81 |
2019 |
33 |
2020 onwards |
54 |
|
1,934 |
( - ) Present value adjustment |
(31) |
( - ) Allowance for doubtful accounts and cancellations |
(101) |
|
1,802 |
On December 31, 2015, the balance of clients by real estate development totaled R$1.80 billion, compared to R$1.83 billion on December 31, 2014. This decrease is the result of launches average volume of approximately R$1 billion seen in the last three years.
24
All the balances of accounts receivable presented herein are adjusted to present value, as required by Technical Pronouncement CPC 12 “Present Value Adjustment.”
Property for Sale – Current and Non-Current
The balance of property for sale was comprised as follows in the periods indicated:
|
12/31/2015 |
12/31/2014 |
12/31/2013 |
|
|
|
|
Land bank |
1,443,460 |
1,311,847 |
1,077,762 |
( - ) Present value adjustment |
(16,771) |
(5,503) |
(883) |
Property under construction |
857,619 |
905,190 |
630,407 |
Cost of property in recognition of provision for cancellations |
21,764 |
52,309 |
107,172 |
Finished units |
333,036 |
260,808 |
291,232 |
( - ) Provision for loss on the realization of properties for sale |
(8,491) |
(12,309) |
(11,276) |
|
|
|
|
|
2,630,617 |
2,512,342 |
2,094,414 |
|
|
|
|
Current |
1,880,377 |
1,695,817 |
1,442,019 |
Non-current |
750,240 |
816,525 |
652,395 |
On December 31, 2015, the balance of properties for sale, both current and non-current, totaled R$2.6 billion, compared to R$2.5 billion on December 31, 2014. At the end of 2015, 12.7% of total inventory was represented by finished units, while units under construction accounted for 32.6% of total inventory. The Company remains focusing on inventory reduction, chiefly at Gafisa, which accounts for 72% of total inventory.
Other accounts receivable – Current and Non-Current
The balance of other accounts receivable held by the Company on December 31, 2015 stood at R$203.5 million, 15.6% lower than the balance of same period in 2014, as a result of lower volume escrow deposits.
Intangible assets
On December 31, 2015, the balance of intangible assets reached R$77.3 million, compared to R$76.9 million on December 31, 2014, evidencing the alignment between additions and write-offs/amortization of intangible assets in the year.
Deferred income tax and social contribution
On December 31, 2015, the balance of deferred income tax and social contribution came to R$16.5 million, down 52.5% over the R$34.7 million on December 31, 2014. Liabilities are stated net of assets.
Liabilities
Loans, Financing and Debentures - Current and Non-Current
The Company’s total level of indebtedness on December 31, 2015 came to R$2.2 billion, a decrease of 16.8% over the balance of R$2.6 billion on December 31, 2014, reflecting the Company’s conservative position concerning its capital discipline, and reduced consolidated gross debt.
The table below shows the development of net indebtedness and obligations with investors in the Company:
Total Debt
(in R$ thousand) |
|
Balance in | ||
Transaction Type |
Rate |
2015 |
2014 |
2013 |
Bank Credit Note – CCB |
117.90% of CDI 2.20% + CDI 13.20% fixed |
131,128 |
268,911 |
550,052 |
Housing Finance (SFH) |
8.30% to 12.80% + TR 117% to 120% of CDI |
1,161,707 |
1,128,514 |
1,088,258 |
|
|
1,292,835 |
1,397,425 |
1,638,310 |
Current |
|
672,365 |
550,058 |
590,386 |
Non-current |
|
620,470 |
847,367 |
1,047,924 |
25
Debentures
|
|
|
|
Consolidated | ||
Program/Issuances |
Principal (R$) |
Annual Compensation |
Due Date |
2015 |
2014 |
2013 |
|
|
|
|
|
| |
6th issuance |
- |
- |
- |
- |
- |
151,513 |
7th issuance |
450,000 |
TR + 9.8205% |
December 2017 |
452,568 |
502,033 |
551,855 |
8th issuance/1st issuance |
- |
CDI + 1.95% |
October 2015 |
- |
147,640 |
294,073 |
8th issuance/2nd issuance |
5,787 |
IPCA + 7.96% |
October 2016 |
8,395 |
15,185 |
14,216 |
9th issuance |
132,026 |
CDI + 1.90% |
July 2018 |
130,394 |
134,624 |
- |
10th issuance |
55,000 |
IPCA + 8.22 |
January 2020 |
64,724 |
- |
|
1st issuance |
200,000 |
TR + 9.25% |
October 2016 |
201,877 |
389,617 |
409,561 |
|
200,000 |
TR + 9.02% |
October 2016 |
857,958 |
1,189,099 |
1,421,218 |
|
|
|
|
|
| |
Current |
|
|
|
389,621 |
504,387 |
563,832 |
Non-current |
|
|
|
468,337 |
684,712 |
857,386 |
Obligations for property purchases and advances to clients – Current and Non-Current
On December 31, 2015, the Company’s obligations for the purchase of property and client advances totaled R$609.9 million, up 3.1% year-over-year. This variation is mainly due to liabilities with development client advances and services.
The following table shows the development of obligations for the purchase of properties and client advances, as well as its distribution between the short and long terms.
Balance of obligations for the acquisition of property and client advances
|
12/31/2015 |
12/31/2014 |
12/31/2013 |
Current |
361,420 |
490,605 |
408,374 |
Non-current |
248,514 |
101,137 |
79,975 |
Total |
609,934 |
591,742 |
488,349 |
Material and service providers
On December 31, 2015, the balance of payables due to material and service providers came to R$57.3 million, down 39.7% over the balance of R$95.1 million on December 31, 2014. The decrease in this obligation is mainly due to a solid volume of deliveries and resulting drop in the volume of projects under execution of Gafisa segment.
Taxes and contributions - Current
The balance of taxes and social contributions (current) on December 31, 2015 totaled R$102.1 million, down 10.8% over the R$114.4 million recorded on December 31, 2014. This decrease is due to higher current results and their acquittance during 2015, with income tax and social contribution previously withheld.
Income tax and social contribution – current and non-current
The balance of deferred income tax and social security totaled R$16.5 million on December 31,2015, down 52.5% over the R$34.7 million recorded on December 31, 2014, due to higher active temporary differences, mainly over provision for contingencies, impairment and cancellations. Liabilities are stated net of assets.
Provision for Contingencies - Current and Non-Current
The Company and its subsidiaries are parties in legal actions and administrative processes in various courts and with several government bodies, as a result of normal business operations, involving tax, labor, and civil matters, among other issues. The Company, based on information from its legal advisers, analysis of the pending lawsuits and, when concerning labor cases, based on its prior experience in terms of the amounts claimed, made a provision considered sufficient to cover the estimated losses as a result of the claims being made.
26
The table below shows the evolvement of the Company’s provisions for contingencies.
Consolidated |
Civil |
Tax |
Labor |
Total |
Balance on December 31, 2013 |
134,483 |
173 |
63,272 |
197,928 |
Supplementary provision (Note 23) |
65,699 |
600 |
46,765 |
113,064 |
Payments and reversal of unutilized provision |
(42,340) |
(359) |
(28,719) |
(71,418) |
Balance on December 31, 2014 |
157,842 |
414 |
81,318 |
239,574 |
Supplementary provision (Note 23) |
68,976 |
12,156 |
37,317 |
118,449 |
Payments and reversal of unutilized provision |
(77,197) |
(12,170) |
(25,674) |
(115,041) |
Balance on December 31, 2015 |
149,621 |
400 |
92,961 |
242,982 |
|
|
|
|
|
Current |
84,576 |
220 |
15,516 |
100,312 |
Non-current |
65,045 |
180 |
77,445 |
142,670 |
The provision for contingencies related to civil proceedings on December 31, 2015 totaled R$42,296 thousand in which the Company was included as defendant with personal liability for collection of court and out-of-court debts in which the original debtor is a former shareholder of the Company, Cimob Companhia Imobiliária (“Cimob”), or involving other entities of same economic group of Cimob. In these lawsuits, the claimant alleges the Company should answer for Cimob’s debts, according to understanding that the requirements for disregard of Cimob corporate entity to affect the Company would exist (corporate succession, co-mingling of assets and/or the creation of same economic group involving the Company and Cimob Group).
The Company does not agree with the grounds through which it has been included in these lawsuits and is still questioning in court its personal liability for third party company’s debts, as well as the collection amount submitted by claimants. The Company already obtained favorable and unfavorable court decisions related to this issue, reason that it is not possible to estimate a consistent outcome for all lawsuits. The Company also seeks in lawsuit filed against Cimob and its former and current controlling shareholders the recognition that it should not be held liable for that company’s debts, as well as the refund of amounts already paid by the Company in lawsuits collecting debts only due by Cimob.
Other accounts payable – Current and Non-current
On December 31, 2015, the balance of other accounts payable came to R$196.7 million, down 1.4% over the R$199.5 million on December 31, 2014. This decrease is due lower volume of provisions and fines for construction work delays, long-term suppliers and obligations with investors.
Shareholders’ equity
As at December 31, 2015, the Company’s shareholders’ equity balance came to R$3.10 billion, compared to R$3.06 billion in 2014, a slight variation due to lower volume of treasury shares acquisition.
Other accounts
Other accounts on the Company’s balance sheet not discussed in this analysis varied in the normal course of business or are of little importance in terms of the consolidated balance sheet.
27
Cash Flow for the Fiscal Year Ended December 31, 2016 compared to 2015
Operating activities
In 2016, net cash verified in operations totaled R$132.6 million, compared to R$190.1 million in 2015. This decrease reflects Gafisa segment’s lower operating volume, due to the recessive macroeconomic scenario. The R$132.6 million were mainly composed of: (1) an R$73.6 million decrease in obligations for purchase of land and advances from customers; (2) an R$288.9 million increase in receivables from clients; (3) an increase in related parties transactions of R$100.2 million; (4) R$75.2 million in expenses which did not affect the working capital; and (5) other less relevant variations in other operating categories.
Investment activities
The net cash verified in investment activities, including the acquisition of assets, equipment and new investments came to R$157.4 million in 2016. The cash applied in 2016 was mainly related to investments in securities, sureties and credits.
Financing activities
The cash burn registered by financing activities in 2016 totaled R$351.5 million, compared to R$339.7 million recorded in 2015. This cash burn is mainly due to the amortization of loans and financing, net of new releases, totaling R$365.4 million, reiterating the Company’s conservative position in relation to its capital discipline.
Below is the change in cash during the year:
|
4Q15 |
1Q16 |
2Q16 |
3Q16 |
4Q16 |
Cash and cash equivalents |
478,037 |
457,154 |
304,351 |
355,389 |
253,180 |
Change in cash and cash equivalents (1) |
- |
(20,883) |
(152,803) |
51,038 |
(102,210) |
Total Debt + Obligation with Investors |
1,907,358 |
1,914,131 |
1,807,989 |
1,853,755 |
1,638,804 |
Change in Total Debt + Obligation with Investors (2) |
- |
6,773 |
(106,142) |
45,766 |
(214,951) |
Other investments |
210,761 |
210,761 |
218,956 |
219,454 |
237,109 |
Change in other investments (3) |
|
- |
8,195 |
498 |
17,654 |
Cash Generation in the Period (1) - (2) + (3) |
|
(27,656) |
(38,466) |
5,770 |
130,396 |
Final Cash Accumulated Generation |
|
(27,656) |
(66,122) |
(60,352) |
70,044 |
Cash Flow for the Fiscal Year Ended December 31, 2015 compared to 2014
Operating activities
In 2015, net cash verified in operations totaled R$190.1 million, compared to net cash used in operations of R$31.9 million in 2014. This increase reflects better Gafisa’s operating management, in spite of a more challenging macroeconomic scenario. The R$190.7 million were mainly composed of: (1) decreased expenses which did not affect the working capital totaling R$267.6 million in 2015; (2) a decrease in properties for sale of R$159.6 million mainly imputed to landbank and properties under construction; and (3) other less relevant variations in other operating categories.
Investment activities
The net cash verified in investment activities, including the acquisition of assets, equipment and new investments came to R$162.4 million in 2015. The cash applied in 2015 was mainly related to investments in securities, sureties and credits.
28
Financing activities
The net cash used in financing activities in 2015 totaled R$339.7 million, compared to a generation of R$686.0 million in 2014. This cash burn is mainly due to the amortization of loans and financing, net of new releases, totaling R$334.3 million, reiterating the Company’s conservative position in relation to its capital discipline and the stock repurchase amounting to R$24.2 million.
Below is the change in cash during the year:
|
4Q14 |
1Q15 |
2Q15 |
3Q15 |
4Q15 |
Cash and cash equivalents |
662,682 |
680,412 |
541,684 |
596,589 |
478,037 |
Change in cash and cash equivalents (1) |
- |
17,730 |
(138,728) |
54,905 |
(118,552) |
Total Debt + Obligation with Investors |
2,159,003 |
2,218,657 |
2,095,614 |
2,149,115 |
1,907,358 |
Change in Total Debt + Obligation with Investors (2) |
- |
59,654 |
(123,043) |
53,500 |
(241,757) |
Other investments |
183,578 |
208,740 |
208,740 |
210,761 |
210,761 |
Change in other investments (3) |
|
25,161 |
- |
2,022 |
- |
Cash Generation in the Period (1) - (2) + (3) |
|
(16,762) |
(15,685) |
3,426 |
123,205 |
Final Cash Accumulated Generation |
|
(16,762) |
(32,447) |
(29,021) |
94,183 |
10.2.
a) the company’s operating results |
Description of any significant revenue items
The Company’s revenues come mainly from the development and sale of real estate properties. To a lesser extent, it also earns revenue from providing real estate services, such as construction, technical and real estate management to third parties.
|
2016 |
2015 |
2014 |
Development, sale of real estate properties and construction services |
990,613 |
1,568,566 |
1,704,399 |
(Recording) reversal of provision for doubtful accounts and dissolutions |
(6,950) |
(6,749) |
1,424 |
Taxes on sales of properties and services |
(67,965) |
(118,460) |
(124,963) |
Total net revenue |
915,698 |
1,443,357 |
1,580,860 |
Factors that materially affected the operating results
Net operating revenues were down 5.0% in the fiscal year ended December 31, 2014, year-over-year, due to lower volume of launches over the past two years in the Gafisa segment.
In the fiscal year ended December 31, 2015, net operating revenue decreased by 8.7% compared to 2014, due to lower volume of launches in the Gafisa segment.
In the fiscal year ended December 31, 2016, net operating revenue went down 36.6% year-over-year, chiefly due to the following items: (i) lower operating volume; (ii) lower speed of inventory sales, which records the highest contribution to revenues, (iii) higher volume of dissolutions and (iv) result of assets pricing current market conditions.
b) changes in revenue attributable to variations in prices, exchange rates, inflation, changes in volumes or the introduction of new products and services |
The Company recognizes revenue from real estate developments according to their construction, based on a financial calculation of project completion and not at the moment that the sale contract is signed. The main impacts on revenue variations between the 2016, 2015 and 2014 fiscal years are changes in sales volumes and introduction of new products and services of the Company, as well as a detailed review of the Company’s operations and strategy defined in 2011.
29
The 36.6% decrease in net revenues in 2016 compared to 2015, is chiefly due to: (i) lower operating volume; (ii) lower speed of inventory sales, which records the highest contribution to revenues, (iii) higher volume of dissolutions and (iv) result of assets pricing current market conditions.
The 8.7% decrease in net revenues in 2015 compared to 2014, is due to Gafisa segment’s lower volume of launches in the last years and lower revenue recognition due to the progress of projects for sale from previous periods.
The decrease of 5.0% in net revenues in 2014 year-over-year is due to the lower volume of launches in the last two years of the Gafisa segment the consequent lower revenue recognition due to the progress of projects for sale from previous periods.
R$’000 |
|
2016 |
2015 |
2014 |
|
2016 vs 2015 |
2015 vs 2014 |
Contracted Sales |
|
810,464 |
914,796 |
811,032 |
|
-11.4% |
12.8% |
Launches |
|
920,846 |
996,316 |
1,087,801 |
|
-7.6% |
-8.4% |
Net revenue |
|
915,698 |
1,443,257 |
1,580,861 |
|
-36.6% |
-8.7% |
c) impact of inflation, variation in the prices of the company’s main inputs and products, exchange rates and interest rates on the company’s operating and financial results, when relevant |
As mentioned in item 5.1 of the Reference Form, the main indexes used in Company’s business plan are the INCC, IGP-M, CDI and TR:
INCC (National Building Cost Index): most of the Company’s costs and its entire revenue portfolio from unfinished projects are adjusted according to this index. Hypothetically, an increase of 1% in the INCC would represent an increase of R$15,621 thousand in the Company's operating income based on the current level of assets linked to this index.
IGP-M (General Market Price Index) and IPCA (Extended Consumer Price Index): the Company’s entire revenue portfolio from finished projects is adjusted according to these indexes. Hypothetically, an increase of 1% in the IGP-M or IPCA would not represent a significant variation in the Company's operating income based on the current level of assets linked to these indexes.
CDI (Interbank Deposit Certificate): all of the Company’s financial investments and roughly 37.6% of total indebtedness are pegged to the CDI. Hypothetically, an increase of 1% in the CDI would represent a decrease of R$91,794 thousand in the Company's financial results based on the current level of indebtedness linked to this index.
TR (Reference Rate): Approximately 62.4% of the Company’s total debt is indexed to the TR. Hypothetically, an increase of 1% in the TR would represent a decrease of R$30.744 thousand in the Company's financial results based on the current level of indebtedness linked to this index.
Exchange rates: the Company does not have any debts or amounts receivable denominated in foreign currency, and none of the Company’s significant costs are denominated in foreign currency.
30
10.3. Significant events and impacts on the company’s financial statements and results:
a) introduction or disposal of operations |
The officers inform that in the fiscal years ended December 31, 2014, 2015 and 2016 there was no introduction or disposal of operating segment so that to cause impacts on the Company’s financial statements and results. |
b) establishment, acquisition or disposal of shareholdings |
The officers inform that in the fiscal years ended December 31, 2014 and 2015 no relevant shareholding was established, nor acquired or disposed of to cause impacts on the Company’s financial statements and results. However, on February 7, 2014, the Company announced preliminary studies for a potential separation of the Gafisa and Tenda business units into two publicly-held and independent companies. The Company assessed that the separation would be the next step within a broad plan of Management aiming at improving and reinforcing the capacity of generating value of both business units. As per Material Fact released on December 14, 2016, the Company entered into a stock purchase agreement with Jaguar Growth Asset Management, LLC, to acquire up to 30% of shares issued by Tenda, at the price of R$8.13 per share, representing, within the context of operation, cash receivable for Gafisa of R$231.7 million, with a total valuation of R$539.0 million for full payment of Tenda’s capital stock. It is worth mentioning that the completion of referred transaction is subject to certain conditions precedent, amongst them we point out: (i) Tenda’s capital stock reduction, without cancelation of shares, with refund to Gafisa, currently its sole shareholder, of R$100.0 million, adjusted by SELIC interest rate, of which (a) R$50.0 million with payment until December 31, 2018; and (b) the balance payable until December 31, 2019, with possibility of anticipation in view of certain financial covenants provided for in the agreement; (ii) Gafisa’s capital stock reduction, with distribution effects to its shareholders of shares corresponding to 50% of Tenda’s capital stock; and (iii) the conclusion of exercise by Gafisa’s shareholder of preemptive right to acquire shares for the price per share referred to in operation, noting that, within this context, Gafisa will offer its shareholders, 50% of shares representing Tenda’s capital stock held thereby, and not only the 30% purpose of the offer received from Jaguar, considering its decision of selling these shares, even if in multiple operations. Such process has been in progress and currently, Gafisa and Tenda already operate independently, with their own structures and proper to specificities of their business models. |
c) exceptional events or operations |
There were no exceptional events or operations. |
31
10.4. significant changes in the accounting practices – reservations and emphasis in the auditor’s report
a) Significant changes in the accounting practices |
There were no significant changes in the accounting practices. |
b) Material effects of changes in accounting practices |
There was no impact on the Company’s individual and consolidated financial statements. |
c) Reservations and emphasis in the auditor’s report |
The independent auditors’ report on the financial statements for the fiscal year ended December 31, 2016, 2015 and 2014 contains emphasis related to the fact that the individual and consolidated financial statements were prepared according to the accounting practices adopted in Brazil. The consolidated financial statements prepared according to the IFRS applicable to real estate development entities also consider the Guidance OCPC04 issued by the Brazilian Accounting Standards Committee. This guidance addresses the recognition of revenue from this sector and covers issues related to the meaning and application of the concept of continuous transfer of risks, benefits and sale control of real estate units. The independent auditor’s opinion is not modified due to this matter. The Company's Management believes that this emphasis paragraph is standardized between audit firms and is aligned with the entities of the real estate industry and regulatory bodies due to the application of the OCPC04 Guidance, in addition to International Financial Reporting Standards (IFRS) and with no additional comments to the emphases in question. The auditors reinforced that their opinion is not modified due to this matter. The Company's Management does not have any comments on the auditors’ reservations, given there was no reservations in the independent auditors’ report on the preparation of the financial statements for the fiscal years ended on December 31, 2016, 2015 and 2014. |
32
10.5. Critical Accounting Policies of the Company:
The consolidated financial statements are prepared and presented in accordance with accounting practices adopted in Brazil, including the pronouncements issued by the Accounting Standards Committee (CPC), endorsed by the Brazilian Securities Commission (CVM) and according to the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB)).
Specifically, the consolidated financial statements are in compliance with the International Financial Reporting Standards (IFRS) applicable to real estate entities in Brazil, including Guidance OCPC 04 – Application of Technical Interpretation ICPC 02 to Brazilian real estate entities regarding to the processing of recognition of revenue from this sector and involves matters relating to the application of the concept of continuous transfer of risks, benefits and control in the sale of real estate units.
The officers understand that the preparation of the Company’s individual and consolidated financial statements requires that the Management makes certain judgments and estimates, as well as adopts assumptions that affect the reported values for revenue, expenses, assets and liabilities, and the amount of contingent liabilities, on the base date of the financial statements.
In this regard, the Company’s officers understand that critical accounting policies, those if altered, would cause a relevant accounting change, as described below:
a) Impairment of assets
Management yearly reviews the assets’ net carrying amount and/or when any specific event occurs, aiming at assessing events or changes in economic, operating or technological circumstances, which may indicate impairment or loss of their recoverable value. If this evidence is identified and, if net carrying amount exceeds the recoverable value, a provision is recorded, adjusting the net carrying amount to the recoverable value. These losses are recorded under net income for the year when identified.
33
The fair value calculation less costs of sale is based on information available on transactions of similar sale of assets or market prices less additional costs to discard the asset. The value in use calculation is based on the discounted cash flow model.
The cash flows are derived from the budget for the next five years and do not include reorganization activities that the Company has still not committed to, or significant future investment that would improve the asset base of the cash generating unit subject to the test. The recoverable value is sensitive to the discount value used in the discounted cash flow method, as well as the future expected cash receivables and the growth rate used for extrapolation purposes.
b) Transactions with share-based payments
The Company measures the cost of transactions to be settled with shares with employees based on the fair value of the equity instruments on the date they are granted. For share-based payments settled with cash, the liabilities need to be remeasured at the end of each reporting period until the settlement date, recognizing in results any variation in fair value, which requires a reassessment of the estimates adopted at the end of each reporting period. The estimated fair value of payments made with shares requires the use of a valuation model more suited to the granting of such equity instruments and that depends on the terms and conditions they are offered under.
This also requires the definition of more adequate data for the valuation model, including the useful life of the option, volatility, dividend yield and corresponding assumptions.
c) Provision for lawsuits
The Company recognizes a provision for ongoing/pending tax, labor and civil cases. The estimate of the probability of loss includes the evaluation of all the evidence available, the legal hierarchy, available jurisprudence, the most recent and pertinent decisions in the courts and their relevance to the ruling in question, as well an opinion from external counsel. The provisions are revised and adjusted to take any changes in circumstances into account, such as the statute of limitations, completion of tax audits or additional exposure identified based on new matters or court rulings. The settlement of transactions involving these estimates may result in amounts different from those estimated due to inaccuracies inherent to their calculation process. The Company reviews the estimates and assumptions, at least, yearly.
There are uncertainties concerning interpretation of complex tax regulations and about the value and time of future tax results. The Company and its subsidiaries are subject, in the normal course of business, to investigations, audits, lawsuits and administrative proceedings in civil, tax and labor matters. Depending on the purpose of investigations, lawsuits or administrative proceedings filed against the Company and its subsidiaries, we may be adversely affected, regardless of respective outcome.
d) Allowance for doubtful account and cancelled contracts
34
The Company calculates its allowance for doubtful accounts and cancelled contracts based on assumptions supported by historical data from its current operations and estimates. These asumptions are annually reviewed to evaluate eventual changes in circunstamces and update on historical data.
e) Warranty provision
Company’s warranty provision, which is recorded to cover expenditures for repairing construction defects covered during the warranty period, is calculated based on the estimate that considers the history of incurred expenditures adjusted by the future expectation. These assumptions are regularly reviewed.
f) Budgeted Project Costs
The total budgeted costs, mainly comprised of the costs incurred and expected to be complete when the construction work is concluded, are regularly revised during the course of the project and the effect of these revisions is reflected in the Company’s results.
g) Realization of the deferred income tax
The initial and following analyses of the realization of deferred income tax occur when is it probable that the taxable profit of the next years will be available for offsetting the deferred tax asset based on results projections prepared and based on internal assumptions and future economic scenarios that enable their total or partial use, if full credit is recorded.
10.6. significant items not evidenced in the company’s financial statements:
a) assets and liabilities held by the Company, directly or indirectly, that do not appear on the balance sheet |
The Company does not have any material assets or liabilities that are not reflected in this Form and in the Company’s financial statements and the notes thereto. |
b) other items not evidenced in the financial statements |
The Company does not have any other items not evidenced in its financial statements. |
10.7. Comments on items not evidenced in the financial statements:
a) how such items altered or could alter the revenue, expenses, operating results, net financial expenses or other items in the Company’s financial statements |
As explained in item 10.7 above, there is no item not evidenced in the financial statements. |
b) nature and purpose of the operation |
As explained in item 10.7 above, there is no item not evidenced in the financial statements. |
c) nature and amount of obligations assumed and rights generated for the company as a result of the operation |
As explained in item 10.7 above, there is no item not evidenced in the financial statements. |
35
10.8. business plan:
a) investments (including a quantitative and qualitative description of investments in course and that are foreseen, sources of investment financing and significant divestments that are in course or that are foreseen) |
i. quantitative and qualitative description of investments that are in course or are foreseen Net cash for 2016, generated in investing activities, including the acquisition of goods, equipment and new investments totaled R$157.5 million, mainly due to net investments in securities of R$193.4 million and investments in goods and equipment totaling R$35.8 million. Net cash for 2015, generated in investing activities, including the acquisition of goods, equipment and new investments amounted to R$162.4 million, mainly due to net investments in securities of R$197.4 million and investments in goods and equipment in the amount of R$34.3 million. Net cash for 2014, generated in investing activities, including the acquisition of goods, equipment and new investments amounted to R$708.58 million, mainly due to net redemption of securities of R$709.44 million. The Company’s disbursements in 2016 were mainly related to investments in goods, sales stands, software and improvements, totaling R$35.8 million versus R$34.3 million in 2015. The Company's disbursements in 2015 were mainly related to investments in goods, sales stands, software, and improvements, totaling R$34.3 million versus R$70.53 million in 2014. ii. Sources of investment financing The Company relies on proceeds from the sale of treasury shares, the abovementioned funding of corporate debts, debentures issues and lines of credit from the SFH (National Housing Finance System). iii. significant divestments that are in course or are foreseen No significant divestments are in course or foreseen. |
b) previously disclosed acquisitions of plant, equipment, patents or other assets that can materially affect the Company’s production capacity |
There have been no acquisitions of plant, equipment, patents or other assets that can materially affect the Company’s production capacity. |
c) new products and services |
There are no new products or services. |
10.9. Other factors with relevant influence:
All relevant information referring to this topic has been disclosed in the items above.
36
APPENDIX II
(as per Appendix 24, items 12.6 and 12.9 of CVM Instruction No. 480 of December 17, 2009)
12.5./6. Composition and professional experience of candidates to the fiscal council appointed by the Company’s Management:
Management proposes to elect the following members of the Fiscal Council, whose main information is as follows:
Name |
Birth Date |
Management Body |
Date of election |
Term of office |
Nº of consecutive terms of office |
CPF |
Profession |
Position held |
Date of investiture |
Elected by controlling shareholder |
Percentage of attendance at meetings |
Other positions and duties performed at the issuer |
Description of another position/title | ||||
Olavo Fortes Campos Rodrigues Junior |
11/16/1961 |
Fiscal Council |
Proposal to be elected at the Annual General Meeting of April 28, 2017 |
If elected, until 2018 Annual General Meeting |
8 (if elected, this new term of office will be the 9th consecutive) |
769.488.977-20 |
Business administrator |
Sitting member of the Fiscal Council elected by minority common shareholders |
Not applicable |
No |
100% |
No other positions or titles held at the Company |
| ||||
Peter Edward Cortes Marsden Wilson |
02/05/1972 |
Fiscal Council |
Proposal to be elected at the Annual General Meeting of April 28, 2017 |
If elected, until 2018 Annual General Meeting |
3 (if elected, this new term of office will be the 4th consecutive) |
168.126.648-20 |
Business administrator |
Sitting member of the Fiscal Council elected by minority common shareholders |
Not applicable |
No |
100% |
No other positions or titles held at the Company |
| ||||
Laiza Fabiola Martins de Santa Rosa |
10/14/1980 |
Fiscal Council |
Proposal to be elected at the Annual General Meeting of April 28, 2017 |
If elected, until 2018 Annual General Meeting |
5 (if elected, this new term of office will be the 6th consecutive, 2nd as sitting member) |
294.953.408-29 |
Economist |
Sitting member of the Fiscal Council elected by minority common shareholders |
Not applicable |
No |
100% |
No other positions or titles held at the Company |
| ||||
Marcello Mascotto Iannalfo |
06/24/1968 |
Fiscal Council |
Proposal to be elected at the Annual General Meeting of April 28, 2017 |
If elected, until 2018 Annual General Meeting |
8 (if elected, this new term of office will be the 9th consecutive) |
101.947.028-39 |
Economist |
Deputy member of the Fiscal Council elected by minority common shareholders |
Not applicable |
No |
0% |
No other positions or titles held at the Company |
| ||||
Marcelo Martins Louro |
07/24/1971 |
Fiscal Council |
Proposal to be elected at the Annual General Meeting of April 28, 2017 |
If elected, until 2018 Annual General Meeting |
4 (if elected, this new term of office will be the 5th consecutive) |
118.319.918-02 |
Business administrator |
Deputy member of the Fiscal Council elected by minority common shareholders |
Not applicable |
No |
0% |
No other positions or titles held at the Company |
| ||||
Alessandro de Oliveira Nascimento |
03/27/1984 |
Fiscal Council |
Proposal to be elected at the Annual General Meeting of April 28, 2017 |
If elected, until 2018 Annual General Meeting |
1 (if elected, this new term of office will be the 2nd consecutive) |
335.489.628-07 |
Brazilian federal savings bank’s employee |
Deputy member of the Fiscal Council elected by minority common shareholders |
Not applicable |
No |
0% |
No other positions or titles held at the Company |
|
37
Name |
CPF |
Professional Experience/ Declaration of Any Conviction / Independence Criteria | |
Olavo Fortes Campos Rodrigues Junior |
769.488.977-20 |
Professional experience: Mr. Rodrigues Junior started his career at Arthur Andersen in the audit and consulting areas. He has professional experience in the management of services, industry and retail companies, and worked at Carrefour, Pepsi-Cola Engarrafadora, Alcoa Brazil, Officer at Alcoa Argentina,Siciliano Group and Papaiz Group, as Chief Executive Officer. He also held positions of member of the Fiscal Council of Duke Energy International, Geração Paranapanema S.A.; Over the past five years, he acted as (i) member of the Board of Directors of Renova Energia S.A., a publicly-held company operating in the production of renewable energy, especially wind energy; (ii) deputy member of the Fiscal Council of São Carlos Empreendimentos e Participações S.A., a commercial property management company; and (iii) member of the Fiscal Council of Alphaville Urbanismo S.A., a company operating in the urban project development, and the Company holds 30% in the capital of Alphaville Urbanismo S.A..; and (iv) member of the Fiscal Council of Usinas Paulista Lavrinhas and Paulista Queluz de Energia S.A., closely-held companies operating in the hydroelectric generation and energy trading sectors – small hydroelectric plants (PCHs). Currently, Mr. Rodrigues Junior holds the following positions: (a) member of the Company’s Fiscal Council; (b) member of the Fiscal Council of Construtora Tenda S.A., a publicly-held company operating in the construction and development of real estate projects and wholly-owned subsidiary of the Company; (c) member of the Board of Directors of Maria Madá Com. E Serv. S.A., a closely-held company, operating in the retail sector; (d) managing partner of OREA Consultoria Empresarial, a business management and corporate governance consulting firm; and (e) president of São Isidoro Foundation, a non-profit organization. None of these companies hold relevant interest in the Company’s capital, is controlled by Company’s shareholder holding direct or indirect interest of 5% or more of same class or type of the Company’s securities or compose its economic group, except for Construtora Tenda S.A. and Alphaville Urbanismo S.A. | |
Declaration of Any Conviction: Mr. Olavo Fortes Campos Rodrigues Junior, sitting member of the Fiscal Council to be elected on April 28, 2017, declared for all legal purposes that over the past five years, he was not subject to the effects of any criminal conviction, any adverse judgment or application of penalty in the Brazilian Securities and Exchange Commission (CVM) administrative proceeding or any final and unappealable judgment, at the judicial or administrative level to suspend or disqualify him to practice any profession or business activity. | |
Independence Criteria: The criteria provided for by applicable laws were observed for appointment of this member to the Company’s Fiscal Council, especially the provisions of Article 162, caput and Paragraph 2 of Law No. 6.404/76. | |
Peter Edward Cortes Marsden Wilson |
168.126.648-20 |
Professional Experience: Over the past five years, Mr. Wilson acted as partner in charge of the corporate finance area and restructuring of medium-sized companies of Managrow Consultoria Estratégica em Finanças Ltda. In addition, he held/holds the following managerial positions: (i) current member of the fiscal council of the Company and of Construtora Tenda S.A., a publicly-held company operating in the construction and development of real estate projects and wholly-owned subsidiary of the Company; (ii) current member of the Board of Directors of Banco Mercantil do Brasil S.A., a financial institution; (iii) current member of the fiscal council of B2W S.A., a retail company; (iv) member of the fiscal council of Bradespar S.A., holding of investments in non-financial institutions; (v) member of the fiscal council of Vivo S.A., a telecommunications company; (vi) member of the fiscal council of Banco Pine S.A., a financial institution; (vii) member of the Board of Directors of Confab Industrial S.A., a metal company; (viii) member of the Board of Directors of Minupar Participações S.A., a holding of investments with interest in companies operating in the processing of pork and poultry products; and (ix) member of the Fiscal Council of Trisul S.A., a real estate development company, operating in the same sector of the Company. None of these companies hold relevant interest in the Company’s capital, is controlled by Company’s shareholder holding direct or indirect interest equal of 5% or more of same class or type of the Company’s securities or compose its economic group, except for Construtora Tenda S.A. | |
Declaration of Any Conviction: Mr. Peter Edward Cortes Marsden Wilson, sitting member of the Fiscal Council to be elected on April 28, 2017, declared for all legal purposes that over the past five years, he was not subject to the effects of any criminal conviction, any adverse judgment or application of penalty in the Brazilian Securities and Exchange Commission (CVM) administrative proceeding or any final and unappealable judgment, at the judicial or administrative level to suspend or disqualify him to practice any profession or business activity. | |
Independence Criteria: The criteria provided for by applicable laws were observed for appointment of this member to the Company’s Fiscal Council, especially the provisions of Article 162, caput and Paragraph 2 of Law No. 6.404/76. | |
Laiza Fabiola Martins de Santa Rosa |
294.953.408-29 |
Professional Experience: Currently, Mrs. Rosa is the Structured Fund Development National Executive Manager of the Vice Chief Executive Officer of the Brazilian Federal Savings Bank’s asset management. Mrs. Rosa joined the Federal Savings Bank in 2006, working at the housing and commercial loan departments, and in 2010 started working with the Federal Savings Bank’s Vice Chief Executive Officer in the structuring, prospecting, management and administration of Private Equity Funds, Credit Rights Investment Funds and Real Estate Investment Funds, as well as the management of portfolios concerned with investment in sanitation, urban mobility, housing, debt and equity structrured operations. Manager of Caixa Porto Maravilha Real Estate Investment Fund, also in charge of the asset management concerned with investments in logistics infrastructure, holding the position of deputy member of the Board of Directors of Malucelli Energia S.A.., a closely-held company operating in the energy sector. In addition, (i) Mrs. Rosa was appointed by Caixa Cyrela Private Equity Fund as officer of SPE Baronesa Empreendimentos Imobiliários S.A. and SPE Pedrália Empreendimentos Imobiliários S.A., fund’s investees operating in the real estate market; and (ii) she was nominated by Caixa Imobiliária Private Equity Fund as board member of SPE Odebrecht Realizações SP 54 - Empreendimento Imobiliário S.A., fund’s investee operating in the real estate market. None of these companies hold relevant interest in the Company’s capital, is controlled by Company’s shareholder holding direct or indirect interest of 5% or more of same class or type of the Company’s securities or compose its economic group. | |
Declaration of Any Conviction: Mrs. Laiza Fabiola Martins de Santa Rosa, deputy member of the Fiscal Council to be elected on April 28, 2017, declared for all legal purposes that over the past five years, he was not subject to the effects of any criminal conviction, any adverse judgment or application of penalty in the Brazilian Securities and Exchange Commission (CVM) administrative proceeding or any final and unappealable judgment, at the judicial or administrative level to suspend or disqualify her to practice any profession or business activity. | |
Independence Criteria: The criteria provided for by applicable laws were observed for appointment of this member to the Company’s Fiscal Council, especially the provisions of Article 162, caput and Paragraph 2 of Law No. 6.404/76. Note: Candidate appointed by Federal Savings Bank, as per obligation provided for in the 7th Issue of the Company’s Debentures | |
Marcello Mascotto Iannalfo |
101.947.028-39 |
Professional Experience: Currently, Mr. Iannalfo is the Chief Executive Officer of Clic Metais Ltda., a limited liability company operating in the sanitary metal sector; a deputy member of the Fiscal Council of the Company and Construtora Tenda S.A., a publicly-held company operating in the construction and development of real estate projects and wholly-owned subsidiary of the Company. Over the past five years, Mr. Iannalfo also held the positions of (i) Latin America chief administrative and financial officer of El Tejar Group, an agribusiness company; (ii) Chief financial officer of Trip Linhas Aéreas, an airline company; (iii) Chief administrative and financial officer of Termomecânica São Paulo S.A., a company whose main activity is the transformation of non-ferrous metals; (iv) Chief administrative and financial officer and member of the Board of Directors of Power Transmission Industries S.A., a manufacturer of speed reducer and couplings and (v) deputy member of the fiscal council of Alphaville Urbanismo S.A., during the period in which the Board was instated. The Company holds 30% interest in the capital of Alphaville Urbanismo S.A., a company operating in the urban project development. None of these companies hold relevant interest in the Company’s capital, is controlled by Company’s shareholder holding direct or indirect interest equal of 5% or more of same class or type of the Company’s securities or compose its economic group, except for Construtora Tenda S.A.and Alphaville Urbanismo S.A. | |
Declaration of Any Conviction: Mr. Marcello Mascotto Iannalfo, deputy member of the fiscal council to be elected on April 28, 2017, declared for all legal purposes that over the past five years, he was not subject to the effects of any criminal conviction, any adverse judgment or application of penalty in the Brazilian Securities and Exchange Commission (CVM) administrative proceeding or any final and unappealable judgment, at the judicial or administrative level to suspend or disqualify him to practice any profession or business activity. | |
Independence Criteria: The criteria provided for by applicable laws were observed for appointment of this member to the Company’s Fiscal Council, especially the provisions of Article 162, caput and Paragraph 2 of Law No. 6.404/76. | |
Marcelo Martins Louro |
118.319.918-02 |
Professional Experience: Mr. Louro started his career at Arthur Andersen in the audit and consulting areas, currently he is a deputy member of the Company’s fiscal council and Construtora Tenda S.A.. Over the past five years, Mr. Louro held the positions of (i) Chief financial officer and deputy member of the Fiscal Council of Alphaville Urbanismo S.A., a company operating in the urban project development; (ii) planning and control officer of Construtora Tenda S.A., a publicly-held company operating in the construction and development of real estate projects and wholly-owned subsidiary of the Company; (iii) chief financial officer of Scalina S.A., a textile company; and (iv) investor relations officer of T4F Entretenimento S.A., an entertainment company. The Company holds 30% interest in the capital of Alphaville Urbanismo S.A., a company operating in the urban project development and is the parent company of Construtora Tenda S.A.. None of these companies hold relevant interest in the Company’s capital, is controlled by Company’s shareholder holding direct or indirect interest of 5% or more of same class or type of the Company’s securities or compose its economic group, except for Construtora Tenda S.A.and Alphaville Urbanismo S.A. | |
Declaration of Any Conviction: Mr. Marcelo Martins Louro, deputy member of the Fiscal Council to be elected on April 28, 2017, declared for all legal purposes that over the past five years, he was not subject to the effects of any criminal conviction, any adverse judgment or application of penalty in the Brazilian Securities and Exchange Commission (CVM) administrative proceeding or any final and unappealable judgment, at the judicial or administrative level to suspend or disqualify him to practice any profession or business activity. | |
Independence Criteria: The criteria provided for by applicable laws were observed for appointment of this member to the Company’s Fiscal Council, especially the provisions of Article 162, caput and Paragraph 2 of Law No. 6.404/76. | |
Alessandro de Oliveira Nascimento |
335.489.628-07 |
Professional experience: Currently, Mr. Alessandro de Oliveira Nascimento is executive manager of the Brazilian Federal Savings Bank, a banking company, he has been holding such position for more than five years and is candidate to the position of deputy member at the Company’s Fiscal Council. The company mentioned above does not hold relevant interest in the Company’s capital nor is controlled by Company’s shareholder holding direct or indirect interest of 5% or more of same class or type of the Company’s securities, and nor composes its economic group. | |
Declaration of Any Conviction: Mr. Alessandro de Oliveira Nascimento, candidate to the position of deputy member of the Fiscal Council to be elected on April 28, 2017, declared for all legal purposes that over the past five years, he was not subject to the effects of any criminal conviction, any adverse judgment or application of penalty in the Brazilian Securities and Exchange Commission (CVM) administrative proceeding or any final and unappealable judgment, at the judicial or administrative level to suspend or disqualify him to practice any profession or business activity. | |
Independence Criteria - The criteria provided for by applicable laws were observed for appointment of this member to the Company’s Fiscal Council, especially the provisions of Article 162, caput and Paragraph 2 of Law No. 6.404/76. Note: Candidate appointed by Federal Savings Bank, as per obligation provided for in the 7th Issue of the Company’s Debentures |
38
Percentage of Attendance at Meetings
Pursuant to provisions of Directive Release/CVM/SEP/nº02/2016, below, total meetings held by the Fiscal Council and Committees of the Company, as well the percentage of attendance of each member:
Fiscal Council |
Total meetings held by respective body after investiture |
% of member attendance at meetings held after investiture |
Olavo Fortes Campos Rodrigues Junior |
4 |
100% |
Peter Edward Cortes Marsden Wilson |
4 |
100% |
Laiza Fabiola Martins de Santa Rosa |
4 |
100% |
Marcello Mascotto Iannalfo |
4 |
0% - not summoned while deputy member |
Marcelo Martins Louro |
4 |
0% - not summoned while deputy member |
Alessandro de Oliveira Nascimento |
4 |
0% - not summoned while deputy member |
12.7./8. Composition of statutory committees and audit, financial and compensation committees:
Fiscal Council members are not members of any Company’s committee.
12.9. Existence of marital relationship, common-law marriage or kinship up to second degree related to Management of the issuer, subsidiaries and controlling shareholders:
Justification for not completing the chart:
Not applicable since there is no marital relationship, common-law marriage or kinship up second degree between Management of the Company or its direct or indirect subsidiaries.
In addition, the Company’s Code of Ethics does not allow hiring 1st degree employees’ family members (father, mother, siblings, and children), spouse, cousins, uncles and nephews to work for the Company or at its direct or indirect subsidiaries.
The common-law marriage between the Company’s employees or its direct or indirect subsidiaries is also not allowed.
Referring to direct or indirect controlling shareholders, not applicable, since the Company has widely held stock and there are no controlling shareholders.
12.10. Subordination relations, services rendering or control between Management and subsidiaries, controlling shareholders and others:
Justification for not completing the chart:
Not applicable, since there are no subordination relations or controls between Management and subsidiaries, no controlling shareholders, as this is a diffuse capital company.
39
Referring to services rendering, the Company’s Code of Ethics forbids any services relations between the Company’s suppliers, customers, debtors or creditors with its managers, employees and 1st degree employees’ family members (father, mother, siblings, children), spouse, cousins, uncles and nephews. The Company also forbids engaging companies or consulting firms owned by former employees who left the Company less than one year.
In addition, the Audit Committee is in charge of setting forth the guidelines for the Company to hire employees or former employees of the independent auditor.
40
APPENDIX III
(As per Appendix 24, item 13 of CVM Instruction no. 480 of December 17, 2009)
13. MANAGEMENT COMPENSATION
13.1. Description of the compensation practice or policy, Including the Non-Statutory Executive Officers:
a. objectives of the compensation policy or practice:
The compensation policy of the Company for its managers, including members of the Board of Directors, statutory and non-statutory officers, members of the Fiscal Council, in line with the best corporate governance practices, aims to attract and retain the best professionals in the market. Compensation is established based on market research and directly aligns the interests of the executives in question and those of the Company's shareholders.
In the case of officers, the existence of a variable short-term and long-term incentives (the later in the form of grant of stock option plans) practice permits the sharing of the Company's risks and results with its main executives, being characteristic of a transparent policy and aimed at achieving long-lasting results and the perpetuity of the Company.
b. breakdown of compensation, indicating:
(i) description of compensation elements and the objectives of each one
a) Board of Directors
The members of the Board of Directors are entitled to a fixed compensation, which is established in accordance with market criteria and aims to attract professionals who contribute effectively to the results of the company.
b) Executive Board
The members of the statutory and non-Statutory Executive Officers are entitled to fixed and variable short-term compensation, and long-term incentive tranche, in the form of a stock option plan and phantom shares, based on the Company shares. The amounts paid in fixed compensation are close to the median market standards. The variable portion has significant representation in the total compensation, which means that the officers share risks and results with the Company, so providing a greater alignment of interests between executives and shareholders.
The objective of the short-term variable compensation is to reward the results achieved for the year if the targets stipulated for the period were reached. By the same token, long-term incentives, based on stock options and phantom shares, aims at providing reward for results achieved over a longer period (generally more than 2 years. This policy aims to align the interests of the executives with those of the shareholders.
In addition to fixed and variable compensation, the Company offers its directors health plan benefits and life insurance, which are established in accordance with market standard.
41
It is important to emphasize that the Company has a Compensation Committee that analyses the strategy for fixed and variable compensation to be adopted, the models for granting of stock option models and the recommendations of corresponding beneficiaries of the plan, for subsequent approval by the Board of Directors.
c) Fiscal Council
The members of the Fiscal Council, in addition to mandatory reimbursement for necessary travel and lodging expenses as a result of their function, are entitled only to a fixed compensation based on the legal minimum.
d) Committees
All the members of the Company's Committees are managers or employees, and do not receive specific compensation for the fact that they participate on the Committees.
(ii) in relation to the last 3 fiscal years, which is the proportion of each element in total compensation
In the case of the Fiscal Council and the Board of Directors, fixed compensation corresponds to 100% of the total compensation, as previously mentioned – both the assumption and realized.
In the case of the Statutory Executive Officers, fixed compensation, in assumption, corresponds to approximately 30% of the total compensation on average. Regarding the tranche referring to variable incentives, the stock option plans and phantom shares (long-term) represent approximately 50%, while the part referring to the bonuses (short-term) represents approximately the other 50% – in this case, for both the statutory and the non-Statutory Executive Officers.
The variable incentives percentages may be modified due to changes in the results presented by the Company in the period, given the component of shared risks and results inherent in the variable compensation amount. Referring to realized and according to the tables presented below, the percentages assessed were, in 2014, fixed 20% and variable 80% (short-term bonus, accounting for 26% of variable amount), in 2015, fixed 40% and variable 60% (short-term bonus accounting for 34% of variable amount), and, in 2016, fixed 43% and variable 57% (short-term bonus accounting for 38% of variable amount). Remind that the amounts reported for long-term incentives represent accounting costs assessed and not effective gains deriving from these programs.
(iii) methodology for the calculation and readjustment of each of the compensation elements
The amount of compensation paid by the Company to its managers and employees are periodically compared with those in the market, based on research carried out by external specialist consultants, so that they can measure their competitiveness and evaluate the possible need to carry out any adjustments to some of the components. The researches involve all positions in the Company’s structure and include companies that can or cannot be from the same segment and that have all or some of the following characteristics: similar presence as the Company, publicly-held company, national capital, high level of corporate governance and good practices of compensation and human resources.
(iv) reasons which justify the compensation breakdown
The Company adopts a compensation breakdown model, which concentrates a significant tranche of the total compensation into variable components (both short and long-term), which is part of its policy of sharing risks and results with its main executives.
(v) existence of non-remunerated members and reasons for this fact
42
There are no non-remunerated members at the Board of Directors, at the Statutory Executive Board and at the Fiscal Council.
c. main performance indicators that are taken into consideration in the calculation of each compensation element :
For calculation of all the compensation items, the performance of the employee and his individual targets are taken into consideration, in accordance to what was achieved in comparison to the proposition and agreed for the year. Variable compensation is directly linked to the indicators contained in the Company's Scorecard, which is approved by the Board of Directors and which contains defined targets for the period, such as for example cash flow, EBITDA and sales volume, among others.
d. how compensation is structured to reflect the improvement in performance indicators:
Any changes to the compensation items is directly linked to the performance of the individual and that of the Company and the reaching of targets in the period in question, while salary increases, the variation in salary multiples received in the form of bonuses and the quantity of options and phantom shares granted under the option plan are all directly linked to the performance demonstrated in the assessed period.
e. how compensation policy or practice is aligned with the short, medium and long-term interests of the Company:
The practice adopted by the Company with regard to the various components of the total compensation is directly aligned to the short, medium and long-term interests of the Company. Fixed compensation reflects compensation in line with market practices and, as the cycle in the segment is medium and long term, the Company believes that a significant portion of compensation and variable incentives should be remitted to these periods, fully in line with the Company performance monitoring and, therefore, reaffirming the sharing of risk and results between executives and the Company.
f. Existence of compensation supported by subsidiaries, controlled companies, or direct or indirect controlling shareholders:
There is no compensation supported by subsidiaries, controlled companies, or direct or indirect controlling shareholders of the company.
g. Existence of any compensation or benefit linked to the occurrence of any particular corporate event, such as the sale of control of the Company:
There is no compensation or benefit linked to the occurrence of any particular corporate event, such as the sale of control of the Company.
13.2. Total compensation of the Board of Directors, the Statutory Executive Board and the Fiscal Council:
43
Total compensation estimated for the fiscal year to end on December 31, 2017 – Annual Amounts | ||||
|
Board of Directors |
Statutory Executive Officers |
Fiscal Council |
Total |
Total No. of Members |
7.00 |
6.00 |
3.00 |
16.00 |
No. of Compensated Members |
7.00 |
6.00 |
3.00 |
16.00 |
Fixed Annual Compensation |
|
|
|
|
-Salary or Pro Labore |
1,862,356.00 |
4,109,500.00 |
217,200.00 |
6,189,056.00 |
-Direct and indirect benefits |
NA |
314,000.00 |
NA |
314,000.00 |
-Attendance at committees |
NA |
NA |
NA |
NA |
-Other |
372,471.20 |
821,900.00 |
43,440.00 |
1,237,811.20 |
Description of other fixed compensations |
Payment of INSS (National Institute of Social Security) contribution (employer’s lien) |
Payment of INSS (National Institute of Social Security) contribution (employer’s lien |
Payment of INSS (National Institute of Social Security) contribution (employer’s lien |
|
Variable Compensation |
|
|
|
|
-Bonus |
NA |
5,855,000.00 |
NA |
5,855,000.00 |
-Profit Sharing |
NA |
NA |
NA |
NA |
-Attendance at meetings |
NA |
NA |
NA |
NA |
-Commissions |
NA |
NA |
NA |
NA |
-Other |
NA |
NA |
NA |
NA |
Description of other variable compensation |
|
|
|
|
Post-employment |
NA |
NA |
NA |
NA |
Termination of office |
NA |
NA |
NA |
NA |
Share-based compensation |
NA |
5,403,999.80 |
NA |
5,403,999.80 |
Notes |
1. No. of members: The number of members of each body corresponds to the annual average of the number of members of each body, calculated monthly. 2.Salary or pro labore: The amounts reported as pro labore do not include payroll charges. 3. Total Compensation: the information contained in the Financial Statements reported refers to pro labore and benefits (where applicable) of the Board of Directors. 4. Note: the total volume referred in this management compensation proposal is the sum of the amounts of the Board of Directors and the Statutory Board of Executive Officers (R$18,739,227.00) and, separately, the Fiscal Council compensation (R$260,640.00). |
1.No. of members: The number of members of each body corresponds to the annual average of the number of members of each body, calculated monthly. 2.Salary or pro labore: The amounts reported as pro labore do not include payroll charges. 3. Share-based compensation: the amounts reported as share-based compensation started to reflect the total potential book cost of the grant still to be approved in 2016 referring to the Statutory Executive Officers, to be recorded during grace period (3 years) according to the Monte Carlo (Traditional Stock Options and Phantom Shares Programs) pricing model. 4. Total Compensation: the information contained in the Financial Statements reported refers to pro labore and benefits (where applicable) of the Statutory Executive Officers. |
1. No. of members: The number of members of each body corresponds to the annual average of the number of members of each body, calculated monthly. 2.Salary or pro labore: The amounts reported as pro labore do not include payroll charges. 3.Total Compensation: the information contained in the Financial Statements reported refers to pro labore and benefits (where applicable) of the Fiscal Council. 4. Note: the total volume referred in this management compensation proposal is the sum of the amounts of the Board of Directors and the Statutory Board of Executive Officers (R$18,739,227.00) and, separately, the Fiscal Council compensation (R$260,640.00). |
|
Total Compensation |
2,234,827.20 |
16,504,399.80 |
260,640.00 |
18,999,867.00 |
|
|
|
|
|
44
|
|
|
|
|
Total Compensation for the Fiscal Year as at December 31, 2016 – Annual Amounts | ||||
|
Board of Directors |
Statutory Executive Officers |