Académique Documents
Professionnel Documents
Culture Documents
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2. INDEPENDENT AUDITORS
4. RISK FACTORS
15
5. MARKET RISKS
36
6. COMPANY HISTORY
46
7. COMPANYS ACTIVITIES
51
8. ECONOMIC GROUP
72
9. RELEVANT ASSETS
78
85
11. PROJECTIONS
118
120
139
165
15. OWNERSHIP
173
179
181
18. SECURITIES
190
216
218
220
224
1.
1.1
Srgio Karyia
Chief Executive Officer
2.
INDEPENDENT AUDITORS
(ii)
3.
2011
736,140
1,280,619
677,592
337,170
92,177
125,656,724
5.86
0.73
2013
1,016,513
1,801,245
832,262
497,328
172,592
127,385,996
7.98
1.35
EBITDA
EBITDA is a non-accounting measurement adopted by the Company, reconciled with its financial
statements, in accordance with CVM Instruction 527/2012, as applicable. The Company has calculated its
EBITDA as net earnings before financial results, the effect of depreciation of assets and equipment used
for rental, and the amortization of intangible assets. EBITDA is not a measure recognized under BR GAAP,
IFRS or US GAAP. It is not significantly standardized and cannot be compared to measurements with
similar names provided by other companies. The Company has reported EBITDA because it is used to
measure its performance. EBITDA should not be considered in isolation or as a substitute for "net income"
or "operating income" as indicators of operational performance or cash flow, or for the measurement of
liquidity or debt repayment capacity.
2011
2012
2013
161,968
76,188
238,156
272,046
131,042
403,088
ROIC: (Annual Operational Income (30% Income Tax Rate) + remuneration from affiliates) / Average
Invested Capital of the last thirteen months.
For the Company, invested capital is defined as the sum of its own capital (net equity or shareholders
equity) and capital from third parties (total loans and other liabilities that carry interest, from banks or
not), both being average capital from the beginning to the end of the period considered.
177,836
207,238
932,708
694,680
433,887
97,929
1,206,266
801,123
510,813
105,671
1,471,402
943,023
619,452
91,073
12.3%
14.7%
14.1%
________________________________________
(1)
Effective tax rate on operational Income before financial result, and since 2011 theoretical rate of 30%.
(2)
Comprising shareholders equity.
(3)
Comprising total loans and other liabilities that carry interest.
(4)
Includes industrial services , that was sold and discontinued in 2013.
The subsequent events listed ahead refere to financial statements ended in 12/31/2013.
10
Program
Program
Program
Program
Program
Program
Program
Program
Program
Program
2012
2012
2010
2011
2012
2012
2013
2010
2011
2012
01/10/2014
01/10/2014
02/05/2014
02/05/2014
02/05/2014
02/05/2014
02/05/2014
02/14/2014
02/14/2014
02/14/2014
711
3,000
50,174
13,825
3,554
11,250
7,710
1,820
3,890
2,800
104,512
5.76
20.39
13.13
21.70
5.81
20.56
6.78
13.16
21.74
20.60
4
61
659
300
21
231
52
24
85
58
1,619
Because of the stock options issued by the company in 2014, the Companys share capital raised R$
1,618,708.66 passing R$ 553,231,139.43, divided in 127,385,996 common, nominative shares with no
par value at the end of 2013 for R$ 554,849,848.09 divided in 127,490,508 common, nominative
shares with no par value until 03/11/2014, date of the disclosure of the 2013 financial statements.
Shareholders Agreement
On February 28, 2014, the Company announced the execution of the new shareholders agreement, which
maintains the bases and assumptions of the previous shareholders agreement in force and effect until the
mentioned date.
The execution of the new shareholders agreement does not result in any amendment to the management
structure or in any change to the corporate control of Mills, which continues to be held by the parties of
shareholders agreement, in the same proportion previously held by them.
The shareholders agreement has been made available to the public in accordance with CVM regulation.
3.4
2011
In addition to the
cases provided by the
law,
as
provision
introduced
on
February 8, 2010, the
Companys
bylaws
provide that up to
75% of the adjusted
net income for the
year
could
be
allocated
to
the
expansion reserve, as
11
2012
In
provision
introduced
on
February 8, 2010, the
Companys
bylaws
provide that up to
75% of the adjusted
net income for the
year
could
be
allocated
to
the
expansion reserve, as
long as the recorded
amount
in
such
2013
In addition to the
cases provided by the
law,
as
provision
introduced
on
February 8, 2010, the
Companys
bylaws
provide that up to
75% of the adjusted
net income for the
year
could
be
allocated
to
the
expansion reserve, as
Frequency of dividend
distribution
Restrictions to dividend
distribution
12
3.5
In R$
Adjusted net income
Dividend distributed regarding the adjusted net income
Return rate regarding the net equity of the issuer
Total dividend distributed
Net Income retained
Date of approval of the retention
In R$
Dividend amount
Payment
Interest on equity amount
Payment
2011
946,519.58
30/4/2012
24,400,000.00
4/30/2012
2012
41,780,000.00
6/14/2013
2013
3,483,455.75
30/4/2014
43,014,000.00
4/30/2014
Includes completion of the special goodwill reserves in the amount of R$1,520 thousand in the years of 2011 and 2012 and R$ 808 thousand in 2013.
3.6
The dividends presented in the chart of item 3.5 were declared in the net income of the fiscal year.
3.7
Debt
632,550
(25,798)
606,752
() EBITDA..........................................................................
411,247
147.5%
13
Collateral
Floating Guarantee
Unsecured obligations
Total
Between 1 and 3
years
12,764
112,532
125,296
3,821
299,079
302,900
Prazo de Vencimento
Between 3 and 5
years
(in R$ thousands)
9,414
116,651
126,066
Includes FINAME, BNDES and leasing, secured by chattel mortgage on the financed assets.
Includes debntures, loans in foreign currencies with swap and other unsecured debts (liabilities and obligations).
3.9
14
Over 5 years
Total
5,581
72,707
78,288
31,581
600,968
632,550
4.
15
RISK FACTORS
4.1
Risk factors
a.
to the Company
The Company may not be able to fully implement its business strategy
One of the Companys key objectives over the next few years is to sustain its accelerated annual growth
rate. The continued growth depends on several factors, many of which are beyond the Companys control.
In particular, the Companys strategy for the expansion of its business units is based on the assumption
that the Brazilian construction, industrial, and oil and gas sectors will experience significant growth in
coming years, driven, to a large extent, by public and private investments aimed at improving Brazils
infrastructure for energy, sanitation, public transportation and housing, including Minha Casa, Minha
Vida, the Brazilian governments low income housing program, and the set of projects that include the
Logisitc Investment Program (PIL) and others. If these investments are not made, the Company would
expect a significant decrease in the demand for its products and services and would not be able to
implement its growth strategy satisfactorily.
The Companys organic growth strategy also includes substantial geographic expansion of its operations
through the opening of new branches. The Company may not be able to successfully expand its
operations to additional Brazilian cities and regions for a number of reasons, including shortages of
qualified workers, lack of reliable suppliers in such cities and regions, competition from local players, and
difficulties in securing market acceptance of its brands. Although the geographic expansion occurs
satisfactorily, the Company will be subjected to risks from the local economy of these new regions.
Additionally, the Companys future performance will depend on its ability to manage the rapid and
significant growth of its operations. The Company cannot guarantee that it will be able to manage its
growth successfully, or that this growth will not have an adverse effect on its existing business. If the
Company is unable to manage its growth, it may lose its leading market position, which could have a
material adverse effect on its financial condition, results of operations and the negotiation price of its
shares.
The Company provides solutions for companies that operate in a number of industries,
primarily the residential, commercial and heavy construction sectors and the oil and gas
sectors. As a result, the Companys business is exposed to risks that are similar to those
faced by companies that operate in these and in other sectors.
The Heavy Construction business unit offers customized solutions to companies involved in the
implementation of large infrastructure projects, while the Real Estate business unit provides services to
residential and commercial construction companies. The products offered by Rental business unit are
leased to companies operating in a broad number of industrial segments. Consequently, the Companys
financial condition and results of operations are directly linked to the growth and performance of these
several industries, and the Company is exposed to many of the risks faced by companies operating in
these industries.
Events that may negatively affect these industries in such sectors, including macroeconomic factors,
adverse climate conditions, deterioration of the Brazilian social conditions, decreases in public investment,
changes to laws and regulations that adversely affect these industries, credit restrictions, supplier
problem, reductions in client purchasing power, and difficulties in the management of the clients
business, among others, are beyond the managements control and may cause an adverse material effect
on the Companys operations and results.
16
Adverse conditions in the financial and credit markets, or the Companys failure to secure
financing on adequate terms, may adversely affect its ability to run its business or to
implement its strategy.
The implementation of the Companys expansion strategy will demand additional investments and require
additional capital, which may not result in an equivalent increase in its operating income. In addition, the
Company may face an increase in operating costs as a result of other factors, as shortages of raw
materials, equipment or skilled labor, increased equipment costs and increased competition in the
segments in which it operates. The Company may need to raise additional funds through securities
offerings, including offerings of its shares or debt instruments, or through credit financings, in order to
meet its future capital needs. The Company may not be able to secure such funds on favorable terms, or
at all.
The Company future capital needs will be determined by a number of factors, including the growth rate of
its revenues, the cost and significance of future acquisitions, and the expansion of its business operations.
The Company may need to increase its cash flow and/or seek alternative funding by entering into
strategic partnership agreements. Efforts to increase its cash flow by means of an increase in sales,
reduction in operating expenses, introduction of more efficient processes for the collection of receivables,
or inventory cuts may not be successful. In addition, the Company may not be able to raise funds to
finance the Companys operations on favorable terms, in which case it may be unable to take advantage
of future opportunities, to react to an increase in competition, or to meet its existing debt obligations. Any
of the events mentioned above could have a material adverse effect on its financial condition, operation
results and the negotiation price of its shares.
The current funding lines from the Company represented, on December 31 of 2013, a short-term debt of
R$ 125.3 million, and long-term debt of R$ 507.3 million. Pursuant to the terms of the Companys existing
financing agreements it must comply with certain conditions which restrict, among other things, its ability
to incur additional debt, pay dividends and carry out capital reductions. As a result of these restrictions,
the Company may have difficulty in securing additional financing to run its operations.
In addition, some of the Companys clients are dependent on the credit availability to finance their
investments. A scenario of credit shortages and high interest rates may adversely affect its clients ability
to fund their projects and, consequently, purchase the Companys services, which may have a material
adverse effect on its financial condition and results of operations.
The Company is also exposed to the fact that counterparts to its financing agreements may be prevented
from fulfilling their obligations toward the company, should they go bankrupt or into receivership due to a
sharp decrease in their liquidity levels, so great that such institutions may be prevented from fulfilling
their obligations. The Companys difficulty in the credit scarcity may also adversely affect its suppliers.
Therefore, should the Companys financial counterparts or suppliers be unable to satisfactorily meet their
obligations under the terms of the Companys existing agreements, the Company may need to secure
alternative financing and/or approach alternative suppliers in order to meet its own obligations toward its
clients. Such events could also lead to litigation with its partners or clients, which could have a significant
adverse impact on its reputation, operation and financial condition.
The Companys growth may be adversely affected if it fails to identify and complete strategic
acquisitions. Difficulties in the integration of acquisitions could adversely affect its results of
operations.
The Company operates in a fragmented market, where the credit access is limited. The Company
believes, therefore, that its sector will go through a process of consolidation over the next few years,
which may significantly change the existing competitive landscape. The Company believes that identifying
and executing strategic acquisitions is one way it could successfully implement its growth strategy and
17
quickly and efficiently expand its operations and geographic footprint. However, this strategy could be
adversely affected if the Company fails to identify suitable acquisition opportunities and/or fail to execute
such acquisitions on favorable terms. In addition, the Company may not be able to integrate companies it
acquires into its operations within the timeframe and in the manner determined by its management. Any
such failure could have an adverse effect on the rate of return on the Companys investment, preventing
from taking full advantage of the potential synergies of any such acquisition and result in an adverse
effect on its financial condition and results of operations.
The loss of members of the Companys management team may have a material adverse
effect on its operations.
The Companys current market position and its ability to maintain this position is largely dependent on the
skill of its highly experienced management team. None of the Companys executive officers are subject to
long-term employment contracts or non-compete agreements. The Company cannot guarantee that it will
be able to retain its current executive officers or hire other qualified professionals. The loss of a few of the
Companys senior executive officers, or its failure to attract and retain experienced professionals, may
adversely affect its business.
The Companys expansion strategy could be adversely affected if it is unable to hire qualified
professionals and provide training to its staff.
As part of the execution of its expansion strategy, the Company will need to hire new qualified
professionals active in the most various business sectors. However, it faces significant competition in the
hiring of qualified personnel from other providers of engineering and industrial services and there can be
no assurance that it will be able to attract the number of professionals necessary to implement its
expansion plan in the desired timeframe. In addition, the Company may face difficulties in retaining its
current staff if it is unable to preserve its corporate culture and offer competitive compensation packages.
The Company believes that the hiring and retention of skilled labor is a critical factor for business success
and its growth strategy. The Companys financial condition and results of operations could be adversely
affected if it fails to implement this strategy.
The Companys operations have already been interrupted in the past by labor issues, and the
Company cannot guarantee that such interruptions will not occur in the future.
As of December 31, 2013, approximately 0.3% of the Companys employees were members of labor
unions, primarily in the civil construction and trade industries. The Company has entered into collective
bargaining agreements with each of these unions, which agreements are renegotiated on an annual basis.
The renegotiation of these agreements could become more difficult as unions campaign for salary
increases on the basis of the growth of its operations. During the last three years, the operations of
Industrial Services business unit have been interrupted during negotiation of new collective bargaining
agreements, the segment was sold in 2013.
The Companys success depends, to a large extent, on the quality and safety of its services
and products.
The Companys success depends, to a large extent, on the quality and safety of the machinery and
equipment that it uses in the provision of its services or that are rented to its clients. If the Companys
products are in any way defective, incorrectly assembled or unsafe, if they cause any kind of accident or
delay in its clients operations, or if they do not meet the expected quality and safety standards, the
Companys relationships with its clients and partners could suffer, its reputation and strength of its brand
could be adversely affected, and the Company could lose market share, besides being exposed to
administrative proceedings and lawsuits in connection with any potential failures of its machinery or
equipment and incur significant expenses. The occurrence of any of these factors could adversely affect
the Companys business, financial condition and results of operations.
18
Proceeds from the Companys insurance policies may not be sufficient to cover damages
resulting from a contingent event.
The Company cannot guarantee that proceeds from its insurance policies will be sufficient to cover the
damages resulting from any event covered by such policies. Accordingly, certain risks may not be covered
under the terms of its insurance policies (such as war, fortuitous events, force majeure and interruption of
certain operations). Therefore, if any non-covered event occurs, the Company may incur additional
expenses to rebuild or refurbish its buildings, or to repair or replace its equipment. Furthermore, the
Company cannot guarantee that the proceeds from its insurance policies will be sufficient to cover the
damages caused by any event for which its insurance policies provide coverage. There can be no
assurance that the Company will be able to renew its insurance policies on favorable or acceptable terms,
or at all, or enter into new insurance policies with alternate providers.
The nature of the services rendered by the Company requires making significant financial
and technical investments before knowing whether or not it will be hired.
Due to the nature of the services the Company provides, it is required to make substantial initial
investments in the development of new processes, the provision of constant training to its employees and,
in particular, the acquisition of machinery and equipment to be used in the provision of its services. Some
of these investments are carried out before the Company knows whether its services will be used on a
continuous, successive basis and it is exposed to the risk that significant initial investments will not
generate the returns that are anticipated. The Company is particularly vulnerable to a sudden decrease in
the level of demand for its services that would result in an increase in its spare capacity and leave its
revenue-generating assets idle, which could have an adverse affect on its financial condition and results
of operations.
All of the Companys business units face significant competition in the markets in which they
operate.
The Company faces strong competition in all of the segments in which it operates. Moreover, the
Company may be exposed in the future to additional competition from new market players, as well as
from foreign competitors entering the Brazilian market. The Company operates in a fragmented market
which demonstrates considerable potential for growth and is served by a substantial number of
companies offering less sophisticated and, therefore, less cost services. The Companys clients decision to
hire a particular service provider is influenced by a number of factors, including the quality of the services,
the reliability of the contractor and its ability to offer innovative solutions, and the price charged for the
services required. The Companys competitors are making substantial efforts to improve their market
positions and the Company may lose certain clients to these competitors, including long-standing clients
that regularly employ its services.
In addition, if construction companies and industries create new in-house departments to complement
their core operations, so as to no longer require the Companys services (or even to compete with the
19
Company), it may experience a reduction in the demand for its services, and a potential increase in
competition, which may adversely affect its market stock price and results of operations.
The development of engineering solutions and technological innovations which add value to
the Companys services is critical to the protection of its leading market position and to the
expansion of its business.
Due to the nature of the Companys business, it must remain abreast of the latest engineering solutions
and technological innovations in its industry. The Company must employ qualified personnel, maintain an
adequate infrastructure, and expand relationships with suppliers that have a successful track record.
Should the Company fail to provide value-added engineering solutions, or to buy or license new
technologies developed by third-parties on acceptable terms, the services rendered by the Company could
become outdated or obsolete in comparison to the services offered by its competitors. Any failure to
remain at the technological forefront of the industry would adversely affect its relationship with clients
and, consequently, its financial condition and results of operations.
b.
The interests of the Companys controlling shareholder may conflict with the interests of its
investors.
The Companys controlling shareholder has the ability, among other things, to elect the majority of the
members of its board of directors and determine the outcome of decisions requiring shareholder approval,
including with respect to transactions with related parties, corporate restructurings, asset sales and
partnership agreements, and will have power to influence the amount and timing of any dividends to be
distributed in the future, subject to the provisions of the Brazilian corporate law regarding the payment of
mandatory dividends. The Companys controlling shareholder may choose to pursue acquisition
opportunities, dispose of assets, and enter into partnership and financing agreements or similar
operations which may conflict with the interests of its other shareholders.
After the completion of the public offering, the Company came to be a diffused controlled
company, since it does not have a controlling shareholder or group of shareholders holding
more than 50% of its voting capital, which can allow it be susceptible to alliances and
conflicts between shareholders and other events resulting from the absence of a controlling
shareholder or shareholder group holding more than 50% of the voting capital.
After the completion of the public offering, the Company came to not have a shareholder holding more
than 50% of its voting capital. There is no established practice in Brazil of a public company with no
controlling shareholder of the voting capital. Alliances or agreements can be made between the new
shareholders, which could have the same effect as having a group of shareholders. In the event of a
group of shareholders and this group takes a hold of the decision power of the company, it can suffer
sudden and unexpected changes in the corporate policies and strategies, including through mechanisms
such as the replacement of the Companys management staff. Besides this, the Company may be more
vulnerable to hostile attempts to acquire control and conflicts from this outcome.
Additionally, the Company's shareholders can possibly change or exclude these provisions from its bylaws
which provide a public offering for share acquisition by a shareholder who becomes holder of 20% of its
share capital and then disregard their obligation to make a public offering to acquire shares as it is
required by its bylaws. The absence of a controlling shareholder or controlling group of shareholders of
more than 50% of the voting shares of the Company may also hinder certain decision-making processes,
which could not be reached the quorum required by law for certain decisions. In the case that there isnt
a controlling shareholder holding the absolute majority of the voting shares of the Company, the
Company's shareholders may not use of the same protection granted by Share Companies Law against
abuses practiced by other shareholders and, consequently, may have difficulty in repairing the damage
20
caused. Any sudden or unexpected change in the Company's management team in its business policy or
strategic direction, attempt to acquire control or any dispute among shareholders concerning their
respective rights may adversely affect the Company's business and operating results.
c.
to the shareholders.
An active and liquid market for the Companys shares may not develop. The volatility and
lack of liquidity of the Brazilian capital market could substantially limit the investors ability
to sell their shares at the desired price and time.
An investment in securities traded in emerging market countries such as Brazil frequently involves a
greater degree of risk when compared to investments in securities of issuers located in major international
securities markets, and are generally considered to be more speculative in nature. The Brazilian securities
market is substantially smaller, less liquid, more concentrated and usually more volatile than major
international securities markets such as the United States. As of December 31, 2013, the BM&FBOVESPA
represented a market capitalization of approximately R$ 2.5 trillion (US$ 1.2 trillion), with an average
daily trading volume of R$ 7.4 billion during the year. The Brazilian capital market is significantly
concentrated. The ten most liquid shares had their annual daily average financial volume traded on the
BM&FBOVESPA accounting for approximately 41% of the total volume in 2013.
These characteristics of the Brazilian capital market may substantially limit investors ability to sell the
Companys shares for the desired price and at the desired time, which in turn may have a significant
adverse effect on the price of its shares.
The average daily trading volume of the Companys shares, in 2013, was of R$ 13.8 million.
The Company may need additional funds in the future and may issue additional securities to
secure such funds. This may adversely affect the price of the shares and result in a dilution of
the investors percentage interest in the Companys shares.
The Company may need to raise funds in the future through an additional public or private offering of
shares or securities convertible into or exchangeable for shares. Any additional funds raised by the
distribution of shares or securities convertible into or exchangeable for shares may impact their price and
dilute the investors percentage interest.
Provisions in the Companys bylaws may discourage, delay or make more difficult a change of
control of the company or the approval of transactions that might otherwise in the best
interests of its shareholders.
The Companys bylaws contain provisions intended to avoid the concentration of ownership of its shares
in small groups of investors and to foster a dispersed ownership. These provisions require that any
shareholder that: (a) acquires or becomes the holder, of the Companys shares with 20% (twenty
percent) or more of emited shares of the company shall, within sixty (60) days from the date of
acquisition or event that resulted in the ownership of shares in an amount equal to or exceeding 20%
(twenty percent) of the total shares issued by the Company; (b) acquires or becomes the holder of other
21
rights such as (i) other Corporate Rights over a volume equal to or greater than 20% (twenty percent) of
the total shares issued by the Company or that might result in the acquisition of shares issued by the
Company in an amount equal to or greater than 20% (twenty percent) of the total shares issued by the
Company, or (ii) derivatives that give the right to shares of the Company representing 20% (twenty
percent) or more of the shares of the company, or that give the right to receive corresponding to 20%
(twenty percent) or more of the shares of the Company, shall apply or request for registration for
subsequent realization of an OPA of all shares issued by the Company, observing the applicable CVM
regulations, to the Novo Mercado, the other regulations of BM&FBOVESPA and the terms of the
Company's Bylaws. These provisions could have the effect to discourage, delay or even prevent the
Company to merge with another company or be acquired by another company, including transactions in
which the investor may receive a bonus over the market value of the Companys shares. Likewise,
statutory provision might allow the maintenance or perpetuation of the staff members of the Company
nominated and elected by shareholders holding less predominant portion of the Company's capital.
d.
The Company does not have subsidiaries or affiliates. The only society in which the Company holds a
stake is Rohr S/A Estruturas Tubulares (Rohr). Since Rohr operates in the same market of the Company,
the Companys management believes that both societies are subject to the same risks listed in the items
(a) above and (e), (f) and (g) below.
In addition, the minority stake held by the Company in Rohr does not allow it to prevail in the
deliberations of its general meetings or elect administrators, and shall only be facultative to elect a fiscal
council member and exercise the rights of shareholders provided for in corporate law. Consequently, the
Company is exposed to various risks, such as (i) does not receive dividends beyond the minimum required
in Rohrs bylaws, the corresponding amount, in each fiscal year of 6% of its capital, (ii) to not be able to
influence the executive administration and management of Rohr, including the case of disagreeing with
decisions made by its officers, and (iii) eventual difficulty to access Rohrs documents and information, or
related to its operations.
e.
to its suppliers.
Fluctuations in the price of raw materials, components and equipment used in the Companys
operations, as well as of commodities, may adversely affect its results.
Certain raw materials and components used in the Companys operations are prone to sudden and
significant fluctuations in price, over which it has no control. The final price of components, machinery
and equipment that are acquired or rented from third parties correlates to a significant extent with the
price of commodities such as steel and aluminum. A substantial increase in the price of such commodities
generally results in an equivalent increase in the Companys suppliers operating costs and, consequently,
in an increase in the prices they charge for their products. The Company may not be able to pass these
price increases on to its clients, which could have an adverse effect on its operating costs and financial
condition and results of operations.
In addition, all of the equipment used by the Rental business unit is imported, as there is no equipment of
comparable quality available locally, and their prices are defined in foreign currencies. Should the Brazilian
Real depreciate against the foreign currencies in which the Company purchases equipment, its purchase
costs will increase and it may be unable to reflect the increased cost of equipment in the rental prices
charged.
The components, machinery and equipment used in the Companys operations are
manufactured and supplied by third parties.
22
The components, machinery and equipment used in the Companys operations are manufactured by thirdparties. The Company also buys other materials used in its operations from local or foreign companies.
The Company generally does not carry a very large inventory of equipment in its warehouses, only the
minimum required for the provision of its services. As a result, the Company is vulnerable to delays in the
delivery of equipment or increases in the prices charged by its suppliers, which could prevent from
providing its services or renting its equipment to its clients in a timely manner. Also, if the Companys
suppliers are not prepared for and are unable to meet potential increases in the demand for their
products, it may not be able to buy the amount of equipment or volume of raw materials necessary to
carry out its operations. If such delays in delivery or lack of products become recurrent, the company may
not be able to find new suppliers quickly enough to meet its clients needs. In addition, the introduction of
restrictions on the acquisition of imported goods, or the increase of taxes due on imported equipment,
may have a negative impact on the Companys business, in particular on the operations of the Rental
business unit. Any delays or price increases resulting from the actions or failures of the Companys
suppliers, or due to new import regulations, could result in increased costs for the Company, requiring a
price increase, in which case the demand for the Companys services could be adversely affected,
affecting its financial condition and operation results.
f.
to its clients.
The success of the Heavy Construction business unit depends on the development of longterm relationships with a limited number of large companies operating in the Brazilian civil
construction sector.
According to O Empreiteiro magazine, the revenue of the ten largest Brazilian construction companies
represented, in the year 2012, 58.3% of the revenues from the 50 largest construction companies in the
country. Maintaining long-standing partnerships with such companies is the key to ensure the Companys
involvement in the implementation of prestigious and innovative activities and execute its operations, in
particular, more complex projects. Should the Company lose any of its main clients, or in case the
Company is unable to maintain a close relationship with such clients, the operations and revenue from the
Heavy Construction business unit could be materially adversely affected.
The Company may be unable to attract new clients or to develop new business at the pace
required for the expansion of the Real Estate and Rental business units.
The average term of the service agreements between the Real Estate and Rental business units and their
clients is generally shorter than that of the service agreements negotiated by the other business units. As
a result, both the Real Estate and Rental business units rely on the constant generation of new business
in order to maintain their revenue at a constant level. Due to the high degree of competition faced by the
Real Estate and Rental business units, the Company must make significant investments in order to attract
new clients and retain existing ones, in addition to offering its services at competitive prices. In 2013, the
Real Estate and Rental business units accounted for 33% and 41%, respectively, of the Companys net
revenue, compared to 27% and 29%, respectively, of the Companys net revenue in 2012. If the
Company is unable to generate new business at the rate required by the Real Estate and Rental business
units, the operations and expansion of the activities carried out by these business units could be adversely
affected.
The Company may be unable to meet the needs of all of its clients or deliver its services in a
timely manner.
The Company owns a limited number of machinery and equipment, which must be properly allocated to
each project in which it is involved. Delays or interruptions in the manufacturing and maintenance of such
equipment and its component parts, as well as sudden increases in the demand for the Companys
23
services, could prevent from providing its services in the agreed timeframe or from meeting the needs of
its clients satisfactorily and efficiently, as a result of any of the following factors:
If the Company is unable to meet its deadlines, either due to internal problems, or as a result of events
over which it has no control, it may lose the trust of its clients and, therefore, experience a decrease in
the demand for its services, which could adversely affect its financial condition and operation results.
Fluctuations in the price of commodities may impact the Companys clients investment
decisions and the cost of equipment and, consequently, the Company may face cancellations
or delays affecting its existing and future projects or loss of revenue.
Fluctuation in commodity prices may affect the Companys clients in many areas. For example, for clients
engaged in the oil and gas, copper and fertilizers business, fluctuation in their product prices may have a
direct impact in the profit margins and cash flows, and consequently influence decisions between
maintaining existing investments or making new expenditures. Should the Companys clients choose to
postpone new investments and/or to cancel or delay the execution of existing projects, the demand for
the Companys services would drop, which could have a material adverse effect on its operations and
financial condition. The Companys operations and financial situation has been adversely affected in the
past, and could be substantially affected in the future, due to cancellations and delays in connection with
projects in which it was or is involved.
g.
The demand for the Companys services is directly linked to the volume of public investment
in the engineering, construction and infrastructure sectors.
The public sector is generally involved in the implementation of large engineering and infrastructure
projects in Brazil, either by means of direct investment in such projects or through financing agreements.
For example, over the coming years, the Company expects that approximately R$955 billion will be
invested between the 2011 to 2014 period to fund public construction projects linked to the Brazilian
governments PAC 2 program. According to estimates from BNDES, the public and private sectors are
expected to invest R$4,0 trillion between 2014 and 2017, of which R$ 510 billion in infrastructure. Brazil
has the worst infrastructure quality among the BRICs, according to the latest World Economic Forum
(WEF) and has only invested 2% of their GDP in the sector for the last twenty years, versus 5% GDP
investment in the 70s.
24
In 2012 the government launched a new logistics investment program which predicts investments of R$
194 billion, of which R$ 91 billion in railroads, R$ 54 billion in ports, R$ 42 billion in roads and R$ 7 billion
in airports. A new road concession project was announced early 2014, with total investments of R$ 17.5
billion. The Company believes that the involvement of the public sector will be the key in the viability of
such enterprises and in the execution of such new projects.
In Brazil, public investments have historically been influenced by macroeconomic, political and legal
factors, which are all beyond of the Companys control. Such factors could determine, among other
things, the suspension or cancelation of projects that require the involvement of the public sector. Any
such suspension or cancellation could have a material adverse effect on the Companys clients operations
and on the demand for its services. If estimates regarding the level of future investments in construction
and infrastructure are not correct, or if such investments are not made, the Companys clients operations
(and, consequently, the Companys financial condition and operations) may be adversely affected.
h.
Costs related to laws and workplace safety regulations as well as those third-party
professionals. Such costs can be relevant and adversely impact the Companys results.
As of December 31, 2013, the Company had 2,093 employees. Due to the nature of the services provided,
both the Companys employees and employees of third parties face risks when executing its projects,
which could result in serious injury or death. In accordance with existing labor laws and regulations, the
Company is required to provide and ensure the use of safety equipment for its employees and other
individuals working on its projects, under the Companys responsibility. If the Company fails to provide all
necessary safety equipment and ensure its proper use, or if it works with companies that are not
sufficiently committed to ensuring the safety of their staff, the Company could be deemed responsible for
any accidents that take place at the worksites where it provides services. Any accidents at the worksites
where it provides its services could potentially reduce the number of able bodied employees available to
carry out its operations and would expose the Company to the payment of fines and penalties. Any
changes to existing safety regulations may impose additional obligations on the Company and result in an
increase in its expenses with respect to safety equipment and procedures. The Company cannot predict
whether any such changes would have a significant impact on its operations. For example, changes
imposing a reduced work day, for safety reasons, could result in a drop in employee productivity,
therefore forcing the Company to hire additional staff. Similarly, provisions requiring the Company to
install additional safety components could increase the cost of its equipment and, therefore, adversely
impact its operating costs and results.
In addition, the Company engaged a third-party labor provider to hire temporary employees during
periods of rapid increases in the demand for the Companys services, particularly for the Companys
Industrial Services business unit. As a result, the Company could be considered responsible for meeting
any employment obligations relating to such professionals, or deemed to be their employer under the
terms of existing laws and regulations, and would be subject to potential costs associated with failure to
comply with workplace safety regulations with respect to such professionals. Besides, the editing of
stricter legal and regulatory provisions regarding the use of outsourced personnel, or of provisions
imposing additional obligations on the contractor of outsourced services, could increase the Companys
labor costs and have a negative effect on its financial condition and results of operations.
The technical requirements and the use of the Companys equipments, as well as, the way
which the Company renders its services, may suffer relevant changes due to the incident of
drastic climate change. Moreover, the Companys inability to adapt to climate change may
adversely affect its business and financial results. Additionally, the Company is subjected to
several environmental laws and regulations that may become stricter in the future, as a
25
response to the drastic climate changes, and may result in higher duties and greater capital
investment.
Climate change, including flooding or erosion caused by increased rainfall, could adversely affect the
technical requirements in the projects and equipments to which the Company is subjected to, the way in
which the Company uses its equipment and the way it render its services. For instance, increased rainfall
could interfere with the Companys ability to perform industrial painting services. In addition, variations in
weather caused by climate change may lead to postponements in project schedules, which in turn may
lead to a decrease in the demand for the Companys services. The Companys inability to adapt its
operations to such climate change and maintain its quality standards from our equipment and services,
may lead to a decrease in its market share, adversely affecting its business and financial results.
The Companys operations are subject to several federal, state and municipal environmental laws and
regulations, including protocols and international treaties to which Brazil is party. Such regulatory
framework may become more stringent in the future due to, among other things, climate change.
Compliance with the provisions of these laws and regulations is monitored by certain governmental bodies
and agencies that are responsible for applying administrative sanctions in the event of the breach of any
relevant provisions. These sanctions may consist of fines ranging from R$500 to R$50,000,000, result in
the cancelation of our licenses and, ultimately, the temporary or permanent suspension of the Companys
operations, among other penalties. Environmental laws and regulations may become stricter in the future,
which may require the Company to make additional investments in compliance and, as a result, affect its
existing investment program. Such changes may cause an adversely affect to its financial condition and
results of operations. Besides, the failure to comply with such laws and regulations, such as operating
without the necessary environmental licenses and permits, or failing to adequately dispose of residues
arising from the Companys painting and equipment maintenance services, may result in the application of
criminal and administrative sanctions, as well as the obligation to repair the alleged harm or pay penalties
for any potential damage to the environment. Criminal sanctions may include, among other things, the
arrest of the persons responsible for the breach, the revocation or restriction of tax incentives and the
cancelation or suspension of credit facilities provided by public financial institutions. The Company could
also be prohibited from providing services to the public sector. The application of any of these sanctions
could have an adverse effect on the Companys revenues and prevent us from being able to raise capital
in the financial markets. The introduction of additional environmental obligations in the future as a result
of legal or regulatory changes or as a consequence of an increase in the environmental impact of the
Companys operations, or failure to obtain any necessary environmental licenses and permits, may result
in additional and substantial compliance costs and have an adverse effect on its business, financial
condition and results of operations.
i.
The Company is part of a judicial and administrative proceedings in the civil, tax and social security, labor
and environment, as described below. The Companys contingency provisions are recorded in the financial
26
statements for the total amount of probable losses. As of December 31, 2013, the total value of cases
involving contingent liabilities was R$ 74.0 million and the total value involved in processes with probable
loss, according to its assessment and its legal counsel, was R$ 10.5 million, as indicated below:
Proceeding/Contingency
2011
2013
2,349
440
596
444
4,812
467
Possible losses
Probable losses
13,743
9,902
13,218
7,013
26,442
6,518
Labor claims
Possible losses
Probable losses
9,004
1,396
6,791
2,462
10,944
3,588
Other
Possible losses
Probable losses
5,000
1,096
5,000
-
12,834
9,919
10,573
7,666
11,853
10,053
Civil proceedings
Possible losses
Probable losses
Tax and social security proceedings
Provisions
Judicial deposits
For the fiscal year 2011, the judicial deposits were presented on a net basis, for which had been
constituted a contingent liability. For the fiscal years 2012 and 2013, the provisions for contingencies are
presented in their entirety, unlike previous years.The Company believes that its provisions for legal and
administrative contingencies are sufficient to cover probable losses. The Company describes below the
main legal and administrative proceedings in which it is involved.
Civil Proceedings
The Company is defendant in 15 proceedings concerning civil liability and indemnification payments,
regarding, above all, contract terminations and indemnification payments, whose total value was of R$
5.3 million on December 31, 2013. Based on the advice of the Companys external legal counsel, as of
December 31, 2013 it has recorded provisions of R$ 0.5 million to cover probable losses arising from
these proceedings.
Federal Justice
Instance
1st Instance
Date of filing
03/21/2006
Main facts
27
(CDA
No.
70.6.05.018933-01/
Installment
Plan)
and
15374.001300/00-72 (CDA No. 70.2.05.013557-18), filed by reason of
the cancellation of expenses incurred by Mills (former Aluma), by
reason of the supposed lack of proof of operating costs and expenses
deducted from the profits earned for purposes of determination of the
taxable income, in relation to the hiring of the company Mills do Brasil.
Latest update on 4/30/2013: The Company filed motions to the
execution that were dismissed. The Company is currently awaiting
judgment of the appeal filed.
Chances of loss
Possible
Chances of loss
Analysis of impact in the case of losing
the suit
Federal Justice
1st Instance
06/07/2006
Mills Indstria e Comrcio Ltda. (succeeded by the Company) and
Federal Union
R$851 thousand on 12/31/2013
Subject Matter: This is a Lawsuit seeking the cancellation of the tax
liabilities
substantiated
in
Administrative
Proceedings
Nos.
13707.002177/93-71 (CDA No. 70.2.06.003889-75) (IRPJ) and
13707.002178/93-34 (CDA No. 70.6.06.007170-64) (FINSOCIAL). The
taxpayer executed with its affiliate Mills Equipamentos Ltda a lease
agreement of some equipment of its production.
At first, the
agreement provided that the amounts would be paid on a monthly
basis and adjusted at the OTN rate. On January 5, 1998, the parties
entered into a new agreement whereby the rent would be paid
annually, but that the adjustment would still be made on a monthly
basis. However, on August 3, 1998, there was the execution of the reratification agreement whereby the parties ratified the agreement that
the payment would be annual and agreed that the adjustment would
also be made at the average rate of OTN. The Tax Authority
understood that the lessee should have paid, until January 5, 1998, the
IRPJ and the CSLL levied upon the amounts supposed received by way
of rent in the first seven months of the year. In the Companys
defense, it claimed that no amount was due in the period, because
according to the terms of the agreement executed with the affiliate the
amount would only be paid to the Company at the end of the fiscal
year, for which reason the taxable event of the said taxes had not yet
occurred.
Latest update on 4/30/2013: Waiting for the entry of judgment.
Possible
If the claim is held to be invalid, the Company will have to pay the tax
liability disputed, in the adjusted amount of R$840 thousand (until
December 31, 2013). Since this is an isolated fact, which is not a
habitual practice of the Company, the Company does not believe that
an unfavorable decision would have a material adverse effect on its
financial situation or on its operating results..
28
Federal Justice
Instance
1st Instance
Date of filing
06/07/2006
Chances of loss
Analysis of impact in the case of losing
the suit
Process n 12267.000047/2007-14
Jurisdiction
Instance
1st Instance
Date of filing
May/23/2005
Chances of loss
Analysis of impact in the case of losing
the suit
29
Process n 37280.000387/2006-17
Jurisdiction
Instance
1st Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of losing
the suit
May/23/2005
Mills do Brasil Estruturas e Servios Ltda. (succeeded by the Company)
and INSS (National Institute of Social Security)
R$1,018 thousand on 12/31/2012
This is a tax-deficiency notice (NFLD n 35.739.841-6) seeking the
payment of amounts supposedly not paid by way of social-security
contributions, because the tax authority acknowledged the employment
relationship between the members of Coopcel, a cooperative, and the
Company. In its defense, the Company claims that the tax authority
cannot acknowledge the employment relationship and that the tax
liability has been barred by the statute of limitations.
Latest update on 4/30/2014: The file was forwarded to the Division of
Tax Control and Monitoring (DEMAC). Pending judgment of the
Voluntary Appeal.
Remote
In the event of an unfavorable decision, the Company will have to pay
the tax liability in question, in the updated amount of R$1.018 million
(on December 31, 2013). Since this is an isolated fact, which is not a
habitual practice of the Company, the Company does not believe that
an unfavorable decision would have a material adverse effect on its
financial situation or on its operating results.
-
Process n 2005.51.01.026197-3
Jurisdiction
Federal Justice
Instance
2nd Instance
Date of filing
September/21/2005
Chances of loss
Analysis of impact in the case of losing
the suit
30
Process n E-04/0620000/2011
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of losing
the suit
01/31/2011
Mills Estruturas e Servios de Engenharia S.A. and State of Rio de
Janeiros Treasury Department
R$2,481 thousand on 12/31/2013
Subject Matter: this infraction seeking to require the ICMS and fine as
a result of the transfer of operations to a third party without collect tax
allegedly owing. As the State Treasury claims, the society would not
be a "trading company", which is why the ICMS would be due. In:
01.31.2011 challenge of administrative acts Protocol.
Latest update on 4/30/2014: Protocol of Administrative appeal.
Currently is awaiting the proceeding contesting judgment.
Possible
The Company will have to pay the updated in 12/31/2013 amount of
R$2,481 thousand. Taking into account the amount involved in the
lawsuit, the Company does not believe that an unfavorable decision will
have a material adverse effect on its financial condition or operating
results.
-
Process n E-04/371.092/98
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of losing
the suit
Labor Claims
The Company is defendant in 405 labor claims, and with the advisory of an external legal counsel, the
Company has recorded provisions on the amount of R$ 3.6 million on December 31, 2013, to cover
probable losses resulting from the labor claims filed against the Company.
The labor claims filed against the Company relate to the following matters: (i) payment of
indemnifications for material damages; (ii) payment of risk, hazard, transfer and night shift allowances;
(iii) length of lunch and shift breaks; (ix) payment of equal pay for equal work; (v) workplace accidents;
31
(vi) re-hiring as a result of the development of professional illness; (vii) recognition of employment
relationships; and (viii) existence of subsidiary (or joint and several) responsibility between the Company
and its services providers, with respect to outsourced workers employed by such providers and allocated
to providing services for the Company. Below, the Company included a structured summary of the major
labor claims that it is part:
Action n 01106. 5.134.05.00.1
Jurisdiction
Instance
1st Instance
Date of filing
October/24/2005
Chances of loss
Possible
In the event of loss, the Company will have to pay the amount in
dispute and will have to extend the number of employees that suffer
from deficiency, under penalty of fine. According to the external
consulting lawyer, the estimated value for the condemnation would be
R$ 440 thousand (in 12/31/2013).
32
Action n 0120300-11.2009.5.19.0005
Jurisdiction
Instance
1st Instance
Date of filing
09/05/2009
Author: C.F.
Defendant: Mills Estruturas e Servios de Engenharia S.A.
Main facts
Chances of loss
Possible
The Company will have to collect the amount in favor of the former
employee, which is estimated by its advisors in the amount of R$457
thousand (in 12/31/2013). The Company does not believe that an
unfavorable outcome can have any adverse effects on its financial
condition or its operational results.
Action n 0122700-66.2007.5.05.0131
Jurisdiction
1 Vara do Trabalho (1st labor staff) of Camaari
Instance
1st Instance
Date of filing
11/16/2007
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
Author: F. T. P. L
Defendant: Mills Estruturas e Servios de Engenharia S.A
R$ 388 thousand on 12/31/2013
This is a labor claim by a former employee in order to obtain
compensation for moral and material damages due to occupational
illness.
Latest update on 4/30/2014 were oposed by Mills Embargos to Execution.
Possible
The Company will have to collect the amount in favor of the former
employee, which is estimated by its advisors in the amount of R$ 388
thousand (in 12/31/2013). The Company does not believe that an
unfavorable outcome can have any adverse effects on its financial
condition or its operational results.
Action n 0000196-42.2013.5.05.0133
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
33
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
0001836-27.2013.5.03.0007
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
0110600-41.2005.5.05.0134
Jurisdiction
Instance
Date of filing
Parties in the suit
Amounts, goods or rights involved
34
Main facts
Chances of loss
Analysis of impact in the case of
losing the suit
This is Public Civil Action lawsuit filed by the Ministry of Labor alleging that
Mills is not giving a cogent rule contained in Article 93 of Law 8.213/91,
which requires all corporations with more than 100 employees to hire
employees with special needs.
Latest update on 01.22.2014 Dispatch: Considering the above certificate
that informs the absence of final judgment, and the duty of this Court in
upholding the principles of diligence and economy, null around the order
of fl. 1511 and all subsequent acts. Refers to the acts to the Office of
Judicial Coordination of Second Instance to be regularized the scan as fl.
1515.
After returning from the file, give order to the calculus of claimed fls
1499/1510 by preclusive period of ten days in the form of art. 879, 2 of
the CLT.
1. GIVE ORDER TO THE PARTIES OF THE PRESENT FILE.
2. AFTER PUBLICATION, referring the acts up urgently to the Department
of Judicial Coordination of Second Instance.
Possible
The Company will have to collect the amount in favor of the former
employee, which is estimated by its advisors in the amount of R$ 394
thousand (in 12/31/2013). The Company does not believe that an
unfavorable outcome can have any adverse effects on its financial
condition or its operational results.
-
4.4
Judicial, administrative or arbitral awards, which are not under confidentiality, in
which the company or its subsidiaries are part and whose appellees are administrators or
former administrators, owners or ex-owners or investors of the company or its subsidiaries.
Not applicable to the Company.
4.5
On December 31, 2011, 2012 and 2013 the Company was not part of any confidential lawsuit.
4.6
Judicial, administrative or arbitral lawsuits, repetitive or related, non confidential and
based on similar legal facts and causes, which are not under confidentiality and which
together, are relevant.
Not applicable to the Company.
4.7
35
5.
36
MARKET RISKS
5.1
interest rates;
exchange controls and restrictions on remittances abroad;
fluctuations in exchange rates;
inflation;
social and political instability;
expansion or contraction of the global or Brazilian economies;
liquidity of domestic capital and financial markets;
tax burden and policy; and
other political, social and economic developments in or affecting Brazil.
Uncertainty over whether the Brazilian government will implement changes in policy or regulation
affecting these or other factors in the future may contribute to economic uncertainty in Brazil and
heightened volatility in the Brazilian securities markets. The Company cannot predict whether the current
or future Brazilian government will implement changes to existing policies on taxation, exchange controls,
monetary strategy and social security, among others, nor estimate the possible impact of any such
changes on the Brazilian economy or the Companys operations.
Federal Government's efforts to reduce inflation may delay the Brazilian economys growth
and affect the Company's business negatively.
In the past, Brazil experienced extremely high inflation rates and, consequently, adopted monetary
policies that resulted in one of the largest real interest rates in the world. In 2013, the SELIC medium rate
was 8.1%. The annual inflation calculated by the IGP-M was of 5.10%, 7.82% and 5.51% in 2011, 2012
and 2013, respectively, and by the IPCA was of 6.50%, 5.84% and 5.91% in 2011, 2012 and 2013,
respectively. Inflation and measures taken by the Federal Government to combat it, especially through
the Central Bank, had and can return to have significant impact on the Brazilian economy and on the
Company's business. The strict monetary policy with high interest rates may limit the Brazilian growth and
the credit availability. Conversely, looser government and monetary policies, the decline in interest rates
and the intervention in the exchange and stock markets to adjust or fix the real value may trigger
increases in inflation rates and, consequently, the volatility of growth and the need for sudden and
significant interest rate increases. Besides this, the Company may not have conditions to adjust the prices
to offset the effects of inflation on its cost structure. Any of these factors could adversely affect the
Companys business.
Exchange rate instability may affect the Brazilian economy, as well as the Companys
operations and the market value of its shares.
37
Over the last few decades, the Brazilian currency faced frequent and substantial exchange rate
fluctuations in relation to the U.S. dollar and other foreign currencies. The real showed significant
devaluation against the U.S. dollar between 2000 and 2002, reaching an exchange rate of R$ 3.53 per U$
1.00 by the end of 2002. On the other hand, the real appreciated substantially against the U.S. dollar in
the period from 2003 to mid-2008 as a result of stability in the macroeconomic environment and strong
growth in foreign investments in the country, reaching an exchange rate of R$ 1.56 per US$ 1.00 in
August 2008. As a result of the global financial crisis in mid-2008, the real depreciated 31.9% against the
U.S. dollar, reaching an exchange rate of R$ 2.34 per US$ 1.00 by the end of 2008. In 2009, due to the
recovery of the Brazilian economy at a faster rate than the global economy, the real once again
appreciated 25.2% against the U.S. dollar, reaching an exchange rate of R$ 1.74 per U$ 1.00 by
December 31, 2009. This recovery also happened in 2010, when the real increased 3.4% in comparison to
U.S. dollar, reaching the exchange rate of R$ 1.67 per U$ 1.00 in December 31, 2010. In 2011, the dollar
reached its lower price on July 26, when it reached the level of R$ 1.53 per US$ 1.00, or an appreciation
of 7.1% in the year. Yet, at the end of the year it showed a devaluation of 13.6% in the year, reaching an
exchange rate of R$ 1.66 per U$ 1.00 on December 31, 2010. In 2012 the real depreciated 9.4%,
reaching R$ 2.04 per US$ 1.00 in December 31, 2012. In 2013 the real appreciated 15.1% against the
U.S. dollar, reaching a exchange rate of R$ 2.36 per US$ 1.00 in December 31, 2013.
The depreciation of the real against the U.S. dollar could create additional inflationary pressures in the
Brazilian economy and lead to increase the interest rates, which could negatively impact Brazilian
economic growth as a whole, as well as the Companys financial condition and results of operations,
besides limiting access to international financial markets and lead to governmental interventions, which
could include the introduction of recessive policies. In the context of the current slowdown in global
economic activity, the depreciation of the real against the U.S. dollar could also trigger a drop in
consumer spending, as well as create deflationary pressures and result in lower economic growth. On the
other hand, the appreciation of the real in comparison to the U.S. dollar and other foreign currencies in
turn lead to deterioration in the Brazilian balance of payments and a drop in export-based growth.
Depending on the circumstances, the depreciation or appreciation of the real could have a material
adverse effect on the countrys economic growth, as well as on the Companys business and the market
value of the Companys shares.
Events and the perception of risk in other countries, especially the United States and
emerging market countries, may adversely affect the market price of Brazilian securities,
including that of the Companys shares.
The market price of securities issued by Brazilian companies is affected to varying degrees by economic
and market conditions in other countries, including the United States and other Latin American and
emerging market countries. Therefore, investors reactions to developments in these other countries may
have an adverse effect on the market value of securities of Brazilian issuers. Crisis in other emerging
market countries may reduce investor interest in securities issued by Brazilian companies, including those
issued by the Company.
38
The Company takes a dynamic approach to analyzing its exposure to interest rates. Various scenarios are
simulated, taking into consideration refinancing, financing and hedging. Based on these scenarios, the
Company determines a reasonable change in the interest rate. The scenarios are prepared only for
liabilities that represent the main positions with interest. See below the sensitivity analysis of possible
fluctuations in interest rates.
Sensitivity analysis
The following table shows the sensitivity analysis of the financial instruments, describing the risks that
could generate material losses for the Company, with the most probable scenario (scenario I), as
assessed by management, considering an annual horizon. Two other scenarios are also shown, as
required by the Brazilian Securities Commission - CVM, in Instruction No. 475/2008, in order to show
deterioration of 25% and 50% of the risk variable considered, respectively (scenarios II and III):
Debt
BNDES
Leasing
Working Capital
Debentures - 1 issuance
Debentures - 2 issuance, 1st series
Index
TJLP
CDI
CDI
CDI
CDI
Total
Present
23,427
8,154
39,932
275,530
166,938
513,981
Scenario I
(probable)
1,493
2,683
4,244
25,626
16,699
50,745
Variation
The sensitivity analysis presented above considers changes in relation to the interest rate risk, maintaining
constant other variables, associated with other risks.
Reference
CDI (%)
TJLP (%)
Scenario I
Rate
Maintenance
10.5%
5.0%
Scenario II
+25%
13.1%
6.3%
Scenario III
+50%
15.8%
7.5%
Regarding interest risk, the Company's management considered as a probable premise (scenario I) for its financial instruments a 10,5% rate, considering an
increase in the CDI rate in line with the expected increase in the Selic rate, since there is a direct relationship between the rates, and a rate increase as premise
for the other two scenarios.
For financial liabilities related to loans and financing - BNDES, the Company's management considered as a probable premise (scenario I) would be the
maintenance of the TJLP, since there is no evidence of a change in the short term, and a rate increase as a premise for the other two scenarios.
Inflation risk
The Company seeks to reflect inflation rates in the prices that are charged for its products and services.
However, Brazilian laws and regulations provide that long-term agreements may only be adjusted for
inflation once every 12 months. The main inflation indexes used by the Company to adjust prices under
long-term agreements are IGP-M and IPCA, released by the Brazilian Institute of Geography and Statistics
(IBGE). In addition, the Companys payroll is affected by salary increases negotiated under collective
bargaining agreements, which are usually in line with increases in the main Brazilian inflation indexes.
In 2012, the Company issued debentures with an interest rate linked to the inflation index IPCA. This
way, there is a risk that the Company will incur losses due to fluctuations in the IPCA index, which
increase financial expenses relating to the second series of the 2nd issue of debentures issued by the
Company.
In the years 2011, 2012 and 2013, the IGP-M ndex reported by FGV was of 5.1%, 7.8% and 5.5%,
respectively, and the IPCA ndex announced by IBGE was of 6.5%, 5.8% and 5.9%, respectively.
39
Sensitivity analysis
The following table shows the sensitivity analysis of the financial instruments, describing the risks that
could generate material losses for the Company, with the most probable scenario (scenario I), as
assessed by the management, considering an annual horizon. Two other scenarios are also shown, as
required by the Brazilian Securities Commission - CVM, in Instruction No. 475/2008, in order to show
deterioration of 25% and 50% of the risk variable considered, respectively (scenarios II and III):
Debt
Debentures - 2 Issue 2 tranche
Index
IPCA
Total
Present
120,803
120,803
The sensitivity analysis presented above considers changes in relation to the particular risk, maintaining
constant other variables, associated with other risks.
Reference
IPCA(%)
Scenario I
Rate
Maintenance
6.0%
Scenario II
+25%
7.5%
Scenario III
+50%
9.0%
For financial liabilities related to the second issue of the debntures, the Company's management considered as likely premise (scenario I), expectation of IPCA
for 2014 described the FOCUS report released by the Central Bank of Brazil on February 14, 2014 since there is no evidence of a change in the short term, and a
rate increase as a premise for the other two scenarios.
40
2011
Heavy Construction
Industrial Services
Real Estate
Rental
Events
Total
Trade
Receivables
52,867
66,585
59,041
51,290
4,247
234,030
2013
Trade
Receivables
68,785
4,408
82,145
73,468
3,796
232,602
ADD
13,715
4,408
16,071
18,637
1,030
53,861
Remaining amount receivable from the operations of the Industrial Services business unit, which was discontinued on November 30, 2013.
Value to receive for the sale of the fixed asset from the Business unit events that was discontinued in 2008
Liquidity risk
Liquidity risk is the risk of the Company encountering difficulties in fulfilling its obligations associated with
its financial liabilities that are settled with cash payments or with another financial asset. The Companys
41
approach to managing liquidity is to ensure, to the greatest extent possible, that there is always sufficient
liquidity to fulfill its obligations as they fall due, under normal and stress conditions, without causing
unacceptable losses or risking harming the Companys reputation.
The financial department monitors ongoing forecasts of the Companys liquidity requirements to ensure
that it has sufficient cash to meet its operating needs. The monthly forecasts take into consideration the
plans for financing the Companys debt, fulfillment of contractual clauses and the meeting of internal
targets in accordance with the Companys strategic plan. In addition, the Company maintains lines of
credit with the main financial institutions operating in Brazil.
The table below presents the Companys non-derivative financial liabilities per maturity bracket,
corresponding to the remaining period in the balance sheet until the contractual date of maturity.
Between
one and
two years
49,475
131,129
1,084
267
181,955
Less than
one year
Borrowings and financing
Debentures
Finance leases
Derivative financial instruments
Trade payables
Total
6,144
139,418
7,612
37,904
191,078
5.2
a.
The Companys activities are exposed to several financial risks (including risks of interest rate, inflation,
exchange rate, price fluctuation from raw materials and imported equipment and credit risk). The risk
management program focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the Company's financial performance. The Company uses derivative financial
instruments to hedge against certain risk exposures and has a policy not to participate in any trading of
derivatives for speculative purposes.
Risk management is carried out by the Finance department, under policies approved by the Board of
Directors. The Finance department identifies, evaluates and protects the Company from financial risks in
co-operation with the Company's operating units. The Finance department establishes principles for
overall risk management, as well as for specific areas, such as foreign exchange risk, interest rate risk,
credit risk, use of derivative financial instruments and non-derivative financial instruments, and
investment of cash surplus.
b.
The Company intends on using financial derivative instruments locally and abroad to manage the
exchange and interest rate fluctuation risks. In accordance with the accounting principles generally
accepted in Brazil, the derivative contracts are going to be recorded in the balance sheet based on the fair
market value recognized in the revenues statements, unless in cases when the specific hedging criteria
are met. The market value estimations are going to be held on a specific date, usually based on the markto-market.
c.
In order to protect shareholders equity from exposure to foreign currency commitments, the Company
developed a strategy to mitigate the market risk. When applied, the objective of the strategy is to reduce
the volatility of the desirable cash flow, maintaining the planned disbursement of resources.
42
The Company considers management of these risks essential to support its growth strategy without
potential financial losses reducing its operating income, as the Company does not seek financial gains
from derivatives. Foreign currency risk management is carried out by the Financial Management and
Director, who assess the potential exposure to risks and establish guidelines for measurement, monitoring
and management of the risks of the Company's operations.
Based on this objective, the Company contracts derivative operations, normally swaps and NDF (Non
Deliverable Forwards), with prime financial institutions (brAAA credit rating - national scale, Standard &
Poor's or similar), to guarantee the commercial value agreed on ordering the item to be imported.
Similarly, swap or NDF contracts should be contracted to guarantee the payment flow (amortization of
principal and interest) of foreign currency financing. Under the Company's by-laws, any contract or
assumption of obligation in excess of R$ 10.0 million) must be approved by the Board of Directors, unless
foreseen in the Business Plan. It is not necessary to contract hedge operations for amounts of less than
R$ 100,000, with maturities of less than 90 days. Other commitments should be protected against foreign
exchange exposure.
Swap and NDF transactions are carried out to translate future foreign currency financial commitments into
reais. By contracting these operations, the Company minimizes the foreign exchange risk by leveling both
the amount of the commitment and the exposure period. The cost of contracting the derivative is tied to
the interest rate, normally to the CDI (Interbank deposit certificate) percentage. Swaps and NDFs
maturing before or after the final maturity of the commitments may, in time, be renegotiated so that their
final maturities are the same as - or close to - the final maturity of the commitment. In this way, on the
settlement date, the result of the swap and the NDF may offset part of the impact of the exchange
variation of the foreign currency against the real, assisting stabilization of the cash flow.
As derivatives, the monthly position is calculated by the fair value methodology, calculating the present
value by applying the market rates that are impacted on the determination dates. This widely used
methodology may result in monthly distortions in relation to the curve of the derivative contracted,
however, the Company is of the opinion that this is the best methodology to use, as it measures the
financial risk in the event of the need for early settlement of the derivative.
By monitoring the commitments assumed and the monthly valuation of the fair value of the derivatives, it
is possible to monitor the financial results and the impact on the cash flow and to ensure that the original
objectives are achieved. The calculation of the fair value of the positions is provided monthly for
management supervision.
The derivative instruments contracted by the Company are intended to protect its equipment import
operations against fluctuations in the exchange rate in the interval between placing the order and the
corresponding formal receipt in Brazil. They are not used for speculative purposes.
As of December 31, 2013, the Company had equipment purchase orders with foreign suppliers amounting
approximately to US$ 71.8 million (in December 31, 2012, such orders amounted to US$ 78.2 million), all
of them with payments expected during 2014.
In order to reduce the Companys exposure to exchange rate fluctuations between the date of the order
and the date of the settlement of these obligations, the Company hired derivative instruments
represented by swap contracts in the aggregate amount of R$ 168.4 million, which fair value on
December 31, 2013, totalized R$ 7.5 million, as presented in the table below.
43
Receivable
Notional
Fair
/ Payable
Value
Value
Values
December 31, 2011
Type
Receivable
Notional
Fair
/ Payable
Value
Value
Values
December 31, 2012
NDF
Receivable
Notional
Fair
/ Payable
Value
Value
Values
December 31, 2012
67,958
2,842
152,868
(800)
(800)
152,868
(800)
(800)
168,419
7,516
7,516
168,419
7,516
7,516
2,842
206
(1)
(1)
68,164
2,841
2,841
The derivatives are evaluated by the market rate present value, in the base data of future flow
determined by the application of contractual rates until maturity. For contracts with limiter or double index
were considered, in addition, the embedded option in the swap contract.
The Companys hedge operations are realized in order to seek protection against fluctuations in foreign
currency of its equipments and machines importations. Such operations are classified as hedge
accounting.
The company ensures it effectiveness of these instruments with the Dollar offset methodology, which is
commonly used by derivative market participants, and consists in comparing the present value, net of
foreign currency exposure and Company commitments with the derivatives hired for such hedge.
On December 31, 2013, there was no inefficiency in the results of the hedge operations of the Company.
Considering the fact that the Company ensures the effectiveness of the realized hedge accounting
operations, the gains and losses observed in these derivative operations are recognized in counterpart of
the hedged asset (fixed asset) as part of the initial cost of the asset in the same moment of the
accounting. In December 31, 2013, the amount of R$ 2.3 million were transferred from the net equity and
deducted in equipments initial cost.
d.
Regarding the exchange rate risk, The Company's policy is to not be exposed to any commitments in
foreign currency. For the interest rate risk, the Companys policy is to operate with floating interest rates,
since their revenues also grow along with inflation. The Company does not use protection against the
inflation risk caused by momentary mismatch between its revenues and costs.
e.
If the Company uses various financial instruments with various objectives for
asset protection (hedge) and what these objectives are
The Company operates financial instruments in order to maintain the price of imported equipments and,
consequently with foreign currency prices, in Brazilian reais, solely for hedge purposes.
f.
The risk control politics and procedures are defined directly through the Companys Board of Directors and
are implemented by the Companys Executive Officers. The Board of Directors are also responsible for
monitoring the fulfillment of these practices.
44
g.
Adequacy of the operational structure and internal controls to verify the effectiveness
of the adopted policy
The Companys Board of Directors analyzes its operational structure and intern controls, and believes that
the policies and procedures of adopted controls are appropriate to the Companys operational structure.
In fiscal years ended in December 31, 2011, 2012 and 2013, the opinion of independent auditors did not
identify deficiencies in those controls.
5.3
In the fiscal years ended December 31, 2011, 2012 and 2013, there were no events that could
significantly change the main market risks to which the Company is exposed.
5.4
45
6.
46
COMPANY HISTORY
6.1
The Company was established on December 1, 1980 as a limited liability company. On January 29, 2009,
the Companys shareholders approved a corporate transformation of the Company, which became a
privately held corporation. The first company of Mills group, named Aos Firth Brown SA was established
in 1952 in the city of Rio de Janeiro, State of Rio de Janeiro, in the form of privately held corporation.
6.2
Company Lifetime
Undetermined.
6.3
The Company was formed in 1952 by the Nacht family, as a scaffold and shoring company which provided
services to the civil construction sector. Mr. Andres Cristian Nacht was a member of the Companys
management team from 1969 to 1998, being President Director from 1978 until 1998. In 1998, Mr.
Andres Cristian Nacht became Chairman of the Board of Directors of the Company, position that occupies
until this Reference Forms date.
In the 70s and 80s, the Company had substantial growth due to the significant civil construction and
industrial sectors expansion in Brazil. Among its activities from this period can be highlighted the
construction of the Rio-Niteroi Bridge (1971), the Itaipu Hydroelectric Plant (1979) and the first Brazilian
oil drilling platform (1983), among other projects.
During this period the Company made important partnerships with international companies that
cooperated with the Companys development. From 1974 to 1986, GKN plc, a large British conglomorate,
was the Companys shareholder, strengthening the beginning of good governance and credibility. In 1980,
the Company signed a partnership with the Canadian company Aluma Systems Inc., the Aluma Systems
Concrete Forms and Formwork Ltda., which had as main objective the introduction of aluminum
formworks in the civil construction sector in Brazil which lasted until 2001.
In the 90s, while seeking to expand the Companys portfolio of services, it made new strategic
partnerships. In 1996, the Company entered into a licensing contract with the German company NOESchaltechnik Georg Meyer-Keller GmbH, to produce and supply modular steel and aluminum panels
formwork to the Brazilian civil construction market. In 1997, the Company entered into a joint venture
partnership with the American company JLG Industries, Inc., to begin activities in the equipment rental
sector in Brazil.
In 2001, the Argentine company Sullair Argentina S.A., replaced JLG Industries, Inc. as the Companys
partner in the in the industrial equipment rental venture, and subsequently acquired its stake in 2003.
In 2007, the private equity funds, Peninsula FIP, managed by IP, and the Natipriv Global L.L.C., managed
by the Axxon Group, became the Companys shareholders, acquiring, each one, 10% of the Company for
R$ 20 million. The resources from these investments were used, mainly, to acquire equipment.
In 2008, the Company returned to its activities in the rental unit in an organic way, with the establishment
of the Rental business unit, and suspended the operations of its Events business unit, which was
responsible for providing temporary structures, such as outdoor stages and grandstands for the sports
and entertainment segment, as an objective to focus on the segments where it has competitive
advantages. Also in 2008, the Company acquired Jahu Indstria e Comrcio Ltda. (Jahu), which became
the Real Estate business unit, focused on providing engineering services to the residential and commercial
civil construction industry, complementing its activities in the Heavy Construction segment.
47
The Companys IPO was on April 2010, with a transaction totaling R$ 685 million, of which R$ 411 million
related to the primary offering that, consequently, were used to enable its growth plan. Shortly after the
offer, the Companys free float was of 48%.
In October 2010, after the expiration from the lock-up period, due to the IPO, the private equity funds,
Peninsula FIP and Natipriv Global L.L.C., sold the joint participation of 6.2% of the Companys capital,
increasing its free float to 57.2%.
On January 19, 2011, the Company entered into a purchase and sales agreement to acquire 25.0% of the
voting and total capital stock of Rohr S/A Estrutura Tubulares (Rohr), a privately held company specialized
in access engineering and solutions for civil construction, for R$90.0 million. This strategic acquisition will
enable the Company to broaden its exposure to the sectors it serves, especially in the areas of
infrastructure and the oil and natural gas industry. In September 2011, there was a rise in the stake held
in Rohr to 27.5%, resulting from the repurchase by Rohr of 9% of its shares held as treasury stock.
In May 2011, the Company entered into a purchase and sales agreement to acquire 100% of the voting
and total capital stock of GP Sul, one of the largest players in the suspended scaffold rental market to
residential and commercial construction in the state of Rio Grande do Sul, for R$5.5 million, which was
merger into the Company in August 2011. This strategic acquisition, according to Managements opinion,
enabled the Company to become the leader in the suspended scaffold rental market in the state of Rio
Grande do Sul and to broaden its exposure to the residential and commercial construction market in the
South region, in line with the geographic expansion plan of the Real Estate business unit.
In July 10, 2013, the company entered into an agreement for the sale of its Industrial Services business
unit for a total sum of R$102 million, through the sale of their participation in the company Albuquerque
Participaes Ltda. On November 30, 2013, the transaction was completed and the Company recorded a
net gain of R$8,3 million. This sale was made in line with the Company's strategy to focus on businesses
where their skills are able to generate greater value for its shareholders and customers. Therefore, the
Company ceased to operate in the Industrial Services sector where they were offered access services,
industrial painting, surface treatment and thermal insulation, both during construction and in the
maintenance phase of large industrial plants.
6.4
48
In October 2012, Nacht Participaes S.A. (Nacht Participaes) reduced its capital through the transfer of
all shares issued by Mills held by Nacht Participaes to its shareholders, with the transaction completed
on December 28, 2012
As a result of such transfer, the shareholders Andres Cristian Nacht and his family members, held directly,
27,421,713 common nominative shares with no par value, issued by Mills, representing 21.7% of Mills
capital.
Neither the capital reduction, nor the related transfer of the shares issued by Mills, resulted in any change
of Mills' corporate control, which, before the capital reduction, was formerly exercised jointly, by Nacht
Participaes, by its shareholders and by Snow Petrel S.L., and, after the capital reduction, are now
exercised by Nacht Participaes' shareholders jointly with Snow Petrel S.L. Such shares remains
encumbered and subject to the terms of the "Shareholders Agreement of Nacht Participaes S.A.",
executed on February 11, 2011, as amended, which also applies to Mills.
49
costs; and (ii) take advantage of the tax benefit resulting from the amortization of R$ 4.7 million
generated in its acquisition of at least five years, as from the 2011 fiscal year.
50
7.
51
COMPANYS ACTIVITIES
52
2013
Heavy Construction
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
131,638
57,821
43.9%
20,064
15.2%
174,059
84,365
48.5%
36,014
20.7%
216,956
108,104
49.8%
48,303
22.3%
Real Estate
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
155,761
65,978
42.4%
28,188
18.1%
237,955
113,472
47.7%
49,289
20.7%
257,964
93,771
36.4%
26,111
10.1%
Rental
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
175,410
93,629
53.4%
39,374
22.4%
253,460
141,256
55.7%
61,774
24.4%
357,342
201,212
56.3%
87,460
24.5%
Industrial Services
Net revenue
EBITDA
EBITDA margin
Net income
Net margin
214,783
20,728
9.7%
3,205
1.5%
213,800
19,410
9.1%
1,225
0.6%
208,295
19,494
9.4%
4,918
2.4%
EBITDA EBITDA is a non-accounting measurement prepared by the Company in accordance with CVM Instruction 527/2012, when
applicable. The calculation of the EBITDA consists of our operating results before financial expenses, from the depreciation and
goodwill. The EBITDA is not a Brazilian, IFRS or US GAAP measure, have no standardized meaning and our definition may not be
comparable to that used by other companies. The Company uses the EBITDA to measure its performance. The EBITDA should not
be considered as alternatives to net income, as an indicator of our operating performance, or as alternatives to cash flow as an
indicator of liquidity or debt payment capability.
Heavy Construction
The Company estimates, according to data published by the O Empreiteiro magazine in 2013, that its
Heavy Construction business unit is Brazils leading provider of specialty engineering solutions and
equipment in revenue. In this unit, the Companys focus is directed to large engineering projects,
including infrastructure projects toward the logistics sectors (specially railways, underground urban
networks, highways, airports, ports and shipyards), social and urban infrastructure (including sanitation
networks) and energy (primarily regarding hydroelectric, thermoelectric and nuclear plants), besides the
industrial and large building construction projects. Such projects are characterized by long-term (usually
over one year), usually developed by the major construction companies in Brazil.
The Heavy Construction business unit offers its clients specific and customized engineering solutions for
every type of construction, considering all the peculiarities and specificities inherent to the location and
complexity of the construction works, with the objective of facilitating the project execution, ensuring
safety, cost, speed and schedule compliance optimization. In many situations, due to its vast experience,
the Company is looked for by its clients to participate in preliminary studies that will provide structuring
for its proposals in the biddings for the construction of large engineering projects.
The Company offers to the clients of the Heavy Construction business unit customized engineering
solutions according to the specific characteristics of each project, the peculiarities of the construction or
development location, and the complexity of the work to be undertaken, which the Company believes
helps to facilitate execution and reduce costs. Given the Companys extensive experience in the sectors in
which the Heavy Construction business unit operates, at the request of its clients the Company often
participates in the initial studies to help prepare bidding proposals for large engineering projects.
53
The Company believes that its main competitive advantages are its expertise, agility, reliability, quality
and safety standards, as well as its ability to provide equipment on a large scale, factors that contribute to
the reduction of overall duration and costs from its clients projects. The Company provides services
throughout the Brazilian territory and also in international projects from its customers, providing high value
service and providing equipment. The Company has a history of long-standing relationships with almost
all of the largest and best-known companies in the construction sector, including Construtora Norberto
Odebrecht S.A., Camargo Corra S.A., Andrade Gutierrez S.A., Construtora OAS Ltd. and Construtora
Queiroz Galvo S.A., and many others.
The Companys extensive track record includes participation on several of the largest and most important
infrastructure projects in Brazil, such as the construction of the city of Braslia (Brazils capital), the Rio de
Janeiro-Niteri Bridge and the Itaipu hydroelectric plant. More recently, the Company assisted in the
construction of the State of So Paulo Beltway (Rodoanel), the subway systems in the cities of Rio de
Janeiro and So Paulo, the Santos Dumont and Congonhas airports in the cities of Rio de Janeiro and So
Paulo, respectively, the Santo Antnio and Jirau hydroelectric plants in the north of Brazil and the Joo
Havelange Olympic Stadium in the city of Rio de Janeiro. Typical contract terms for this business unit
range from six to 24 months, as the services that the Company provides are critical during an extended
phase of major civil construction projects.
In order to facilitate the implementation of solutions that the Company idealizes, its offered to the clients,
through rental contracts and in some cases sales, a wide range of equipments, including concrete forms
and shoring structures, which include projects and technical studies, technical support and necessary
training for its proper use. Taking into account the specific needs from a particular project, there is
flexibility to hire the manufacture of special shaped equipments for specific construction works.
The Companys clients generally use their own employees to implement the solutions developed by the
Heavy Construction business unit. However, for complex projects or at the request of its clients, the
Company is able provide labor for the assembly and disassembly of its equipment.
As of December 31, 2013, the Heavy Construction Business unit had eight operational branches, located
in the states of Rio de Janeiro, So Paulo, Minas Gerais, Bahia, Pernambuco, Cear and Maranho also in
the Federal District.
Real Estate
While the Heavy Construction business unit is focused on large engineering and infrastructure projects,
the Real Estate Business unit attends, primarily, the residential and commercial construction contractors,
developing projects and providing services of concrete formwork, scaffolding, shoring and access
equipment. The Company also provides engineering services in connection with building refurbishing and
maintenance, primarily through the provision of suspended scaffolding. Inside of this business unit's
activities, the Company provides planning, project development, technical supervision, equipment and
related services.
With outstanding performance in the sector for over 50 years and being one of the major leaders for ten
years in net revenue terms, Jahu was a recognized company in the residential and commercial
construction market, acquiring an extensive client base along its history. Due to that, as part of its
expansion and diversification strategy, in June 2008 the Company acquired Jahu, which was incorporated
to the Group and became one of the business units, called Real Estate. Since then the Company has been
improving Real Estate performance by introducing the concrete formwork in the product portfolio,
increasing significantly the equipment inventory, capitalizing on the strong brand name of Mills and
therefore increasing its client base.
54
The residential and commercial construction sector in Brazil is fragmented. When compared to the Heavy
Construction market, the projects from this business unit, are generally dispersed within cities, are smaller
in size and have shorter durations, being the average contract term of four and a half months. The
recognized reputation on the Brazilian market is a really important factor for the Companys success in the
activities from this business unit. Its main competitive advantage is the extensive presence at a large
number of worksites, which enables it, together with its clients, to analyze the job needs and to supply
the requested services and equipment on demand.
The main clients of this business unit are Brookfield, Construtora OAS S.A., Capital Engenharia Ltda.,
Construcap, Encalso Construes Ltda., Engevix, Kallas Engenharia Ltda., Joo Fortes, Gafisa, Mtodo,
MRV, Odebrecht Realizaes, PDG Realty S.A, Racional, Rossi, Th, Via Engenharia S.A., entre outros.
This business unit comprises, on December 31, 2013, 17 operational branches, located in the states of
Amazonas, Bahia, Cear, Distrito Federal, Esprito Santo, Gois, Maranho Mato Grosso, Minas Gerais,
Par, Paran, Pernambuco, Rio de Janeiro, Rio Grande do Sul e So Paulo.
Rental
The Company is one of the largest providers of motorized access equipment, in Brazil, supplying aerial
work platforms and telescopic handlers, to lift people and cargo to considerable heights, based on data
published in the O Empreiteiro magazine in 2013. The equipment enables safe, fast, versatile and
precise access for professionals to perform tasks safely and efficiently at heights from two to 48 meters.
The handlers allows materials weighing up to 4,500 kg to be lifted, transported and delivered to heights
of over 17 meters, at a job site or within an industrial plant.
The Rental business unit serves the same sectors as the other business units, such as heavy or residential
and commercial construction and industrial construction, as well as other economic sectors, as the
automotive, retail and logistics sectors, among others. Therefore, its client base is diverse, including
clients from the other business units, such as Camargo Corra S.A., Construtora OAS Ltd., Construtora
Norberto Odebrecht S.A., Construtora Queiroz Galvo S.A., UTC Engenharia S.A. and etc. Generally, the
Company rents equipment on a monthly basis, being the average contract length from two to three
months, although 18-month or even longer contracts.
The Company introduced the large-scale use in Brazil of motorized access equipment specific for height
purposes in 1997, when it entered into a joint venture agreement with the American company JLG
Industries Inc., world leader in access equipment manufacturing, to rent aerial platforms and telescopic
handlers, the first joint venture in JLGs history.
In 1999, the Company introduced the large-scale use of telescopic handlers in the Brazilian market. This
motorized equipment can be used to transport loads to various heights and replaces a number of other
pieces of equipment traditionally used at construction sites, such as cranes, munck trucks and service lifts,
among other equipment. In 2001, Sullair, an Argentine equipment rental company, replaced JLG as the
Companys partner. In 2003, due to unfavorable market conditions in Brazil and the lack of capital
necessary to carry out essential investments, the Company suspended its equipment rental operations
and transferred the joint venture to Sullair.
In December 2007, as part of its diversification strategy and based on favorable market and credit
conditions, the Company established its Rental business unit and began renting aerial platforms and
telescopic handlers again.
According to the Companys estimates, based on data of 2011 from Terex and Brazilian import statistic of
2011, there are currently 13,812 aerial platforms and 1,965 telescopic handlers in Brazil. In comparison,
614,000 aerial platforms and 175,000 telescopic handlers are available in the United States based on data
55
provided by Yengst Associates. The Company believes that this gap, together with the current favorable
economic conditions in Brazil, indicates that this rental market is incipient in Brazil, offering significant
opportunities for expansion in the segment. The Company believes that its scale, specific industrial sector
expertise, reliability and safety record have been the primary factors driving the growth of the Rental
business unit since the beginning of its activities in 2008.
In addition, the Company may benefit from the introduction of stricter technical norms and procedures, in
particular with respect to safety regulations for work performed at significant heights or in areas that are
difficult to access. Among other provisions, Regulatory Norm 18 establishes that workers must be lifted
with the use of motorized access equipment, rather than manual equipment, which has resulted in an
expansion of the potential market for rental of its equipment. The Company believes that the long-term
outlook for the Rental business unit is strong as a result of favorable macroeconomic conditions in Brazil,
including exchange rate stability, considerable infrastructure construction investments under the Brazilian
governments PAC program, the Brazilian governments low income housing program and the overall
growth of the real estate industry in Brazil, anticipated industrial plant expansions (including major
investments in the oil and gas sector), investments related to the 2014 FIFA World Cup and 2016 Olympic
Games, and the multitude of other projects that will require safe working conditions at elevated heights.
With the Equipment Rental business unit, the Company won in 2014 the IAPA Awards, in the category
Best IPAF training center of the year. IPAF is a international association that promotes the safe use of
motorized access equipment. In 2012, the Company also won the IAPA award for Best Company of the
Access World, which is considered to be the Oscars equivalent in this business unit.
As of December 31, 2013, the Equipment Rental business unit was present through 17 operational
branches, in the states of Amazonas, Bahia, Cear, Esprito Santo, Gois, Maranho, Mato Grosso, Minas
Gerais, Par, Paran, Pernambuco, Rio de Janeiro, Rio Grande do norte, Rio Grande do Sul, Santa
Catarina, So Paulo and Sergipe and the Federal District.
Industrial Services
The Industrial Services business unit is focused on the provision of services to the oil and gas sector, as
well as to the chemical and petrochemical, naval, steel, pulp and paper, and mining industries. The
Industrial Services business unit was established in the 1980s with the recognition that certain equipment
used in its civil construction projects could also be employed to provide access to the structures and
facilities of large industrial plants. At that time, the Company began renting access equipment, such as
scaffolding systems, to carry out maintenance work in industrial plants, rapidly, expanding its services in
the industrial sector to include assembly and disassembly, a sector that the Company believed could
easily exploit in view of its past expertise in civil construction, and in sequence, it also began offering
specialized maintenance services, in particular, industrial painting and thermal insulation, which started to
compete with companies that had regularly rented the Companys access equipment for these purposes of
providing such surface treatment services and helping its clients manage their costs more effectively as
they were able to reduce the number of suppliers contracted for the provision of such services. This way,
the Industrial Services business unit provides the equipment and also the labor required for the provision
of its services, being labor-intensive.
Based on data published on 2012 by the O Empreiteiro magazine, the Company believes to be one of
Brazils major players in providing structures designed to provide access for personnel and materials
during the assembly of equipments and pipes, during the construction of industrial plants, as in the
maintenance phase, preventive and corrective. The Company also offers industrial painting services,
surface treatments and thermal insulation.
The Industrial Services business unit works, generally, together with the industrial contractor or the
plants maintenance department in planning, erecting and dismantling structures, when and where they
56
are needed, and performing painting and insulation, with own labor, as a way to guarantee the quality
and safety of its execution.
The contracts from the Industrial Services business unit with its clients are usually long-term, from one to
three years, being able to be renewed at the end of the contracted period. On most cases, this Business
unit is generally paid based on units of finished services or in service levels, such as meters of erected
scaffolding, or square meters of painted or insulated surface, being able to hire on a man-hour based
price.
Currently, the Company provides two types of services:
Maintenance. Most of the revenue from this business unit, 63.5% of net revenue in 2012, are from
maintenance services in existing plants and facilities on a continuous basis, where most contracts have
from one to two years term, which are often successively renewed for equal terms. Additional revenue is
generated by the provision of scheduled maintenance services usually carried out once a year and which
generally require an extended interruption of its clients operations. Because its clients necessarily suffer
losses as a result of any extended interruptions, the Company believes that it has a competitive
advantage based on its proven ability to provide maintenance services quickly and safely, as evidenced by
its high rate of repeat business.
New Plants. The Company also offers services in connection with the assembly of new industrial plants, oil
and gas platforms and vessels, which are often provided as a natural extension of the services rendered
by the Heavy Construction business unit. The revenue generated through the assembly of new projects
and structures represented 36.5% of the total revenue of the Industrial Services business unit in 2012.
The Company expects that future investments in the sectors in which the Industrial Services business unit
operates, in particular the petrochemical and oil and gas sectors, will lead to a significant increase in
revenue generated from assembly services rendered by the Industrial Services business unit. The
Company also seeks to develop long-term relationships with its new plants clients, with the objective of
establishing agreements for the provision of maintenance services.
The Industrial Services business unit is present in the main industrial centers in Brazil, through seven
branches, in the states of Rio de Janeiro, So Paulo, Minas Gerais, Bahia, Pernambuco and Rio Grande do
Sul, and has a long history of developing innovative solutions and making on-time or early delivery of
projects, including with respect to deep sea oil platforms.
The Company believes that the Industrial Services business units clients value its reliability, consistent
quality and award-winning safety performance. These qualifications have yielded high client renewal rates
(80% in 2012), and have allowed us to develop long-lasting relationships with clients such as the
corporate groups Dow do Brasil and Braskem, for whom the Company has worked continually for up to 16
years. Clients seek the Company for expert, fast and flexible delivery of equipment and highly skilled
installation, as well as in-depth understanding of local needs.
The main sectors served by the Industrial Services business unit are oil and gas, petrochemicals, steel,
paper and pulp, mining, and naval. Oil and gas represented 65.5% of the Industrial Services Business
units revenue in 2012. The Companys clients include some of the largest industrial groups in Brazil, such
as Braskem, Camargo Corra, Dow do Brasil, Petrobras, Queiroz Galvo, among others. The Industrial
Services business unit has significant synergies with the Heavy Construction business unit. After the
completion of the concrete structures in large industrial projects, such as plants or refineries, its clients
often engage the Industrial Services business unit to support the industrial construction of the plant and
subsequently to provide preventive and corrective maintenance.
The Companys commitment to safety, which is reflected in all of its operations, is particularly critical to
the clients from this business unit, many of which operate according to international safety standards
57
established by their headquarters. Many of its clients operations involve the use of flammable and toxic
substances. Seeking continuous improvement, along the years, the Industrial Services business unit has
secured several international safety certifications, such as OHSAS 18001, ISO 9001 and ISO 14001. The
Companys commitment to the application of robust safety standards has also been recognized by its
clients, as demonstrated by the following awards: Destaque Petrobrs, Braskem Ouro, TOP Copene,
Prmio Isopol de Segurana, Prmio DOW for 14 consecutive years of providing services without work
loss time injuries, Prmio 5 Estrelas Arcelor Mittal (five star award), Prmio Excelncia na Construo
Bahia (excellency in construction), Prmio Performance SSMA Millennium Cristal , Prmio
Reconhecimento pelos resultados de SSMA in the Braskem unit at Alagoas, Prmio Zero Acidente
Reportvel - Dow.
The Companys strategy for this business unit is to raise its profitability through the identification of
complementary services with higher added value, and, as a consequence, of higher profitability, to offer
its clients, mainly on the offshore market. The investments in the Oil and gas sector in Brazil are the main
growth drivers for this business unit. The 2013 business plan form Petrobras estimates investments
amounting to US$ 236.7 billion for the period of 2013-2017, of which US$ 147.5 billion in Exploration and
Production (E&P) in Brazil, seeking to raise production from 2 million bpd (Mbpd) in 2011 to 2.75 Mbpd in
2017, of which 1.0 Mbpd related to the Pr-Sal.
7.2
Regarding each operational segment(s) disclosed in the consolidated financial
statements for the past fiscal years
a.
Heavy Construction
Offered Equipment
The main equipment offered by the Company to the clients of the Heavy Construction business unit
includes:
Steel Shoring Equipment. The primary shoring equipment the Company provides are Millstour
shoring posts, a versatile system capable of supporting loads ranging from 24 to over 156 tons
per post, depending on the configuration. In accordance with the Companys market perception,
its shoring equipment is considered the most flexible and versatile shoring system in Brazil. This
system provides for ease of assembly with its heaviest component parts weighing less than 13
kilograms. Each shoring post has an automatic locking element and can support loads of up to six
tons. Load-bearing capacity may be doubled or even tripled with the use of connecting trusses. In
addition, these telescopic shoring posts are fully adjustable to meet nearly any height
requirement and may be used in multiple applications. Millstour is typically used in the
construction of bridges, viaducts and dams, as well as in large-scale industrial projects.
Shoring Aluminium. The main equipment used is the Alu-Mills, a system of aluminum shoring with
load capacity up to 14 tons, which can be connected by trusses forming isolated towers of
different heights. This system also allows total displacement of the joint without the need for
disassembly also bringing significant labor savings. Compared to the shoring post systems or
conventional steel shoring, this system is the one with the lightest weight / resistance ratio, being
up to 2.5x lighter, saving very much in the amount of equipment deployed in the works. The AluMills can be used in buildings and even heavy construction works reaching a wide range of
application.
Trusses. The Aspen Launching is a motorized horizontal truss able to transport and position
precast beams weighing up to 140 tons and spanning up to 45 meters. This truss may be used
58
during all stages of a construction project, from the delivery of the beams at the construction site
to positioning the beams on permanent supports. The truss may also be used to launch braces for
the construction of viaducts with a high degree of safety and minimum labor. No additional
equipment is required to launch such braces, as the Aspen Launching Truss also transports the
supports, stands and other accessories required for launching such braces. Moreover, the truss
may be operated at inclines as steep as 6% without additional components and without any
deterioration in its load-bearing capacity. The Aspen Launching Truss is typically used in the
construction of bridges, viaducts and industrial structures. The M150 Truss is a horizontal heavy
duty truss used for laying concrete. The Company believes that the M150 Truss has the highest
load-bearing capacity among similar products in the market, while remaining as light as
conventional trusses. The M150 can bear positive stress of 150 tons per meter and negative
stress of 100 tons per meter, thus requiring fewer modules than for conventional trusses and less
movement of materials, which reduces costs for labor and secondary equipment. The Company
believe that the M150 Truss is the only truss available in the market which is able to absorb
negative stress and which includes a curvature adjustment mechanism. The lower rail supports
the truss via an exclusive connecting post, eliminating the need for additional supports. The
Companys Truss can be operated either with the use of supporting structures, or through the
even distribution of weight, providing it with the capacity to be operated at significant heights
over great spans.
Balanced Cantilevers. Balanced Cantilevers are used to build bridges and overpasses under
conditions where the constructive approach does not allow for shoring directly from the ground,
when there is a need to implement large spans, and when work has to be carried out without
interrupting the traffic on urban roads. The principle behind the Balanced Cantilever is the use of
specific equipment (Mills' metal trusses and profiles) implementing portions of the superstructure
"hanging" right on the transversal section (staves) that go on swings, from the pillars, stave to
stave, until the entire span has been completed. The trusses are always anchored on the
previous, already prestressed staves, and all forces coming from the concrete are transferred to
and then supported by them.
Reusable metallic formowrk systems: The formworks are used as molds for concrete. There are
two different formworks: vertical walls and pillars and horizontal beams and slabs for such as: SL
2000, ALU-L, ALUMA, TOP MILLS, climbing, automatic climbing and special.
SL 2000: Using the German NOE technology, and with easy application and handling as its main
feature, the 2000 SL formwork system allows a single worker to assemble and disassemble the
panels.
It was designed especially for work for which there is no equipment available, such as cranes and
hoists. It consists of panels made of steel and coated with a plasticized 12-mm plywood plate that
can
withstand
concrete
pouring
pressures
of
up
to
55
KN/sq.m.
The SL 2000 formwork panel is light, 33 kgf/sq.m, and affords quick and easy assembly (few
components) in any situation and on any surface. It also allows any geometry to be formed,
whether rectangular or circular, with varying heights and radii. It is ideal for blocks and straps,
adjustment layers, gutters, beam sides and for pillars and walls. The SL 2000 supersedes any
conventional formwork of the same nature and can be used even for the simplest concrete tasks,
cutting labor costs by up to 70% compared to conventional formwork.
Top Mills: The Top Mills system consists of industrialized panels, made in steel and coated with a
21-mm plywood plate specially designed to withstand concrete pressures of up to 80 KN/sq.m. It
is ideal for broad area formwork and is very efficient not only for use with reservoir walls,
powerhouses and spillways, elevator shafts and stairwells, but also to build large pillars. Panel
modulation is smart and allows one to form a large variety of heights and widths, significantly
59
reducing the use of wood and conventional formwork complements and, thus, allowing for
excellent concrete surface finishing. With Top Mills, no complement needs to be larger than 15
cm. The panels are interconnected by means of staples and may be transported to the next stage
of the work in isolation or coupled to form a rigid assembly providing a reduction of up to a third
of the time in the concrete pouring cyclic. Formwork assembly takes place at a rate of 0.22
Mh/sq.m, while the disassembly rate is 0.11 Mh/sq.m.
ALU-L: ALU-L is an aluminum formwork system manufactured in Brazil using the cutting-edge
German NOE technology. It is a large-area formwork panel system made with special aluminum
profiles and coated with a 15-mm high-resistance plasticized plywood plate that can withstand
concrete pouring pressures of up to 60 KN/sq.m, affording excellent concrete finishing. It is selfalignable and ideal for application on large wall formwork, whether in reservoirs, canals, galleries,
cooling towers, rectangular silos or any other structure that has large concrete pouring sides and
repetitive formwork cycles. It is also used as a formwork solution for pillars. This formwork
system was developed for work that requires large cranes or hoists, but it can also be used
manually. The lightweight panels (average weight = 20 kg/sq.m) can be handled individually or
joined to form a single panel measuring up to 30 sq.m, and then transported to the next concrete
pouring stage. The large panels that are put together, as long as they are assembled at the
application site, do not require full support from the hoist, which can be used to tend to other
needs at the construction site. Hoist support is only required when the panels are positioned
and/or transported. This affords great savings, not only in assembly and disassembly (0.17
Mh/sq.m - assembly and 0.08 Mh/sq.m), but also in machine usage time, freeing them for other
activities at the site. ALU-L can also form circular walls using the same accessories as SL 2000. It
is also compatible with the SL 2000 formwork system and it is possible to join panels from both of
these two systems using joining clamps
Aluma System: The Aluma Formwork System comprises broad area panels made with highly
resistant aluminum beams and headers that afford the work multiple applications in several
geometries: walls, pillars, galleries, tunnels and slabs. Its lightweight components allow broad
panels to be built in any dimension with little weight (40 kg/sq.m), high load capacity and easy
assembly, doing away with the need for specialized labor and allowing for excellent productivity.
Its aluminum beams and headers have high impact absorption capacities, performing three times
better than steel. The advantage of aluminum, combined with the best weight/strength ratio
afforded by the Aluma panels, is that it allows for greater flexibility in projects that require speed.
It is necessary to use a machine to operate the panels.
Climbing Formwork System: The Mills Climbing System was conceived to address the challenge of
very high walls and pillars, having been designed for vertical concrete structures where a single
concrete pouring operation is not feasible. It should be applied, preferably, in similar and
repetitive stages, although this is not essential. Its application is recommended for special
industrial building structures, bridges and overpass pillars and, especially, hydroelectric power
plants. It can also be used to build elevator boxes and stairwells and for blind gables in residential
and commercial buildings. The basic principle behind the climbing formwork is its reuse in a
subsequent concrete pouring stage, always supported on an anchor made in the previous poured
layer. A first concrete pouring stage is carried out leaving a concrete anchorage point in the
concrete, typically formed by a small steel tail and a positioning cone (recoverable). After the
removal of the formwork, the positioning cone is substituted for a support cone, which will serve
as a support for the next layer. The set will be raised when the concrete has hardened. It is
moved with the aid of the crane. The next stage is raised, formwork and scaffolding both, with no
need for additional scaffolding. It is compatible with all Mills panels: ALU-l, Top Mills and Aluma.
Automatic Climbing Formwork System: Mills' Automatic Climbing Formwork System comprises
metal platforms and form panels that move vertically, driven by a special hydraulic system, with
60
no need for a crane. The process takes place with maximum safety and the whole set (platforms
and forms) is lifted to the next phase of the work all at once. The Self-climbing System has
advantages over the sliding formwork system: (a) When necessary, the concrete pouring can be
interrupted and then restarted; (b) It allows for labor cost reductions as it does not use
uninterrupted work processes (overtime) and specialized teams; (c) Improved final looks of the
finished concrete, with improved geometric control and greater accuracy; (d) Does not require
special concrete, accelerators and steel frame reinforcements; (e) Greater operating safety.
Modular Formwork and Shoring System. The SM Mills modular system is the new formwork and
shoring solution in a single system. This equipment has high load capacity and it is indicated for
complex geometries and can be moved, making the reuse without disassembly possible, with
great labor savings. The SM Mills is formed by the combination of metallic sections, that, when
unified through special connections and combined with aluminum beams, can form a variety of
geometrical formations, attending various types of concrete structures, such as tunnels, galleries,
inclined slabs, suction, diversion and transition tunnels in big hydroelectric plants. The modular
steel composition, in the above described situations, replaces advantageously the traditional
shoring systems made of towers, tubes and clamps, increasing productivity and safety in the
construction site. SM Mills is ideal for repetitive sections, because it allows vertical shoring and
horizontal formwork in a single system, and, with the help of deformation and displacement
equipment it is possible to lower it after the concreting and displace it to the next work phase
without the need for disassembly.
Access Scaffolding. The Company offers a scaffolding system called Elite, which is a tubular
metal tower system that can be assembled into access structures of varying heights and
dimensions. Elite is a simple system composed of only three types of pieces: support posts,
transverse pieces and diagonal supports, manufactured from galvanized steel. Each post can bear
loads of up to three tons. No tools, bolts or screws are required to assemble the scaffolding
system as each part is simply slotted into each other part. On average, a single worker is
generally able to assemble 15 linear meters of scaffolding per hour.
Another access product are the assembled stairs, measuring 2.00 m x 3.30 m, with flat areas
every 1.50 m vertically, railing at heights of 0.70 and 1.20, and measuring 80 cm in working
width. All measurements comply with Standard NR18. Assembly (0.5 m in height/MH) and
disassembly (1.0 m in height/MH) productivity exceeds customer expectations.
Real Estate
Offered Equipment
The Real Estate business unit offers specialty engineering solutions and equipment, such as
concrete formwork, access and maintenance scaffolding and shoring equipment. The Companys
employees are generally responsible for the development of engineering solutions, as well as for
supervising the use of its equipment, while its clients are usually in charge of the assembly and
disassembly of such equipment. However, for more complex projects, the Company may provide
the labor for the assembly and disassembly of equipment.
Steel shoring. The main steel shoring system is the metallic modular towers, formed by the fitting
of braced tubular frames, which allows loads of up to 8 tons per tower. Connecting brackets make
it possible to aggregate additional frames to the tower, increasing its load capacity, and
adjustable shoes and brackets allow the milimetric adjustment of the top and base of the towers,
providing great time reduction not only in the leveling but also in the formwork removal. Metallic
sections complete the system, allowing the perfect union of the slab structure, providing great
savings to the shoring. The shoring and bracing system for of buckets enables form removal
61
keeping the slab re-shored. It consists of metal guides to support buckets and drop heads on the
heads of the struts for quick formwork removal without strut removal. Re-shoring and
conventional shoring for towers and struts. Greater alignment and ease in positioning of the
buckets. The system provides for the locking of the buckets, preventing them from moving during
the framework assembly, thus increasing safety.
Aluminum shoring. The Aluma Light Flying Table form is a shoring system designed with highly
resistant aluminum trusses conceived to expedite residential and commercial building construction
with large pieces of flagstone, preferably smooth. The major benefit offered by this form is that it
saves labor in operations, as it does not require the shoring to be disassembled and later
reassembled for concrete pouring. We can make these flying tables of up to 80 square meters
fully ready to execute the frames. The set is hoisted by the crane and positioned on the upper
level of the slab, in the case of vertical repetition, or slid forward, in the case of horizontal
repetition. The system is ideal for a short work schedule or for work involving a structural design
that has a lot of repetitions, whether vertical or horizontal, such as large commercial and
residential buildings, shopping centers and industrial facilities. It allows any type of slab to be
made, with or without beams, with higher productivity and with all of the indirect gains resulting
from a reduction in the schedule. Aluma Light Flying Table form is 50% lighter than anything on
the market (only 35 kg/sq.m).
Formwork for concrete in modular reusable panels. The formwork is used as molds for the
concrete. There are two types of formwork: vertical, for walls and pillars, and horizontal, for
beams and slabs, such as: SL 2000 and Mills Deck.
SL 2000: The SL 2000 Formwork was designed to expedite concrete pouring for pillars, curtains,
walls, stairwells or elevators, suspended or buried reservoirs, foundation blocks, beams and walls
in general. It affords increased safety and a substantial reduction in time and labor costs thanks
to its ease of assembly. Design based on technology provided by the German company NOE; Easy
to assemble, disassemble and transport, this framework requires no training or skilled labor, a
fact that affords gains in safety and finish quality; Its use enables a 50 to 70% reduction in labor
compared with conventional wooden formwork; Manufactured under strict quality controls, this
framework allows for superior concrete finishing; Because it is a highly versatile product made in
different dimensions, the SL 2000 Formwork allows for a simple, safe application for assemblers
in any work situation and geometry.
Mills Deck Light. The Mills Deck Light is a system of forms of flat slab formworks for the
residential and commercial segment. Formed by struts, aluminum panels and "dropheads" which
allow the removal of the bottom panels from the slabs keeping them shored, the Deck System
provides the economy of a form set to the builder and also provides more speed to the
construction work.
Easy-set Formwork (used in the government program Minha Casa, Minha Vida). Easy-Set is a
formwork system that was conceived and developed by Aluma Systems Canada for residential,
house and multiple floor building work and withstands pressures of up to 60 KN/sq.m. With the
Easy-Set system, execution time is reduced to less than half compared with the traditional
construction system. It allows for daily concrete pouring cycles, resulting in a home per day.
Tubular Scaffolding. Real Estate business units scaffolding, of great tradition in the Brazilian civil
construction market, are present in the daily lives of countless workers in Brazil, which doubtlessly
makes for a big operational advantage un the delevopment of the construction work. With fast
and simple assembly, the scaffolding towers are put together through the fitting of tubular
frames, braced by diagonals embedded in the frames through extremely functional latches. All
types of frames used by the Company are a result of technological and market research, aiming
62
to ensure maximum safety and versatility upon use. As an example, the access staris are
embedded to the tubular frame, making the workers access easier and contributing to the
structural rigidity. They are also equipped of frames and trusses that makes it ideal for use in
urban centers, allowing the pedestrian to walk freely, without being blocked by the tubular
structure.
Suspended Scaffolding. Suspended scaffoling are systems that use steel cables fixed to the
buildings faades. The electric suspended scaffolding is meant for the execution of servies that
require extreme speed and agility without any effort from its user, since it has a powerful engine
and a simplified operation that allows a constant speed of approximately ten meters/minute. The
platforms have a non slip flooring and can be modulated in various lengths with a minimum
configuration of 2 meters and a maximum of 8 meters, and cable lengths that reach up to 150
meters. The Real Estate Light Lifter/Puller Cable suspended scaffolding is suitable for work that
requires extreme speed and agility, but not a high load capacity. Using it in painting, wall cleaning
and waterproofing jobs or in facility or external piping renovation speeds the work up.
Mast Climbing Platform. The mast climbing platform, as it is automatic, aloows greater speed in
faade works than traditional scaffolding, also providing much greater safety in its operation.
Rental
Offered Equipment
The Rental business unit offers aerial platforms, new or semi-used, which allow workers to perform tasks
at different altitudes, and telescopic handlers, which are used to lift loads to varying heights.
Boom Platforms. Offered both telescopic and articulated boom platforms, which provide access to
heights ranging from 2 to 48 meters. Offered with several options, as two or four-wheel, allterrain kits, models with a narrow or wide base, and either diesel or electric engines.
Scissor Platforms. Scissor platforms provide an alternative to boom platforms that allow access to
narrow spaces. These platforms have a platform extension sliding system, and are available with
either diesel or silent electric engines. These platforms are available in a number of models which
may be used in various types of terrain and provide access to heights ranging from 6.4 to 18
meters.
Telescopic Handlers. Telescopic handlers are an extremely versatile type of equipment able to lift
loads weighting up to 4,500 kilos to a height of up to 17 meters.
Technical Assistance. To provide support both to rentals and equipment sales, the Company has
highly qualified technical staff trained to deal with the entire line of aerial work platforms and
telehandlers. The staff is constantly trained by equipment manufacturers and take regular
refresher courses through an internal training program. The Company owns a fleet of workshop
vehicles, equipped with the tooling needed to carry out preventive and minor corrective
maintenance , thereby speeding up technical services and ensuring greater equipment availability.
Treinamento IPAF. Mills is the first company to provide training for IPAF Operators and
demonstrators in Brazil, and the second to do so in Latin America. Additionally, it is at the helm of
the CBI - the Brazilian Council of the IPAF. One of the main goals of this initiative pioneered by
Mills is to instruct these professionals on the concepts of risk perception/assessment and drive
their ability to ensure the proper and efficient operation of Aerial Work Platforms, increasing
productivity and compliance with standards related to safety at work.
In the Companys seven Training Centres there are courses of operation certified by IPAF in
accordance with ISO18.878, with instructors trained by IPAF and equipment manufacturers.
Industrial Services
63
Access. The Industrial Services business unit offered engineering solutions, equipment and labor
relating to the provision of access to construction sites, plants and other structures, for the
performance of maintenance and assembly work. Most of the equipment used for this purpose
has been designed by the Company, and the main products adopted in the provision of these
services are the scaffolding systems TuboMills, Elite and Mills Lock. The latter two have slotting
mechanisms and can therefore be assembled without clamps, which results in reduced assembly
time. The platforms for these systems are being transitioned from wood to metal, either steel or
aluminum, due to the longer useful life, higher load-bearing capacity, and slotting mechanisms of
such metal platforms. In addition, the Company offers customized safety products, such as
skirting boards, that help prevent objects from falling. Finally, the Company uses specially
designed ladders and in some cases mechanical lifts for quick movement between levels.
Assembly and Disassembly of Access Equipment. In most cases, the Companys clients required to
assemble the access structures for the provision of maintenance services. The Company provides
continuous technical operation and safety training to its employees for the use of such equipment
specific to the needs of the work to be performed at the plants and facilities of its clients. The
Companys employees used individual safety equipment in compliance with the characteristics of
each workplace during the complete operation in which its equipment is in use, as evidenced by
technical reports prepared by its safety engineers.
Industrial Painting. The industrial painting process included the following stages: (1) evaluation of
the technical treatment needs of each surface, which is performed in partnership with its clients;
(2) use of its equipment or aerial platforms provided by the Rental business unit to access the
surface to be painted (if the Company is unable to access the surface with the use of its
equipment, the Company engages its specialized climbing painters in the performance of the
work); (3) preparation of the surface to be painted, which is a critical stage in the process and
consists of the removal of the existing layer of paint with the use of high pressure water guns (or
other abrasive means complying with national and international technical norms and procedures);
(4) priming of the surface for the application of the new layer of paint and anti-corrosive
treatment; and (5) application of the new layer of paint. The Company also performs industrial
painting operations inside boilers, furnaces and tanks. Environmental concerns led the Company
to invest heavily in additional employee training for its employees and the progressive suspension
of the use of abrasive chemicals and other materials for paint removal and their replacement with
high pressure water guns. The Company has also adopted new models of painting chambers that
allow the workspace to be completely isolated from the surrounding environment.
Insulation. The provision of services relating to the removal and replacement of insulation is key
to the operation of companies that work with fluids, due to the high temperatures to which
volatile fluids are exposed while travelling through pipes, ducts and equipment. The Company
used a special foam for basic insulation and external coating, the characteristics of which differ
according to the type of structure to be insulated. In most cases, the existing insulation cannot be
repaired, requiring the removal of the existing layer of foam and the application of a new layer of
insulation whenever a pipe or similar insulated equipment requires maintenance work.
Mills Habitat. Mills Habitat is an advanced pressurized compartment intended for use in places
where there are special safety requirements for hot work, such as welding, cutting and grinding.
The compartments are generally used in offshore oil production rigs and at petrochemical plants
and terminals. The positive pressure enclosure has proved to be the best solution in terms of cost
64
and operation for many different applications, such as the installation and modification of support
structures, to repair and service critical equipment, work in oil tanks and on pipe junctions. This
includes meeting the strict QSEH (Quality, Safety, Environment and Health) standards expected
by the world's leading oil and gas enterprises. In addition to the security provided for the
company's employees and facilities, eliminating any risk of explosion, the main benefit afforded by
the equipment is that it allows hot work to be done without shutting down the unit's production,
which on a platform can amount to 180,000 barrels per day. In addition to the European Ex/ATEX
certificate, Mills Habitat is certified by UL-BR, which is accredited by INMETRO, and bears the
SBAC (Brazilian System of Conformity Assessment) seal of conformity identification for use in
potentially explosive atmospheres - Zones 1 and 2. There is no need for power tools or manuals
for installation, just a basic tubular structure to provide anchoring points. Moreover, all
components are light, the heaviest of which weighing in at only 25 kg. There is no waste because
the panels and equipment can be reused.
The information above related to Industrial Services is limited to the Companys evaluation up to the
conclusion of business unit sale, in November 2013.
The Company believes that the equipments that make up your portfolio increases the productivity of its
clients and contributes to cut down delays and increase the safety of their operations.
b.
Revenue from the segment and its participation in the Company's net revenues
The table below indicates the net revenue from each of the business units and its share in the total net
revenue on the indicated periods:
Business unit
2011
Net Revenue
Heavy Construction
Real Estate
Rental
Industrial Services
Total
131,638
155,761
175,410
214,783
677,592
Pro-forma results consolidated data considering the Industrial Services business unit, until its sale date.
c.
Profit or loss resulting from the segment and its participation in the Company's net
income.
The table below indicates the net income from each of the business unit and its share in the total net
income on the indicated periods:
Business unit
Heavy Construction
Real Estate
Rental
Industrial Services
Others
Total
Pro-forma results consolidated data considering the Industrial Services business unit, until its sale date.
7.3
Products and services that correspond to the operating segments disclosed in
item "7.2
65
a.
The Company outsources the entire process of production of the equipment used in their operations. See
item 7.3(e) below.
b.
The Company rents its equipment and provides their services according to the needs from their clients. As
of December 2013, the Company was present in 17 states with 51 branches.
For greater details about our equipment, see item 7.2 above.
c.
(i)
The Company believes to be Brazils leading provider of specialty engineering solutions and equipment,
such as formwork, shoring and scaffolding, and in the access motorized equipment rental for the for the
Brazilian market, according to the Brazilian magazine O Empreiteiro and the IRN 100 from International
Rental News, both published about the market in 2012. The Company also acted in the industrial services
business unit (access equipment, industrial painting and insulation), which was one of the major players
in this market, until the sale of this business unit in November 2013. However, there is no public
information about the exact market share of the Company and its competitors.
(ii)
Each of the Companys business units faces significant competition in the segments in which it operates.
However, the Company believes its ability to offer innovative solutions at competitive prices and its
66
capacity to meet or beat client deadlines are a significant competitive advantages in the segments in
which it operates. By the Companys understandings, the considerable size and importance of the
Brazilian engineering and construction services market creates numerous business opportunities in the
segments in which it operates, which generally provides incentives for new competitors to try enter the
market.
Heavy Construction
The Company believes that its Heavy Construction business unit enjoys an established leading presence in
its segments, having as main competitors Doka, Estub, Pashal, Peri, Rohr (in which the Company is owner
of 27.5% of its participation), SH Formas and Ulma.
Real Estate
Since the demand in the residential and commercial construction markets tends to be more constant and
fragmented than demand from the heavy construction market, the Company faces a higher number of
companies, some of them with strong regional operations.
In this market, the ability to reduce construction costs and to provide solutions for reducing execution
time and the use of manpower is crucial to attracting new clients and securing participation in new
construction projects.
The Company believes that its Real Estate business unit is a leader in the residential and commercial
construction market. Despite the lack of public data about the competition, the Company believes that it
has maintained a leading position for the past ten years. The main competitors in this sector are Aliana,
Cofix, Doka, Estub, Jirau, Metax, Pashal, Peri, SF Formas, SH Formas, Tensor and Ulma.
Rental
Due to the participation in a still minor market with great potential for expansion, the Rental business unit
faces a moderate level of competition when compared to the other business units.
The Company believes that its Rental business unit is one of the major providers of motorized access
equipments, aerial platforms and telescopic handlers, both for lifting personnel and cargo to considerable
heights in Brazil. Besides the lack of public information about its competitors, the Company believes that
its main competitors are A Geradora, Bilden, Degraus, Estaf, Locar, Orguel, Solaris and Trimak.
Industrial Services
The Industrial Services business unit operates in highly competitive market segments. While in the access
segment the Company believes to have solid leadership, in the industrial painting and, in particular, the
insulation market, the Company competes with larger competitors.
The Company believes that the competitive in this sector consists on offering solutions both innovative
and high level of excellence at low cost, building long-term commercial relationships with its clients. The
main competitors in the markets served by the Industrial Services Business unit are Calorisol, Fast, Kaefer
IsoBrasil, Mecan, NM Engenharia, RIP, Rohr in which the Company is owner of 27.5% of its participation),
and SH Formas.
The information above related to Industrial Services is limited to the Companys evaluation up to the
conclusion of business unit sale, in November 2013.
d.
Possible seasonality
67
The demand for the services rendered by the Industrial Services business unit increases significantly
during periods when industries suspend normal operations and use such down-time to carry out
maintenance work. However, suspensions of operations are not concentrated at any particular time of the
year, but rather are determined in accordance with the operational practices adopted by each industry.
The operations of the other three business units are not affected by seasonality. The information above
related to Industrial Services is limited to the Companys evaluation up to the conclusion of business unit
sale, in November 2013.
e.
Key inputs and raw materials: (i) description of the relationships with suppliers,
including whether they are subject to governmental control or regulation, identifying the
bodies and the respective legislation; (ii) potential dependence on few suppliers; and (iii)
possible volatility in their prices
To the Heavy Construction, Industrial Services and Real Estate business units are acquired from habitual
suppliers, the raw material necessary for the manufacture of equipments offered by the Company,
primarily steel and aluminum sheets, which prices paid for such materials are directly impacted by
fluctuations in commodity prices. The Company has a large number of options when choosing its raw
material suppliers and the choice is influenced mainly by the charged price. In the fiscal year ended
December 31, 2013, the main raw material suppliers to the Companys business units were Indstria
Santa Clara, Araya do Brasil, Solues Usiminas, Alcoa and CBA.
After purchasing the raw materials, the Company outsources the entire manufacturing process to third
parties, as well as subsequent to the assembly. In this manner, all of the equipment manufactured is
done by third-parties. Due to the very high quality standards that are needed from the equipment, the
Company has very careful restricted selected companies to perform the manufacturing which are,
Caldren, Jesiana, and Fundiferro. To catch up with demand, equipment is also imported from China,
through criteriously verified suppliers, which must be within the Companys high-quality standards, such
as Kitsen, East Grace and Aluma.
In addition, the Industrial Services business unit occasionally rent equipment from third-parties, in
particular from S Leone and Construservice, and enters into agreements with AGM for the provision of
temporary labor.
Regarding the Equipment Rental unit, the aerial platforms and telescopic manipulators used are acquired
from third parties. The criterion that guides the choice of suppliers for these products is based on its
quality and on after-sale services. The main suppliers of finished products are JLG, Terex and Skyjack, of
whom the Company is partially dependent on, due to the small number of suppliers in the market.
Furthermore, parts and motor components are acquired, especially from Cummins, Deutz and Perkins, in
addition to axles from Dana and ZF do Brasil. The Company has made efforts in parts location and
replacement seeking to reduce dependence on the suppliers for these parts, besides obtaining
productivity and cost gains.
Regarding the inputs, industrial paints are regularly acquired and used in the Industrial Services unit,
supplied mainly by Akzo Nobel and Renner, besides gasoline and diesel for the motorized equipment in
the Rental division. For the Heavy Construction and Real Estate unit, the companies Madewal and
Ecomader are the main suppliers of hardboards for the maintenance and industrialization of the
equipment, with the plasticized hardboards used to equip the formwork in the aluminum chassis systems
(Mills Deck-Light, Mills Deck and ALU-L), and in the steel chassis systems, (SL 2000 formworks). Still for
the industrialization and maintenance of the equipment, paints and solvents are acquired for the painting
of equipment mainly by the companies Mepco, Solventex and Toulon.
68
Generally, the agreements with the suppliers are short-term. The charged prices by the suppliers may
experience volatility as a result from the labor prices, and commodities that are used in the equipment
manufacturing, especially steel and aluminum. The Rental Business unit equipment, are impacted by the
exchange rate fluctuations.
The information above related to Industrial Services is limited to the Companys evaluation up to the
conclusion of business unit sale, in November 2013.
7.4
Clients accounted for more than 10% of total net revenues of the Company
In the fiscal years ended December 31, 2013, 2012 and 2011, the Company had no sole clients
accounting for more than 10% of the total net revenue.
7.5
a.
The need for government authorization to exercise the activities and long-standing
relationships with the government to obtain such permits
There is no specific regulation on the activities that the Company carries. The Company does not need to
obtain permission or license in addition to those required to all commercial companies.
On July 5, 2006, environmental authorities in the state of Rio de Janeiro, the Delegacia de Proteo ao
Meio Ambiente, launched an investigation against the Company for the alleged breach of articles 54 and
60 from the Environmental Crimes Law (Lei de Crimes Ambientais) resulting from the alleged inadequate
disposal of solid and liquid waste. The investigation has not yet been completed, though the Company has
started the necessary works to remedy the irregularities appointed by the authorities and requested the
environmental licenses required for the works carried out at the construction site. For further information
regarding relevant non-confidential judicial, administrative or arbitrary lawsuits, see item 4.3 from this
Reference Form.
The Delegacia de Meio Ambiente e produtos controlados of Osasco initiated the Police inquiry, based on
the Police report dated October 18, 2011, to investigate the alleged practice of crime against the
environment, provided for in Article 56 of Law 9.605/98, due to (i) irregularities in the artesian well, (ii)
irregular use and storage of chemicals and (iii) irregular disposal of waste in the Company's subsidiary in
Osasco/SP. The investigation is not complete, but the Company is now taking all measures to search,
verify and correct the deficiencies pointed out, together with the police authority and the environmental
agencies of the State of Sao Paulo.
For more information on the Companys relevant legal, adminstrative or arbitration processes, see item
4.3 in this Reference Form.
b.
environmental policy of the Company and costs incurred for compliance with
environmental regulation and, where appropriate, other environmental practices,
including adherence to international standards of environmental protection.
Considering the nature of the Companys activities, it does not adopt environmental policies and
regulations and is not subjected to specific environmental regulations.
The main environmental impacts of the Company regard the maintenance process of its equipment, which
involves, among others, hardboard, paint and lubricant oils. The Company seeks to mitigate the possible
environmental impacts coming from its activities through the survey of the aspects and research of its
proper disposal. As an example, the proper disposal of lubricant oils through separation and disposal in
69
licensed companies. Investments are alos made in the separation systems of water and oil from the
lubrication and washing of machines.
With the objective of reducing use of oils in the lubrication of its equipment, the Company has invested
expressive resources in docking scaffolding for the industrial environment, which exempts the use of
clamps and bolted connection sleeves, and uses instead a system of fitting wedges, which, other than
dismissing the need for maintenance with lubricant oils, also provide gains in productivity and
competitiveness.
Since early 2003, the Company has invested expressive amounts of resources to gradually replace
wooden scaffolding floors with aluminum ones, that are more durable and environmentally correct, thus
contributing to the reduction of the extraction of trees, helping to raise a greener planet. Beyond that, the
Company has products that reduce environmental impact, especially the new formwork and shoring
systems and the metallic structures, which reduce the use of wood in the construction process.
The Company acts with environmental responsibility when acquiring the wood that will be used in the
execution of its services. All of the wood used in its equipment come from legal sources licensed by the
Brazilian Ministry Of Environment Brazilian Environment and Natural Renewable Resources Institute, and
the Company maintains archived copies of all the legal documentation regarding the origin, transport and
registry of its suppliers, with focus on: (2) DOF Forest Origin Document; (b) CTF Federal Technical
Certificate of Regularity for the use of Natural Resources; and (c) GF3 Forest Guide for the transport of
forest products.
The equipment that is damaged in the construction work, when classified as improper for reuse, are
turned into pieces of smaller sizes or discarded and sent to further recycling. In the discarding, carbon
steel piecesare sent to steel makers and turn into other metallic products; aluminum beams and floors are
sent for reprocessing in plants, returning to the Company in the form of new products with the same
characteristics; and the wooden floors are sent to accredited partners who transform this residue into an
energy source.
c.
reliance on patents, trademarks, licenses, concessions, franchises, contracts,
royalties for the development of relevant activities.
In case the Company may not use its main brand, Mills, or if such brand loses distinctiveness, the
Company may have problems in relationships with their clients to tailor their services and equipments in
the market, which may prevent the development from its activities in a satisfactory condition. The
development from its activities does not dependent on secondary brands, patents, concessions, franchises
and contracts, royalties.
The Company has contracts of technology transfer for the exclusive manufacturing of several equipments,
as detailed in Item 9.1b. In case any of these contracts are discontinued or the regulation on patends or
on the use of technology changes, the Company may have its portfolio of products reduced and its
competitivity affected.
7.6
The Company only operates in Brazil. The fiscal year ended on December 31, 2013, 98.7% of the
Company's revenue came from clients located in Brazil.
70
b) revenue from the clients assigned to each foreign country and their participation
share in the Companys total net revenue;
The fiscal year ended on December 31, 2013, 1.3% of the Company's revenue came from clients located
in the United States.
c) total revenue from foreign countries and their participation share in the Company's
total net revenue.
The fiscal year ended on December 31, 2013, 1.3% of the Company's revenue came from clients located
outside of Brazil.
7.7
Not applicable.
7.8
Description of long-term relationships relevant to the Company that are not listed in
this form.
The company does not publish sustainability report or similar. Considering the significant increase of
transparency about the sustainability issue, the Company is considering formalizing a process of analysis
(diagnosis) and action plan to improve its sustainability practices.
7.9
71
8.
72
ECONOMIC GROUP
8.1
a.
The Companys capital stock is comprised exclusively of common shares. The table below presents the
Companys ownership structure, as of December 2nd, 2014, highlighting the amount of shares held by the
Company, its main shareholders and its Administrators:
Shareholders
Andres Cristian Nacht ..................................................................
Jytte Kjellerup Nacht ...................................................................
Tomas Richard Nacht ..................................................................
Antonia Kjellerup ........................................................................
Pedro Kjellerup Nacht ..................................................................
Francisca Kjellerup Nacht ............................................................
Snow Petrel S.L. .
Capital Research Global Investors (1) ..
HSBC Bank Brasil S.A.(2) ...............................................................
Share Ownership
Shares
(%)
15,595,249
12.2%
5,354,929
4.2%
2,156,845
1.7%
2,156,845
1.7%
2,156,845
1.7%
1,000
0.0%
17,728,280
13.8%
6,620,000
5.2%
6,323,300
5.0%
Administrators(3) ..................................................................
Others ................................................................................
Total ...............................................................................
3,359,453
66,425,179
128,057,925
2.8%
51.9%
100.0%
79,368,479
62.0%
(1)
(2)
(3)
(4)
On June 5, 2014. According to information received officially by the Company and released to the CVM.
On October 2, 2012. According to information received officially by the Company and released to the CVM.
Does not consider Andres Cristian Nacht and Francisca Nacht shares, both are also administrators of the Company.
And considers the number of shares reported last month, according to CVM Instruction No. 358/02
Considers all the shares issued by the Company, except for shares held by the Direct and indirect Controlling
shareholders and administrators
Share Ownership
(%)
100.0
100.0
Malachite Limited
Shareholder
Nicolas Nacht
.................................................
Helen Anne Margaret Ahrens ..................................
Others ...............................................................
Share Ownership
(%)
40.0
40.0
20.0
73
Total
.............................................................
100.0
Snow Petrel S.L. is a company with headquarter in Barcelona, Spain, at Calle Johann Sebastian Bach 20,
3rd floor, registered under CNPJ/MF n 14.740.333/0001-61. Snow Petrel is a part of Mills Estruturas e
Servios de Engenharia S.A.s controlling group and its entire capital stock is held by Malachite Limited, a
holding company organized under the laws of Malta and whose shares are fully held by: (i) Mr. Nicolas
Nacht, the brother of Mr. Andres Cristian Nacht; (ii) Mrs. Helen Anne Margaret Ahrens, the wife of Mr.
Nicolas Nacht; and (iii) other shareholders, also members of the Nacht family.
Shareholders' agreement of Nacht Participaes S/A
Aiming to regulate its relationship as shareholders of the Company and continue to be qualified jointly as
the controlling group of the Company, all shareholders of Nacht Participaes S.A. on February 11, 2011,
which included at the time Jeroboam Investments L.L.C and the members of the Nacht family (Nacht
Family), executed a shareholders agreement regulating the voting rights and the transfer of shares of
Nacht and the Company.
The main terms of the shareholders agreement are: (a) maintenance of the Nacht Family and Jeroboam
(succeeded as a Companys shareholder by Snow Petrel) as the group controlling shareholder, (b) joint
exercise of voting rights in each and any resolution pertaining to the Company, (c) Andres Nacht's
appointment as representative of the controlling group on the Board of Directors and on the Companys
Shareholder Meetings, and (d) prohibition of sale of the Companys shares of more than 10% interest that
each shareholder owns, individually, to third parties.
Due to the extinction of Jeroboam Investments L.L.C, Snow Petrel S.L., as its sole member, succeeded all
of its rights and obligations, including as a party to the Nacht Participaes S.A. Shareholders Agreement
executed on February 11, 2011.
In October 2012, Nacht Participaes reduced its capital through the delivery of the entire stake held by it
in Mills to its shareholders, with the transaction completed in December 28, 2012.
As a consequence of such transfer, the shareholders Andres Cristian Nacht and his family members, now
hold, directly, 27,421,713 common nominative shares with no par value, issued by Mills, representing
21.7% of Mills capital stock.
Neither the capital reduction nor the related transfer of the shares issued by Mills resulted in any change
of Mills corporate control, which, before the capital reduction, was formerly exercised jointly by Nacht
Participaes, its shareholders and Snow Petrel S.L., and, after the capital reduction, are now exercised by
Nacht Participaes shareholders jointly with Snow Petrel S.L. Such shares remains encumbered and
subject to the terms of the "Shareholders Agreement of Nacht Participaes S.A.", executed on February
11, 2011, as amended, which also applies to Mills.
On February 28, 2014 a new Shareholders Agreement was celebrated without any change in Mills
corporate control structure. On May 5, 2014, the Shareholders Agreement was ammended, as to include
Francisca Kjellerup Nacht.
HSBC Bank Brasil S.A. Banco Mltiplo
HSBC Bank Brasil S.A. Banco Mltiplo (HSBC) is a legal entity of private law, headquartered at the city
of Curitiba, Paran, Travessa Oliveira Bello n. 34, 4th floor, Brazil, under corporate number CNPJ
01.710.201/0001-89.
Capital Research Global Investors
The Capital Research Global Investors is a fund manager based in Los Angeles, California, United States.
74
b.
c.
On January 19, 2011, the Company entered into a purchase and sales agreement to acquire 25.0% of the
voting and total capital stock of Rohr for R$90.0 million, paid fully on February 8, 2011.
Rohr is a privately held company specialized in access engineering and solutions for civil construction and
has 45 years of experience in this market. The company serves the following sectors: heavy construction
and infrastructure, residential and commercial construction, industrial maintenance and events.
The Company does not participate in Rohrs administration, once this was a strategic acquisition, in which
enables the Company to broaden its exposure to the sectors it serves - infrastructure, residential and
commercial construction, the oil and gas industry, among others.
In September 2011, there was a rise in the stake held in Rohr to 27.5%, resulting from the repurchase by
Rohr of 9% of its shares held as treasury stock.
d.
Not applicable.
e.
8.2
Organization chart where Company operates, compatible with information presented
in item 8.1.
Nacht
Family
21.4%
Snow
Petrel S.L.
13.8%
Administr
ators
2.8%
HSBC
5.0%
Capital
Reasearch
5.2%
Others
51.9%
MILLS ESTRUTURAS E
SERVIOS DE ENGENHARIA
S.A.
8.3
Description of the restructuring operations, such as additions, mergers, splits,
incorporation of shares, corporate divestitures and acquisitions, corporate governance,
acquisitions and disposals of important assets, which may have taken place in the Group.
Date of Operation
Corporate Event
7/10/2013
Sale
75
Operation Description
Date of Operation
Corporate Event
Description of Corporate Event
Operation Description
12/28/2012
Other
Capital Reduction of Nacht Participaes S.A.
At the Extraordinary General Meeting held on October
29, 2012, the shareholders of Nacht Participaes S.A.
approved its capital reduction. The aforementioned
capital reduction occured through the delivery of the
totality of its previously held shares issued by Mills to its
shareholders (27,421,713 shares), after the 60-day
statutory period provided by article 174 of Law 6,404, of
December 15, 1976, as amended. There was no change
in the Companys corporate control.
Date of Operation
3/14/2012
Corporate Event
Other
Operation Description
Date of Operation
08/01/2011
Corporate Event
Merger
Operation Description
Date of Operation
05/27/2011
Corporate Event
Acquisition.
Operation Description
76
02/17/2011
Corporate Event
Other
Operation Description
Date of Operation
01/19/2011
Corporate Event
Operation Description
8.4
77
9.
78
RELEVANT ASSETS
9.1
Description of noncurrent relevant assets for the development of the Companys
activities
a.
Fixed assets, including those subject to rent or lease, indicating its location.
Most of the Companys revenues are generated by the rental and use of equipment, as well the provision
of services related to such equipment, including insulation, industrial painting and equipment assembly
and disassembly.
The Company also owns several fixed assets for its own use; mainly warehouses to storage the
equipment described above, offices, furniture, fixtures, and other general equipment used at the
Companys facilities.
The Companys main fixed assets are listed in the table below:
Assets
11,049
1,197
1,001,891
8,526
28,645
1,051,308
57,503
(884)
(569)
(223,549)
(4,999)
(5,924)
(235,925)
-
10,165
628
778,342
3,527
22,721
815,383
57,503
1,108,811
(235,925)
872,886
1,327,922
Cost
Buildings and Land
Facilities
Equipment
IT Equipment
Others
Subtotal
Construction in Progress
Total
2011
Accumulated
Depreciation
Net
(324,575)
1,003,347
2013
Accumulated
Depreciation
Cost
Net
24,274
5,470
1,491,854
13,886
31,625
1,567,109
39,086
(1,526)
(1,051)
(362,749)
(6,594)
(9,799)
(381,719)
-
22,748
4,419
1,129,105
7,292
21,826
1,185,390
39,086
1,606,195
(381,719)
1,224,476
Plot Size
Constructed
Area
Status
End of Term of
Lease
City
State
Office/Warehouse
14,984 m
2,428 m
Rented
5/1/2016
Manaus
AM
Office/Warehouse
4,200 m
1,200 m
Rented
1/1/2016
Manaus
AM
Office/Warehouse
6,975 m
1,558 m
Rented
4/12/2015
Camaari
BA
Office/Warehouse
4,500 m
1,286 m
Rented
12/31/2014
Simes Filho
BA
Office/Warehouse
4,644 m
2,000 m
Rented
12/31/2014
Simes Filho
BA
Office/Warehouse
13,552 m
4,360 m
Rented
1/1/2016
Fortaleza
CE
Office/Warehouse
20,000 m
17,011 m
Rented
10/25/2021
Braslia
DF
Office/Warehouse
3,900 m
1,750 m
Rented
5/6/2023
Braslia
DF
79
Location
Avenida Colantino Aleixo, n
1,849 Bairro Puraquequara
Distrito Industrial II
Travessa Anduzeiro, 19
Loteamento Rio Piorini Bairro
Colnia Terra Nova
Av, Concntrica, 137 Centro
DICA - Distrito Industrial do
Calado, Quadra 5, Lote 1,
CIA
DICA - Distrito Industrial do
Calado, Quadra 5, Lote 2,
CIA
Rodovia BR 116, 5360 A KM
14 Bairro Pedras
Rodovia DF 290, KM 1,2
Ncleo Rural Hortigranjeiro de
Santa Maria
Rodovia DF 290, KM 1,2
Ncleo Rural Hortigranjeiro de
Santa Maria
Office/Warehouse
10,000 m
3,675 m
Rented
9/3/2017
Serra
ES
Office/Warehouse
11,689 m
1,849 m
Rented
10/27/2015
Goinia
GO
Office/Warehouse
47,076 m
3,388 m
Rented
1/3/2018
So Lus
MA
Office/Warehouse
3,386 m
1,351 m
Rented
In effect
indefinetly
Belo
Horizonte
MG
Office/Warehouse
5,258 m
2,750 m
Rented
In effect
indefinetly
Belo
Horizonte
MG
Office/Warehouse
2,000 m
2,000 m
Rented
4/30/2014
Belo
Horizonte
MG
Office/Warehouse
25,000 m
4,179 m
Rented
1/31/2023
Contagem
MG
Office/Warehouse
2,869 m
64 m
Rented
1/11/2016
Uberlndia
MG
Juiz de Fora
MG
Office/Warehouse
3,452 m
610 m
Rented
Office/Warehouse
3,750 m
848 m
Rented
8/26/2018
Trs Lagoas
MS
Office/Warehouse
3,600 m
940 m
Rented
5/1/2016
Cuiab
MT
Office/Warehouse
4,320 m
Under
construction
Rented
5/5/2016
Cuiab
MT
Office/Warehouse
17,500 m
1,100 m
Rented
9/30/2017
Ananindeua
PA
Office/Warehouse
7,500 m
1,280 m
Rented
11/1/2018
Parauapebas
PA
Cabo de
Santo
Agostinho
Cabo de
Santo
Agostinho
Office/Warehouse
5,000 m
2,188 m
Rented
9/19/2016
Office/Warehouse
12,640 m
1,700 m
Rented
10/30/2015
Office/Warehouse
17,982 m
7,365 m
Rented
4/30/2018
Curitiba
PR
Office/Warehouse
2,880 m
1,331m
Rented
2/9/2016
Itabora
RJ
Office/Warehouse
74,551 m
1,000 m
Rented
1/23/2017
Itatiaia
RJ
Office
2,000 m
972 m
Rented
5/9/2018
Maca
RJ
54,793 m
11,032 m
Owned
N.A.
Rio de
Janeiro
RJ
N.A.
293 m
Owned
N.A.
Rio de
Janeiro
RJ
Office/Warehouse
Headquarter/Office
80
PE
PE
Headquarter/Office
N.A.
216 m
Rented
1/24/2015
Rio de
Janeiro
RJ
Office/Warehouse
8,173 m
226 m
Rented
1/1/2018
Parnamirim
RN
Office/Warehouse
23,316 m
3,015 m
Rented
7/10/2018
Cachoeirinha
RS
Office/Warehouse
8,064 m
1,882 m
Rented
12/1/2014
Porto Alegre
RS
Office/Warehouse
4,800 m
700 m
Rented
1/9/2016
Rio Grande
RS
Office/Warehouse
5,105 m
687 m
Rented
9/14/2016
Itaja
SC
Office/Warehouse
6,480m
883 m
Rented
7/20/2018
Aracaju
SE
Office/Warehouse
5,060 m
2,998 m
Rented
6/1/2018
Bauru
SP
Office/Warehouse
30,941 m
2,415 m
Rented
10/5/2017
Campinas
SP
Office/Warehouse
49,620 m
18,841 m
Rented
1/31/2018
Osasco
SP
Office/Warehouse
4,764 m
160 m
Rented
2/28/2015
Ribeiro
Preto
SP
Office/Warehouse
850 m
350 m
Rented
8/31/2015
So Jos dos
Campos
SP
Office/Warehouse
1,170m
343 m
Rented
1/1/2017
So Vicente
SP
All facilities used by the Company, whether they are owned or leased from third parties, are free of liens
and charges.
Description of the fixed asset
Real property
Land
Equipment for rent (formwork, shoring and equipment machines)
IT Equipment
Facilities
Construction in progress
Country of
Location
Municipality
of Location
Type of
propriety
Brasil
Brasil
Brasil
Brasil
Brasil
Brasil
Rio de Janeiro
Rio de Janeiro
Owned
Owned
Owned
Owned
Owned
Owned
REGISTRATION #
COVERAGE
TERRITORY
740164244
NATIONAL
780190670
NATIONAL
3/25/2020
7200595
NATIONAL
12/7/2022
800121546
NATIONAL
8/30/2021
829369724
NATIONAL
2/8/2019
812940792
NATIONAL
12/18/2021
821121316
NATIONAL
The requested brand registrations still The impact cannot be qualified. The loss
not granted by the INPI do not have
of rights over the brands imply the
term of effectiveness established and
impossibility to prevent third-parties
may still be refused. The granted
from using the identical brands or
registrations may be challenged
similar to mark, specially, services or
through, invalidity lawsuits, in the event
competing products, once the holder
of an unvalid granted registration, either loses its right to use exclusively. There
by revocational applications, partial or
is also the possibility that the holder
total, in case the brand is not being
suffers criminal and civil lawsuits, for
81
12/18/2021
821121324
NATIONAL
12/18/2021
200018167
NATIONAL
10/31/2015
817692177
NATIONAL
10/312015
817692215
NATIONAL
10/31/2015
817692223
NATIONAL
10/31/2015
817692231
NATIONAL
9/25/2019
6989454
NATIONAL
9/25/2019
Awaiting approval for
extension
Awaiting approval for
extension
Awaiting approval for
extension
9/27/2018
6989462
NATIONAL
200065726
NATIONAL
608965065
NATIONAL
800221737
NATIONAL
812987683
NATIONAL
5/30/2019
812987691
NATIONAL
9/13/2018
813141010
NATIONAL
5/30/2019
Awaiting approval for
extension
2/12/2024
Awaiting decision
from the INPI
regarding the brand
concession
4/24/2017
813782414
NATIONAL
815236662
NATIONAL
830724915
NATIONAL
830724931
NATIONAL
824647548
NATIONAL
4/24/2017
824647556
NATIONAL
3/25/2016
6268625
NATIONAL
DURATION
REGISTRATION #
COVERAGE
TERRITORY
PI0705035-6
NATIONAL
BR 30 2013 002803-8
NATIONAL
BR 30 2013 002802-0
NATIONAL
BR 10 2013 013430-9
NATIONAL
x
Concession term
expired
Concession term
expired
9/20/2014
BR 30 2013 002801-1
NATIONAL
MU7801603-7
NATIONAL
MU7903337-7
NATIONAL
MU7902162-0
NATIONAL
9/3/2014
MU7903347-4
NATIONAL
MU8901783-8
NATIONAL
MU8901887-7
NATIONAL
PI1004014-5
NATIONAL
PI1101068-1
NATIONAL
PI1003939-2
NATIONAL
MU9101029-2
NATIONAL
c.
Discontinued Operations
82
In July 10, 2013, the company entered into a sale agreement of its Industrial Services business unit to
FIP Leblon Equities Partners V, a fund managed by Leblon Equities Gesto de Recursos Ltda., through
the sale of its stake in the company Albuquerque Participaes Ltda. The sale price set on May 31, 2013,
trading date base, was R$ 102,0 million. During the 3-year period, beginning on the closing date, the
parties entered into a mutual agreement not to compete.
The transaction was closed on November 30, 2013, and the price was updated based on CDI, adjusted by
partial performance of the business and settled, after adjustments, in local currency.
Investiments
On January 19, 2011, the Company entered into a purchase and sale agreement to acquire 25% of the
voting and total capital of Rohr for R$ 90 million, paid on February 8, 2011.
Rohr is a private company specializing in access engineering and the provision of construction solutions,
with more than 45 years of experience in the market. The company operates in the heavy construction
and infrastructure, building construction, industrial maintenance and events sector.
The Company does not participate in the management of Rohr, as this is a strategic acquisition, whereby
the Company aimed to increase its presence in its areas of activity - infrastructure, residential and
commercial construction, oil and gas, etc. In September 2011, Rohr acquired 9.0% of its own stock, and,
as a result, the Company expanded its participation from 25.0% to 27.5% in Rohr.
(i) Company Name: Rohr S.A. Estruturas Tubulares
(ii) Headquarter: Avenida Francisco Matarazzo, 1400 Conjunto 181, cidade de So Paulo, Estado de So
Paulo, Brasil.
(iii) Activities developed: Rohr is a private company specializing in access engineering and the
provision of construction solutions, with more than 45 years of experience in the market. The company
operates in the heavy construction and infrastructure, building construction, industrial maintenance and
events sector.
(iv) Ownership: 27.5%
(v) Ownership profile: investment recorded at the cost of acquisition.
(vi) CVM registration: not applicable
(vii) Book value of participation: R$87.4 million (as of December 31, 2013)
(viii) Market value of ownership according to stock price at the date of the fiscal year, when
such stocks are traded on organised markets of securities: not applicable
(ix) Appreciation or depreciation of such ownership, over the last 3 fiscal years, according to
the book value: not applicable. On January 19, 2011, the Company entered into a purchase and sale
agreement to acquire 25.0% of the voting and total capital of Rohr for R$90.0 million. In September
2011, there was a rise in the stake held in Rohr to 27.5%, resulting from the repurchase by Rohr of 9.0%
of its shares held as treasury stock.
(x) Appreciation or depreciation of such ownership, over the last 3 fiscal years, according to
the market value, to stock price at the date of the fiscal year, when such stocks are traded on
organised markets of securities: not applicable
(xi) Dividends received in the 3 last fiscal years:
2013 -> R$ 1,648 thousand as interest on capital related to the fiscal years of 2013, registered as
financial revenue of 2013.
2012 > R$ 3,214 thousand as interest on capital related to the fiscal years of 2011 and 2012,
registered as financial revenue of 2012.
83
2011 > R$ 3,954 thousand, of which (i) R$ 1,346 thousand as extraordinary dividend related to
the fiscal year of 2011 and registered as financial revenue in 2011; (ii) R$2,035 thousand (net of
taxes) of interest on capital and dividends related to the fiscal year of 2010 and registered
reducing the value of the investment as it is figures for the years prior to the date of acquisition of
the shares of the investee; and (iii) R$573 thousand (net of taxes) of interest on capital related to
the year of 2007 and registered reducing the value of the investment as it is dividends from
profits or reserves existing at the date of acquisition of the shares of the investee.
(xii) reasons for the ownership acquisition and its maintenance: through this acquisition, the
Company aimed to increase its presence in its areas of activity - infrastructure, residential and commercial
construction and oil and gas.
84
10.
85
MANAGEMENT COMMENTS
10.1
a.
The management of the Company believes that the Company is one of the largest providers of specialized
engineering services, the leading supplier of concrete formwork and tubular structures and motorized
access equipment for the Brazilian market. The company offers to its clients specialized engineering
services, providing creative and differentiated solutions, specialized workforce and main equipment to
major infrastructure projects and residential and commercial construction. The customized engineering
solutions of the Company include planning, design and the temporary structures for civil construction
(such as formwork, shoring and scaffolding) and motorized access equipment (such as aerial work
platforms and telescopic handlers), as well as technical assistance and specialized workforce.
The Company believes that the sectors in which it operates will have a strong growth in coming years due
(i) the favorable macroeconomic fundamentals and the increasing availability of credit in Brazil; (ii) the
significant investment in infrastructure projects like the new Logistics Investments Program, aimed at
roads, railways, ports and airports; (iii) the Brazilian governments low income housing program (Minha
Casa, Minha Vida); (iv) the investments required for the World Cup in 2014 and the 2016 Olympic Games;
and (v) the growing concern of companies with safety and productivity, which can boost the use of
services and equipment offered by the Company.
The Company's revenues come mainly from rental of equipment which accounted to 81.0% of Companys
total net revenues which correspond to an amount of R$ 832.3 million in the fiscal year ended December
31, 2013. The revenue from the performance of services is recognized based on the measurement of the
stages for performance of the services carried out through the reporting date. Revenue from the sale of
merchandise is recognized when the significant risks and benefits of ownership of the merchandise are
transferred to the buyer. Accordingly, the Company adopts the date on which the product is delivered to
the buyer as the basis for its revenue recognition policy. Rental revenue is recognized on a prorated basis
in monthly results on a straight-line basis, according to the equipment lease agreements.
The management of the Company believes that the current availabilities and its operational cash, together
with its borrowing capacity, with proper leverage of EBITDA in relation to the Company's net debt are
sufficient to comply with the investment plan and the need for working capital during the same period.
For more information on the Companys debt, see item 3.7 of this Form.
The Management of the Company believes that the Company has financial conditions and sufficient assets
in order to implement its business plan and to comply with its short and medium term obligations.
Impact of Brazilian general macroeconomic conditions on its financial condition and results
of operations.
The Heavy Construction business unit offers customized solutions to companies involved in major
construction and infrastructure projects, while the Real Estate business unit is dedicated to providing
services to residential and commercial construction companies. The Rental business units products,
focused on the rental, technical assistance and sale of motorized access equipment, are needed by
companies operating in various industries. All these sectors are directly affected by changes in
macroeconomic conditions in Brazil, especially the growth of gross domestic product - GDP, interest rates,
inflation, credit availability, unemployment level, exchange rates and commodity prices, the latter two
because they affect the cost of equipment the Company uses in its activities. Consequently, these factors
affect, indirectly, its operations and results.
In addition, the Companys operations and results of operations are directly affected by changes in (i)
inflation rates, which are used as a reference for the adjustment of the prices paid under long-term
86
contracts; (ii) interest rates, which affect the Companys financial obligations; and (iii) prices of materials
consumed in the construction job or fluctuating of the prices of maintenance of the equipment of the
Company.
b.
According to the Company's balance sheet on December 31, 2013, the capital structure of the Mills was
56.4% equity, measured by the stockholders equity, and 43.6% capital from third party, measured by
total liabilities.
The management of the Company typically use both equity, from operating cash generation, and capital
from third-party, though the contraction of new loans and/or the issuance of debt securities, to finance
the needs for investments in non-current assets and working capital of the company. For strategic
operations, when necessary, the company may resort to the capital from their shareholders or third
parties, through the issuance of shares.
There are no hypotheses of redemption of shares issued by the Company in addition to the legally
provided for.
c.
Financial commitments
The Company calculates and discloses its EBITDA in accordance with CVM Instruction 527/12. For further
information on the calculation of EBITDA and its reconciliation to net income in each period, see item 3.3
of this Reference Form.
The Companys EBITDA for the year ended on December 31st 2013, was R$ 403.1 million and its financial
expenses, net of financial revenue in the same period were R$ 46.8 million. Thus, the Companys EBITDA
for year ended on December 31st 2013 presented a coverage ratio of 8.6 times its net financial expenses
during the same period. Only considering its financial expenses, which amounted to R$ 60.0 million in the
year ended on December 31st 2013, the coverage ratio would be 6.7 times.
The Companys total debt for the year ended on December 31st 2013, amounted to R$ 632.6 million, or,
1.6 times the Companys EBITDA for the year ended December 31 st 2013. The flow of payment from this
debt, considering the debt profile as of that date, will take place in a period of eight years, of which R$
118.3 million in less than one year, R$ 303.5 million from 1 to 3 years, R$ 116.7 million in a period
between 3 to 5 years and R$ 94.1 million in more than five years. The Companys long-term debt profile
has a policy for contracting loans and financing aimed at ensuring that all financial commitments are
honored, if necessary, through its cash generation. This way, the Company's management believes that
its cash generation is sufficient to meet its financial commitments.
In addition, on December 31st 2013, the Company had registered on its balance sheet the amount of R$
10.4 million, which refers to the Tax Recovery Program (REFIS) with a maturity of 180 months, with 130
remaining installments. The Company is compliant to the aforementioned installment program.
With regard to contractual limitations for assumption of new debt, there are clauses in the Company's
bank credit contracts that require adherence to certain financial indicators, among which: the ratio
between EBITDA and net debt, the ratio of net short-term debt and total net debt, and the ratio between
net financial expenses and EBITDA. On the date of this Reference Form, the Company was within the
limits of contractual financial indicators.
d.
87
The investments from the Company in non-current assets and working capital are financed by its own
cash generation and third party capital, through the contraction of new loans and/or the issuance of debt
securities. For strategic operations, when necessary, the Company can turn tocapital from its shareholders
or third parties, through the issuance of shares.
On March 29, 2011, the Company conducted its first issuance of 30 commercial promissory notes with a
unit value of R$ 1.0 million, totaling R$ 30 million, each note with a maturity of 90 days as of the
respective issue. Interest charges will fall due corresponding to 105% of the accumulated variation in the
average daily Domestic Demand (DI) rate. Remuneration was fully paid upon the maturity date.
On April 18, 2011, the Company issued R$270 million in non-convertible unsecured debentures, with
maturity on April 18th, 2016. The nominal value will be amortized in three annual installments starting on
the third year of the issuance, and shall pay semi-annually interest of 112.5% of accrued variation of the
CDI interest rate. The net proceeds from the Offering were used for (a) the redemption of all commercial
papers, issued under the first public offering of the Company, totaling R$ 30 million, (b) investments
defined in the Mills expansion plan, including estimated investments of R$ 337 million in 2011, (c)
rearrangement of cash balance following disbursement of R$ 90 million in February 2011 in connection
with the acquisition of 25% of the Rohr S/A Estruturas Tubulares (Rohr) total capital stock, and (d)
general corporate purposes and expenses of the Company.
On December 7th, 2011 the Company issued a single series of 3 (three) commercial promissory notes with
unit face value of R$ 9.0 million, for a total amount of R$ 27.0 million with maturity on December 1 st,
2012. Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in
the average daily Domestic Demand (DI) rates, plus 1.10% per annum. Remuneration will be fully paid
upon the maturity date.
On April 23th, 2012, the Company issued a single series of 30 commercial promissory notes with unit face
value of R$ 1.0 million, for a total amount of R$ 30.0 million with maturity on December 3rd, 2012.
Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in the
average daily Domestic Demand (DI) rates, plus 4.9% per annum. Remuneration will be fully paid upon
the maturity date.
On September 18th, 2012, the Company held its second issuance, in two series of simple debentures, non
convertible into shares, unsecured, public offering object with limited placement efforts, pursuant to CVM
Instruction 476. 27,000 debentures were issues, each with a nominal value of R$ 10,000.00, of which: i)
16,094 debentures of the first series, amounting to R$ 160.9 million, with maturity date on August 15,
2017, not subject to monetary adjustment. The nominal value of the first series debentures will be
amortized in two annual installments starting on the fourth year of the issuance, and the interest paid
semi-annually and equal to surtax of 0.88% per annum of 100% of DI accrued variation; ii) 10,906
debentures of the second series, amounting to R$ 109.1 million, with maturity date on August 15, 2020,
subject to monetary adjustment by the accrued variation of the IPCA. The nominal value of the second
series debentures will be amortized in three annual installments starting on the sixth year of the issuance,
and the interest paid annually and equal to 5.50% per annum of the above mentioned monetarily
adjusted amount.
On December 6, 2013 the Company entered into a loan agreement with the Nassau Branch of Banco Ita
BBA S.A. totaling US$ 16.9 million (equivalent to R$40.0 million). Principal will be settled in a bullet
payment on January 30, 2015 and interest will be paid semiannually. In order to eliminate the foreign
exchange risk on this borrowing, on the same date a swap was contracted with Banco Ita BBA S.A. in
the amount of R$ 40 million so that all obligations (principal and interest) are fully converted into local
currency and carried out on the same maturity dates.
88
e.
Potential sources of financing used for working capital and for investments in noncurrent assets.
The management of the Company believes that the existing resources and the cash flow to be generated
from its operations, along with its borrowing capacity, with proper leverage, will be sufficient to cover its
investment plan and the need for working capital during the same period.
f.
2011
CDI+0.29%
TJLP+0.2% to 0.9%
62.1
22.1
As of December 31st,
2012
(in R$ million)
2013
27.3
26.7
40.2
23.4
52.2
18.0
8.2
274.6
410.9
272.5
164.7
113.3
622.5
274.4
165.9
120.6
632.6
89
BNDES
The Company celebrated with financial agents from Banco do Brasil and Ita BBA the financing contracts
for the purchase of equipment through FINAME, as described on the table below:
Contract Number
ITAU N 106509120003700
ITAU N 006950006211200
ITAU N 006950006221200
ITAU N 006950006221400
ITAU N 006950006211300
BRASIL 00399-X
BRASIL 40-00402-3
Issue Date
06.22.2010
10.02.2011
03.09.2011
08.12.2011
12.15.2011
02.15.2010
06.22.2010
Maturity Date
03.16.2015
11.16.2020
09.30.2020
01.29.2021
04.15.2021
02.17.2020
03.16.2020
Original Value
(in R$ thousands)
6,000
4,294
3,069
7,194
3,627
10,000
1,921
Outstanding as of
Decemberst, 2013
(in R$ thousands)
2,020
3,901
2,619
3,843
1,809
7,727
1,504
23,427
90
Debentures
On April 8, 2011 approval was granted for the issuance by the Company of a total of 27,000 debentures
in a single tranche, of non-convertible unsecured debentures, of a total amount of R$ 270.0 million, and
unit face value of R$ 10,000, issued on April 18, 2011. The debentures have maturity on April 18, 2016,
with remuneration equivalent to 112.5% of the CDI rate and semi-annual payments of interest and
amortization in three consecutive installments, with the first maturity date on April 18, 2014. The
transaction costs associated with this issue, in the amount of R$ 2.4 million, are being recognized as
Company funding expenses, in accordance with the contractual terms of the issue.
On August 3, 2012 approval was granted for the issuance by the Company, in two series of simple
debentures, non convertible into shares, unsecured, public offering object with limited placement efforts,
pursuant to CVM Instruction 476. On September 18, 2012, 27,000 debentures were issued, each with a
nominal value of R$ 10,000.00, of which: i) 16,094 debentures of the first series, amounting to R$ 160.9
million, with maturity date on August 15, 2017, not subject to monetary adjustment. The nominal value of
the first series debentures will be amortized in two annual installments starting on the fourth year of the
issuance, and the interest paid semi-annually and equal to surtax of 0.88% per annum of 100% of DI
accrued variation. ii) 10,906 debentures of the second series, amounting to R$ 109.1 million, with
91
maturity date on August 15, 2020, subject to monetary adjustment by the accrued variation of the IPCA.
The nominal value of the second series debentures will be amortized in three annual installments starting
on the sixth year of the issuance, and the interest paid annually and equal to 5.50% per annum of the
above mentioned monetarily adjusted amount.
As of December 31, 2013 the balance of debentures including transaction costs is R$ 113.3 million in
current liabilities and R$ 450.0 million in non-current liabilities, and R$ 112.5 million and R$ 448.2 million,
net of transaction costs, respectively.
Promissory Notes
On March 29, 2011 the Company held its first issuance of 30 commercial promissory notes with unit face
value of R$ 1.0 million, for a total amount of R$ 30.0 million with a maturity date of 90 days as of the
respective date of issue. Remuneration interest charges will fall due corresponding to 105% of the
accumulated variation in the average daily Domestic Demand (DI) rates. Remuneration was fully paid
upon the maturity date.
On December 7, 2011 the Company issued a single series of three commercial promissory notes with unit
face value of R$ 9.0 million, for a total amount of R$ 27.0 million with maturity on December 1st, 2012.
Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in the
average daily Domestic Demand (DI) rates, plus 1.10% per annum. Remuneration was fully paid upon the
maturity date.
On April 23, 2012 the Company issued a single series of thirty commercial promissory notes with unit face
value of R$ 1.0 million, for a total amount of R$ 30.0 million with maturity on December 3, 2012.
Remuneration interest charges will fall due corresponding to 100% of the accumulated variation in the
average daily Domestic Demand (DI) rates, plus 4.9% per annum. Remuneration was fully paid upon the
maturity date.
Leasing Agreements
Several leasing agreements which the Company entered are guaranteed through promissory notes. The
table below shows the promissory notes which amounts are considered relevant:
Contract binding
615556-1
615800-5
615587-1
19340110471
19340115341
19340116534
Bank
SANTANDER
SANTANDER
SANTANDER
HSBC
HSBC
HSBC
Issue Date
07.27.2009
08.27.2009
05.08.2009
09.15.2009
12.29.2009
02.05.2010
Maturity Date
07.28.2014
08.25.2014
08.04.2014
09.15.2014
12.29.2014
02.02.2015
Outstanding as of
December 31st, 2013
(in R$ million)
587
1,312
308
647
1,538
774
As of the date of this Reference Form, the Company is part of several leasing agreements with several
financial entities, representing obligations of R$ 8.2 million as of December 31st, 2013. The Company
entered into such agreements as lessee, with the purpose of leasing (or in certain cases purchasing) the
equipment and other assets necessary for running its operations. Upon maturity of each leasing
agreement, the Company has the option to return the equipment or assets to the respective lessor, or
exercise an option to buy such equipment or asset, upon payment of a residual value. The amounts owed
under these leasing agreements are repaid in monthly installments, subject to a minimum guaranteed
payment corresponding to the lower amount for which the equipment or assets could be sold to a thirdparty.
92
The Company contracted with financial institutions, instruments for monetary exchange protection
(hedge). These derivative instruments contracted by the Company have the intention to protect it, on
their equipment import operations, in the interval between the placing of orders and nationalization
against the risk of fluctuation in the exchange rate, and are not used for speculative means.
On December 31st, 2013, the Company possessed purchase orders with foreign suppliers of equipment
valued at approximately US$ 71.3 million (in 2012, these orders amounted to US$ 72.8 million, and in
2011, it amounted to US$ 69.2 million), all scheduled for payment until December, 2014.
(iv) any restrictions imposed on the issuer, in particular, for limits of indebtedness and contracting of new
debts, the distribution of dividends, disposal of assets, the issuance of new securities or disposal of
corporate control
Some of the Companys long-term financial instruments contain obligations relating to the maintenance of
certain levels for determined financial indicators. The main conditions imposed on financial instruments
entered into by the Company are: (i) the ratio between EBITDA and net debt (total bank debt minus cash
equivalents); and (ii) the ratio between EBITDA and net financial expenses. Thus, the Company is
required to maintain a relatively low indebtedness and a satisfactory capacity to pay its financial
obligations, and the hiring of new borrowings should meet these prerequisites. On the fiscal years ended
December 31st, 2011, 2012 and 2013, the Company was in compliance with the required levels for the
indicators.
The management of the Company believes that the current provisions will not significantly restrict the
ability to recruit new debt to meet its capital needs.
g.
On December 31, 2013, the Company had credit limits in the major financial institutions in Brazil, plus
your debts already contracted of R$ 632 million, but had no limits to use in financing transactions already
contracted. The Company maintains relationships with major financial institutions operating in Brazil and,
93
the evaluation of its board has conditions and the risk rating of credit that enable the Company to
contract new debt in the amount required to meet the current needs of cash for short and long term.
h.
In accordance with the existing accounting policies adopted in Brazil, the revenue reported in the income
statement should include only the gross inflows of economic benefits received and receivable by the
Company, when originating from their own activities. Amounts collected on behalf of third parties - such
as sales taxes, taxes on goods and services and from taxes on added value - do not generate benefits for
the Company and do not result in an increase in equity and therefore are excluded from revenue. Thus,
the comments below relating to variations between the results for the years ended December 31 st, 2011,
2012 and 2013 refer only to net revenue, not to the gross revenue.
2011
677.6
131.6
155.8
214.8
175.4
VA(1) (%)
100%
19.4%
23.0%
31.7%
25.9%
(340.4)
50.2%
33.6%
(410.9)
46.7%
20.7%
(334.9)
-40.2%
(18.5%)
Gross Profit
337.2
49.8%
14.3%
468.3
53.3%
38.9%
497.3
59.8%
6.2%
(175.2)
25.9%
18.7%
(218.5)
24.8%
24.7%
8.3
(225.4)
1.0%
-27.1%
3.2%
Operating Profit
162.0
23.9%
9.8%
249.9
28.4%
54.3%
280.2
33.7%
12.1%
Financial Expenses
Financial Income
(46.6)
14.7
6.9%
2.2%
91.6%
(21.3%)
(51.2)
12.1
5.8%
1.4%
9.9%
(17.7%)
(60.0)
13.2
-7.2%
1.6%
17.2%
9.1%
130.1
(38.0)
19.2%
5.6%
-8.3%
(1.4%)
210.7
(59.2)
24.0%
6.7%
62.0%
55.8%
233.4
(65.7)
28.0%
-7.9%
10.8%
11.0%
167.7
4.9
172.6
20.1%
0.6%
20.7%
10.7%
13.9%
HA(2) (%)
(5.3%)
24.6%
8.4%
(100.0%)
41.0%
Year ended December 31st, 2013 compared with year ended December 31st, 2012
Revenue of Products Sold and Services Provided
The following table shows the Companys net revenue by business unit for the years ended December
31st, 2012 and 2013:
Year ended December 31st
2012
VA (%)(1)
174.1
238.0
213.8
253.5
879.3
19.8%
27.1%
24.3%
28.8%
100.0%
2013
VA (%)(1)
HA (%) (2)
217.0
258.0
357.3
832.3
26.1%
31.0%
0.0%
42.9%
100.0%
24.6%
8.4%
(100.0%)
41.0%
(5.3%)
94
In the year ended December 31st, 2013 the Companys net revenue from sales and services totaled R$
832.3 million. For comparison purposes, excluding the result of the Industrial Services business unit,
which was sold in 2012, there was an increase of R$ 166.8 million, or 25.1%. This increase comes mainly
from the incremental revenue from the Rental and Heavy Construction business units. The analysis of the
Company's management regarding the factors that led to these changes is listed below.
Heavy Construction
Net revenue from the Heavy Construction business unit, totaled R$ 217.0 million in 2013, with an increase
of 24.6% or R$ 42.9 million compared to the previous year. The management of the Company attributed
this expansion as a result of the investments in organic growth made in this business unit, since 2010.
Real Estate
Net revenue from the Real Estate business unit, totaled R$ 258.0 million in 2013, with an increase of
8.4% or R$ 20.0 million compared to 2012, including expansion of 15.9% of the revenue from equipment
rental. The branches opened since November 2009 contributed with 55% of this business units revenue
in the year 2013. The management of the Company attributed this expansion as a result of the
investments in organic growth made in this business unit, since 2010.
Industrial Services
The sale of the Industrial Services business unit was concluded in November 30, 2013, and the Company
recorded gain of R$ 8.3 million with the sale. Of the agreed sales price of R$ 102 million, we received R$
25 million on the date of the sale agreement, in July. We will receive the outstanding amount in
installments adjusted by the Interbank Deposit Certificate CDI rate, discounting the cash generation of
this business for Mills between June 1st, 2013 and the closing date, which was equal to R$ 6.8 million.
This disposal is in line with Mills strategy to focus on businesses in which its competences are able to add
higher value for its shareholders and clients.
Rental
Net revenue from the Rental business unit totaled R$ 357.3 million in 2013, which was 41.0% or R$ 103.8
million greater than that 2012. The branches opened since 2010 contributed with 69% of 2013 revenue.
On the evaluation of the management of the company, this increase is mainly associated with increasing
fleet of equipment, with investments in organic growth since 2010.
95
Cost of products sold and services rendered and general and administrative expenses
Since 2010, the Company began to detail its costs of goods sold and general and administrative expenses
by business unit and by nature, and the information by business unit has been presented only on a
consolidated basis, excluding the effects of depreciation.
The table below shows the Companys cost of goods sold and services rendered by nature in fiscal years
ended December 31, 2012 and 2013.
Year ended on December 31st, 2012
Direct cost
General
of
and
constructio
Administrat
n and
ive
renting
Expenses
Total
(in R$ million)
Labor
Third-party Services
Freight
Construction Material /
Maintanance and Repair
Rent Equipment
Travel
Cost of Sales
Depreciation ad
Amortization
Asset impairment
Allowance for Doubtful
Debts
Stcok Option
Update provisions
Profit sharing
Others
Total
(1)
(179.2)
(6.3)
(15.0)
(109.3)
(22.1)
(0.8)
(288.6)
(28.4)
(15.8)
(58.8)
(5.0)
(15.5)
(107.4)
(20.4)
(0.8)
(166.2)
(25.5)
(16.2)
120.4
1.3
(0.5)
1.9
1.7
0.0
122.4
2.9
(0.4)
(41.7)
(4.8)
(46.5)
(8.3)
(8.6)
(41.0)
(11.3)
(11.5)
-
(19.5)
(20.1)
(41.0)
(43.5)
(6.1)
(49.6)
(1.8)
(1.3)
(3.1)
(5.9)
(5.0)
(68.0)
(15.0)
(11.6)
-
(20.8)
(16.5)
(68.0)
2.4
3.6
(27.0)
(3.7)
(0.1)
-
(1.3)
3.6
(27.0)
(104.2)
(4.4)
(4.9)
(108.6)
(122.6)
(8.4)
(131.0)
(18.4)
(4.0)
(22.4)
(4.9)
(8.9)
(8.9)
(4.0)
(4.0)
(1.6)
(410.9)
(16.1)
(16.1)
(16.2)
(16.2)
(0.1)
(0.1)
(5.8)
4.0
(20.1)
(16.3)
(218.5)
(5.8)
4.0
(20.1)
(17.9)
(629.4)
(1.9)
(334.9)
(9.0)
0.2
(18.8)
(12.0)
(225.4)
(9.0)
0.2
(18.8)
(13.8)
(560.4)
(0.2)
76.0
(3.2)
(3.8)
1.3
4.3
(6.9)
(3.2)
(3.8)
1.3
4.1
69.0
The table below shows the Companys cost of goods sold and services rendered and general and
administrative expenses by business unit in fiscal years ended December 31st, 2012 and 2013. The
information provided in this table does not reflect the effects of depreciation on such costs.
2012
st
(%)
(1)
2012
x
2013
Var. (%)
(2)
(in R$ million)
Heavy Construction ....................................
Real Estate ................................................
Industrial Services .....................................
Rental .......................................................
Total .....................................................
(1)
(2)
(89.7)
(124.5)
(194.4)
(112.2)
(520.8)
17.2%
23.9%
37.3%
21.5%
100.0%
(108.9)
(164.2)
(156.1)
(429.2)
25.4%
38.3%
0.0%
36.4%
100.0%
21.4%
31.9%
(100.0%)
39.2%
(17.6%)
Percentage share of the business unit of goods sold and services provided and general and administrative expenses
Percentage increase (decrease) of the total registered from one period to another.
Cost of goods sold and services provided, excluding the effects of depreciation, went from R$ 520.8
million in the year ended December 31, 2012 to R$ 492.2 million year ended December 31, 2013, a
decrease of R$ 91.6 million, or 17.6%, mainly due to the sale of the Industrial Services business unit.
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services
rendered increased 17.7% due to higher investments in the past years, from R$ 104.2 million for the year
ended on December 31, 2012 to R$ 122.6 million in the fiscal year ended December 31, 2013,
maintaining the average depreciation period of 10 years.
96
Considering the depreciation costs, the Companys cost of goods sold and services rendered totaled R$
334.9 million in the fiscal year ended December 31, 2013, compared with R$ 410.9 million in the fiscal
year ended December 31, 2012, representing a decrease of 18.5%, mainly due to the sale of the
Industrial Services business unit.
As a result of the sale of the Industrial Services business unit, compared to net revenues, the total cost of
goods sold and services provided, excluding the effects of depreciation, decreased from 34.9% in the year
ended December 31, 2012 to 25.5% in the year ended December 31, 2013. Including the effects of
depreciation, the same ratio decreased from 46.7% in the year ended December 31, 2012 to 40.2% in
the fiscal year ended December 31, 2013.
The general and administrative expenses increased from R$ 218.5 million in the fiscal year ended
December 31, 2012 to R$ 225.4 million in the fiscal year ended December 31, 2013, an increase of R$ 6.9
million, or 3.2%. In 2013, we continued the technical and commercial team expansion and improvement
and some branches were transferred to larger spaces, consistent with the growth of the companys
businesses. Despite the Company, at a first glance, incurred in greater general and administrative
expenses and consequent compression of margin, the management of the Company believes that these
are fundamental measures to enable its growth with productivity improvements in the operation of its
warehouses and maintaining the high technical quality of its services.
The ratio between the Companys operating, general, and administrative expenses in relation to the net
operating income went from 24.8% in the fiscal year ended December 31, 2012 to 27.1% in the fiscal
year ended December, 2013.
Operating Profit
Operating profit before financial result increased from R$ 249.9 million in the fiscal year ended December
31, 2012 to R$ 280.2 million in the fiscal year ended December 31, 2013, an increase of R$ 30.3 million,
or 12.1%. Companys management believes that such increase was a consequence of the maturity of the
investments made, as mentioned above. Operating profit represented 33.7% of net revenues in
December 31, 2013, compared to 28.4% of net revenues in December 31, 2012.
Financial Results
Net financial expenses increased from R$ 39.2 million in the fiscal year ended December 31, 2012 to R$
46.8 million in the fiscal year ended December 31, 2013, representing an increase of R$ 7.6 million. The
Company's bank debt, which was R$ 622.5 million in December 31, 2012 increased to R$ 632.6 million in
December 31, 2013.
Net Income
97
The net profit increased from R$ 151.5 million in the fiscal year ended December 31, 2012 to R$ 172.6
million in the fiscal year ended December 31, 2013, an increase of R$ 21.1 million, or 13.9%. This
expansion is due to the decrease of cost of goods sold and services provided and general and
administrative expenses (R$ 69.0 million), partially offset by the decrease of net revenue (R$ 47.0 million)
and negative net financial result (R$ 7.6 million).
Year ended December 31st, 2012 compared with year ended December 31st, 2011
Revenue of Products Sold and Services Provided
The following table shows the Companys net revenue by business unit for the years ended December
31st, 2011 and 2012:
Year ended December 31st
2011
VA (%)(1)
131.6
19.4%
174.1
19.8%
155.8
23.0%
238.0
27.1%
52.8%
214.8
31.7%
213.8
24.3%
(0.5%)
Rental .............................................................
175.4
25.9%
253.5
28.8%
44.5%
2012
VA (%)(1)
HA (%)
(2)
Total ...............................................................
677.6
100%
879.3
100.0%
29.8%
(1)
Vertical analysis, which is a percentage of total net sales and services.
(2)
Horizontal analysis, which is the percentage of variation in the income statement accounts between fiscal years of 2011 and 2012.
In the year ended December 31st, 2012 the Companys net revenue from sales and services totaled
R$879.3 million, a new annual record, compared with R$677.6 million in the year 2011, an increase of
R$201.7 million, or 29.8%. This increase comes from the incremental revenue from the Rental, Real
Estate and Heavy Construction business units. The analysis of the Company's management regarding the
factors that led to these changes is listed below.
Heavy Construction
Net revenue from the Heavy Construction business unit, totaled R$ 174.1 million in 2012, with an increase
of 32.3% or R$ 42.5 million compared to the previous year. The management of the Company attributes
that this increase was mainly due to the recovery of the Heavy Construction market, which had been
through a period of weakened demand during most of 2011.
Real Estate
Net revenue from the Real Estate business unit, totaled R$ 238.0 million in 2012, with an increase of
52.8% or R$ 82.2 million compared to 2011, including expansion of 45.9% of the revenue with equipment
rental. The branches opened since November 2009 contributed with 51% of this segments revenue in the
year. The management of the Company attributed this expansion as a result of the investments in organic
growth made in this segment, since 2010.
Industrial Services
Net revenues for the Industrial Services business unit totaled R$ 213.8 million in 2012, in line with the
revenue for 2011, which was of R$ 214.8 million. On the evaluation of the management of the Company,
this revenue increase is mainly due to the adopted strategy of optimizing existing contracts, prioritizing
improvement of profitability over revenue growth.
Rental
Net revenue from the Rental business unit totaled R$ 253.5 million in 2012, which was 44.5% or R$ 78.1
million greater than that of 2011, with the larger volume of rented equipment contributed with 98.5% of
98
the revenue expansion between years. The branches opened since 2010 contributed with 62% of this
years revenue. On the evaluation of the management of the company, this increase is mainly associated
with increasing fleet of equipment, with investments in organic growth since 2010.
Cost of products sold and services rendered and general and administrative expenses
Since 2010, the Company began to detail its costs of goods sold and general and administrative expenses
by business unit and by nature, and the information by business unit has been presented only on a
consolidated basis, excluding the effects of depreciation.
The table below shows the Companys cost of goods sold and services rendered by nature in fiscal years
ended December 31, 2010 and 2011.
A tabela abaixo mostra os custos dos produtos vendidos e servios prestados abertos da Companhia por
natureza nos exerccios sociais encerrados em 31 de dezembro de 2011 e 2012.
Year ended on December 31st, 2011
General
and
Direct cost of
Administra
construction
tive
and renting
Expenses
Total
(in R$ million)
Labor
Third-party Services
Freight
Construction Material
/ Maintanance and
Repair
Rent Equipment
Travel
Depreciation
Amortization of
intangilbe assets
Asset impairment
Allowance for
Doubtful Debts
Stcok Option
Update provisions
Profit sharing
Others
Total
(1)
(162.3)
(7.0)
(13.4)
(89.9)
(17.4)
(0.6)
(252.3)
(24.4)
(14.0)
(179.2)
(6.3)
(15.0)
(109.3)
(22.1)
(0.8)
(288.6)
(28.4)
(15.8)
(16.9)
0.7
(1.6)
(19.4)
(4.7)
(0.2)
(36.3)
(4.0)
(1.8)
(35.2)
(4.1)
(39.3)
(41.7)
(4.8)
(46.5)
(6.5)
(0.7)
(7.2)
(10.0)
(8.6)
(73.0)
(9.5)
(11.4)
(2.5)
(19.4)
(20.0)
(75.5)
(8.3)
(8.6)
(104.2)
(11.3)
(11.5)
(3.3)
(19.5)
(20.1)
(107.5)
1.7
0.0
(31.2)
(1.8)
(0.1)
(0.8)
(0.1)
(0.1)
(32.0)
(0.7)
(0.7)
(1.1)
(1.1)
(0.4)
(0.4)
(4.6)
(4.6)
(4.9)
(4.9)
(0.3)
(0.3)
(11.4)
(11.4)
(16.1)
(16.1)
(4.7)
(4.7)
(26.3)
(340.4)
(3.1)
(1.7)
(7.9)
(15.0)
(175.2)
(3.1)
(1.7)
(7.9)
(41.3)
(515.6)
(42.6)
(410.9)
(5.8)
4.0
(20.1)
(16.3)
(218.5)
(5.8)
4.0
(20.1)
(58.9)
(629.4)
(16.3)
(70.5)
(2.7)
5.7
(12.2)
(1.3)
(43.3)
(2.7)
5.7
(12.2)
(17.6)
(113.8)
The table below shows the Companys cost of goods sold and services rendered and general and
administrative expenses by business unit in fiscal years ended December 31st, 2011 and 2012. The
information provided in this table does not reflect the effects of depreciation on such costs.
Year ended December 31st
99
2011
x
2011
(%)
(1)
2012
(%)
(1)
2012
Var. (%)
(2)
(in R$ million)
Heavy Construction ....................................
Real Estate ................................................
Industrial Services .....................................
Rental ......................................................
Total .....................................................
(1)
(2)
(73.8)
(89.8)
(194.1)
(81.8)
(439.4)
16.8%
20.4%
44.2%
18.6%
100.0%
(89.7)
(124.5)
(194.4)
(112.2)
(520.8)
17.2%
23.9%
37.3%
21.5%
100.0%
21.5%
38.6%
0.2%
37.2%
18.5%
Percentage share of the segment of goods sold and services provided and general and administrative expenses
Percentage increase (decrease) of the total registered from one period to another.
Cost of goods sold and services provided, excluding the effects of depreciation, went from R$ 439.4
million in the year ended December 31, 2011 to R$ 520.8 million year ended December 31, 2012, an
increase of R$ 81.4 million, or 18.5%, mainly due to growth of the Companys business in 2012.
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services
rendered increased 42.7% due to higher investments in the past years, from R$ 73.0 million for the year
ended on December 31, 2011 to R$ 104.2 million in the fiscal year ended December 31, 2012,
maintaining the average depreciation period of 10 years.
Considering the depreciation costs, the Companys cost of goods sold and services rendered totaled R$
410.9 million in the fiscal year ended December 31, 2012, compared with R$ 340.4 million in the fiscal
year ended December 31, 2011, representing an increase of 20.7%.
As a result of the maturity of the Companys investments and the recovery in Heavy Construction
demand, compared to net revenues, the total cost of goods sold and services provided, excluding the
effects of depreciation, decreased from 39.5% in the year ended December 31, 2011 to 34.9% in the
year ended December 31, 2012. Including the effects of depreciation, the same ratio decreased from
50.2% in the year ended December 31, 2011 to 46.7% in the fiscal year ended December 31, 2012.
The general and administrative expenses increased from R$ 175.2 million in the fiscal year ended
December 31, 2011 to R$ 218.5 million in the fiscal year ended December 31, 2012, an increase of R$
43.3 million, or 24.7%. In 2012, the technical and commercial team was expanded and some branches
were transferred to larger spaces, consistent with the growth of the companys businesses. Despite the
Company, at a first glance, incurred in greater general and administrative expenses and consequent
compression of margin, the management of the Company believes that these are fundamental measures
to enable its growth with productivity improvements in the operation of its warehouses and maintaining
the high technical quality of its services.
The ratio between the Companys operating, general, and administrative expenses in relation to the net
operating income went from 25.9% in the fiscal year ended December 31, 2011 to 24.8% in the fiscal
year ended December, 2012.
Operating Profit
Operating profit before financial result increased from R$ 162.0 million in the fiscal year ended December
31, 2011 to R$ 249.9 million in the fiscal year ended December 31, 2012, an increase of R$ 87.9 million,
or 54.3%. Companys management believes that such increase was a consequence of the recovery of the
Heavy Construction business unit and the maturity of the investments made, as mentioned above.
Operating profit represented 28.4% of net revenues in December 31, 2012, compared to 23.9% of net
revenues in December 31, 2011.
Financial Results
100
Net financial expenses increased from R$ 31.8 million in the fiscal year ended December 31, 2011 to R$
39.2 million in the fiscal year ended December 31, 2012, representing an increase of R$ 7.4 million, as the
increase in bank debt was partially compensated by lower interest rates. The Company's bank debt, which
was R$ 410.9 million in December 31, 2011 increased to R$ 622.5 million in December 31, 2012. On August
2012, the Company issued its second debentures offering, a total amount of R$ 270.0 million. The
Company used the net proceeds from the issuance for (a) the financing of investments to be made by the
Company (b) the payment of the Companys debts (c) general uses and expenses.
Expenditure on income tax and social contribution went from R$ 38.0 million in the fiscal year ended
December 31, 2011 to R$ 59.2 million in the fiscal year ended December 31, 2012, an increase of R$ 21.2
million, or 55.8%.
In the fiscal year ended December 31, 2012, the Companys deducted from its income tax and social
contribution the amount of R$ 14.2 million, due to the provisioning of interest on equity for distribution of
part of the annual results, while in fiscal year ended December 31, 2011 this deduction totaled R$ 8.3
million. Moreover, the effective rate of 2012 was 28.1% after adjustment of expenses not deductible,
compared to 29.2% in 2011.
Net Income
The net profit increased from R$ 92.2 million in the fiscal year ended December 31, 2011 to R$151.5
million in the fiscal year ended December 31, 2012, an increase of R$ 59.3 million, or 64.3%. This
expansion in due to the increase of net revenue (R$ 201.7 million), partially compensated by the
expansion in the amounts of cost of goods sold and services provided and general and administrative
expenses (R$ 113.8 million) and negative net profits (R$ 7.3 million).
Year ended December 31st, 2013 compared to year ended December 31 st, 2012
Current Assets
The Companys current assets increased from R$ 473.7 million as of December 31, 2012 to R$ 319.5
million as of December 31, 2013, a decrease of R$ 154.2 million or 32.6%. The main reasons for such
decrease, in the assessment of the Management of the Company, were:
a reduction of R$ 159.6 million in securities and marketable securities, due to the use of the
proceeds from the Companys second offering of non convertible debentures held in September
2012;
a reduction of R$ 17.4 million in accounts receivable, due to the sale of the Industrial Services
business unit;
an increase of R$ 26.8 million in other accounts receivable sale o investee due to the
outstanding receivable amount related to the sale of the Industrial Services business unit;
Non-current assets
The Companys non-current assets increased from R$ 45.1 million as of December 31, 2012 was increased
to R$ 101.5 million as of December 31, 2013, an increase of R$ 56.4 million or 125.0%. The main
variations in the non-current assets was in other accounts receivable sale o investee due to the
outstanding receivable amount related to the sale of the Industrial Services business unit.
Investment
In December 31, 2013, the Company maintained the same registered investment value as of December
31, 2012, R$ 87.4 million. In January, 2011 the Company acquired 25.0% of the total voting capital of
101
Rohr for R$ 90 million. The Company received in 2011, R$ 2.6 million of shareholder remuneration from
Rohr related to previous fiscal years than 2011, and therefore was recorded as a reduction for the
acquisition investment.
Intangible assets
The Companys intangible assets increased from R$ 54.5 million as of December 31, 2012 to R$ 68.4
million as of December 31, 2013, mainly due to R$16.5 million in software acquisition.
Current liabilities
The Companys current liabilities increased from R$ 214.5 million as of December 31, 2012, to R$ 255.0
million as of December 31, 2013, an increase of R$ 40.5 million. The main factors that led to this change,
according to the Managements opinion, were:
increase of R$ 18.6 million in the short-term loans and financing balance, due to the issuance of
promissory notes in December 2011, to enable the Companys investments in 2011;
a reduction of R$ 11.5 million in taxes payable, due to lower taxes on revenues, such as PIS, COFINS
and ICMS;
increase of R$ 99.5 million, in the short-term debentures balance, due to the reclassification from
long-term debentures to short-term liability related to a debt amount to be paid in 2014;
decrease of R$ 29.0 million in the short-term borrowing and financing account, due to the settlement
of debt due in 2013;
Non-current liabilities
The non-current liabilities increased from R$ 590.2 million as of December 31, 2012 to R$ 529.7 million as
of December 31, 2013, a reduction of R$ 60.5 million, or 10.3%. The main factor that led to this variation,
according to the managements opinion, was the R$ 89.2 million decrease in the long-term debenture
account, due to the the reclassification from long-term debentures to short-term liability related to a debt
amount to be paid in 2014, and the R$ 28.5 million increase in the long-term borrowing and financing
account, due to a new borrowing contract of R$ 40.0 million signed in December 2013.
Stockholders Equity
Shareholder's equity increased from R$ 859.3 million as of December 31, 2012 to R$ 1,016.5 million as of
December 31, 2013, an increase of R$ 157.2 million, or 18.3%, substantially due to the increase of the
Companys income reserve that aims retain financial resource to support its budget investment.
Year ended December 31st, 2012 compared to year ended December 31 st, 2011
Current Assets
The Companys current assets increased from R$ 224.9 million as of December 31, 2011 to R$ 473.7
million as of December 31, 2012, an increase of R$ 248.8 million or 110.6%. The main reasons for such
increase, in the assessment of the management of the Company, were:
102
an increase of R$ 159.6 million in securities and marketable securities, due to the proceeds from the
Companys second offering of debentures held in September 2012;
an increase of R$ 55.6 million in accounts receivable, reflecting an increase in the Companys
revenue;
an increase of R$ 15.7 million in inventories due to the expanding activities of the Company;
an increase of R$ 13.0 million in recoverable taxes, due to PIS and COFINS credit over permanent
asset acquisitions;
a reduction of R$ 4.8 million in advanced payments to suppliers, as a consequence of the receiving
payments.
Non-current Assets
The Companys non-current assets of R$ 50.0 million as of December 31, 2011 was decreased to R$ 45.1
million as of December 31, 2012, a decrease of R$ 4.9 million or 9.8%. The main variation in the noncurrent assets was in the deferred taxes account due to the settlements and to write-downs of financial
leases.
Investment
In 2012 the Company maintained the same registered investment value as 2011 of R$ 87.4 million. In
January, 2011 it acquired 25.0% of the total voting capital of Rohr for R$ 90.0 million. The Company
received in 2011, R$ 2.6 million of shareholder remuneration from Rohr related to previous fiscal years
than 2011, and therefore was recorded as a reduction for the acquisition investment.
Intangible assets
The Companys intangible assets increased from R$ 45.5 million as of December 31, 2011 to R$ 54.5
million as of December 31, 2012, mainly due to R$ 9.2 million in software acquisition.
Current liabilities
The Companys current liabilities increased from R$ 177.7 million as of December 31, 2011, to R$ 214.5
million as of December 31, 2012, an increase of R$ 36.8 million. The main factors that led to this change,
according to the managements opinion, were:
increase of R$ 14.3 million in dividends and payable interest on capital, due to the good result of
the Company and consequent increase in shareholder remuneration;
increase of R$ 12.2 million in the profit sharing payable account, due to the expansion of the
variable remuneration program EVA in the year of 2012, in comparison with 2011;
increase of R$ 11.9 million in the trade payables account, due to the higher investment volume in
2012;
increase of R$ 10.5 million in the taxes payables account, due to the tax revenues such as PIS,
CONFINS and ICMS;
increase of R$ 6.9 million, in the short-term debentures balance, due to the debentures offering
in September 2012, in the amount of R$270 million;
103
reduction of R$ 23.5 million in the short-term loans and financing balance, due to the liquidation
of the promissory notes in December 2012.
Non-current liabilities
The non-current liabilities increased from R$ 366.7 million as of December 31, 2011 to R$ 590.2 million as
of December 31, 2012, an increase of R$ 223.5 million, or 60.9%. On the Companys management
evaluation, the main factor that led to this variation was the R$ 269.0 million increase in the long-term
debenture account, due to the second debenture issuance in September 2012, in the amount of R$ 270
million.
Stockholders Equity
Shareholders equity increased from R$ 736.1 million as of December 31, 2011 to R$ 859.3 million as of
December 31, 2012, an increase of R$ 123.2 million, or 16.7%, substantially due to the increase of the
Companys income reserve.
CASH FLOW
2011
(in R$ millions)
202.3
(393.1)
199.8
9.0
2013
263.4
(258.1)
(23.7)
(18.4)
(430.3)
(2.8)
(433.5)
29.5
(404.0)
(in R$ millions)
(287.4)
(287.4)
25.6
(261.8)
2013
(489.4)
(489.4)
43.4
(446.0)
The gross investments in intangible assets in the years ended December 31 st 2011, 2012 and 2013
totaled, R$ 2.6 million (excluding the goodwill from GP Suls acquisition), R$ 10.1 million and R$ 16.5
million, respectively.
104
The cash flow from financing activities includes new loan agreements, the amortization of the principal
and payment of interest on existing loans, as well as increases in the capital stock, and dividend payment.
In 2011, the Company completed its first debentures issuance on a total amount of R$ 270.0 million with
maturity of five years, and issued commercial promissory notes totaling R$ 30.0 million and R$ 27.0
million, maturing on June 27, 2011 and December 1, 2012, respectively.
In 2012, the Company captured R$ 270.0 million through its second non-convertible debentures issuance,
made in two series. The first series, at the value of R$ 160.9 million, has a 5-year term, with amortization
starting from the fourth year, and interest rates equivalent to CDI + 0.88%. The second series, at the
value of R$ 109.1 million, has an 8-year term, with amortization starting from the sixth year, and interest
rates equivalent to IPCA + 5.50%. The net proceeds of the offering will be used for the financing of
investments in 2013, general uses and expenses and for the payment of debts, allowing the reduction of
cost and expansion of its average term. The Company also issued, in April 2012, promissory notes at the
amount of R$ 30.0 million, with maturity date in December 3 rd, 2012.
10.2
a.
(i)
(ii)
105
The cost of products sold and services rendered by its Heavy Construction, Real Estate and Rental
business units tends to grow less than their net revenues, as some components of these costs do not
grow at the same rate of the revenue.
Financial Results
The Companys financial results consist of its financial expenses, net of financial revenues. The Companys
main financial expenses include interest payments on loans, leasing operations, and costs associated with
discounting to present value certain long-term receivables derived from the sale of equipment owned by
its former Events division. Its main financial revenues consist of income from its financial investments and
interest in connection with late payments by its clients.
b.
The Companys revenues have a direct correlation with changes in price and volume of equipment rented
to clients. Introduction of new products and services also directly impact revenue. As for inflation, the
correlation of its revenue is indirect, in the extent that the adjustments take place only in the renewal or
closing of new contracts, reflecting the past inflation. As regards to the exchange rate fluctuation,
currently there is no correlation to its revenue, except that the Rental segments equipment are imported
and hence have their acquisition cost in foreign currency. Consequently, in the future, the rental revenue
from this division may be influenced by possible in exchange rates variations. In terms of volume, the
revenue variation for the Heavy Construction business unit was affected by the volume decrease from the
end of 2010, and only recovering at the second half of 2011. The increased revenue from the Real Estate
106
and Rental business units over the past three years are the result of the increase in the volume of rented
equipment and sales, given favorable market conditions and its geographic expansion.
c.
Impact of inflation, price variations of main inputs and products, exchange rate and
interest rate on operating profit and the issuer's financial result.
The Companys expenses are subject to impact of inflation via wage increases for employees, a raise in
the cost of the hired services, such as freight, and inputs used in the provision of services and through
financial expenditure due to the remuneration of the debentures which are subject to monetary
restatement by the accumulated variation of IPCA. Moreover, the equipment the Company invests in to
use at its services are also subject to increases due to inflation and changes in commodity prices, mainly
steel and aluminum. In the case of Rental business unit, the prices of the equipment the Company uses
can increase according to the fluctuation of the exchange rate, because they are imported.
10.3 The directors must comment on the relevant effects that the events listed below may
have caused or are expected to cause on the Companys financial statements or its results
a.
In 2013, the Company sold, through the sale of the company Albuquerque Participaes Ltda., the
Industrial Services business unit, as described in item (b) below. The Company did not introduce or
dispose of any segment in fiscal years 2011, 2012 and 2013.
b.
Acquisition of GP Sul
On May 27, 2011, the Company entered into a purchase and sale agreement to acquire 100% of the
voting and total capital of GP Sul for R$ 5.5 million.
GP Sul is a privately held company located in Porto Alegre, and one of the largest players in the
suspended scaffold rental market to residential and commercial construction in the state of Rio Grande do
Sul.
On the evaluation of the Management of the Company, this strategic acquisition enabled the Company to
become the leader in the suspended scaffold rental market in the state of Rio Grande do Sul and to
broaden its exposure to the residential and commercial construction market in the South region, in line
with the geographic expansion plan of Real Estate business unit.
107
On August 1st, 2011, was approved, in Extraordinary Shareholders Meeting, the merger of GP Sul by the
Company, in its protocol and merger justification terms. The objectives of the merger were (i) optimize
and centralize the activities developed by GP Sul in the Companys management, therefore, rationalizing
the operations and consequently reducing costs; and (ii) take advantage of the tax benefit resulting from
the amortization of R$ 4.7 million generated in its acquisition of at least five years, as from the 2011 fiscal
year.
c.
There were no unusual transactions or events in fiscal years 2011, 2012 and 2013, except as described
above.
10.4
a.
New and revised standards and interpretations issued and not yet adopted
Several standards and amendments to standards and interpretations issued by IASB have not yet entered
into force for the period ended December 31, 2013, these being:
(i) IFRS 9 Financials Instruments
Financial Instruments, establishes the principles of disclosure of assets and liabilities that will present
relevant and useful for assessing values, timing and uncertainty of future cash flows of information.
108
The Company's management expects that IFRS 9 to be adopted in the financial statements will not have a
material effect on the balances reported in relation to financial assets and liabilities of the Company.
However, the detailed review of potential impacts has not been completed.
(ii) Amendments to IFRS 10, IFRS 12 and IAS 27 entities investment
The amendments to IFRS 10 define an investment entity and require the reporting entity and which
meets the definition of an investment entity not consolidated subsidiaries, but instead, measure its
subsidiaries at fair value through profit or loss in their consolidated and separate financial statements. To
be characterized as investment entity, a reporting entity must: (a) obtain funds from one or more
investors in order to provide them with professional investment management services, (b) commit to their
investors that their corporate purpose is to invest resources only for returns on capital appreciation and
investment income, or both and (c) measure and evaluate the performance of substantially all of its
investments based on fair value. Such changes do not cause effects on the financial statements.
(iii) Amendments to IAS 32
Clarify the requirements related to the compensation of financial assets and liabilities. Specifically, these
amendments clarify the meaning of "currently has the legal right to offset" and "simultaneous realization
and settlement".
Management does not believe that the adoption of the amendments to IAS 32 will have a material impact
on the consolidated financial statements since the Company has no assets or financial liabilities that
qualify for compensation.
Amendments to IFRS mentioned above have not yet been issued by the CPC. However, due to the
commitment of the CPC and CVM to keep the set of standards issued based on the updates and changes
made by the IASB, it is expected that such changes and modifications are issued by the CPC and
approved by CVM until the date of its mandatory.
(1) Effective for annual periods beginning on or after January 1, 2015.
(2) Effective for annual periods beginning on or after January 1, 2014.
While it awaits the approval of the international standards by the CPC, the Company is analyzing the
impacts of these new standards on its financial statements.
109
b.
There was no change in significant accounting practices, methods of calculation, judgments, estimates
and accounting assumptions in the financial statements of the company for the fiscal years ended
December 31, 2011, 2012 and 2013.
c.
Following, the Companys Management presents a discussion about what they consider relevant as
accounting practices for the presentation of Companys financial information.
(i)
Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual
provisions of the respective instrument.
110
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognized immediately in profit or loss.
(ii)
Income tax expense comprises current and deferred taxes. Taxes on income are recognized in the income
statement, except when they relate to items that are recognized directly in equity or in other
comprehensive income, in which case, the tax is also recognized in equity or in other comprehensive
income.
The current income tax and social contribution expense is calculated based on tax rates prevailing in
Brazil at the end of the reporting period, which are 15% for income tax, plus a 10% surtax on taxable
profit exceeding R$ 240, and 9% on taxable profit for social contribution. Management periodically
reviews positions taken in respect of tax matters that are subject to interpretation and recognizes a
provision when the payment of income tax and social contribution according to the tax bases is expected.
Deferred income tax and social contribution are calculated on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit. The tax rates currently defined are 25% for income tax and 9% for social
contribution.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be
sufficient against which the deductible temporary differences can be utilized, based on projections of
future results prepared on the basis of internal assumptions and future economic scenarios that are,
therefore, subject to changes.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
For purposes of calculating income tax and social contribution, the Company adopted the Transition Tax
Regime (RTT), as prescribed by Law 11,941/09, that is, in the determination of the taxable profit it
considered the accounting criteria of Law 6,404/76, before the changes introduced by Law 11,638/07.
Current and deferred taxes are recognized in profit or loss, except when they relate to items that are
recognized in Other comprehensive income or directly in equity, in which case, current and deferred
taxes are also recognized in Other comprehensive income or directly in equity, respectively Where
current and deferred taxes arise from the initial accounting for a business combination, the tax effect is
included in the accounting for the business combination.
(iii)
A majority of the Company revenues come from property, plant and equipment for operational rental and
use, either solely through rental, or rental combined with assembly and disassembly.
Property, plant and equipment for own use consists mainly of facilities to store equipment, office,
improvements, furniture and equipment necessary for the operation of these facilities.
Property, plant and equipment are carried at historical cost, less accumulated depreciation and
accumulated impairment losses. Historical cost includes expenditure directly attributable to the acquisition
of the property, plant and equipment items.
111
The items of PP&E are valued at historic cost, less accumulated depreciation. The historic cost includes
expenditures as well as any exchange rate hedge gain or loss cash flow directly attributed to the
acquisition of such fixed assets.
Subsequent costs are added to the residual value of property, plant and equipment or recognized as a
specific item, as appropriate, only if the future economic benefits associated to these items are probable
and the amounts can be reliably measured.
The residual value of the replaced item is derecognized. Other repair and maintenance costs are
immediately recognized when incurred.
Depreciation is calculated under the straight-line method, taking into consideration the estimated
economic useful lives of assets. Land is not depreciated.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets or, where shorter, the term of the relevant lease.
Any gain or loss arising on the disposal of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is included in operating
income or expense.
The residual values and estimated useful lives of assets are reviewed at the end of each reporting period,
with the effect of any changes in estimate accounted for on a prospective basis.
(iv)
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition
of the business less accumulated impairment losses, if any.
Goodwill is allocated to cash-generating units (CGUs) for impairment testing purposes. Goodwill is
allocated to each of the cash-generating units (or groups of cash-generating units) that is expected to
benefit from the synergies of the combination and is identified according to the operating segment.
(v)
Impairment of assets
Property, plant and equipment and other non-current assets, including goodwill and intangible assets, are
tested to identify evidences of impairment on an annual basis or whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. When applicable, the
recoverable amount is calculated to determine if there is an impairment loss.
When an impairment loss is identified, it is recognized in the amount by which the carrying amount of the
asset exceeds its recoverable amount, which is the higher of the net selling price and the value in use of
an asset. For impairment testing purposes, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units - CGUs). Non-financial assets other than goodwill
that suffered impairment are reviewed for the analysis of a possible reversal of the impairment at the
reporting date.
(vi)
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of
a past event, it is probable that the Company will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.
112
The provisions for tax, civil and labor claims are recognized at the amount of probable losses, according
to the nature of each provision. Based on the opinion of its legal counsel, management believes that the
recognized provisions are sufficient to cover any losses on ongoing lawsuits. Provisions are measured at
the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognized as expense on the
Companys results.
A provision for onerous contracts is recognized where the Company has a contract under which the
unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected
to be received from the contract. The provision is measured at present value at the lower of the expected
cost of terminating the contract and the expected net cost of continuing with the contract.
(vii)
The Company offers stock option plans to certain employees and executives. The fair value of the options
granted is recognized as an expense during the period over which the right is vested, that is, period
during which specific vesting conditions should be met. At the end of the reporting period, the Company
reviews its estimates of the number of options whose rights must be vested based on the conditions. It
recognizes the impact of the review of the initial estimates, if any, in the income statement, as a
balancing item to the capital reserve in equity.
The amounts received, net of any directly attributable transaction costs, are credited to capital when
options are exercised.
(viii)
Revenue recognition
Revenue from a contract to provide services is recognized by reference to the stage of completion of the
contract at the end of the reporting period.
Revenue from the sale of goods is recognized when the Company has transferred to the buyer the
significant risks and rewards of ownership of the goods. Therefore, the Company adopts as revenue
recognition policy the date in which goods are delivered to the buyer.
Rental income is recognized on a straight-line basis over the term of the equipment lease agreements.
The Company separates the identifiable components of a single contract or a group of contracts to reflect
the essence of the contract or group of contracts, recognizing the revenue of each of the elements
proportionally to its fair value. Thus, the Company's revenue is split into lease, technical assistance, sales
and indemnities/recoveries of expenses.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate through maturity, when it is determined whether such income will accrue to the Company.
Dividend income from investments is recognized when the shareholders right to receive such dividends
has been established (provided that it is probable that future economic benefits will flow to the Company
and the amount of income can be measured reliably).
Income, expenses and assets are recognized net of taxes on sales.
10.6 Regarding the internal controls adopted to ensure the preparation of reliable financial
statements, the management shall comment on:
a.
Efficiency of such controls, indicating any flaws and the steps taken to correct them
113
The management of the Company believes that its internal controls are adequate to ensure the
elaboration of reliable financial statements.
b.
Weaknesses and recommendations on internal controls present in the report of the
independent auditor
No deficiencies or recommendations were submitted by the independent auditors in their report about the
effectiveness of internal controls adopted by the Company.
10.7 Management comments on the use of resources from public offerings for distribution
of securities
In April, 2010, the Initial Public Offering of shares of the Company provided net proceeds of R$ 411
million, which enabled the Company to expand its investments in all business units to meet the growing
demand in markets where it operates and to settle higher cost debts.
In the fiscal years ended December 31st, 2010 and 2011, the Company invested R$ 348.5 million and R$
430.4 million, respectively, mainly in equipment acquisition.
The Company also invested the amount of R$ 95.5 million in acquisitions in 2011. On January 19th, 2011,
the Company entered into a purchase and sale agreement to acquire 25% of the voting and total capital
of Rohr, a private company specializing in access engineering and the provision of construction solutions,
for R$ 90 million. On May 27th, 2011, the Company entered into a purchase and sale agreement to
acquire 100% of the voting and total capital of GP Sul, one of the largest players in the suspended
scaffold rental market to residential and commercial construction in the state of Rio Grande do Sul, for R$
5.5 million.
To obtain sufficient resources for such investments, the Company used the resources from its Initial Public
Offering, cash generation and debt issuance.
On March 29th, 2011, the Company conducted its first issue of 30 promissory notes, each with par value
of R$1.0 million, totaling R$30.0 million. The net proceeds were used to finance investments, as planned.
On April 18th, 2011, the Company conducted its first issue of 27,000 debentures, each with par value of
R$ 10,000.00, totaling of R$ 270.0 million.
In terms of their deed of issuance, it was established the following destination for net resources of this
offering (i) the redemption of commercial papers of 90 days issued in March 2011, totaling R$ 30 million,
(ii) the investments defined in the expansion plan of Mills, including estimated investments of R$ 337
million in 2011, (iii) rearrangement of cash balance following disbursement of R$ 90 million in February
2011 in connection with the acquisition of 25% of the Rohr total capital stock, and (iv) general corporate
purposes and expenses of the Company. Management used the funds raised in accordance with the
planned allocation.
On December 7th, 2011 the Company issued a single series of 3 (three) commercial promissory notes
with unit face value of R$ 9.0 million, for a total amount of R$ 27.0 million. The net proceeds of the issue
were fully used to: (i) rearrangement of cash balance following investments made in 2011, and finance
(ii) general corporate purposes of the Company.
In April 23rd, 2012, the Company issued a single series of 30 promissory notes with par value of R$ 1.0
million, totaling R$ 30.0 million. The net proceeds of the issue were fully used to: (i) reinforcement of
working capital of the company; and (ii) debt refinancing of the company.
114
In September 18th, 2012, the Company held its second issue of simple, non-convertible, unsecured
debentures subject to public offering with restricted placement efforts. A total of 27,000 debentures were
issued, each with par value of R$ 10,000.00. The net proceeds of the offering will be fully utilized for: (a)
the financing of investments to be made by the Company, (b) the payment of Companys debts, and (c)
general uses and expenses of the Company. The realized investments in renting goods amounted to R$
463.6 million in 2013.
The resources used for strategic acquisitions until December 31st, 2013, totaled R$ 95.5 million, R$ 61.7
million, or 39%, less than the amount estimated at the date of the prospectus for Initial Public Offering
shares issued by the Company.
10.8 Managements comments on significant items not included in the balance sheet and
their effects on the consolidated financial statements
In the evaluation of the management, there are no significant items not included in the balance sheet of
the Company.
10.9
In the evaluation of the management, there are no significant obligations not included on the financial
statements of the Company.
10.10 Management shall indicate and comment on key elements of the Company's business,
specifically exploring the following topics:
a.
Investments, including: (i) quantitative and qualitative description of investments in
progress and forecasted investments; (ii) financing sources of investments and (iii) relevant
alienations in progress and forecasted alienations
The Company plans its investment policy in accordance with its cash flow and credit availability in the
market. The Companys internal policy is to maintain its leverage around 1.0x net debt to EBITDA. To
ensure the necessary amount of capital for the implementation of its investment plan, the Company
constituted a statutory reserve, of which the shareholders may allocate up to 75% of net income,
provided that such reservation does not exceed the limit of 80% of the capital. The cash generation of the
Companys normal operations, from the retention of profits was used to partially finance the investments
made in 2011, 2012 and 2013, without any value being allocated to the above mentioned reserve during
that period.
The management presents below the major investments made in the course of the years ended
December 31, 2011, 2012 and 2013, and highlight the investment budget for fiscal year 2014.
Heavy Construction
In the fiscal years ended by December, 31st, 2011, 2012 and 2013, the Heavy Construction business unit
invested, mainly, in shoring structures and industrialized steel and aluminum formwork, amounting to R$
47.3 million in 2011, R$ 50.5 million in 2012 and R$ 106.3 million in 2013.
115
Real Estate
Over the past three fiscal years ended by December, 31 st, 2011, 2012 and 2013, the Real Estate business
unit invested mainly in acquisition of shoring equipment, suspended scaffolding and industrialized
formworks, having disbursed R$ 185.0 million in 2011, R$ 59.8 million in 2012 and R$ 90.1 million in
2013. In 2011, there was the acquisition of GP Sul by R$ 5.5 million, amounting to R$ 190.5 million.
Rental
In 2011, 2012 and 2013, the Company continued to implement its strategy of expanding its portfolio of
aerial work platforms and telescopic handlers, investing R$ 162.8 million, R$ 160.9 million and R$ 267.2
million in the acquisition of such equipment, respectively.
Acquisition of Rohr
On January 19, 2011, the Company entered into a purchase and sale agreement to acquire 25% of the
voting and total capital of Rohr, a private company specializing in access engineering and the provision of
construction solutions, for R$ 90 million. This strategic acquisition enabled the Company to broaden its
exposure to the sectors it serves infrastructure, residential and commercial construction, oil & gas
industry, among others.
Acquisition of GP Sul
On May 27, 2011, the Company entered into a purchase and sales agreement to acquire 100% of the
voting and total capital stock of GP Sul, which the Companys Management believed to be one of the
largest players in the suspended scaffold rental market to residential and commercial construction in the
state of Rio Grande do Sul, by the time of the acquisition, for R$ 5.5 million. This strategic acquisition, as
evaluated by the Management, enabled the Company to become the leader in the suspended scaffold
rental market in the state of Rio Grande do Sul and to broaden its exposure to the residential and
commercial construction market in the South region, in line with the geographic expansion plan of the
Real Estate business unit.
The Company intends to finance its investments through (i) cash generated from its own activities, and
(ii) indebtedness.
Project
Acquisition of equipment, primarily shoring
structures and industrialized formwork.
Acquisition of equipment, primarily expanding of
its portfolio of shoring structures, industrialized
steel and aluminum formwork and suspended
access equipment.
Acquisition of motorized access equipment.
Investments
(in R$ millions)
37
25
169
b.
Since it has already disclosed, indicate the purchase of plants, equipment, patents or
other assets that should materially affect the productive capacity of the Company
116
The Company has in its estimated budget the continued expansion of its operations, through the purchase
of equipment, part of which orders have already been made, besides continuing its geographical
expansion process, through the opening of new branches.
c.
New products and services, by indicating: (i) description of researches in progress
already disclosed; (ii) total amounts paid by the issuer in researches for development of new
products or services; (iii) projects under development already disclosed and (iv) total
amounts paid by the issuer for the development of new products or services
The Companys management believes that providing innovative solutions is a constant mark of its
activities and a key aspect to retain its customers. In this sense, although the Company does not carry
out in-house research and development activities, it annually visits the main national and international
fairs of equipment from the industrial and construction sectors to meet the main technological innovations
available to the industry in which the company operates.
Furthermore, the Companys representatives visit the factories of leading national and international
manufacturers of equipment and construction sites around the world to assess the functioning and
operation of advanced equipment available for purchase.
The Company does not develop new products and services, so it does not incur expenses related to the
research and development department. All the technology and innovation present in its equipment and
offered to its clients come from its suppliers. For this, the Company seeks to acquire or license new
technologies from third parties on acceptable terms in the domestic and international market, preferably
with usual suppliers with whom the Company seeks to establish long term partnerships. As an example of
such partnerships, the Company entered into a licensing contract in 1996 with the German company NOE
Schaltechnik, to produce and supply modular steel and aluminum panel formwork (replacing the wood)
for the Brazilian construction market, an innovation in the Brazilian market.
10.11 Management is expected to discuss and analyze other material factors that influenced
operating performance, which were not discussed under previous items in this section.
There are other factors that have significantly affected the operating performance in fiscal years 2011,
2012 and 2013 and which have not been identified or discussed in other items of this section.
117
11.
118
PROJECTIONS
11.1
Identification of projections
Projection monitoring
119
12.
120
12.1
Administrative Structure
a.
BOARD OF DIRECTORS
The Board of Directors is a decision-making body responsible for both formulating and monitoring the
implementation of the general guidelines and policies of its business, including long-term strategies, and
appointing and supervising the Executive Officers.
In accordance with the Companys bylaws, the Board of Directors shall be comprised of a minimum of five
and a maximum of 11 members, shareholders or not, in accordance with the Novo Mercado Listing Rules.
Members of the Board of Directors are to be elected for a continuous two-year term at the General
Shareholders meeting. Further, such members may be reelected and removed from office at any time by
a decision of the Companys shareholders, at the General shareholders meeting.
Pursuant to the Brazilian corporate law and CVM Instruction No. 282, dated June 26, 1998, the minimum
percentage of voting capital required to adopt cumulative voting in publicly-held companies is 5%. If the
adoption of cumulative voting is not required, the directors will be elected by a majority vote of the
shareholders that are present, or represented by proxy. The CVM Board elected by majority on November
8, 2005 established that shareholders who, individually or collectively, represent at least 10% of the total
capital of publicly-held companies, are entitled to appoint a director and its substitute in separate voting.
All members of the Board of Directors must a sign a Consent Agreement of the Administrators, in which
their respective position will depend on the signing of the document. Through the Consent Agreement,
the Companys new members of the Board of Directors are personally responsible to act in accordance
with the Contract of Novo Mercado, Regulation of the Market Arbitration Chamber and the Rules of the
Novo Mercado.
Currently the Companys Board of Directors is comprised of seven members (without any substitutes), of
which were elected at Ordinary Shareholders Meeting held on April 25, 2014. The members were elected
for a two-year term expiring in the 2016 Ordinary General Meeting. The table below indicates the name,
age and title of the board of directors.
The table below presents the information related to the members of the Board of Directors.
Name
Andres Cristian
Nacht
Age
71
Elio Demier
63
Francisca Kjellerup
Nacht
43
70
Nicolas Arthur
Jacques Wollak
Pedro Sampaio
Malan
Jorge Marques de
Toledo Camargo
52
Profession
Business
Administration
Bachelor of Social
Communication
Business
Administration
Business
Administration
CPF
Title
Date of Las
Election
Date of
Office
Term of
Office
Other
Titles
Elected by
the
Controlling
Shareholder
098.921.337/49
Chairman
4.25.2014
4.25.2014
2 years
No
Yes
260.066.507-20
Vice Chairman
4.25.2014
4.25.2014
2 years
Yes
Yes
124.175.657-06
Director
4.25.2014
4.25.2014
2 years
No
Yes
Director
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
Yes
Yes
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
No
Yes
060.903.038-87
Executive
057.378.217-22
71
Economist
028.897.227-91
60
Geologist and
Physicist
114.400.151-04
Independent
Director
Independent
Director
Independent
Director
According to the Novo Mercado Listing Rules and the Companys bylaws, the companys board of directors
must have at least 20% independent members. Whenever the percentage of 20% mentioned above
results in fractional number of members, the number shall be rounded to reach a whole number: (i)
immediately above, if fractional number is equal to or higher than 0.5; or (ii) immediately below, if fractional
number is lower than 0.5. Since the Companys Board of Directors is composed of six members, it should
121
have at least one independent director. The Independent director should be identified as such in the
minutes of the General Shareholders meeting that elects him. Currently Mr. Pedro Malan, Mr. Nicolas Arthur
Jacques Wollak and Mr. Jorge Camargo are the Companys Independent Directors.
The decisions of the Companys Board of Directors are taken by a majority vote of the members that are
present. Under Brazilian corporate law, members of the board of directors are prohibited to vote in any
meeting ou General Meeting, on any matter or intervene in any transaction that would create a conflict of
interest between the Company and that board member.
EXECUTIVE BOARD
The Companys Executive Officers are responsible for the management of daily operations of the business
and for implementing the general policies and guidelines established by the Board of Directors.
The Brazilian corporate law provides that executive officers must reside in Brazil and that they may or
may not be shareholders of the company in which they serve. In addition, up to one-third of the members
of a companys Board of Executive Officers may also serve as members of the Board of Directors.
The members of the board of executive officers are elected by the Companys board of directors for oneyear term and they may be reelected. Any executive officer may be removed by the board of directors
before the expiration of his or her term. According to the Companys bylaws, the board of executive
officers must be comprised of four to 11 officers, including one chief executive officer, one chief financial
officer and the remaining without specific designation.
All the members of the Board of executive officers must a sign a Consent Agreement of the
Administrators, in which their respective position will depend on the signing of the document. Through the
Consent Agreement, the Companys new members of the Board of executive officers are personally
responsible to act in accordance with the Contract of Novo Mercado, Regulation of the Market Arbitration
Chamber and the Rules of the Novo Mercado.
The table below indicates the name, age and title of the board of executive officers.
Date of
Last
Election
Elected by
the
Controlling
Shareholder
Term of
Office
Until
Srgio Kariya
40
Engineer
197.064.378-19
Chief Executive Officer
12.12.2014
1.1.2015
OSM
No
Yes
2015
Until
Frederico tila
Chief Financial and
56
Engineer
595.166.407-10
3.4.2013
3.4.2013
OSM
Yes
Yes
Silva Neves
Administrative Officer
2015
Until
Alessandra Eloy
39
Engineer
021.092.597-36
Investor Relations Officer
3.4.2013
3.4.2013
OSM
Yes
Yes
Gadelha
2015
Until
Gabriel Esteves
42
Engineer
021.850.487-08
Officer
12.17.2013 12.20.2013
OSM
No
Yes
2015
Until
Rogrio Bregaglio
51
Engineer
086.655.858-69
Officer
12.17.2013 12.20.2013
OSM
No
Yes
2015
1
th
As specified in the Companys Board of Directorss meeting held on March 4 2013, Mr. Frederic Atila Silva Neves will operate under the title of Senior
Vice President of Finance.
Name
Age
Profession
CPF
Title
Date of
Office
Othe
r
Titles
FISCAL COUNCIL
Under the Brazilian Corporate Law, the Fiscal Concil is responsible for: (i) reviewing, by any of its members, the
actions of management and verify compliance with its legal and statutory duties; (ii) opine on management's
annual report, including in its opinion the additional information it deems necessary or useful to the General
122
Meeting decision; (iii) give their opinion on the administrations proposals, to be submitted to the General
Meeting, relating to changes in capital, issuance of debentures or warrants, capex plans or capital budget,
capital distribution, dividend distribution, transformations, incorporations, merger or split up; (iv) report, by any
of its members, to the administrators or, if they do not take the necessary action to protect the interests of the
company, to the general meeting, the mistakes, fraud or crimes they find out, and suggest necessary
measures to the company; (v) convene the ordinary shareholder meeting, if the administrative bodies delay for
more than one month calling, and extraordinary, whenever there are serious or urgent matters, including in
the agenda the subjects they deem relevant; (vi) analyze, at least quarterly, the balance sheet and other
financial statements periodically prepared by the company; (vii) review and give an opinion on the financial
statements of the fiscal year; and (viii) exercise those powers during the settlement, in view of the special rules
that govern it.
According to the Company's Bylaws, the Fiscal Council works on a permanent basis, and consists of three
members and an equal number of alternates, shareholders or not, resident in Brazil and elected at the General
Meeting, when will determine their remuneration. The Chrairman of the Fiscal Council is elected at the General
Meeting.
All new members of the Fiscal Council must sign a Fiscal Council Compliance Statement, conditioned on
possession in their respective offices the signing of this document. Through the Compliance Agreement, new
members of its Board of Directors are personally responsible to act in accordance with the Novo Mercado, with
the Rules of the Arbitration Chamber and the Novo Mercado Listing Rules.
At the the Ordinary and Extraordinary General Meeting held on April 19, 2011, the Company's shareholders
requested the installation of the Fiscal Council and elected three members and three alternates. At the
Extraordinary General Meeting held on April 20, 2012 the Fiscal Council became a permanent body. The Fiscal
Council members indicated by the controlling shareholders were reelected at the General Shareholders'
Meeting held on April 25, 2014, when Mr. Hlio Carlos de Lamare Cox and Mr. Massao Fabio Oya were
separately elected by minority shareholders.
The table below presents name, age and title of the Fiscal Council members:
Name
Rubens Branco da Silva
Daniel Oliveira Branco Silva
Eduardo Botelho Kiralyhegy
Maria Cristina Pantoja da
Costa Faria
Helio Carlos de Lamare Cox
Massao Fbio Oya
Profession
Lawyer
Lawyer
Lawyer
CPF
120.049.107-63
080.968.467-52
082.613.217-03
Title
President
Substitute
Member
Date of Last
Election
4.25.2014
4.25.2014
4.25.2014
Date of
Office
4.25.2014
4.25.2014
4.25.2014
Office
Term
1 year
1 year
1 year
Other
Titles
No
No
No
Elected by
the
Controlling
Shareholder
Yes
Yes
Yes
37
Lawyer
886.793.577-15
Substitute
4.25.2014
4.25.2014
1 year
No
Yes
63
32
Engineer
Accountant
298.152.157-87
297.396.878-06
Member
Substitute
4.25.2014
4.25.2014
4.25.2014
4.25.2014
1 year
1 year
No
No
No
No
Age
64
33
35
ADVISORY COMMITTEES
With the goal of improving the decision-making process, sustaining the execution of our growth plan, and
supporting it in its functions, the Board of Directors has approved the creation of the Human Resources
Committee and the Management Risk Committee, in line with the best practices of corporate governance.
The Human Resources Committee is responsible for: (a) supervision and support during the development,
planning and execution of strategies that enable the company to attract and retain talent, as well as the
improvement of the work environment, and (b) proposals for the remuneration of Mills executive officers
for analysis and approval by the Board of Directors.
The current members of the Human Resources Committee are Elio Demier (Vice-Chairman of Mills Board
of Directors) and Jos Felipe Vieira de Castro.
123
The Management Risk Committees purpose will be to monitor and assess the Companys management to
ensure it is conducted in compliance with applicable law, and to monitor matters relating to business
risks, ethics and conduct, including: (a) monitoring and assessing the mapping, planning and
implementation of strategies toward increasing the Companys capacity to identify, manage and mitigate
the risks to which it is exposed in its operations; (b) presenting, for purposes of the Companys risk
management policy, proposals for tolerance limits for the different risks identified, for examination and
approval by the Board of Directors; and (c) other attributes established by the Board of Directors within
the scope of the above activities.
The current members of the Management Risk Committee are Jorge Marques de Toledo Camargo
(Independent Director), Frederico tila Silva Neves (Chief Financial and Administrative Officer) and
Alessandra Eloy Gadelha (Investor Relations Officer).
Committees of this type are non-permanent and therefore can be either created or extinguished anytime
by the Board of Directors.
The table below presents the names, ages and positions of the Human Resources Committee and the
Management Risk Committee members:
Human Resources Committee
Name
Age
Elio Demier
63
61
Profession
Bachelor of Social
Communication
Economist
CPF
Title
Date of
Last
Election
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
260.066.507-20
Member
05.22.2014
05.22.2014
1 year
Yes
Yes
402.760.747-34
Member
05.22.2014
05.22.2014
1 year
No
Yes
Name
Alessandra Eloy Gadelha
Frederico tila Silva Neves
Jorge Marques de Toledo
Camargo
b.
Age
39
56
60
Profession
Engineer
Engineer
Geologist and
Physicist
CPF
021.092.597-36
595.166.407-10
Title
Member
Member
Date of
Last
Election
07.21.2014
07.21.2014
114.400.151-04
Member
07.21.2014
Starting
Date
07.21.2014
07.21.2014
Term of
Office
1 year
1 year
Other
positio
ns
Yes
Yes
Elected by
Controlling
Shareholder
Yes
Yes
07.21.2014
1 year
Yes
Yes
The Companys Board of Directors approved, in a meeting held on September 15, 2010, the establishment
of the Human Resources Committee, to support in its functions, aiming to improve the decision making
process and to sustain the execution of the Companys growth plan.
c.
The activities of the Executive Officers are supervised and evaluated by the Board of Directors, whose
performance is an object of appreciation by its shareholders.
Until the end of 2010, the Company did not adopt mechanisms or pre-set avaliation methods to measure
the performance of its Administration. In 2011 a Performance Management Program was established,
aiming to map the competence gaps and guide the development programs to improve the attributes that
lead to high performance, and establish and evaluate individual goals, which continues in effect until the
date of this Reference Form.
124
For compensation and calculation purposes of the aggregated economic value that will determine the
output participation, the organs of its Administration are, jointly with its employees, evaluated based on
the results obtained by the Company.
Each member of the Committee shall be entitled to compensation equivalent to 50% (fifty percent) of the
Board of Directors monthly payment. The members of the Committee who are Executive Officers or
employees of the Company shall not be entitled to any compensation.
d.
Is the responsibility of the Chief Executive Officer: (i) to convene and chair meetings of the Executive
Officers meetings; (ii) to maintain permanent coordination between the Executive Board and the Board of
Directors; (iii) To Comply with and enforce, within his authority, these Articles provisions and the
resolutions made by the Executive Board, Board of Directors and Shareholders Meetings.
The Director of Investor Relations is responsible: (i) release and inform CVM and BM&FBOVESPA, if
necessary, any act or relevant fact occurred or related to the Companys business. As well as, ensure the
immediate dissemination, simultaneously in all markets where such securities are negotiated, besides
other duties established by the Board of Directors; (ii) provide information to the investors; and (iii) keep
the registration of the Company in accordance with the applicable rules of the CVM.
The remaining Directors will have the assignments that may be established by the Board of Directors
upon his election, as set forth in the Company's Bylaws.
e.
Mechanisms for evaluating the performance of the Board of Directors, committees and
the Executive Board
See item 12.1(c).
12.2
a.
Notification
Brazilian Corporate Law for listed companies requires that all general shareholders meetings are convened
after three publications of the same in the Federal Gazette (Dirio Oficial da Unio) or of the State in
which the company is based, as well as in another newspaper with a wide circulation. The Companys
publications are currently placed in the Rio de Janeiro State Gazette ( Dirio Oficial do Rio de Janeiro), the
official means of communication used by the state government of Rio de Janeiro, as well as in the daily
newspaper in Rio de Janeiro, Valor Econmico, with the first call made at least 15 days before the
meeting, and the second eight days before, as stipulated in its bylaws. However, the CVM can, in
specified circumstances, determine that the first call for a general shareholders meeting be made with 30
days prior notification from the date on which the documents related to the issues to be decided upon are
made available to shareholders. The Company, when possible, seeks to antecipate the term of the first
convocation of the General Assembly, allowing shareholders having informations of the General Meeting in
advance to that required by law.
b.
Powers
Without prejudice to the other matters provided for by law, General Shareholders Meeting solely shall:
Appreciation of the Managements Report, the Managements accounts, the Companys Financial
Statements and the independent auditors report;
Approval of the capital budget;
Approval of the Managements Proposal for the Allocation of Net Income;
125
d.
See item 16.3 for a description of the mechanisms the Company uses to avoid and mitigate conflicts of
interest.
e.
Requests for power of attorney and proxy are based on the legal and regulatory requirements. To date,
its management has never made any public request for power of attorney or proxy.
f.
Necessary formalities to accept powers-of-attorney granted for shareholders,
indicating if the Company receives powers from shareholders electronically
Subject to the provisions of Article 126 of Law 6404/76, to shareholders who are represented by proxy,
are requested to deliver at the Companys headquarter the documents that prove the powers of the legal
representative, preferably with advance of 2 (two) days from the date of the Meeting.
As defined in the Companys bylaws, shareholders may be represented at General Meetings of the
Company by a proxy appointed less than 1 year, who is a shareholder or officer of the Company, attorney
or financial institution. The supporting document evidencing his commission shall be filed with the
Companys registered office within the maximum period of 48 hours before the date scheduled for each
General Meeting.
The Company does not accept powers of attorney granted by electronic means.
g.
The Company does not keep Internet forums and pages for shareholders to receive and share comments.
126
h.
i.
Notice to shareholders
announcing the
availability of the
Financial Statements
General Shareholders
Meeting Convening
Notice
Date(s) of
Newspaper
publication
-
3/21/2012
04/25/2012
Financial Statements
3/5/2012
12.4
2012
Publicated
Newspaper
Date(s) of
Newspaper
publication
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
3/22/2013
5/15/2013
3/13/2013
2013
Publicated
Newspaper
Date(s) of
Newspaper
publication
Publicated
Newspaper
3/21/2014
DOE-RJ
Valor Econmico RJ
5/13/2014
DOE-RJ
Valor Econmico RJ
3/20/2014
DOE-RJ
Valor Econmico RJ
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
DOE-RJ
Valor Econmico
RJ
The Board of Directors shall consist of a minimum of five (5) and a maximum of eleven (11) members,
shareholders or not, of which 20% shall be independent, elected at a General Meeting for a unified 2
(two)-year term of office and who may be reelected. In the event of a fractional number of directors as a
result, due to the compliance with this percentage, the fractional number shall be rounded off to: (i) the
next higher whole number, where the fraction is equal or higher than 0.5 (five tenths); or (ii) next lower
whole number, where the fraction is lower than 0.5 (five tenths).
a.
Frequency of meetings
The Board of Directors holds ordinary meetings once a month, and extraordinary meetings, whenever
corporate interests so require.
b.
Shareholder provisions establishing voting restrictions on members of the Board of
Directors
Does not exist
c.
127
application, validity, effectiveness, interpretation, breach and sequelae, of the dispositions contained in
the Brazilian Corporations Law, the By-Laws, the standards issued by the National Monetary Council, the
Central Bank of Brazil and the CVM, as well as other standards applicable to the functioning of the capital
markets in general, beyond those contained in the Novo Mercado Rules, the Sanctions Regulation, the
Contract for Participation in the Novo Mercado and the Arbitration Rules of the Market Arbitration
Chamber.
12.6
Board of Directors
The Companys Board of Directors is currently comprised of seven members, elected at the Ordinary
Shareholders Meeting held on April 25, 2014. The members were elected for a two-year term expiring in
the 2016 Ordinary General Meeting. The table below indicates the name, age and title of the board of
directors.
Name
Andres Cristian
Nacht
Age
71
Elio Demier
63
Francisca Kjellerup
Nacht
43
70
Nicolas Arthur
Jacques Wollak
Pedro Sampaio
Malan
Jorge Marques de
Toledo Camargo
52
Profession
Business
Administration
Bachelor of Social
Communication
Business
Administration
Business
Administration
CPF
Title
Date of Last
Election
Date of
Office
Term of
Office
Other
Titles
Elected by
the
Controlling
Shareholder
098.921.337/49
Chairman
4.25.2014
4.25.2014
2 years
No
Yes
260.066.507-20
Vice Chairman
4.25.2014
4.25.2014
2 years
Yes
Yes
124.175.657-06
Director
4.25.2014
4.25.2014
2 anos
No
Sim
Director
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
Yes
Yes
4.25.2014
4.25.2014
2 years
No
Yes
4.25.2014
4.25.2014
2 years
No
Yes
060.903.038-87
Executive
057.378.217-22
71
Economist
028.897.227-91
60
Geologist and
Physicist
114.400.151-04
Independent
Director
Independent
Director
Independent
Director
128
The table below shows the name, age, years of experience, position, date of election and term of the current
members of the Companys Board of Executive Officers.
Name
Title
Date of Last
Election
Date of
Office
197.064.378-19
40
12.12.2014
1.1.2015
3.4.2013
3.4.2013
Age
Profession
CPF
40
Engineer
Srgio Kariya
Frederico tila Silva
Neves
Alessandra Eloy
Gadelha
56
Engineer
595.166.407-10
39
Engineer
021.092.597-36
3.4.2013
3.4.2013
Gabriel Esteves
42
Engineer
021.850.487-08
Officer
12.17.2013
12.20.2013
Rogrio Bregaglio
51
Engineer
086.655.858-69
Officer
12.17.2013
12.20.2013
Term of
Office
Until OSN
2015
Until OSM
2015
Until OSM
2015
Until OSM
2015
Until OSM
2015
Other
Titles
Elected by
the
Controlling
Shareholder
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes
Fiscal Council
At the the Ordinary and Extraordinary General Meeting held on April 19, 2011, the Company's shareholders
have requested the installation of the Fiscal Council and elected three members and three alternates. At the
Extraordinary General Meeting held on April 20, 2012 the Fiscal Council became a permanent body. The
members were reelected at the Ordinary General Meeting held on April 25, 2014, in which Hlio Carlos de
Lamare Cox and Massao Fbio Oya were separately elected by minority shareholders.
The table below presents name, age and title of the Fiscal Council members:
Name
Rubens Branco da Silva
Daniel Oliveira Branco Silva
Eduardo Botelho Kiralyhegy
Maria Cristina Pantoja da
Costa Faria
Helio Carlos de Lamare Cox
Massao Fbio Oya
Profession
Lawyer
Lawyer
Lawyer
CPF
120.049.107-63
080.968.467-52
082.613.217-03
Title
President
Substitute
Member
Date of Last
Election
4.25.2014
4.25.2014
4.25.2014
Date of
Office
4.25.2014
4.25.2014
4.25.2014
Office
Term
1 year
1 year
1 year
Other
Titles
No
No
No
Elected by
the
Controlling
Shareholder
Yes
Yes
Yes
36
Lawyer
886.793.577-15
Substitute
4.25.2014
4.25.2014
1 year
No
Yes
63
32
Engineer
Accountant
298.152.157-87
297.396.878-06
Member
Substitute
4.25.2014
4.25.2014
4.25.2014
4.25.2014
1 year
1 year
No
No
No
No
Age
63
32
34
12.7 Provide information mentioned in item 12.6 related to the members of the statutory
committees, as well as audit, risk financial and remuneration committees even if such
committees or structures are not statutory
Human Resources Committee
Name
Age
Elio Demier
63
Jos Felipe
Vieira de Castro
61
Profession
Bachelor of Social
Communication
Economist
CPF
Title
Date of
Last
Election
Starting
Date
Term of
Office
Other
positions
Elected by
Controlling
Shareholder
260.066.507-20
Member
5.22.2014
5.22.2014
1 year
Yes
Yes
402.760.747-34
Member
5.22.2014
5.22.2014
1 year
Yes
Yes
Name
Alessandra Eloy Gadelha
Frederico tila Silva Neves
Jorge Marques de Toledo
Camargo
Age
39
56
60
Profession
Engineer
Engineer
Geologist and
Physicist
CPF
021.092.597-36
595.166.407-10
Title
Member
Member
Date of
Last
Election
07.21.2014
07.21.2014
114.400.151-04
Member
07.21.2014
129
Starting
Date
07.21.2014
07.21.2014
Term of
Office
1 year
1 year
Other
positio
ns
Yes
Yes
Elected by
Controlling
Shareholder
Yes
Yes
07.21.2014
1 year
Yes
Yes
12.8 Summary of the business experience, activities and areas of expertise of members of
administration and Fiscal Council
12.8.1 Board of Directors
Andres Cristian Nacht has been the Chairman of the Companys board of directors since 1998. The son of
Mr. Jose Nacht, one of the founders of the Company, Mr. Nacht has a degree in Engineering from
Cambridge University, England. In 1965, Mr. Nacht joined GKN, a British engineering company, where he
worked for three years, holding engineering posts in the UK. In 1967, has worked for one year as
Engeneer in Echafaudages Tubulaires Mills from France. Mr. Nacht became a director of the company in
1969 and was appointed managing director in 1978, a position he held until 1998 when he became the
Chairman of the Board of Directors.
Francisca Kjellerup Nacht holds a degree in Business Administration and Economy from the Copenhagen
Business School, Denmark, since 1995. The granddaughter of Mr. Jose Nacht, one of the founders of the
Company, and daughter of Andres Cristian Nacht, Chairman of the Board of Directors of the Company,
has built her career in Europe, where she lives since 1990. Francisca worked for Procter & Gamble Nordic
between 1997 and 2010, mainly in the fields of leadership and business development. Among other
positions, Francisca was responsible for the commercial integration after Gillettes acquisition, as well as
for the business with the largest retailer of Denmark. In her last position at P&G, she was responsible for
initiating and leading the pharmaceutical division in the Nordic region. In the last five years, besides her
position at P&G, Francisca has
Elio Demier is a graduate of Social Communication from the Fluminense Federal University. He also holds
an MBA from the Institute of Post-Graduation and Research in Administration of the Rio de Janeiro
Federal University. He served as the Companys chairman from 1998 to 1999 and has been a member of
the Companys board of directors since 1998. Mr. Demier was President of the Bomtexto Publisher,
company in the book publishing business located in Rio de Janeiro.
Diego Jorge Bush is a graduate in Business Administration from Yale University in 1967 and also holds an
MBA from Harvard Business School in 1971. Having worked as Chairman of the Boston Finance, Boston
Distributor and Boston Leasing, companies connected to the Bank Boston, an office he held until 1973.
After leaving Boston bank, Mr. Bush founded a specialist finance brokerage company, Edim Comercial e
Imobiliria Ltda., which he manages to-date. Between 1988 and 1996 he has been Chairman of So Paulo
Alpargatas S.A. Mr. Bush has been a member of the Companys Board of Directors since 1998.
Nicolas Arthur Jacques Wollak has been a member of the Companys Board of Directors since 2007.
Graduated from Harvard University, Mr. Wollack is a founder of the Axxon Group in Brazil, where is
Managing Partner since 2001. Mr. Wollak has nearly 20 years of private equity investment experience
having already been a partner of BISA fund (Argentina) prior to founding the Axxon Group. Current
chairman of the board of directors from Guerra S.A (manufacturer of road implements), member of
Luxxon S.A., which controls Aspro Ltda (manufacturer of compressed natural gas), director of MV
Investimentos S.A. (investment vehicle which controller of the franchise network of Mundo Verde), and
also a member of the Deliberative Board of the Brazilian Private Equity Association (ABVCAP). In the past
five years, Mr. Wollack has been (i) managing partner of the Axxon Group in Brazil, as one of the
responsible for its investments in their Investment Funds, (ii) Chairman of the Board of Director from
Guerra S.A (as described above) since July 2008 until the present date, (iii) director in MV Investimentos
S.A. (as described above) since August 2009 until the present date, (iv) member of the Deliberative Board
from ABVCAP since March 2010 until the present date, (v) member of the Board of Directors from Luxxon
S.A (as described above) since December 2007 until the present date, and (vi) member of the Board of
Directors from Lupatech S.A. (equipment and services supplier mainly for the oil and gas industry) sinde
March 2005 until October 2007.
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Pedro Sampaio Malan obtained a degree in electrical engineering in 1965 from Polytechnic School at
Pontifical Catholic University of Rio de Janeiro (PUC-RJ). He holds a PhD in economics from the University
of Berkeley. Mr. Malan is a professor at the Department of Economics at PUC-RJ, has published essays
and articles in economic journals and books, both in Brazil and abroad and is a member of the Board of
Trustees of the IFRS Foundation. He served as Brazils Minister of Finance for eigth years, from 1995 to
2002. President of the Central Bank of Brazil from 1993 to 1994. Special Counsel and Chief External Debt
Negotiator of the Ministry of Finance from 1991 to 1993. Executive Director of the World Bank from 1986
to 1990, and again from 1992 to 1993. Executive Director of the Inter-American Development Bank from
1990 to 1992. Director of the Center of Transnational Corporations of UN in New York from 1983 to 1984.
Director of the UN Department of International Economic and Social Affairs in New York from 1985 to
1986. Mr. Malan has been an independent member of the board of director since March 2010. In the last
five years, Mr. Malan has been a member of the advisory board of ALCOA Latin America (since 2004);
member of the board of directors of Globex Ponto Frio (since 2004); Chairman of the board of directors
of Unibanco (from 2004 until 2008); member of the board of directors of EDP Energias do Brasil (since
2006); member of the board of directors of OGX (since 2008); chairman of the advisory board of
Unibanco-Itau (since august 2009); member of the board of directors of Souza Cruz S.A. (since March
2010), director of Thomson Reuters Founders Share Company (since 2011); member of the advisory
board of BUNGE - Brazil (since 2012); and member of Temasek International Panel (since 2012).
Jorge Marques de Toledo Camargo has been for 37 years in the oil industry. He is graduated in geology
from the University of Brasilia and obtained a masters degree in geophysics from the University of Texas.
Currently, he is serving as a senior consultant at Stateoil in Brazil, at Karoon Oil and Gas and at
McKinsey&Company in Brazil. Mr. Camargo is also a member of of the board of directors of the Brazilian
Oil Institute (IBP) and a member of the advisory board and associate in Brazil of Energy Ventures.
Previously, he has worked for 27 years in Petrobras in Brazil and abroad, holding various technical and
management positions, such as Superintendent of Cear-Potiguar Exploration Districts, General Manager
of Petrobras in the UK, Director of Exploration and Production and then President of Braspetro, and, from
2000 to 2003, a member of the Executive Board as Director of the International Sector. In 2003, he
worked for Statoil, initially as Vice-President at the headquarter in Stavanger, Norway, and, from 2005 to
2009, as president of Statoil in Brazil. Mr. Camargo was appointed to become a member of the Prumo
Logsticas Board of Directors in March 14, 2014 and his election is pending the annual general meeting of
the company.
Over the past five years, none of the members of our Board of Directors has suffered any (a) criminal
conviction; (b) conviction in an administrative proceeding of CVM; or (c) any conviction that has become
final in the judicial or administrative area, that has suspended or disqualified our members of the practice
of professional or commercial activity whatsoever.
12.8.2 Board of Executive Officers
Srgio Kariya has been the Companys Chief Executive Officer since January 2015, Prior to that, worked in
the company Elevadores Otis for more than 10 years. Mr. Kariya has a degree in Mechanical Engineering
from Escola Politcnica da Universidade de So Paulo (Poli-USP) and a graduate degree in Marketing from
Escola Superior de Propaganda e Marketing (ESPM). Mr. Kariya also holds an Masters degree in Business
Administration from IBMEC/SP and a specialization course in Finance awarded by INSPER/SP. In the last
five years Mr. Kariya occupied position of Executive Officer responsible fot the business unit Rental. He
was elected to Companys Chief Executive Officer on December 12 of 2014.
Gabriel Esteves is the Executive Officer responsible for the business unit Rental since 2014. Mr. Esteves
joined the Company as an Engineer in the Heavy Construction unit in 1997 and accumulates more than 16
years of experience in the Company. He holds a degree in Civil Engineering from PUC/RJ and MBA
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degrees in Marketing from IAG MASTER (PUC/RJ) and in Business Management from IBMEC/RJ. He also
has a specialization in Finance from INSPER/SP. Mr. Esteves occupied several positions in Mills and held
the position of the Real Estate business unit Executive Officer from 2010 to 2014.
Rogrio Bregaglio holds the position of Executive Officer of the Heavy Construction and Real Estate
business unit commercial activities. Mr. Bregaglio graduated from Civil Engineering from Instituto de
Ensino de Engenharia Paulista IEEP (now UNIP) and holds an MBA degree with enphasis in Business
Administration from IBMEC SP. He joined Mills in 1989 as a Projects Engineer and accumulates 25 years
of experience in the Heavy Construction business unit. Mr. Bregaglio has held several management
positions in Mills and is responsible for the Heavy Construction business unit since 2011.
Frederico tila Silva Neves currently holds the position Vice President of Finance. Mr. Neves took over as
Director in the Company in 1997, being named in 1999 the Chief Financial Officer, and has accumulated,
until July 2010 the position of Investor Relations Officer. Mr. Neves has a degree in Civil Engineering from
the Rio de Janeiro Federal University (Universidade Federal do Rio de Janeiro - UFRJ), and in 1984 was
awarded a Masters Degree in Business Administration by the Institute of Post-Graduation and Research in
Administration (COPPEAD) of the Federal University of Rio de Janeiro. Mr. Neves worked for six years at
large multinational companies in the industrial and financial sectors, before before joining Ceras Johnson
Ltda. in 1990, last position held as a controller.
Alessandra Eloy Gadelha has a bachelors degree in chemical engineering from the Universidade Federal
do Rio de Janeiro (UFRJ) and a masters degree in Business Administration from Rensselaer Polytechnic
Institute, located in the state of New York, in the US. In the past five years, Mrs. Gadelha worked in the
Investors Relations department at Vale S.A., before coming to the Company to become the Investor
Relations Officer since July 2010.
Over the past five years, none of the members of our Board of Executive Officers has suffered any (a)
criminal conviction; (b) conviction in an administrative proceeding of CVM; or (c) any conviction that has
become final in the judicial or administrative area, that has suspended or disqualified our members of the
practice of professional or commercial activity whatsoever.
12.8.3 Fiscal Council
Rubens Branco da Silva obtained a degree in Law from the Federal University of Rio de Janeiro (UFRJ)
and in Accounting by the Accounting and Administrative School Moares Junior. He worked professionally
at Arthur Andersen for 29 years, being 20 years as an associate responsible for the Tax and Legal area.
Currently a member of the Advisory Board of the SR-Rating, the American Chamber of Commerce for
Brazil-Rio de Janeiro, and the Board of Mediation and Arbitration of Rio de Janeiro. He is also a member
of the Brazilian Institute of Financial Executives (IBEF), Brazilian Association of Financial Law (ABDF) and
the International Fiscal Association (IFA), the Chamber of Commerce and Industry Brazil-Germany (AHK),
Business Council of Commerce Association of RJ (ACRJ) and a vowel from the Board of Commerce of the
State of Rio de Janeiro. He is currently a partner at the Branco Consultores Tributrios Ltda.
Eduardo Botelho Kiralyhegy graduated in Law from the Candido Mendes University, a member of the
Brazilian Lawyers Association, and founding partner of the Negreiro Office, Medeiros & Kiralyhegy
Lawyers, in Rio de Janeiro, specializing in Tax Law, Administrative and Regulatory. Currently a member of
the Special Committee of Tax Issues of the Brazilian Lawyers Association, the Special Committee of the
Federal Justice of the Brazilian Lawyers Association, the Brazilian Academy of Tax Law, and the Brazilian
Association of Financial Law and the International Fiscal Association.
Daniel Oliveira Branco Silva graduated in law from the Pontifical Catholic University of Rio de Janeiro
(PUC) in 2004 and has a postgraduate degree in Corporate Law, specialization in tax Law at the fundao
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Getlio Vargas (FGV). Mr. Daniel is a legal manager at Branco Consultores Tributrios and a member of
Branco Advogados since 2003.
Maria Cristina Pantoja da Costa Faria graduated in law from the Pontifical Catholic University of Rio de
Janeiro (PUC), specializing in corporate finance for lawyers by the Foundation Institute of Management
from the University of So Paulo, and earned her masters degree in executive management of insurances
at IBMEC. Member of the Brazilian Lawyers Association. Currently a member of the Negreiro Office and
Medeiros & Kiralyhegy Lawyers.
Helio Carlos de Lamare Cox is graduated in Civil Engineering from the State University of Rio de Janeiro UERJ, is specialized in Accounting and Financial Management at the Superior Institute of Accounting
Studies - ISEC / FGV, and has a postgraduate degree in Capital Markets from School of Postgraduate
Degree in Economics - EPGE/FGV and holds an MBA in Finance from IBMEC. Mr. Helio has worked for
over 25 years as Financial and Administrative Officer responsible for managing areas such as Finance,
Accounting, Technology Information, Legal and Human Resources. In the period from 1995 to 2010 was
Officer of Usiminas and ThyssenKrupp Groups, working in companies as Dufer S/A, Thyssen Trading S/A,
Rio Negro Steel Trade S/A and Zamprogna NSG Technology Steel S/A, all focused on production,
marketing and distribution of flat steel products. Over the past four years he has been working in financial
and business consulting as Managing Partner of Delamare Financial Advisory and Consultancy Ltd.,
specially in providing industrial relations services to the Association of Maritime Support Companies ABEAM. Mr. Helio is also member of the Fiscal Council of AW Faber-Castell S/A.
Massao Fbio Oya is graduated in Accounting and postgraduate in Financial Management and Accounting
at University Center Padre Anchieta. Mr. Massao is currently an independent consultant providing services
in the administrative, financial, corporate, auditing and corporate governance areas, especially in Fiscal
Councils as member and alternate, such as in the following companies:WLM Indstria e Comrcia S.A.
(since October 2011); Companhia de Saneamento do Estado de So Paulo - Sabesp (since April 2013);
Cristal Pigmentos do Brasil S.A. (since April 2013); Bardella S.A. - Indstrias Mecnicas (since April 2013);
Companhia Providncia Ind. e Com. S.A. (since April 2014); and others.
12.9 Relationship (as a spouse or significant other) or relationship to the second
degree between:
a.
b.
(i) members of the Board of Directors, Executive Board and Fiscal Council and (ii)
members of management of entities controlled by the Company, either directly or indirectly
There is no marital relationship, stable union or any kind of relationship up to the second degree between
the Administrators of the Company and any of the persons indicated in items (a) and (b) above.
133
c.
(i) members of management of entities controlled by the company, either directly or
indirectly; and (ii) Companys direct or indirect controlling shareholders
Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Jytte Kjellerup Nacht/ CPF: 289.858.347-20
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Husband/Wife
-------------------------------------Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Tomas Richard Nacht / CPF: 042.695.577-37
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Father/Son
-------------------------------------Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Antonia Kjellerup Nacht / CPF: 073.165.257-62
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Father/Daughter
-------------------------------------Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Pedro Kjellerup Nacht / CPF: 127.276.837-66
Corporate name of the issuer company, controlled or
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Father/Son
-------------------------------------Administrator of the Company or Controlled Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
134
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling Company and shareholder
Type of relationship: Brother
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Jytte Kjellerup Nacht/ CPF: 289.858.347-20
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Daughter/Mother
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Tomas Richard Nacht / CPF: 042.695.577-37
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Sister/Brother
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Antonia Kjellerup Nacht / CPF: 073.165.257-62
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Sisters
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Pedro Kjellerup Nacht / CPF: 127.276.837-66
135
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Sister/Brother
-------------------------------------Administrator of the Company or Controlled Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling Company and shareholder
Type of relationship: Niece/Uncle
d.
(i) members of the Board of Directors, Executive Board and Fiscal Council and (ii)
Millss direct or indirect controlling shareholders
Administrator of the Company:
Name: Andres Cristian Nacht / CPF: 098.921.337-49
Corporate name of the issuer or controlled company: Mills Estruturas e Servios de Engenharia
S.A. / CNPJ: 27.093.558/0001-15
Title: Chairman of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling company and shareholder
Type of relationship: Brother
Additionally, Mr. Andres Cristian Nacht is the Chairman of the Board of Directors of the Company since
1998 and is a shareholder of the Company.
Administrator of the Company:
Name: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company, controlled or controlling: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Member of the Board of Directors
Related Person:
Name: Nicolas Nacht/ CPF: 734.150.811-68
Corporate name of the issuer company, controlled or controlling: Snow Petrel SL / CNPJ:
14.740.333/0001-61
Title: Controlling company and shareholder
Type of relationship: Niece/Uncle
12.10 Subordination, rendering of services or control relationships for the previous three
fiscal years between directors/officers and:
a.
Not applicable. The Company does not control, neither directly or indirectly, any entity.
136
b.
Mr. Rubens Branco, by the entity Tax Consultants Ltda., provided in the last three fiscal years legal,
accounting and tax services to Mr. Andres Cristian Nacht, controlling shareholder of the Company, by
means of the Nacht Participaes S.A., also controlled by Mr. Nacht.
Mr. Daniel Oliveira Branco Silva, by the entity Tax Consultants Ltda., provided in the last three fiscal years
legal, accounting and tax services to Mr. Andres Cristian Nacht, controlling shareholder of the Company,
by means of the Nacht Participaes S.A., also controlled by Mr. Nacht.
Mr. Eduardo Kiralyhegy, by the entity Negreiro, Medeiros & Kiralyhegy Advogados, provided in the last
three fiscal years legal services to Mr. Andres Cristian Nacht, controlling shareholder of the Company, by
means of the Nacht Participaes S.A., also controlled by Mr. Nacht.
Ms. Maria Cristina Faria, by the entity Negreiro, Medeiros & Kiralyhegy Advogados, provided in the last
three fiscal years legal services to Mr. Andres Cristian Nacht, controlling shareholder of the Company, by
means of the Nacht Participaes S.A., also controlled by Mr. Nacht.
c.
In case its relevant, supplier, client, debtor or creditor of the Company or its
controlled or controlling shareholders
Not applicable, as there is no information about relationships of subordination, provision of service or
control over the past three fiscal years, between the Administrators of the Company and any of the
persons indicated in items (a) to (c) above.
12.11 Directors Insurance
The Company has held civil responsibility insurance since 2009, for administration and proxy holders
acting on behalf of them, with full cover for fines and civil penalties, statutory responsibilities, regulatory
risks, responsibility for errors and omissions, among others, excluding intentional acts, complaints arising
from acts known about prior to the policy date, responsibilities associated with product failures (already
covered by civil responsibility insurance), among other events.
The policy contract was renewed for the period December 31, 2013 until December 31, 2014.
12.12 Other relevant information
a) As mentioned in item 12.1, in the last meeting of the board of directors on December 12, 2014, it
was accepted the resignation presented by Mr. Ramon Nunes Vazquez as Chief Executive Officer
of the Company. The Directors stated that the effective resignation of Mr. Ramon Nunes Vazquez
occured on January 1, 2015. Immediately thereafter, the members of the Board of Directors
approved the election of Mr. Srgio Kariya, for the position of Chief Executive Officer, with term of
office from January 1st, 2015 until the OSM of 2015.
137
138
139
140
13.1 Description of the compensation policy or practices for the Executive Board, the
Statutory and Non-Statutory Boards, the Fiscal Committee, the Statutory Committees and
the Audit, Risk, Finance and Compensation Committees, covering the following topics:
a.
Board of Directors
For the Board of Directors of the Company, the total remuneration is fixed in a discretionary amount
determined by the general meeting, with no relationship with the remuneration policy applicable to
officers and other employees of the Company and, therefore there is no goal of the policy or specific
remuneration practice of this body defined by the human resources department of the Company.
As part of total discretionary remuneration approved by the general meeting, there is a fixed component
and a variable component, according to the results of the Company. The Company believes that the
variable remuneration of the members of the Board of Directors is a way to encourage them to
successfully lead the Company's business by aligning the interests of members of the Board of Directors
with those of shareholders.
Statutory Directors and Non-Statutory Directors
For statutory directors and non-statutory directors of the Company, the remuneration policy aims to
attract and guarantee that the qualified professionals required remain in the Company and have a proper
remuneration. The fixed amount of the remuneration of the Directors includes the salary and direct and
indirect benefits tailored for statutory directors and non-statutory directors. In addition to the fixed
compensation, there is a variable component, which includes profit-sharing in the Companys results and
the granting of stock options or subscribing to shares issued. The Company believes that the profitsharing and stock option programs benefiting statutory directors and non-statutory directors is a way to
motivate them to carry out the Companys business in its best interest, thus stimulating an
entrepreneurial and results orientated culture in line with the interests of both shareholders and
management.
Fiscal Council
Members of the Fiscal Council are entitled to remuneration equivalent to 10% of the average
remuneration of the statutory directors, corresponding to the minimum set by law. In this way, their
remuneration is not correlated to the remuneration policy applicable to officers and other employees of
the Company and therefore there is no objective of the policy or practice of remuneration for that body.
Advisory Committees
The members of the Human Resources Committee and Management Risk Committee will be entitled to
remuneration equivalent to 50% of the monthly remuneration of the members the Board of Directors. The
Committee members who are officers, managers or employees of the Company shall not be entitled to
remuneration. The remuneration of members of the Committee may be amended at any time by the
Board. The purpose of this remuneration policy is to adequately compensate Committee members for time
spent in office, except by those who are already paid by the Company as its directors or employees.
b.
Composition of compensation packages: (i) description of the different elements of
the compensation packages and the objectives of each of them; (ii) proportion of each
element to make up the total compensation package; (iii) the method for calculating and
adjusting each of the elements in the compensation packages; and (iv) reasons for the
composition of remuneration
141
142
Board of Directors
Executive Officers
Human Resources Committee
Fiscal Council
Including taxes.
Salary and
Pro-labore
73.4%
58.7%
100.0%
73.4%
Direct and
indirect benefits
Bonus
26.6%
3.2%
Profit sharing
Grant of
options
11.9%
26.3%
26.6%
Total
100.0%
100.0%
100.0%
100.0%
(iii) Method for calculating and adjusting each of the elements in the compensation packages:
The fixed portion of compensation paid to statutory directors and non-statutory directors is determined
based on market standards, and readjusted annually at regular levels to account for the loss in currency
value or for merit by performance.
In terms of the profit-sharing program granted to statutory directors and non-statutory directors, and to
bonus, payed to the members of Board of Directors, this plan is based on the aggregate economic value,
which consists of the adjusted net profit deducted from shareholder remuneration. If positive, 25% for
2011 and a percentage between 20% and 30%, which will be annually decided by the Board of Directors
starting from 2012, of the Economic Value Added (EVA) will be distributed to management and
employees, and whose portion will be defined in an increasing manner in accordance with their
hierarchical level in the Company and results obtained by their respective business units. i.e. in a
proportion of 50% until 2011 and 75% starting from 2012, based on the segments results that the
manager or employee in question is linked to, and 50% until 2011 and 75% starting from 2012 based on
the result of our Company as a whole. For the employees of corporate areas, the program considers the
total result of the company. In 2012 the Company distributed R$ 7.9 million related to the results of 2011,
in 2013 distributed R$ 20.1 million for the results of 2012 and in 2014 will be distributed R$ 18.7 million
for the results of 2013.
Regarding the stock option plan to purchase or subscribe shares, granted to the statutory directors and
non-statutory directors, the number of options granted is proportional to the investment made in the
Company's shares with resources obtained from the profit sharing program described above. Additionally,
the Board of Directors may distribute discretionary stock options or subscription shares to statutory
directors and non-statutory directors, that is, independent of the investment made in the Company's
shares with resources obtained from the profit sharing program described above, based on merit,
performance and/or outcome.
For the Board of Directors of the Company (and the Advisory Committee), the remuneration is
discretionary determined by the general meeting with no relation with the remuneration policy applicable
to officers and other employees of the Company and therefore there is no goal at the policy or
remuneration practice of this body. Members of the Fiscal Council are entitled to remuneration equivalent
to 10% of the average remuneration of the statutory board, corresponding to the minimum set by law. In
this way, their remuneration is not correlated to the remuneration policy applicable to officers and other
employees of the Company and therefore there is no aim of policy or practice of remuneration for that
body. So, there is no method of calculation and adjustment of each element of remuneration.
(iv) Reasons for the composition of remuneration:
143
For the statutory directors and non-statutory directors, the policy aims in the remuneration of
professionals based on the responsibilities inherent in their job positions, market practices and the
Companys level of competiveness.
For the Board of Directors, the Advisory Committee and the Fiscal Council, the remuneration paid by the
Company is fixed, in a discretionary amount determined by the general meeting, in case of Board of
Directors (and consequently the Advisory Committee), and according to the law, in case of Fiscal Council.
The remuneration of the members of these bodies has no relation with the remuneration policy applicable
to officers and other employees of the Company and therefore there is no goal at the policy or
remuneration practice of this body.
For the statutory directors and non-statutory directors and the members of the Board of Directors, the
variable portion is justified by the Companys focus on results and the target of aligning management
interests with those of the shareholders of Company.
c.
Main performance indicators that are taken into consideration when determining each
element of the compensation package
The main performance indicator used to determine the variable component of management remuneration
is the Companys Economic Value Added (EVA), which is calculated from the net profit of the Company,
deducting from this remuneration the capital invested in the Company by the shareholders, which is the
invested capital in the Company at book value multiplied by the weighted average cost of capital of the
Company. The variable portion of remuneration is determined from the economic value generated in the
Company and in the business unit, under its responsibility.
d.
How the compensation package is structured to reflect the development of the
performance indicators
The remuneration consists of a significant variable portion, represented by profit-sharing of the
Companys results, and the values to be distributed are directly proportionate to the Companys Economic
Value Added (EVA), calculated annually in accordance with the formula described in item (c) above.
e.
How the compensation policy is aligned with the Companys short-, medium- and
long-term interests
The remuneration monthly paid to statutory directors and non-statutory directors is in line with the shortterm interests of the Company to attract and retain qualified professionals. The profit-sharing and stock
options plan are aligned with the medium-to-long-term interests of the Company to motivate
management to carry out the Companys business, stimulating an entrepreneurial and results-orientated
culture, to the extent that both shareholders and directors benefit from improvements in the results and
increases in the price of the shares.
For the Board of Directors of the Company (and consequently the Advisory Committees), the
remuneration is fixed in discretionary amount determined by the general meeting with no relation with
the remuneration policy applicable to officers and other employees of the Company, and therefore there is
no goal at the policy or remuneration practice of this body. The members of the Fiscal Council are entitled
to remuneration equivalent to 10% of the average remuneration of the statutory board, corresponding to
the minimum set by law. In this way, their remuneration is not correlated to the remuneration policy
applicable to officers and other employees of the Company and therefore there is no aim of policy or
practice of remuneration for that body.
144
For the Board of Directors, the bonus, which is based on profit-sharing, being also directly proportional to
the Economic Value Added (EVA), is in line with the Companys mid and long term best interest of
stimulating an entrepreneurial and results orientated culture.
f.
Existence of compensation supported by subsidiaries, and direct or indirect affiliates
or holding companies
Not applicable. There is not any remuneration supported by subsidiaries, and direct or indirect affiliates or
holding companies.
g.
Existence of any compensation or benefits connected to the occurrence of a given
corporate event, such as the sale of the Companys controlling interest
Not applicable. There is no remuneration or benefits connected to the occurrence of a given corporate
event, such as the sale of the Companys controlling interest.
13.2 With respect to compensation acknowledged in the results of the last 3 accounting
reference periods and the estimated compensation for the current accounting reference
period for the Executive Board, the Statutory Board and the Fiscal Council:
Estimated for Current Fiscal Year (2014)
Board of Directors
Board of Executive
Officers
Fiscal Council
Total
18
1,292,330
5,247,727
260,000
6,800,057
457,291
457,291
80,771
80,771
Others
274,620
1,994,136
52,000
2,320,757
830,322
830,322
2,492,436
2,492,436
Comissions
166,064
166,064
Post-employment benefits
Number of members
Annual fixed compensation
Variable Compensation
Bonus
Profit sharing
Others
Stock-based compensation
Total Compensation
3,236,926
2,644,107
13,428,516
3,236,926
312,000
16,384,623
(1) Amount based on the annual amortization rate of all curent plans, by the cost of call option. The number of options granted on the discretionary plan 2014 is
estimated.
Number of members
Board of Directors
6.08
Board of Executive
Officers
5.17
145
Fiscal Council
3.00
Total
14.25
Annual fixed
compensation
Salaries or pro-labore fees
Direct and indirect benefits
Compensation for
participation in Committees
Others
893.619
4.360.016
207.288
5.460.923
323.744
323.743
164.423
164.423
211.608
1.658.550
41.458
1.911.616
383.066
383.066
1.224.640
1.224.640
76.613
76.613
2.694.144
2.694.144
1.729.329
10.261.094
248.746
12.239.169
Variable Compensation
Bonus
Profit sharing
Compensation for
participation in meetings
Comissions
Others
Post-employment benefits
Employment cessation
benefits
Stock-based
compensation
Total Compensation
(1) Amount based on the annual amortization rate of all curent plans, by the cost of call option. The number of options granted on the discretionary plan
2014 is estimated.
Number of members
Annual fixed
compensation
Salaries or pro-labore fees
Direct and indirect benefits
Compensation for
participation in Committees
Others
Board of Directors
7
Board of Executive
Officers
5
Fiscal Council
3
Total
15
933,005
3,278,531
187,200
4,398,736
304,444
304,444
111,926
111,926
208,986
1,185,772
37,440
1,432,198
168,737
168,737
637,433
637,433
Variable Compensation
Bonus
Profit sharing
Compensation for
participation in meetings
Comissions
Others
Post-employment benefits
Employment cessation
benefits
Stock-based
compensation
Total Compensation
33,747
33,747
1,690,083
1,690,083
1,456,401
7,096,263
224,640
8,777,304
(1) Amount based on the annual amortization rate of all curent plans, by the cost of call option.
Number of members
Annual fixed
compensation
Salaries or pro-labore fees
Direct and indirect benefits
Board of Directors
6.75
Board of Executive
Officers
5
Fiscal Council
3
Total
14.75
850,800
3,038,949
120,000
4,009,749
354,261
354,261
146
Compensation for
participation in Committees
Others
65,000
65,000
183,160
1,087,908
24,000
1,295,068
168,162
168,162
523,747
523,747
Variable Compensation
Bonus
Profit sharing
Compensation for
participation in meetings
Comissions
Others
Post-employment benefits
Employment cessation
benefits
Stock-based
compensation
Total Compensation
33,632
33,632
1,121,894
1,121,894
1,300,754
6,126,759
144,000
7,571,513
(1) According to maximum total remuneration of R$9,100,000.00 for the Board of Directors and Executive Officers approved at the Ordinary General
Meeting of April 19, 2011, excluding stock based compensation.
(2) Based on salary or pro-labor average of the Executive Officers in April 2011.
(3) Includes one month of occupation of the position of member of the Board of Directors by Gustavo Felizolla, who resigned in January 2011, and eight
months in the same position occupied by Jorge Camargo, who took office in May 2011.
13.3 With respect to variable compensation in the last 3 accounting reference periods and
compensation estimated for the current accounting reference period for the Board of
Directors, the Board of Executive Officers and the Fiscal Council:
Estimated for Current Fiscal Year (2014)
Board of Directors
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Variable remuneration
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
18
20.0% to 30.0% of
EVA
20.0% to 30.0% of
EVA
20.0% to 30.0% of
EVA
20.0% to 30.0% of
EVA
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
6.08
5.17
14.25
147
25% of Eva
25% of Eva
383.0
383.0
25% do Eva
25% do Eva
1,224.6
1,224.6
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Value effectively recognized in
results of the fiscal year
Variable remuneration
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Value effectively recognized in
results of the fiscal year
Number of Members
15
30.0% of EVA
30.0% of EVA
168.7
168.7
30.0% do EVA
30.0% of EVA
637.4
637.4
Board of Executive
Officers
Fiscal Council
Total
Number of Members
Bonus
Minimum amount estimated
by compensation plan
Maximum amount estimated
by compensation plan
Amount estimated by the
compensation plan if preestablished goals are met
Value effectively recognized in
results of the fiscal year
Variable remuneration
Minimum amount estimated
by compensation plan
6.75
14.75
25.0% of EVA
25.0% of EVA
168.2
168.2
148
25.0% of EVA
25.0% of EVA
523.7
523.7
13.4 With respect to the stock-based compensation plan for the Executive Board and the
Board of Executive Officers, which was in force in the last accounting reference period and
which is estimated for the current accounting reference period:
149
the interests of the Companys shareholders with those of its managers and employees or other entities it
controls; and (iii) allow the Company or its subsidiaries to attract and retain the managers and employees
it requires.
c.
As most of the options are available over the long term, the beneficiaries tend to stay with the Company
until at least the time they can contribute to its long-term results.
d. How the plan is included in the Companys compensation policy
As mentioned in Item 13.1b, this plan is part of the variable compensation package paid to the Companys
officers.
e. How the plans promote the alignment between management and the Company interests at short,
mid and long term
The stock option plan, in general, aligns the medium and long term interests to encourage the
Administration to conduct the company's business success, stimulating entrepreneurial and resultsoriented culture, to the extent that both the shareholders and the directors benefit from improvements in
income and increases in stock market quotation. The establishment of a waiting period before which the
options cannot be exercised (vesting period), ensures that this alignment is found in the short, medium
and long term.
f.
The stock options granted within the scope of this plan confer the rights to acquire up to 5% of shares of
the Companys capital stock, throughout the period of validity of the plan, considering all the options
already granted under the Plan, exercised or not, except those which have been extinct and not exercised
as long as the total number of shares issued or can be issued under the Plan is always within the
boundary the authorized capital of the company. Options issued by the company granted until December
31, 2009 are not subject to the Plan or its limits. In addition, the aim of the Plan is to grant share
purchase options in an amount that does not exceed 1% of shares of the Companys total capital each
year, as verified on the date the plan was approved.
As part of the 1/2010 Program, 538,714 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, 400,267 options have been exercised.
As part of the 1/2011 Program, 392,046 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, 130,281 options have been exercised.
As part of the 1/2012 Program, 232,462 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, 26,615 options have been exercised.
As part of the 1/2013 Program, 210,770 options have been granted that will be converted into ordinary
shares in the Company. Up to December 31st, 2013, no options have been exercised.
g. The maximum number of stock options to be granted
As a result of the number of shares that can be acquired within the scope of the stock option plan. The
maximum total number of shares to be issued is up to 5% of total stock.
h. Conditions for acquiring the shares
150
To receive the stock options in the 1/2010 Program, each beneficiary had to use at least 33% of the
variable component of their compensation associated with the Companys Profit-Sharing Program, net of
taxes, which were received related to the 2009 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2011 Program, each beneficiary had to use at least 33% of the
variable component of their compensation associated with the Companys Profit-Sharing Program, net of
taxes, which were received related to the 2010 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2012 Program, each beneficiary will have to use at least 33% of the
variable component of their compensation associated with the Companys Profit-Sharing Program, net of
taxes, which were received related to the 2011 financial year, to acquire shares issued by the Company.
To receive the stock options in the 1/2013 Program, each beneficiary will have to use at least 33% of the
variable component of their compensation associated with the Companys Profit-Sharing Program, net of
taxes, which were received related to the 2012 financial year, to acquire shares issued by the Company.
Additionally, the Board of Directors approved grants within the 1/2011, 1/2012 and 1/2013 Programs,
independent of the investment in the Company's shares to certain employees of the Company, due to its
performance in the exercise of their jobs.
i.
Until April 20, 2012, the price of the ordinary shares to be acquired by the beneficiaries, by exercising
their option rights were determined by the Companys Board of Directors or committee created for this
purpose based exclusively on the average share price on the BM&FBOVESPA, weighted by the trading
volume in the month or the two months prior to the granting of the stock option, monetarily adjusted by
the inflation index IPCA (ndice de Preos ao Consumidor Amplo), and deducting the value of dividends
and interest on equity per share paid by the Company as from the stock option date. On April 20, 2012,
according to the resolution of the General Meeting held on that date, the criterion for fixing the exercise
price of the options that have as a counterpart the acquisition of shares by its beneficiary was changed
and was defined as the equity value of the shares on the last day of the subsequent fiscal year. This
change does not affect the options granted prior to that General Meeting and the new criterion does not
apply to options granted that have no counterpart of the acquisition of shares by the beneficiary, which
continues to be applied the criterion of market price, described above.
For the 1/2010 Program, the exercise price of the options will be based on the value of the shares issued
at the Companys Initial Public Offering (R$11.50), monetarily adjusted by the inflation according to the
IPCA, which is disclosed by the Brazilian Institute of Geography and Statistics (IBGE), deducting the value
of dividends and interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2011 Program, the exercise price of the options will be the average share price acquired
according to brokerage invoice sent by the beneficiary to the Board of Directors or Human Resources
Committee of the Company (R$ 19.28), monetarily adjusted by the inflation according to the IPCA, which
is disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by another index determined
by the Board of Directors or committee, according to the case, from the date of conclusion of the stock
option agreement until the date the option is exercised, deducting the value of dividends and interest on
equity per share paid by the Company as from the stock option date.
Regarding the 1/2012 Basic Program, the exercise price of the options will be the average share price
acquired according to brokerage invoice sent by the beneficiary to the Board of Directors or Human
Resources Committee of the Company (R$ 5.86), monetarily adjusted by the inflation according to the
IPCA, which is disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by another index
determined by the Board of Directors or committee, according to the case, from the date of conclusion of
151
the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2012 Discricionary Program, the exercise price of the options will be the average share
price on the BM&FBOVESPA in the year of 2011 (R$19.22), weighted by the trading volume, monetarily
adjusted by the inflation according to the IPCA, which is disclosed by the Brazilian Institute of Geography
and Statistics (IBGE), or by another index determined by the Board of Directors or committee, according
to the case, from the date of conclusion of the stock option agreement until the date the option is
exercised, deducting the value of dividends and interest on equity per share paid by the Company as from
the stock option date.
Regarding the 1/2013 Basic Program, the exercise price of the options will be equal to the book value of
shares on December 31st of the fiscal year of the Company immediately preceding the stock option date
(R$ 6.80), monetarily adjusted by the inflation according to the IPCA or by another index determined by
the Board of Directors or committee created for this purpose, according to the case, from the date of
conclusion of the stock option agreement until the date the option is exercised, deducting the value of
dividends and interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2013 Discricionary Program, the exercise price of the options will be the average share
price on the BM&FBOVESPA in the year of 2012 (R$26.16), weighted by the trading volume, monetarily
adjusted by the inflation according to the IPCA, which is disclosed by the Brazilian Institute of Geography
and Statistics (IBGE), or by another index determined by the Board of Directors or committee created for
this purpose, according to the case, from the date of conclusion of the stock option agreement until the
date the option is exercised, deducting the value of dividends and interest on equity per share paid by the
Company as from the stock option date.
j.
The options granted under the terms of this plan will be subject to grace periods of up to 72 (seventy
two) months for the conversion of options into shares.
k.
Form of liquidation/settlement
The shares resulting from the exercising of purchase options will be integrated and/or acquired by their
respective beneficiaries in cash, in current national currency.
l.
Until the exercise price is fully paid, the shares acquired through exercising the option rights under the
terms of the Plan cannot be sold to third parties, except with the prior authorization of the Board, based
on the hypothesis that the product of the sale will preferably be used to settle any debt the beneficiary
has with the Company.
Based on the terms of the respective Option Contract, no beneficiary will be allowed to trade the shares
acquired for a period of 5 (five) years, observing the following rules:
(i) after a period of one year after signing the respective Option Contract, beneficiaries will be free to
trade up to 25% of the shares acquired;
(ii) after a period of one year after the term defined in item i, beneficiaries will be free to trade an
additional 25% of the shares acquired;
152
(iii) after a period of one year after the term defined in item ii, beneficiaries will be free to trade an
additional 25% of the shares acquired; and
(iv) after a period of one year after the term defined in item iii, beneficiaries will be free to trade the
outstanding balance of the shares acquired.
m. criteria and events that, when verified, will lead to the suspension, alteration or extinction of the
plan
The stock option rights granted under the terms of the Plan will automatically all be cancelled in the
following cases: (i) on the complete and full exercising of the same; (ii) after the option term has expired;
(iii) through the mutual rescission of the stock option; (iv) if the Company is dissolved, liquidated or files
for bankruptcy; or (v) if the beneficiary fails to observe the trading restriction rules described in item n
below.
In addition, in the event the beneficiary is laid off, with or without due cause, resigns or steps down from
their job, retires, or suffers from permanent disability, or dies, the option rights granted can either be
cancelled or modified, as described in item n below.
In addition, in the event the beneficiary is laid off, with or without just cause, resigns or steps down from
their job, retires, or suffers from permanent disability, or dies, the option rights granted can either be
cancelled or modified, as described in item n below.
n.
Effects generated by the Company`s Board and Committee Manager`s departure upon his/her
rights as provided by the stock-based compensation plan
If at any time during the validity of the Stock Options Plan, the beneficiary:
(i)
resigns voluntarily from the Company or leave their management role: (i) the rights not exercised
in accordance with the respective Option Contract on the date they leave the Company will automatically
all be cancelled, with no need for any prior warning or notification, and with no right to any indemnity;
and (ii) the rights already exercised in accordance with the respective Option Contract on the date they
leave the Company may be exercised within a period of 30 days from the same date, after which all rights
will automatically all be cancelled, with no need for any prior warning or notification, and with no right to
any indemnity;
(ii)
leaves the Company as a result of being fired with due cause, or failure to fulfill their duties
adequately as a manager, all the right (exercised and not exercised) in accordance with the respective
Option Contract on the date they leave the Company will automatically all be cancelled, with no need for
any prior warning or notification, and with no right to any indemnity;
(iii)
leaves the Company as a result of being fired without due cause, or failure to fulfill their duties
adequately as a manager: (i) the rights not exercised in accordance with the respective Option Contract
on the date they leave the Company will automatically all be cancelled, with no need for any prior warning
or notification, and with no right to any indemnity; except if the Board decides to anticipate the grace
period term for some or all of these rights, and the beneficiary leaves the Company within a period of up
to 12 (twelve) months after the change in share control in the Company all the unexercised rights in
accordance with the respective Option Contract on the date they leave the Company may be exercised
within a period of 30 days from the same date, after which all rights will automatically all be cancelled,
with no need for any prior warning or notification, and with no right to any indemnity, will have their
grace period anticipated; and (ii) the rights already exercised in accordance with the respective Option
Contract on the date they leave the Company may be exercised within a period of 30 days from the same
date, after which all rights will automatically all be cancelled, with no need for any prior warning or
notification, and with no right to any indemnity;
153
(iv)
on retiring from the Company: (i) the rights not exercised in accordance with the respective
Option Contract on the date they leave the Company will automatically all be cancelled, with no need for
any prior warning or notification, and with no right to any indemnity, except if the Board decides to
anticipate the grace period term for some or all of these rights; and (ii) the rights already exercised in
accordance with the Options Contract on the date of leaving the Company will have their grace period
anticipated, allowing the Beneficiary to exercise the respective stock option, as long as this is within a
period of 12 (twelve) months from the date of retirement, after which all the remaining rights will
automatically all be cancelled, with no need for any prior warning or notification, and with no right to any
indemnity;
(v)
leaving the Company due to death or permanent disability: (i) the rights not exercised in
accordance with the respective Option Contract on the date they leave the Company will automatically all
be cancelled, with no need for any prior warning or notification, and with no right to any indemnity,
except if the Board decides to anticipate the grace period term for some or all of these rights; and (ii) the
rights already exercised in accordance with the Options Contract, on the date of passing away, can be
exercised by the Beneficiarys legal successors, as long as this is done within a period of 12 (twelve)
months from the aforementioned date, after which all the remaining rights will automatically all be
cancelled, with no need for any prior warning or notification, and with no right to any indemnity.
Over and above mentioned item, the Board or Committee (whichever is the case) can, at their exclusive
criteria, whenever they deem social interests are better met by this approach, chose not to abide by the
rules stipulated above, and treat a determined beneficiary in a differentiated and individual manner.
13.5
Number of stocks or direct or indirect stock holdings, either in Brazil or overseas, and
other securities that might be converted into stock or quotas, issued by the Company, direct
or indirect affiliates, subsidiaries or companies under common control, by members of the
Executive Board, of the Board of Executive Officers or the Fiscal Board, grouped per board or
committee, on the closing date of the last accounting reference period:
The table below indicates the number of our shares held directly by our administrators and the
percentage that their direct individual contributions represent of the total number of shares issued by our
Company, in the last fiscal year, December 31st, 2013.
On December 31st, 2013
Board of Directors
Number of shares
(%)
18,311,429
14.4%
505,531
0.4%
2011
2012
2013
2014
5.17
154
404,035
83,428
25% by year,
from the year
after the date of
the Grant
05/31/2015
269,357
18,639
134,678
3,769
144,575
51,251
250,718
250,718
400,267
R$11.65
R$12.22
R$12.63
R$ 13.01
R$12.05
R$12.42
R$ 12.86
0.39%
0.39%
0.39%
0.43%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount of
redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the resigning
terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total
shares of the Company's capital at beginning of year. At the end of fiscal year 2011, the amount of shares were 125,656,724, at the end of fiscal year 2012, the total
number of shares was equal to 125,399,430 and at the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
1/2011 Program
Number of Members of the Board of
Executive Officers
Grant Date
Number of granted options
Number of non-redeemable options
Number of redeemable options()
Deadline for options to become
redeemable
Deadline for redeeming options
Grace period for stock transfer
Quantity of options exercised
Pondered average price within accounting
reference period for each of the following
option groups
Outstanding at the beginning of the
accounting reference period
Not redeemed throughout accounting
reference period
Redeemed within accounting reference
period
Expired within accounting reference period
Fair option price on grant date4
Potential dilution in the event of exercise
of all options granted3
2011
2012
2013
2014
5.17
294,034
56,546
25% by year, from the
date of the Grant
196,023
65,742
25% by year, from the
date of the Grant
143,443
209,184
25% by year, from
the date of the Grant
41,466
130,281
130,281
R$ 19.77
R$ 20.60
R$ 21.50
R$ 20.15
R$ 20.82
R$ 2,575,742
0.31%
0.31%
0.31%
0.38%
04/16/2011
392,046
392,046
25% by year, from
the date of the Grant
04/16/2016
-
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount of
redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the
resigning terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total
shares of the Company's capital at beginning of year. At the end of fiscal year 2011, the amount of shares were 125,656,724, at the end of fiscal year 2012, the
total number of shares was equal to 125,399,430 and at the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$6.57 per option. Assumptions available in item 13.9 (b).
2012
5
2013
5.17
155
2014
7
Executive Officers
Grant Date
Number of granted options
Number of non-redeemable options
Number of redeemable options()
Deadline for options to become
redeemable
Deadline for redeeming options
Grace period for stock transfer
Quantity of options exercised
Pondered average price within
accounting reference period for each of
the following option groups
Outstanding at the beginning of the
accounting reference period
Not redeemed throughout accounting
reference period
Redeemed within accounting
reference period
Expired within accounting reference
period
Fair option price on grant date4
Potential dilution in the event of exercise
of all options granted(3)
06/30/2012
38,462
38,462
25% by year, from the date of
the Grant
06/30/2017
28,847
0
25% by year, from the date
of the Grant
27,800
9,985
25% by year, from the date
of the Grant
9,615
9,615
R$ 5.74
R$ 5.75
R$ 5.82
R$ 815,394
0.03%
0.03%
0.04%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount of
redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the resigning
terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total
shares of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 125,399,430 and at the end of fiscal year
2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$ 21.20 per option. Assumptions available in item 13.9 (b).
2012
2013
2014
5.17
06/30/2012
194,000
194,000
25% by year, from the date of
the Grant
06/30/2017
145,500
31,500
25% by year, from the date
of the Grant
167,750
109,750
25% by year, from the
date of the Grant
17,000
17,000
R$ 19.57
R$ 20.37
R$ 20.60
R$ 2,362,920
0.15%
0.15%
0.23%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and total amount
of redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on the
resigning terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers the total
shares of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 126,399,430 and at the end of fiscal
year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$ 12.18 per option. Assumptions available in item 13.9 (b).
156
2013
2014
5.17
04/30/2013
105,770
105,770
25% by year, from the date of the
Grant
04/30/2018
113,585
25,285
25% by year, from the date of the
Grant
R$ 6.72
R$ 2,620,981
0.08%
0.11%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and
total amount of redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on
the resigning terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers
the total shares of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 126,399,430 and
at the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$ 24.78 per option. Assumptions available in item 13.9 (b).
2013
2014
5.17
04/30/2013
105,000
105,000
25% by year, from the date of the
Grant
04/30/2018
157,500
52,500
25% by year, from the date of the
Grant
R$ 26.78
R$ 1,251,600
0.08%
0.16%
1. Total amount of redeemable options less the total amount of redeemable options exercised at the end of the period for the fiscal years ended and
total amount of redeemable options at end of period less the total amount of redeemable options exercised in years previous to the current year.
2. 2014 considers the balance of the options granted to the newly elected officers, minus the balance of options of the offices who resigned, as stated on
the resigning terms available on the Company headquarters and on the minutes of the Board of Directors meeting held on December 17, 2013.
3. Dilution of outstanding options based on the total shares of the Company's capital at the end of fiscal year, except for the current year that considers
the total shares of the Company's capital at beginning of year. At the end of fiscal year 2012, the total number of shares was equal to 126,399,430 and
at the end of fiscal year 2013, the total number of shares was equal to 127,385,996.
4. Fair value of R$ 11.92 per option. Assumptions available in item 13.9 (b).
157
13.7 With respect to outstanding options for the Board of Directors and the Board of
Executive Officers at the closing of the last accounting reference period
Number of members
Program
1/2013 Discretionary
5.17
Program
1/2010
Program
1/2011
134,678
134,678
options
become
redeemable
every year
until 2013
196,023
28,847
145,500
105,770
105,000
715,818
98,011 options
become
redeemable
every year
until 2013
9,616 options
become
redeemable
every year
until 2013
48,500 options
become
redeemable
every year
until 2013
26,442 options
become
redeemable
every year
until 2013
26,250 options
become
redeemable
every year
until 2013
Until 2017
05/31/2015
04/16/2016
05/31/2017
05/31/2017
04/30/2018
04/30/2018
04/30/2018
R$ 2,704,443
R$ 2,505,174
R$ 789,831
R$ 2,213,055
R$ 2,825,117
R$ 1,336,650
R$ 12,374,269
Total
5.17
Non-Outstanding options
Number
3,769
65,742
31,500
101,011
05/31/2015
04/16/2016
05/31/2017
05/31/2017
05/31/2017
R$ 12.86
R$ 20.82
R$ 5.82
R$ 20.06
R$ 20.29
R$ 75,685
R$ 840,183
R$ 0
R$ 479,115
R$ 1,394,982
R$ 2,780,127
R$ 3,345,357
R$ 789,831
R$ 2,692,170
R$ 2,825,117
R$ 1,336,650
R$
13,769,252
Board of Directors
Board of Directors has no stock-based compensation.
13.8 With respect to redeemed and delivered options for the Board of Directors and the
Board of Executive Officers, in the past three accounting reference periods
Number of Members
Redeemable Options
Number of shares
Pondered average price within accounting
reference period
Total value of the difference between the
exercise value and market value of shares related
to options exercised1
Shares Granted
Number of granted shares
Pondered average price of acquisition
Total value of the difference between the
Program
1/2010
5.17
Program
1/2011
5.17
Program
1/2012 Basic
5.17
Program
1/2012 Discretionary
5.17
149,549
88,815
9,615
17,000
264,979
R$ 12.86
R$ 20.82
R$ 5.82
R$ 20.06
R$ 15.73
R$ 2,703,846
R$ 898,808
R$ 241,529
R$ 184,960
R$ 4,029,143
149,549
R$ 12.86
R$ 2,703,846
88,815
R$ 20.82
R$ 898,808
9,615
R$ 5.82
R$ 241,529
17,000
R$ 20.06
R$ 184,960
264,979
R$ 15.73
R$ 4,029,143
158
Total
5.17
Program
1/2010
5
Program
1/2011
5
Total
5
199,467
41,466
240,933
R$ 12.42
R$ 20.15
R$ 13.75
R$ 4,190,802
R$ 550,668
R$ 4,741,470
199,467
R$ 12.42
41,466
R$ 20.15
240,933
R$ 13.75
R$ 4,190,802
R$ 550,668
R$ 4,741,470
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 33.43 at the end of 2012.
2010/1
Program
2
51,251
R$12.05
R$281,881
51,251
R$12.05
R$281,881
1 Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 17.55 at the end of 2011.
Board of Directors
Board of Directors has no stock-based compensation.
13.9 Summary of relevant information aiming at a broader understanding of data
presented under items 13.6 through 13.8 above, as well as an explanation of the pricing
method used for stock and option values
a. Pricing model
The programs granted from 2010 onwards were classified as equity instruments, which the weighted
average fair value of options is determined using the Black-Scholes valuation model using as premises:
(a) weighted average share price, (b) exercise price, (c) expected volatility, (d) dividend yield, (e)
expected option life and (f) annual risk-free interest rate. The equity portion is priced only at the grant
date and the fair value is not remeasured on every reporting date. The portions of equity and debt are
appropriated plan by plan, taking into consideration the respective lock up periods (period in which shares
are blocked for trading), based on management's best estimate as to their end dates.
159
R$11.50
R$11.95
31%
1,461
1.52%
6.60%
R$3.86
R$11.50
R$14.10
31%
1,461
1.28%
6.37%
R$5.49
R$11.65
R$20.55
34.92%
1,247
1.71%
6.08%
R$10.49
R$11.59
R$20.55
34.92%
1,282
1.71%
6.08%
R$10.56
R$12.22
R$17.55
38.68%
882
1.06%
4.81%
R$7.27
R$12.16
R$17.55
38.68%
917
1.06%
4.83%
R$7.37
R$12.63
R$33.43
35.92%
516
0.70%
1.04%
R$20.69
R$12.57
R$33.43
35.92%
551
0.70%
1.08%
R$20.75
R$13.01
R$33.00
33.86%
182
0.64%
3.06%
R$20.08
R$13.01
R$33.00
33.86%
186
0.64%
3.12%
R$20.09
160
Expected volatility1
38.68%
Expected option life (days)
1,202
Dividend yield
1.06%
Risk-free interest rate
4.94%
Fair value per share
R$4.70
At the end of 2012
Exercise price
R$20.60
Weighted average share price
R$33.43
Expected volatility1
35.92%
Expected option life (days)
836
Dividend yield
0.70%
Risk-free interest rate
1.70%
Fair value per share
R$14.36
At the end of 2013
Exercise price
R$21.50
Weighted average share price
R$33.00
Expected volatility1
33.86%
Expected option life (days)
471
Dividend yield
0.64%
Risk-free interest rate
3.77%
Fair value per share
R$12.78
1
Measured by the historical behavior of the value of the stock of the Company
1/2012
Calculation of fair value
Basic (06/30/2012)
Grant Date
Exercise price
R$5.86
Weighted average share price
R$27.10
Expected volatility1
37.41%
Expected option life (days)
1,461
Dividend yield
0.87%
Risk-free interest rate
3.92%
Fair value per share
R$21.20
At the end of 2012
Exercise price
R$5.74
Weighted average share price
R$33.43
Expected volatility1
35.92%
Expected option life (days)
1,277
Dividend yield
0.70%
Risk-free interest rate
2.15%
Fair value per share
R$27.30
At the end of 2013
Exercise price
R$5.75
Weighted average share price
R$33.00
Expected volatility1
33.86%
Expected option life (days)
882
Dividend yield
0.64%
Risk-free interest rate
4.84%
Fair value per share
R$27.38
1
Measured by the historical behavior of the value of the stock of the Company
1/2012
Discretionary (06/30/2012)
R$19.22
R$27.10
37.41%
1,461
0.87%
3.92%
R$12.18
R$19.57
R$33.43
35.92%
1,277
0.70%
2.15%
R$16.14
R$20.37
R$33.00
33.86%
882
0.64%
4.84%
R$15.21
1/2013
Basic (04/30/2013)
1/2013
Discretionary (04/30/2013)
R$6.81
R$31.72
35.34%
1,461
0.82%
3.37%
R$24.78
R$26.16
R$31.72
35.34%
1,461
0.82%
3.37%
R$11.92
R$6.72
R$33.00
R$26.78
R$33.00
161
Expected volatility1
33.86%
Expected option life (days)
1,216
Dividend yield
0.64%
Risk-free interest rate
5.48%
Fair value per share
R$26.71
1
Measured by the historical behavior of the value of the stock of the Company
33.86%
1,216
0.64%
5.48%
R$12.73
c. Method used and assumed premises to incorporate the effects from expected early exercise
There was no early exercise.
Board of Directors
Number of members
Highest individual compensation value
Lowest individual compensation value
Average individual compensation value
6.75
261,336
180,732
192,704
7
270,222
190,251
208,057
6.08
334,510
248,544
284,429
5
2,009,980
687,584
1,232,078
5
2,287,911
822,193
1,419,253
5.17
3,843,450
1,066,639
1,984,738
3
48,000
48,000
48,000
3
74,880
74,880
74,880
3
82,915
82,915
82,915
_______________________________________________
(1)
Compensation paid for the Executive Officers who occupied the position for the 12 months of the year.
The Companys Fiscal Council was installed in the Ordinary General Meeting of April 19th, 2011, and
became a permanent body in the Ordinary and Extraordinary General Meeting of April 20th, 2012.
13.12 Contract agreements, insurance policies or other instruments that might underlie the
compensation or indemnity mechanisms applicable to managers in the occurrence of
dismissal or retirement
162
Not applicable. The Company has no contract agreements, insurance policies or other instruments that
might underlie the compensation or indemnity mechanisms applicable to managers in the occurrence of
dismissal or retirement.
13.13 With respect to the last three accounting reference periods, disclose the percentage of
total compensation for each board or committee as acknowledged in the Company results
and which applies to members of the Executive Board, of the Board of Executive Officers or
the Fiscal Board, that are somehow connected to direct or indirect affiliates, in compliance
with the accounting rules that govern this matter.
Board or Committee
Board of Directors
Board of Executive Officers
Fiscal Council
2011
16%
-
2013
14%
-
13.14 With respect to the last three accounting reference periods, disclose the amounts as
acknowledged in the Company results for compensation paid to members of the Executive
Board, of the Board of Executive Officers or the Fiscal Board, grouped by board or committee,
for any purpose other than the function they perform, such as commissions, consulting or
advisory services.
Not Applicable. There were no compensation of the Board of Directors, Executive Officers and Fiscal
Council members recognized in the results of the Company in the fiscal years ended in 2011, 2012 and
2013, grouped by board or committee, for any purpose other than the function they perform, such as
commissions, consulting or advisory services.
13.15 Compensation of Executive Officers and Fiscal Council members recognized in the
results of controlling companies, direct or indirect, of companies under common control of
subsidiaries of the issuer
Not Applicable. There were no compensation of Executive Officers and Fiscal Council members recognized
in the results of controlling companies, direct or indirect, of companies under common control of
subsidiaries of the issuer in the fiscal years ended in 2011, 2012 and 2013.
13.16 Other relevant information
The number of members of the Management Board, Fiscal Council and Board of Executive Officers of the
Company specified in this Section 13 have been calculated in line with the requirements of OfcioCircular/CVM/SEP / No. 001/2014, as detailed in the following spreadsheet for each fiscal year:
Fiscal year 2014 (estimated)
January
February
March
April
May
June
July
August
September
October
November
Number of members of
Board of
Board of Directors
Executive Officers
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
8
7
163
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
December
Total
Number of Members (Total
divided by the number of months)
8
96
7
84
3
36
Number of members of
Board of
Board of Directors
Executive Officers
7
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
5
6
7
73
62
6.08
5.17
Number of members of
Board of
Board of Directors
Executive Officers
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
84
60
7
Number of members of
Board of
Board of Directors
Executive Officers
7
5
6
5
6
5
6
5
7
5
7
5
7
5
7
5
7
5
7
5
7
5
164
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
3
36
3
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
3
36
3
Fiscal Council
3
3
3
3
3
3
3
3
3
3
3
December
Total
Number of Members (Total
divided by the number of months)
7
81
5
60
3
36
6.75
165
14.
166
HUMAN RESOURCES
14.1
a.
the number of employees (total, by groups based on activity and by geographic
location)
The chart below shows the number of our employees in the financial years ended December 2011, 2012
and 2013:
2011
534
2,777
687
294
249
4,541
Heavy Construction
Industrial Services
Real Estate
Rental
Corporate
Total
2013
604
838
423
227
2,092
The conclusion of the sale of the Industrial Services business unit was on November 30, 2013.
In December 31, 2011, 2012 and 2013, all employees were allocated in Brazil. The table below indicates
the location of the employees of the Company, considering the business units and departments to which
they belong, as indicated below:
2013
States
Amazonas
Bahia
Cear
Distrito Federal
Esprito Santo
Gois
Maranho
Mato Grosso
Mato Grosso do Sul
Minas Gerais
Par
Paran
Pernambuco
Rio de Janeiro
Rio Grande do Sul
Santa Catarina
So Paulo
Sergipe
Total
Employees
Heavy
Construction
31
26
75
28
16
54
113
261
604
Industrial
Services
-
Real Estate
26
51
44
87
26
28
1
24
54
24
40
43
119
60
211
838
Rental
7
26
14
4
13
8
10
5
6
39
26
14
28
77
26
4
114
2
423
Corporate
6
1
8
2
10
2
4
162
3
29
227
Total
33
114
85
174
41
36
39
29
6
119
50
56
129
471
89
4
615
2
2,092
The conclusion of the sale of the Industrial Services business unit was on November 30, 2013.
2012
States
Amazonas
Bahia
Cear
Distrito Federal
Esprito Santo
Gois
Maranho
Mato Grosso
Minas Gerais
Employees
Heavy
Construction
45
71
24
Industrial
Services
750
12
-
Real Estate
27
52
38
116
26
25
6
21
66
167
Rental
20
9
9
4
43
Corporate
23
1
9
4
7
Total
27
890
48
196
51
25
10
21
140
2012
States
Par
Paran
Pernambuco
Rio de Janeiro
Rio Grande do Sul
So Paulo
Total
Employees
Heavy
Construction
49
130
4
274
597
Industrial
Services
654
460
338
437
2,651
Heavy
Construction
38
76
19
36
144
1
220
534
Industrial
Services
927
38
103
421
416
283
589
2,777
Real Estate
49
42
120
65
199
852
2011
States
Amazonas
Bahia
Cear
Distrito Federal
Esprito Santo
Gois
Mato Grosso
Minas Gerais
Par
Paran
Pernambuco
Rio de Janeiro
Rio Grande do Sul
So Paulo
Total
Rental
31
14
30
65
16
105
346
Corporate
2
17
182
5
60
310
Total
31
65
792
957
428
1,075
4,756
Corporate
23
1
5
3
6
12
159
1
39
249
Total
8
1,055
24
176
73
24
8
228
29
57
524
878
352
1,105
4,541
Employees
Real Estate
8
48
17
89
23
24
8
59
44
31
112
56
168
687
Rental
19
6
6
9
41
29
13
24
47
11
89
294
b.
the number of outsourced employees (total, by groups based on activity and by
geographic location)
The Company has outsourced certain activities which are not directly related to its core business, such as
janitorial services, security, transport, meal preparation, and IT support, among others. In addition, the
Company signs short-term employment contracts in accordance with the fluctuation in demand for their
services. In December 31, 2011, 2012 and 2013, the Company had, respectively, 172, 223 and 241
outsourced workers, as detailed below:
2013
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do Sul
Distrito Federal
Gois
Par
Manaus
Mato Grosso
Rio Grande do Norte
Sergipe
Janitorial
services
17
19
5
3
4
3
4
1
4
5
2
2
2
1
2
-
Security
11
15
12
2
8
8
7
2
15
6
2
6
8
2
3
4
Transport
4
2
2
-
168
Catering
4
-
IT Support
24
3
1
1
2
1
2
1
1
1
-
Total
60
39
18
6
14
12
15
4
20
12
4
8
10
3
5
4
2013
State
Maranho
Total
Janitorial
services
2
76
Security
4
115
Transport
8
Catering
4
IT Support
1
38
Total
7
241
Janitorial
services
18
26
5
2
5
3
4
2
3
5
2
1
1
77
Security
23
29
4
4
6
6
5
4
8
2
2
2
4
4
103
Transport
20
2
1
23
Catering
-
IT Support
7
4
1
1
2
1
2
1
1
20
Total
48
59
10
7
33
10
13
7
12
8
4
2
5
5
223
Janitorial
services
14
24
5
2
4
1
3
10
1
64
Security
15
20
12
4
3
5
2
5
9
4
4
83
Transport
3
3
Catering
-
IT Support
8
5
1
1
2
1
2
1
1
22
Total
40
49
18
7
9
7
7
6
9
11
5
4
172
2012
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do Sul
Distrito Federal
Gois
Par
Manaus
Mato Grosso
Total
2011
State
Rio de Janeiro
So Paulo
Minas Gerais
Esprito Santo
Bahia
Cear
Pernambuco
Paran
Rio Grande do Sul
Distrito Federal
Gois
Par
Manaus
Total
c.
The index of employee turnover (churn) in financial years ending in 2013, 2012 and 2011 was 3.2%,
4.6% and 5.5%, respectively, excluding the employees allocated in the Industrial Services business unit in
2013, when the business unit was sold.
d.
169
In 2012, the increase in the Companys workforce is related to the growth of their businesses, especially
due to formation of technical and commercial teams in the new branches, except in the Industrial Services
business unit, where there has been a reduction in the workforce.
In 2011, the increase in the Company's workforce is related to the growth of their businesses, mainly in
the Real Estate and Rental business units, especially due to formation of technical and commercial teams
in the new branches.
14.3
a.
The Company believes one of its key competitive advantages is the quality of its skilled labor. The
Company has developed, over the years, a human resources development culture based on achievement,
employee participation and transparency. The Company also has profit sharing programs and offer
opportunities for professional development. The Company believes this culture promotes the loyalty,
engagement and enthusiasm of the employees, which leads to a historically low rate of substitution of
skilled labor (turnover) and increases our ability to provide quality services to our customers.
The Companys compensation policy includes the payment of salaries consistent with those in the market.
Additionally, the Company offers the Profit Sharing Program to all its employees.
b.
Benefits policy
As a standard policy, the Company offers its employees the following benefits and facilities, which may
change due to contracts executed with its clients:
health insurance with coverage for hospital stays: employees contribute part of the cost of this
benefit (15% to 35%, according to their salary);
group life insurance fully funded by the Company;
dental care fully funded by the employees opting in for this benefit;
essential food baskets partially funded by the Company (50%) for employees who receive up to
six times the minimum wage, and that have not missed a workday or arrived late in the month.
Each of these employees receives one food basket per month. In 2013 the Company distributed
40,608 food baskets to our employees, of which 1,578 were in December.
meal allowance: 10% to 20% of the cost of the benefit is discounted from the employee's
paycheck;
loans to employees under the "Desafogo" Project: the funds should be allocated to specific
purposes and cannot exceed one nominal salary of the employee, limited to the amount of 6
minimum wages;
pharmacy benefit agreement;
lending of a car to the executives, who must bear all maintenance costs of the vehicle (except for
insurance and IPVA property tax); and
stock option plan (only for our directors and executives).
c.
Characteristics of compensation plans based on stock options of non-administrator
employees
The Company has one stock option plan that benefits their employees, Plano de Opes de Compra de
Aes 2010, previously granted purchase options remaining.
The Company has two stock option plans that benefit their employees, namely, " Plano Especial Top Mills
and Plano de Opes de Compra de Aes 2010, previously granted purchase options remaining.
170
171
Pursuant to the respective Option Agreement, each beneficiary is prohibited to trade their acquired shares
for a period of 5 years, respecting the following rules:
(i)
After one year as of the execution of the respective Option Agreement, beneficiaries are free to
trade up to 25% of their acquired shares;
(ii)
After one year as of the term defined in item i, beneficiaries are free to trade another 25% of
their acquired shares;
(iii)
After one year as of the term defined in item ii, the beneficiary is free to trade another 25% of
the acquired shares; and
(iv)
After one year as of the term defined in item iii, each beneficiary is free to trade the remainder
of their acquired shares;
b. Exercise price
Until April 20, 2012, the price of the ordinary shares to be acquired by the beneficiaries, by exercising
their option rights were determined by the Companys Board of Directors or committee based exclusively
on the average share price on the BM&FBOVESPA, weighted by the trading volume in the month or the
two months prior to the granting of the stock option, monetarily adjusted by the inflation index IPCA
(ndice de Preos ao Consumidor Amplo), and deducting the value of dividends and interest on equity
per share paid by the Company as from the stock option date. On April 20, 2012, according to the
resolution of the General Meeting held on that date, the criterion for fixing the exercise price of the
options that have as a counterpart the acquisition of shares by its beneficiary was changed and was
defined as the equity value of the shares on the last day of the subsequent fiscal year. This change does
not affect the options granted prior to that General Meeting and the new criterion does not apply to
options granted that have no counterpart of the acquisition of shares by the beneficiary, which continues
to be applied the criterion of market price, described above.
For the 1/2010 Program, the exercise price of the options will be based on the value of the shares issued
at the Companys Initial Public Offering (R$11.50), monetarily adjusted by the inflation according to the
IPCA, deducting the value of dividends and interest on equity per share paid by the Company as from the
stock option date.
For the 1/2011 Program, the exercise price of the options will be (i) the average share price acquired
according to brokerage invoice sent by the beneficiary to the Board of Directors or Human Resources
Committee of the Company (R$ 19.28), (ii) monetarily adjusted by the inflation according to the IPCA,
disclosed by the Brazilian Institute of Geography and Statistics (IBGE), or by another index determined by
the Board of Directors or committee, according to the case, from the date of conclusion of the stock
option agreement until the date the option is exercised, (iii) deducting the value of dividends and interest
on equity per share paid by the Company as from the stock option date.
For the 1/2012 Program, regarding the Basic Grant, the exercise price of the options will be the amount of
the shares net worth in December 31 of the fiscal year immediately after the stock option date of the
Company (R$5.86), monetarily adjusted by the inflation according to the IPCA, or by another index
determined by the Board of Directors or committee, according to the case, from the date of conclusion of
the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
For the 1/2012 Program, regarding the Discretionary Grant, the exercise price of the options will be the
average, weighed by the trading volume, of the ordinary shares of the Company in BM&FBOVESPA,
during the fiscal year of 2011 (R$19.22), monetarily adjusted by the inflation according to the IPCA, or by
another index determined by the Board of Directors or committee, according to the case, from the date of
172
conclusion of the stock option agreement until the date the option is exercised, deducting the value of
dividends and interest on equity per share paid by the Company as from the stock option date.
For the 1/2013 Program, regarding the Basic Grant, the exercise price of the options will be the amount of
the shares net worth in December 31 of the fiscal year immediately after the stock option date of the
Company (R$6.81), monetarily adjusted by the inflation according to the IPCA, or by another index
determined by the Board of Directors or committee, according to the case, from the date of conclusion of
the stock option agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
For the 1/2013 Program, regarding the Discretionary Grant, the exercise price of the options will be the
average, weighed by the trading volume, of the ordinary shares of the Company in BM&FBOVESPA,
during the fiscal year of 2011 (R$26.16), monetarily adjusted by the inflation according to the IPCA, or by
another index determined by the Board of Directors or committee, according to the case, from the date of
conclusion of the stock option agreement until the date the option is exercised, deducting the value of
dividends and interest on equity per share paid by the Company as from the stock option date.
The options granted under this plan will be subject to vesting periods of up to 72 months for the
conversion of options into shares.
c.
In the 2010/1 Program: Up to 1,475,234 common shares issued by the Company, which 936,520
designated to non-administrators employees. By December, 31, 2013, 661,823 shares were exercised
(options of non-administrators employees).
In the 2011/1 Program: Up to 1,184,229 common shares issued by the Company, which 792,183
designated to non-administrators employees. By December, 31, 2013, 347,807 shares were exercised
(options of non-administrators employees).
In the 2012/1 Program: Up to 1,257,467 common shares issued by the Company, which 792,183
designated to non-administrators employees. By December, 31, 2013, 217,830 shares were exercised
(options of non-administrators employees).
In the 2013/1 Program: Up to 768,335 common shares issued by the Company, which 557,565
designated to non-administrators employees. By December, 31, 2013, no shares were exercised.
14.4
At December 31, 2013, approximately 0.3% of the Companys employees were represented by a trade
union, especially the Civil Construction Trade Union and the Commerce Union. The Company has
agreements with each trade union, and renegotiates them every year. The Company maintains a good
relationship with the main trade unions its employees are represented by.
173
15.
174
OWNERSHIP
15.1/15.2
Controling Group:
The table below presents the ownership structure of company to date, emphasizing the quantity of shares
of capital stock held by direct controlling and administrators on December 2nd, 2014:
MILLS ESTRUTURAS E SERVIOS DE ENGENHARIA S.A.
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
12/28/2012
Individual
098.921.337-49
Argentinian
Participates
in
shareholder
agreement
Yes
12/28/2012
Individual
289.858.347-20
Brazilian
12/28/2012
Individual
042.695.577-37
Brazilian
Antonia Kjellerup
12/28/2012
Individual
073.165.257-62
12/28/2012
Individual
127.276.837-66
05/05/2014
Individual
7/20/2012
Entity
12/02/2014
Entity
10/02/2012
Entity
Administrators
11/28/2014
Individual
Others
11/28/2014
Name
Controlling
shareholder
Quantity of
common
shares
%
Capital
Stock
Yes
15,595,249
12.2%
Yes
Yes
5,354,929
4.2%
Yes
Yes
2,156,845
1.7%
Brazilian
Yes
Yes
2,156,845
1.7%
Brazilian
Yes
Yes
2,156,845
1.7%
124.175.657-06
Brazilian
Yes
Yes
1,000
0.0%
14.740.333/0001-61
Spanish
Yes
Yes
17,728,280
13.8%
American
No
No
6,507,300
5.2%
Brazilian
No
No
6,444,685
5.0%
No
No
3,359,453
2.8%
No
No
66,425,179
51.9%
Controlling
shareholder
Quantity of
common
shares
%
Capital
Stock
01.701.201/0001-89
UF
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
3/14/2012
Entity
N/A
Malta
Date of last
amendment
Type of
Person
CNPJ/CPF
Nationality
Nicolas Nacht
3/14/2012
Entity
734.150.811-68
Argentino
3/14/2012
Entity
Yes
Outros
3/14/2012
Entity
Yes
Name
Malachite Limited
Yes
100%
Malachite Limited
Name
15.3
788
725
29
4/25/2014
79,368,479
% free float
62.0
175
UF
Participates
in
shareholder
agreement
Yes
Controlling
shareholder
Quantity of
common
shares
%
Capital
Stock
Yes
2,000
40%
Yes
2,000
40%
Yes
1,000
20%
15.4
Members:
Andres Cristian Nacht, Jytte Kjellerup Nacht, Tomas Richard Nacht, Antonia Kjellerup Nacht, Pedro
Kjellerup Nacht and Francisca Kjellerup Nacht (jointly, Famlia Nacht);
Snow Petrel S.L. (together with the Natch Family, Members, and
b.
Date: 02.28.2014
c.
Term: 3 years
d.
Description of the clauses concerning the exercise of voting rights and control power.
The vote of the parties with respect to general meetings will be done by shareholder Andres
Cristian Nacht, unless any member of the agreement requires a previous meeting, when the
resolution will be set by the majority of votes within the controlling block, subject to veto rights
for specific matters:
Mergers, splits, incorporations and any other corporate reorganization related to the
Company
Reduction of the mandatory dividend paid by the Company, if below the 25% over net
earnings, as determined by Law 6.404/76;
Capital increase or reduction, apart from when the capital increase is the Board of
Directors responsibility;
Cancelling the register of public company and discontinuing the best practices in
corporate governance as determined by Novo Mercado;
Request from judicial reorganization or voluntary bankruptcy
Approval of evaluation reports to be sent to general shareholders meeting approval
Change in the corporate object of the Company
Change in the minimum or maximum number of members of the Board of Directors, as
stated on the Companys Bylaws, or change in the matters within the Board of Directors
competence;
176
The agreement does not bind the votes of the Board of Directors members or of other bodies of the
Company.
e.
When a previous meeting is not requested, Andres Cristian Nacht will be responsible for appointing all
members of the Companys Board of Directors that the controlling block is allowed to elect.
In the case a previous meeting is requested for the appointment of the members of the Board of
Directors:
Out of the total number of members of the Board of Directors that the parts, altogether,
can elect on the General Shereholders Meeting, each member of the agreement is
entitled to elect a number of members that is proportional to its stake in the share capital
of the Company (regardless of the shares of shareholders who are not part of the
Shareholders Agreement);
In the case the result of the calculation above is a fraction, the ones superior to 0.5 will
be rounded up to 1.0;
Regardless of the rounding above mentioned, the member of the agreement with the
highest stake will have the right to appoint the majority of members of the Board of
Directors which the controlling group is entitled to elect.
Whenever the Chairman is appointed by the members of the controlling group or by the Board of
Directors, the appointment will be under Andres Cristian Nachts responsibility.
The rules abovementioned shall apply mutatis mutandis to the the Fiscal Council,
The Shareholders Agreement does not contain prepositions related to the appointment of the
Board of Officers members.
f.
Description of the clauses concerning the transfer of shares and the preference for buying them.
The Shareholders Agreement states that the shares of its members can not be sold (lock-up)
during its term.
As an exception from the general lock-up rule, each member of the Agreement can sell, during its
term, up to 10% of its shares (Released Shares).
In the case Released Shares are being sold by one member, the other members shall have the
preemptive right to acquire the shares for the price asked by the selling member.
In the case the non selling shareholders do not acquire Released Shares using their preemptive
rights, the selling shareholders may sell them on the stock exchange at a price which is not less
than that offered to non selling members of the Agreement.
177
g.
Description of the clauses restricting or binding the voting rights of members of the board. See
item d. There are no prepositions concerning the transfer of shares and the preference for buying them.
15.6 Significant Changes in the shareholdings of Members of the Control Group and
directors of the Company in the last 3 financial years
178
controlled by Sr. Nicolas Nacht; (d) Snow Petrel intends to continue to hold shared control of the
Company, this being the main objective of its participation; and (e) since all of the capital of Jeroboam
was already held by Snow Petrel, the transfer discussed in this notice does not impact, in any way, control
of the Company.
15.7
On May 15, 2014, was approved, in the Board of Directors Meeting, the increase of the Companys capital
stock, as follows: (i) issuance of 250,004 new common stocks, totalizing on the amount of R$
3,360,053.76 due to the exercise of stock option, according to the Companys Stock Option Plan, archived
in the Companys headquarters (1/2010); (ii) issuance of 95,391 new common stocks, totalizing on the
amount of R$ 2,117,680.20 due to the exercise of stock option, according to the Companys Stock Option
Plan, archived in the Companys headquarters (1/2011); (iii) issuance of 24,800 new common stocks,
totalizing on the amount of R$ 147,064.00 due to the exercise of stock option, according to the
Companys Stock Option Plan, archived in the Companys headquarters (1/2012); (iv) issuance of
101,550 new common stocks, totalizing on the amount of R$ 2,135,596.50 due to the exercise of stock
option, according to the Companys Stock Option Plan, archived in the Companys headquarters (1/2012);
and (v) issuance of 63,827 new common stocks, totalizing on the amount of R$ 443,597.65 due to the
exercise of stock option, according to the Companys Stock Option Plan, archived in the Companys
headquarters (1/2013).
On August 15, 2014, was approved, in the Board of Directors Meeting, the increase of the Companys
capital stock, as follows: (i) issuance of 4,800 new common stocks, totalizing on the amount of R$
64,128.00 due to the exercise of stock option, according to the Companys Stock Option Plan, archived in
the Companys headquarters (1/2010); (ii) issuance of 5,845 new common stocks, totalizing on the
amount of R$ 33,901.00 due to the exercise of stock option, according to the Companys Stock Option
Plan, archived in the Companys headquarters (1/2012); (iii) issuance of 1,550 new common stocks,
totalizing on the amount of R$ 32,581.00 due to the exercise of stock option, according to the Companys
Stock Option Plan, archived in the Companys headquarters (1/2012); and (iv) issuance of 19,650 new
common stocks, totalizing on the amount of R$ 134,013.00 due to the exercise of stock option, according
to the Companys Stock Option Plan, archived in the Companys headquarters (1/2013).
The amount of shares in circulation mentioned in 15.3 already has the modifications described above,
according to orientation from the Ofcio Circular/CVM/SEP/n01/2014.
179
16.
180
16.1
The business and transactions with related parties of the Company are always performed by observing
price and usual market conditions and they do not generate any benefit or detriment to the Company or
any other party.
Under the Companys bylaws, the Board must approve any transaction with any of the Company's
shareholders.
As of December 31, 2013, the Company did not hold any consulting services contracts with members from
the Board of Directors. There has not been any loans between the Company and its administrators during
the fiscal year of 2013.
16.2
There has not been any transactions with related parties during the last three fiscal years.
16.3
The Company adopts corporate governance practices and those recommended and/or required by
applicable regulations including those set out in Novo Mercado regulations. The Board of Directors must
approve the policies and make necessary arrangements for directors and shareholders to not be involved
in conflict of interest situations. Additionally, pursuant to the Companys by-laws, the Board of Directors
must approve any transaction with any of the Company's shareholders.
181
17.
182
SHARE CAPITAL
17.1
17.2
Resolution
Date
Corporate
Body that
ruled the
increase
Issue Date
Total amount
of the increase
Type of
Increase
Shares
issued
Subscription
/ previous
capital
Issue
price
Rate
Unit
Form of
Payment
7/27/2011
Board of
Directors
7/27/2011
R$1,548,424.09
Private
Subscription
128,287
0.2949
R$
12.07
R$ Unit
9/23/2011
Board of
Directors
9/23/2011
R$110,495.40
Private
Subscription
48,028
0.0210
R$ 2.30
R$ Unit
Cash
9/23/2011
Board of
Directors
9/23/2011
R$14,142.18
Private
Subscription
18,598
0.0027
R$0.76
R$ Unit
Cash
10/24/2011
Board of
Directors
10/24/2011
R$790,329.68
Private
Subscription
65,642
0.1498
R$
12.04
R$ Unit
1/24/2012
Board of
Directors
1/24/2012
R$ 398,490.09
Private
Subscription
32,583
0.0755
R$
12.23
R$ Unit
183
Cash
Cash
Cash
2/28/2012
Board of
Directors
2/28/2012
R$ 4,227.33
Private
Subscription
339
0.0008
R$
12.47
R$ Unit
4/2/2012
Board of
Directors
4/2/2012
R$ 112,171.78
Private
Subscription
47,131
0.0212
R$ 2.38
R$ Unit
4/24/2012
Board of
Directors
4/24/2012
R$ 4,613,384.16
Private
Subscription
371,448
0.8736
R$
12.42
R$ Unit
4/24/2012
Board of
Directors
4/24/2012
R$ 892,862.10
Private
Subscription
44,421
0.1691
R$
20.10
R$ Unit
7/2/2012
Board of
Directors
7/2/2012
R$ 31,276.80
Private
Subscription
13,032
0.0059
R$2.40
R$ Unit
8/9/2012
Board of
Directors
8/9/2012
R$ 886,108.00
Private
Subscription
70,550
0.1660
12.56
R$ Unit
8/9/2012
Board of
Directors
8/9/2012
R$ 20,000.00
Private
Subscription
1,600
0.0037
12.50
R$ Unit
8/9/2012
Board of
Directors
8/9/2012
R$ 1,633,370.82
Private
Subscription
80,422
0.3056
20.31
R$ Unit
11/12/2012
Board of
Directors
11/12/2012
R$ 445,178.37
Private
Subscription
35,529
0.0830%
12.53
R$ Unit
11/12/2012
Board of
Directors
11/12/2012
R$ 18,660.00
Private
Subscription
1,500
0.0035%
12.44
R$ Unit
184
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
11/12/2012
Board of
Directors
11/12/2012
R$ 982,280.40
Private
Subscription
48,151
0.1830%
20.40
R$ Unit
2/8/2013
Board of
Directors
2/8/2013
R$ 7,494.00
Private
Subscription
600
0.0014%
12.49
R$ Unit
2/8/2013
Board of
Directors
2/8/2013
R$ 37,820.00
Private
Subscription
3,050
0.0070%
12.40
R$ Unit
2/8/2013
Board of
Directors
2/8/2013
R$ 1,819,309.96
Private
Subscription
88,574
0.3384%
20.54
R$ Unit
4/10/2013
Board of
Directors
4/10/2013
R$ 169,264.59
Private
Subscription
66,903
0.0314%
2.53
R$ Unit
5/9/2013
Board of
Directors
5/9/2013
R$ 2,973,204.90
Private
Subscription
230,481
0.5509%
12.9
R$ Unit
5/9/2013
Board of
Directors
5/9/2013
R$ 2,919,849.05
Private
Subscription
138,185
0.5381%
21.13
R$ Unit
5/9/2013
Board of
Directors
5/9/2013
R$ 143,307.36
Private
Subscription
24,372
0.0263%
5.88
R$ Unit
185
Cash
Cash
Cash
Cash
Cash
5/9/2013
Board of
Directors
5/9/2013
R$ 3,072,963.25
Private
Subscription
153,265
0.5631%
20.05
R$ Unit
5/22/2013
Board of
Directors
5/22/2013
R$ 39,555,60
Private
Subscription
15,512
0.0072%
2.55
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 1,298,869.95
Private
Subscription
101,395
0.2367%
12.81
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 1,180,587.20
Private
Subscription
55,952
0.2146%
21.10
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 41,029.52
Private
Subscription
7,148
0.0074%
5.74
R$ Unit
8/15/2013
Board of
Directors
8/15/2013
R$ 586,700.00
Private
Subscription
29,335
0.1064%
20.00
R$ Unit
11/01/2013
Board of
Directors
11/01/2013
R$ 109,892.16
Private
Subscription
5,152
0.0199%
21.33
R$ Unit
11/01/2013
Board of
Directors
11/01/2013
R$ 19,117.35
Private
Subscription
945
0.0035%
20.23
R$ Unit
186
Cash
Cash
Cash
Cash
Cash
Cash
Cash
11/14/2013
Board of
Directors
11/14/2013
R$ 248,118
.00
Private
Subscription
19,086
0.015%
13.00
R$ Unit
11/14/2013
Board of
Directors
11/14/2013
R$ 368,743.40
Private
Subscription
17,231
0.014%
21.40
R$ Unit
11/14/2013
Board of
Directors
11/14/2013
R$ 10,377.40
Private
Subscription
1,780
0.001%
5.83
R$ Unit
11/14/2013
Board of
Directors
11/14/2013
R$ 559,728.00
Private
Subscription
27,600
0.022%
20.28
R$ Unit
01/10/2014
Board of
Directors
01/10/2014
R$ 78.12
Private
Subscription
0.000005
13.02
R$ Unit
01/10/2014
Board of
Directors
01/10/2014
R$ 124,155.72
Private
Subscription
5,772
0.0045
21.51
R$ Unit
01/10/2014
Board of
Directors
01/10/2014
R$ 4,095.36
Private
Subscription
711
0.0006
5.76
R$ Unit
187
Cash
Cash
Cash
Cash
Cash
Cash
Cash
01/10/2014
Board of
Directors
01/10/2014
R$ 61,170.00
Private
Subscription
3,000
0.0024
20.39
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 658,784.62
Private
Subscription
50,174
0.0394
13.13
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 300,002.50
Private
Subscription
13,825
0.0109
21.70
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 20,648.74
Private
Subscription
3,554
0.0028
5.81
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 231,300.00
Private
Subscription
11,250
0.0088
20.56
R$ Unit
02/05/2014
Board of
Directors
02/05/20147
R$ 52,273.80
Private
Subscription
7,710
0.0061
6.78
R$ Unit
02/14/2014
Board of
Directors
02/14/2014
R$ 23,951.20
Private
Subscription
1,820
0.0014
13.16
R$ Unit
02/14/2014
Board of
Directors
02/14/2014
R$ 84,568.60
Private
Subscription
3,890
0.0031
21.74
R$ Unit
188
Cash
Cash
Cash
Cash
Cash
Cash
Cash
Cash
02/14/2014
Board of
Directors
02/14/2014
R$ 57,680.00
Private
Subscription
2,800
0.0022
20.60
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 3,360,053.76
Private
Subscription
250,004
0.1961
13.44
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 2,117,680.20
Private
Subscription
95,391
0.0748
22.20
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 147,064.00
Private
Subscription
24,800
0.0195
5.93
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 2,135,596.50
Private
Subscription
101,550
0.0797
21.03
R$ Unit
05/15/2014
Board of
Directors
05/15/2014
R$ 443,597.65
Private
Subscription
63,827
0.0501
6.95
R$ Unit
08/15/2014
Board of
Directors
08/15/2014
R$ 64,128.00
Private
Subscription
4,800
0.0037
13.36
R$ Unit
189
Cash
Cash
Cash
Cash
Cash
Cash
Cash
08/15/2014
Board of
Directors
08/15/2014
R$ 33,901.00
Private
Subscription
5,845
0.0046
5.80
R$ Unit
08/15/2014
Board of
Directors
08/15/2014
R$ 32,581.00
Private
Subscription
1,550
0.0012
21.02
R$ Unit
08/15/2014
Board of
Directors
08/15/2014
R$ 134,013.00
Private
Subscription
19,650
0.0153
6.82
R$ Unit
17.3
Not applicable, as there wasnt any reductions in the Companys capital in the last three fiscal years.
17.5
At the Ordinary and Extraordinary General Meeting held on April 19, 2011, it was approved the
amendment of the caput of Article 5 of the Company's Bylaws, to adjust it to the deliberations of the
Board of Directors taken on April 14, 2010 and November 30, 2010, which approved the increase of
capital stock within the limit of authorized capital.
At the Extraordinary General Meeting held on April 20, 2012, it was approved the amendment of the
caput of Article 5 of the Company's Bylaws, to adjust it to the deliberations of the Board of Directors
taken on July 27, 2011, September 23, 2011, October 24, 2011, January 24, 2012 and February 28, 2012,
which approved the increase of capital stock within the limit of authorized capital.
At the Extraordinary General Meeting held on February 25, 2014, it was approved the amendment of the
caput of Article 5 of the Company's Bylaws, to adjust it to the deliberations of the Board of Directors
taken on April 2, 2012, April 24, 2012, June 21, 2012, July 2, 2012, August 9, 2012, November 12, 2012,
February 8, 2013, April 10, 2013, May 9, 2013, May 22, 2013, August 15, 2013, November 1, 2013,
November 14, 2013 and January 10, 2010, which approved the increase of capital stock within the limit of
authorized capital, passing the relevant article to henceforth as the following wording:
190
Cash
Cash
Cash
5th Article - The capital, fully subscribed and paid, is R$553,420,638.63 (five hundred fifty-three million,
four hundred twenty thousand, six hundred thirty eight reais and sixty-three centavos), represented by
127.395.485 (one hundred twenty-seven million, three hundred ninety-five thousand, four hundred,
eighty-five) common, nominative, inscribed and without par value shares.
191
18.
192
SECURITIES
18.1
193
relating to securities convertible into shares, or that give the right to their subscription or acquisition, as
applicable, which comes to result in the sale of Control of the Company, and (b) in the case of a transfer
of control of company(ies) holding the Power of Control of the Company, in which case, the Selling
Controlling Shareholder shall be obliged to declare to the BM&FBOVESPA the value assigned to the
Company in such transaction and provide supporting documentation.
18.3 Description of exceptions and suspensive clauses relative to ownership or
political rights set forth in the bylaws
Not applicable, as there are no exceptions or suspensive clauses relative to ownership or political rights
set forth in the Companys bylaws.
18.4 Information on the volume of trading as well as minimum and maximum values
for securities traded on the stock exchange or the over-the-counter market, in each of the
quarters in the last 3 fiscal years.
Quarter
ended
Securities
Type
Class
Market
03/31/2011
Shares
Common
Stock
Exchange
06/30/2011
Shares
Common
Stock
Exchange
09/30/2011
Shares
Common
Stock
Exchange
12/31/2011
Shares
Common
Stock
Exchange
03/31/2012
Shares
Common
Stock
Exchange
06/30/2012
Shares
Common
Stock
Exchange
09/30/2012
Shares
Common
Stock
Exchange
12/31/2012
Shares
Common
Stock
Exchange
03/31/2013
Shares
Common
Stock
Exchange
06/30/2013
Shares
Common
Stock
Exchange
09/30/2013
Shares
Common
Stock
Exchange
12/31/2013
Shares
Common
Stock
Exchange
18.5
Administrative
Authority
Total financial
volume traded
(Reais)
Highest
price
(Reais)
Lowest
price
(Reais)
Factor
price
(Reais)
389,456,322
23.27
17.13
R$ per
unit
393,427,101
23.49
18.06
R$ per
unit
273,785,519
23.77
16.56
R$ per
unit
337,269,490
18.95
14.49
R$ per
unit
474,013,331
23.78
16.97
R$ per
unit
503,547,358
27.60
22.08
R$ per
unit
708,267,760
30.00
25.25
R$ per
unit
654,291,178
34.00
28.28
R$ per
unit
664,392,189
35.00
29.81
R$ per
unit
971,831,194
35.99
27.21
R$ per
unit
890,684,261
32.00
26.28
R$ per
unit
893,622,222
33.24
28.47
R$ per
unit
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
BM&FBOVESPA -
Bolsa de Valores,
Mercadorias e Futuros
194
Promissory notes of the first issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
30 commercial papers
c Total amount
R$30,000,000.00
Issue date
Deadline
e Restrictions on trading
f Convertibility
The Commercial Papers were the object of a public distribution offer with restricted placement
efforts, targeted at qualified investors, as defined in Article 4 of CVM Rule 476, on a firm guarantee
basis.
Not applicable. The first issue of promissory notes are not convertible into shares issued by the
company.
g Possibility of redemption:
Each commercial note of first issue was subject to early repayment, in whole, at any time from the
date of issue, at the discretion of the company, provided that its holder is notified within 5 (five)
working days in advance of the date set for the rescue. Additionally, the Company was obliged to
(i) hypotheses of redemption
redeem all the notes in advance of the first issue on the date of subscription of the debentures of
the first issue, described below. Therefore, all commercial notes of first issue were fully redeemed on
April 28, 2011, and are no longer in circulation.
(ii) Assumptions and method The amount to be paid by the Company to the holder of each commercial note first issued
of calculating the redemption corresponded to their nominal value plus the remuneration, calculated pro rata temporis since the
value
date of issue until the date of effective payment, but without payment of prize or penalty.
if debt securities, indicate
h
where applicable:
(i) maturity date, including
conditions for acceleration
For more information on maturity date, please refer to item 18.10 below.
The nominal value of each commercial note of first issue was not subject to monetary correction.
On the nominal value of each note were added remuneration interest focused corresponding to the
variation of accumulated 105% (one hundred and five per cent) of the DI rate (Remuneration), from
the date of issue until the date of the effective payment of their commercial note, and followed the
criteria for calculating the Trade Notes formulas and Obligations CETIP21, which is available on the
Web (www.cetip.com.br).
(ii) interest
The remuneration was paid in full on the date of early redemption, subject to the terms and
conditions provided for in each commercial note first issued.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification or
judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the date
of actual payment .
(iii)
guarantee and, if
in the form of collateral,
Not applicable
description of the goods used
as collateral
(iv.)
in the absence of a
guarantee, if the credit is The credit represented by each commercial note of first issued were unsecured.
secured or subordinate
(v)
possible
restrictions imposed on the
issuer
the
dividend
See terms of acceleration described in item 18.10 below.
distribution
assets
195
the
new debt
i
j
possibility
of
None
Promissory notes of the second issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
3 Commercial Notes
c Total amount
Issue date
December 7, 2011
Maturity date
December 1, 2012
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued by
the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification
or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the
date of actual payment
(iii)
guarantee and, if
in the form of collateral,
Not applicable. The second issue of promissory notes does not have collateral or surety.
description of the goods
used as collateral
(iv)
in the absence of a
The credit of the promossory note is unsecured.
guarantee, if the credit is
196
secured or subordinate
v.
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
conditions
for
amendment of the rights
i
Not applicable.
conferred
by
such
securities
j
The amendment of any rights conferred by each commercial note of second issuance depends on
the holders approval.
Promissory notes of the third issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
30 Commercial Notes
c Total amount
Issue date
Maturity date
December 3, 2012
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued by
the company.
g Possibility of redemption:
(i) Possibility of redemption
Not applicable. The Company may not redeem the promissory notes in advance.
Over the nominal value of each note there will be remuneration interest of 100% of accumulated
variation of the DI rate plus spread 4.9% per annum from the date of issue until the date of the
effective payment of their commercial note.
197
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification
or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the
date of actual payment
(iii) .
guarantee and, if
in the form of collateral,
Not applicable. The third issue of promissory notes does not have collateral or surety.
description of the goods used
as collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
(v)
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
None
Promissory notes of the fourth issue, issued in a single series, now fully redeemed.
a Identification of securities
b Quantity
20 Commercial Notes
c Total amount
Issue date
Maturity date
August 8, 2014
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be traded
between qualified investors. The trading restriction period laid down in article 13 of that 90 days
after the statement expired date of issue.
Not applicable. The fouth issue of promissory notes are not convertible into shares issued by the
company.
g Possibility of redemption:
198
The Company shall, unilaterally, and that, for the purposes of the paragraph 2, article 7, CVM
Instruction 134, the holders will have given their express prior consent, irrevocably and irreversibly,
at the moment of the subscription of the Notes in the primary market or acquisition in the secondary
market, as appropriate, perform, at any time, from the 31st (thirty first) day counted from the Issue
Date. In case of partial early redemption, the same will take place by lot, pursuant paragraph 4,
article 7, CVM Instruction 134, and all the steps in this process, such as license, qualification,
verification and validation of the number of Notes to be redeemed will be held outside of CETIP. The
Company shall communicate the holders, the Payment Agent and CETIP, about the redemption with
at least 2 (two) business days of the date of the event.
The amount to be paid by the Company to the holder of each commercial note of the fourth issue
(ii) Assumptions and method
corresponds to the nominal value of the commercial notes plus the remuneration, calculated pro rata
of calculating the redemption
temporis since the date of issue until the date of effective payment, but without payment of prize or
value
penalty, according to the terms and conditions set forth in the notes.
h
(ii) interest
(iii) .
guarantee and, if
in the form of collateral,
Not applicable. The fourth issue of promissory notes does not have collateral or surety.
description of the goods used
as collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
(v)
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
None
199
Debentures
Identification of securities
Issue date
Maturity date
Quantity
27,000
Total amount
270,000,000.00
Restrictions on trading
Description
restrictions
of
yes
The debentures were the subject of public distribution with restricted placement efforts, pursuant to
trading CVM Instruction 476, under the firm commitment and, consequently, can only be traded between
qualified investors. The trading restriction period laid down in article 13 of that 90 days after the
statement expired date of issue
Convertibility
Not applicable
Possibility of redemption
Not applicable
For more information on maturity date, please refer to item 18.10 below.
The face value of the debentures of the first issue will not be monetarily updated.
Interest paid semi-annually will account for 112.5% of the accumulated variation of the interest
rate of CDI.
ii.
Interest
The remuneration provided above shall be paid every six months from the date of issue, being the
first payment on October 18, 2011, and the last payment of the maturity date, or on the date of
any settlement.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification or
judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the
date of actual payment
iii.
guarantee and, if in
the
form
of
collateral,
description of the goods used
as collateral
iv.
in the absence of a
guarantee, if the credit is
secured or subordinate
v.
possible
restrictions imposed on the
issuer
the
dividend
distribution
the possibility of
new debt
Not applicable. The first issue of debentures does not have collateral or surety.
The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
For more information on the fiduciary agent, please refer to item 18.10 below.
200
During deliberations of the General Meetings of debenture holders for each of the series, for each
outstanding Debenture one vote will be granted, permitting the establishment of proxy, whether
Debenture holder or not. Except for the provisions below, all deliberations to be taken in the
General Meeting of debenture holders will depend on approval of debenture holders representing at
least
75%
of
outstanding
Debentures.
conditions for amendment of
Not included in the quorum above are: I. quorums expressly provided for in other clauses of the
the rights conferred by such
deed of issue; and II. changes, which should be approved by debenture holders representing at
securities
least 90% of outstanding Debentures: (a) of the provisions of this clause; (b) of the quorums for
approval provided for in the Deed of issue; (c) the remuneration, except as provided in Clause of
the Deed of issuance; (d) any dates for payment of any amounts provided for in the Deed of
issuance; (e) of the term of the Debentures; (f) of the type of Debentures; (g) creation of a
repricing event; (j) of any Event of Default.
Other relevant characteristics None
Debentures
Identification of securities
Quantity
27,000
Total amount
R$ 270,000,000.00
Issue date
Maturity date
Restrictions on trading
Yes. The debentures were subject of public distribution with restricted placement efforts, pursuant
to CVM Instruction 476, under the firm commitment to the placement of 20,000 debentures, and
under the best-efforts placement in relation to the remaining debentures. The debentures can only
be traded between qualified investors and after a 90 days period from the date of subscription or
purchase according to the articles 13 and 15 of CVM Instruction 476, and compliance by the
Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Not applicable
For more information on maturity date, please refer to item 18.10 below.
The remuneration of each of the First Series Debentures will be as follows:
I. Monetary Adjustment: The nominal value of the debentures of the first issue will not be
monetarily updated.
II. Compensatory Interests: On the nominal value of each of the First Series Debentures will incur
interest corresponding to 100% of the cumulative variation of the DI rate plus surcharge of 0.88%
(eighty-eight per cent) per year.
ii.
Interest
Notwithstanding the payments due to early redemption of the First Series Debentures and/or
acceleration of the obligations under the Debentures, pursuant to the Deed of Issue, the First Series
Compensation will be paid semiannually from the Issue Date, with the first payment on February
15, 2013 and the last, on the maturity date of the First Series.
The remuneration of each of the Second Series Debentures will be as follows:
I. Monetary Adjustment: The nomeinal of each Second Series Debentures will be adjusted by the
National Index of Consumer Prices Broad, released by the Brazilian Institute of Geography and
Statistics ("IPCA"), since the Issue Date until the date of actual payment, being the update
incorporated into the Nominal value of each Second Series Debentures automatically ("Second
Series Monetary Adjustment"). Notwithstanding the payments due to early redemption of the
201
Debentures and/or acceleration of the obligations under the Debentures, pursuant to the Deed of
Issue, the Second Series Monetary Adjustment will be paid on the same dates and the same
amount of amortization of nominal value of each Second Series Debentures, as provided in the
Deed of Issue.
iii.
guarantee and, if in
the
form
of
collateral,
Not applicable. The second issue of debentures does not have collateral or surety.
description of the goods used
as collateral
iv.
in the absence of a
guarantee, if the credit is The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
secured or subordinate
v.
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
vi
the
fiduciary
agent,
indicating the key terms of For more information on the fiduciary agent, please refer to item 18.10 below.
the contract
During deliberations of the General Meetings of first series debenture holders and General Meetings
of second series debenture holders, for each outstanding Debenture one vote will be granted,
permitting the establishment of proxy, whether Debenture holder or not. Except for the provisions
below, (i) all deliberations to be taken in the General Meeting of debenture holders will depend on
approval of debenture holders of the first series representing at least 75% of outstanding First
Series Debentures; and (ii) all deliberations to be taken in the General Meeting of debenture holders
will depend on approval of debenture holders of the second series representing at least 75% of
outstanding Second Series Debentures.
Conditions for amendment of
the rights conferred by such Not included in the quorum above are: (i) quorums expressly provided for in other clauses of the
securities
deed of issue; and (ii) changes, which should be approved by debenture holders of the first series
representing at least 90% of outstanding first series debentures and by debenture holders of the
second series representing at least 90% of outstanding second series debentures, (a) of the
provisions of this clause; (b) of the quorums for approval provided for in the Deed of issue; (c) the
remuneration, except for changes resulting from extinction, limitation and / or non-disclosure of the
DI rate or IPCA, as provided in Clause of the Deed of issuance; (d) any dates for payment of any
amounts provided for in the Deed of issuance; (e) of the term of the Debentures; (f) of the type of
Debentures; (g) creation of a repricing event; (h) the provisions relating to optional early
redemption; (i) the provisions relating to early amortization (j) of any Event of Default.
Other
relevant
None
characteristics
Debentures
Identification of securities
Quantity
20,000
Total amount
R$ 200,000,000.00
Issue date
Maturity date
202
Restrictions on trading
Yes. The debentures were subject of public distribution with restricted placement efforts, pursuant
to CVM Instruction 476, under the firm commitment to the placement of 20,000 debentures, and
under the best-efforts placement in relation to the remaining debentures. The debentures can only
be traded between qualified investors and after a 90 days period from the date of subscription or
purchase according to the articles 13 and 15 of CVM Instruction 476, and compliance by the
Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Yes
The Company may, at its sole discretion, make, at any time, optional early redemption offer, total or
partial, of the outstanding Debentures, with the consequent cancellation of such Debentures, which
will be sent to all Bondholders, without distinction, assured equal conditions to all Bondholders to
accept the early redemption of the Debentures held by them, through an Optional Early Redemption
Assumptions and method of
Offer. The amount to be paid in respect of each Debenture indicated by their respective holders into
calculating the redemption
joining the Optional Early Redemption Offer will be equal to the outstanding balance of the Par
value
Value, plus (a) Remuneration, calculated pro rata from the date issuance or payment date
immediately preceding Compensation, as appropriate, until the date of actual payment; and (b) if
applicable, the redemption premium to be offered to the Bondholders, at the sole discretion of the
Company, which can not be negative redemption.
If debt securities, indicate
where applicable:
i. Conditions for acceleration
For more information on maturity date, please refer to item 18.10 below.
I. Monetary Adjustment: The nominal value of the debentures of the third issue will not be
monetarily updated.
ii.
II. Compensatory Interest: on the outstanding balance of the Nominal Value of the Debentures
outstanding focus interest corresponding to 108.75% (one hundred and seventy-eight point five
percent) of the accumulated variation of average daily DI - Interbank Deposits one day, calculated
and published daily by CETIP in the daily bulletin on its website (http:// www.cetip.com.br)
calculated exponentially and cumulatively pro rata by days elapsed from the Issue Date or payment
date immediately preceding Compensation form as the case until the date of actual payment.
Without prejudice to the payments related to early redemption of the Debentures and / or early
maturity of obligations on the Debentures, the remuneration will be payable semiannually from the
Issue Date, on the 30th of May and November of each year, with the first payment on November
30, 2014 and the last on the Maturity Date.
Interest
iii.
guarantee and, if
in the form of collateral,
Not applicable. The third issue of debentures does not have collateral or surety.
description of the goods used
as collateral
iv.
in the absence of a
guarantee, if the credit is The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
secured or subordinate
v.
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
203
During deliberations of the General Meetings of debenture holders, for each outstanding Debenture
one vote will be granted, permitting the establishment of proxy, whether Debenture holder or not.
Except for the provisions below, (i) all deliberations to be taken in the General Meeting of debenture
holders will depend on approval of debenture holders of the first series representing at least 75% of
outstanding First Series Debentures; and (ii) all deliberations to be taken in the General Meeting of
debenture holders will depend on approval of debenture holders of the second series representing
at least 75% of outstanding Second Series Debentures.
18.6 Description of the Brazilian markets where the company's securities are admitted for
trading
Shares
The Companys common shares are traded at the BM&FBOVESPA.
Commercial Paper
The Companys first, second, third and fourth issuance of commercial paper, described in table 18.5 of
this Reference Form, were registered for trading in the secondary market, through CETIP21 - Ttulos e
Valores Mobilirios, managed and operated by CETIP, trading being settled through CETIP and
electronical custody of the commercial paper by CETIP. The first issue of commercial papers were already
fully redeemed on April 28, 2011. The second issue of commercial papers were already fully redeemed on
November 30, 2012. The third issue of commercial papers were already fully redeemed on December 3,
2012.
Debentures
The debentures issued by the Company, first, second and third issuance, described at table 18.5 of this
Reference Form, were registered for trading in the seconday market and electronic custody SND Mdulo
Nacional de Debntures, managed and operated by CETIP.
18.7
a. Country
United States of America.
d. Market
The ADRs of Mills are traded in the over-the-counter market (OTC) under CUSIP 60114T103, ISIN
BRMILSACNOR2 and ticker MILTY.
e. Administrative entity for the market in which securities are listed for trading
OTC (Over-The-Counter)
204
i. Percentage of trading volume overseas when compared to the total trading volume for
each class and type of security last year
There were no ADR trading in 2013.
j. Proportion of certificates of deposit overseas, if any, when compared to each class and
type of shares
1:1 (one ADR for each commom share).
Public offerings of distribution of commercial promissary notes and debentures, with restricted placement
efforts
Promissory notes of first, second, third and fourth issue and the debentures of the first, second and third
issue were subject of public offerings, with restricted efforts of placement, in accordance with CVM
Instruction No. 476, of January 16, 2009, intended exclusively for qualified investors. The first issue of
commercial papers were already fully redeemed on April 28, 2011. The second issue of commercial papers
were already fully redeemed on November 30, 2012. The third issue of commercial papers were already
fully redeemed on December 3, 2012. All relevant characteristics of these securities are described in
section 18.5 of this Reference Form.
18.9
Description of takeover bids made by Company for shares issued by third parties
Not applicable, as the Company did not make takeover bids for shares issued by third parties.
205
b Quantity
30 commercial papers
c Total amount
R$30,000,000.00
d Issue date
Deadline
e
f
Restrictions on trading
Convertibility
g Possibility of redemption:
Each commercial note of first issue was subject to early repayment, in whole, at any time from the
date of issue, at the discretion of the company, provided that its holder is notified within 5 (five)
working days in advance of the date set for the rescue. Additionally, the Company was obliged to
(i) hypotheses of redemption
redeem all the notes in advance of the first issue on the date of subscription of the debentures of
the first issue, described below. Therefore, all commercial notes of first issue were fully redeemed on
April 28, and are no longer in circulation.
(ii) Assumptions and method The amount to be paid by the Company to the holder of each commercial note first issued
of calculating the redemption corresponded to their nominal value plus the remuneration, calculated pro rata temporis since the
value
date of issue until the date of effective payment, but without payment of prize or penalty.
h if debt securities, indicate
where applicable:
Maturing on June 27, 2011. The notes were redeemed when the Company issued debentures, on
April 28, 2011.
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare early
maturity of the obligations under the Commercial Paper, and may demand immediate payment of
the Nominal Amount plus the remuneration, the occurrence of any of the following events, provided
in addition to other cartouches and those provided by law (each event, an "Event of Default"): (i)
declaration of acceleration of any other Commercial Paper; (ii) default by the Company of any
monetary obligation due under the Commercial Paper; (iii) default by the Company of any nonpecuniary obligation due under the Commercial Paper; (iv) sale, assignment or pledge any form of
transfer or promise to transfer to third parties in whole or in part, by the Company of any of the
Obligations, without the prior consent in writing of the Holder; (v) transformation of the Company
into a privately held Company or any other social arrangement; (vi) approval of any corporate
reorganization involving the Company, without the prior consent in writing of the Holder; (vii)
change in the Company's Control; (viii) Changing the corporate purpose, unless such change does
not result in changing the company's main activity; (ix) acceleration of any financial obligation of
the Company and/or any Subsidiary of the Company, the value of which, individually or in
aggregate, be less than R$ 5,000,000.; (x) default by the Company due to mandatory early
redemption of subscription and payment of the Debentures, as provided under "Early Redemption"
above, or (xi) the Company does not use the net proceeds of the offering as described under "Use
of Proceeds" in the cartouche.
The nominal value of each commercial note of first issue was not subject to monetary correction.
(ii) interest
On the nominal value of each note were added remuneration interest focused corresponding to the
variation of accumulated 105% (one hundred and five per cent) of the DI rate (Remuneration), from
the date of issue until the date of the effective payment of their commercial note, and followed the
criteria for calculating the Trade Notes formulas and Obligations CETIP21, which is available on the
Web (www.cetip.com.br).
The remuneration was paid in full on the date of early redemption, subject to the terms and
conditions provided for in each commercial note first issued.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification or
206
judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the date
of actual payment .
(iii)
guarantee and, if
in the form of collateral,
Not applicable
description of the goods used
as collateral
(iv.)
in the absence of a
guarantee, if the credit is The credit represented by each commercial note of first issued were unsecured.
secured or subordinate
(v)
possible
restrictions imposed on the
issuer
distribution
assets
the
the
new debt
securities
i
j
dividend
possibility
of
None
Promissory notes of the second issue, issued in a single series, now fully redeemed
a Identification of securities
b Quantity
3 Commercial Notes
c Total amount
d Issue date
December 7, 2011
Maturity date
e
Restrictions on trading
f
Convertibility
December 1, 2012
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued by
the company.
g Possibility of redemption:
(i) Possibility of redemption
(ii) Assumptions and method
of calculating the redemption
value
Not applicable. The Company may not redeem the promissory notes in advance.
207
Subject to the provisions of the cartouches in Commercial Notes, the holder could declare early
maturity of the obligations under the Commercial Paper, and may demand immediate payment of
the Nominal Amount plus the remuneration, the occurrence of any of the following events,
provided in addition to other cartouches and those provided by law (each event, an "Event of
Default"): (i) declaration of acceleration of any other Commercial Paper; (ii) default by the
Company of any monetary obligation due under the Commercial Paper; (iii) default by the
Company of any non-pecuniary obligation due under the Commercial Paper; (iv) sale, assignment
or pledge any form of transfer or promise to transfer to third parties in whole or in part, by the
Company of any of the Obligations, without the prior consent in writing of the Holder; (v)
transformation of the Company into a privately held Company or any other social arrangement;
(vi) approval of any corporate reorganization involving the Company, without the prior consent in
writing of the Holder; (vii) change in the Company's Control; (viii) Changing the corporate
purpose, unless such change does not result in changing the company's main activity; (ix)
acceleration of any financial obligation of the Company and/or any Subsidiary of the Company,
the value of which, individually or in aggregate, be less than R$ 5,000,000.; (x) default by the
Company due to mandatory early redemption of subscription and payment of the Debentures, as
provided under "Early Redemption" above, or (xi) the Company does not use the net proceeds of
the offering as described under "Use of Proceeds" in the cartouche.
The nominal value of the promissory note will not be updated monetarily.
Over the nominal value of each note there will be remuneration interest of 100% of accumulated
variation of the DI rate plus spread 1.10% per annum from the date of issue until the date of the
effective payment of their commercial note.
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
(ii) interest
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification
or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the
date of actual payment
(iii)
guarantee and, if
in the form of collateral,
Not applicable. The second issue of promissory notes does not have collateral or surety.
description of the goods
used as collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
v.
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
conditions
for
amendment of the rights
Not applicable.
conferred
by
such
securities
None.
208
Promissory notes of the third issue, issued in a single series, now fully redeemed
a Identification of securities
b Quantity
30 Commercial Notes
c Total amount
d Issue date
Maturity date
e
Restrictions on trading
f
Convertibility
December 3, 2012
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be
traded between qualified investors. The trading restriction period laid down in article 13 of that
90 days after the statement expired date of issue
Not applicable. The second issue of promissory notes are not convertible into shares issued by
the company.
g Possibility of redemption:
(i) Possibility of redemption
(ii) Assumptions and method
of calculating the redemption
value
Not applicable. The Company may not redeem the promissory notes in advance.
The remuneration shall be paid in full by the due date or the date of any anticipated payment.
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification
or judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the
date of actual payment
(iii) .
guarantee and, if
in the form of collateral,
Not applicable. The second issue of promissory notes does not have collateral or surety.
description of the goods used
as collateral
209
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
(v)
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
None
b Quantity
20 Commercial Notes
c Total amount
Issue date
Maturity date
August 8, 2014
e Restrictions on trading
f Convertibility
The commercial notes were the subject of public distribution with restricted placement efforts,
pursuant to CVM Instruction 476, under the firm commitment and, consequently, can only be traded
between qualified investors. The trading restriction period laid down in article 13 of that 90 days
after the statement expired date of issue.
Not applicable. The fouth issue of promissory notes are not convertible into shares issued by the
company.
g Possibility of redemption:
The Company shall, unilaterally, and that, for the purposes of the paragraph 2, article 7, CVM
Instruction 134, the holders will have given their express prior consent, irrevocably and irreversibly,
at the moment of the subscription of the Notes in the primary market or acquisition in the secondary
market, as appropriate, perform, at any time, from the 31st (thirty first) day counted from the Issue
Date. In case of partial early redemption, the same will take place by lot, pursuant paragraph 4,
article 7, CVM Instruction 134, and all the steps in this process, such as license, qualification,
verification and validation of the number of Notes to be redeemed will be held outside of CETIP. The
Company shall communicate the holders, the Payment Agent and CETIP, about the redemption with
at least 2 (two) business days of the date of the event.
The amount to be paid by the Company to the holder of each commercial note of the fourth issue
(ii) Assumptions and method
corresponds to the nominal value of the commercial notes plus the remuneration, calculated pro rata
of calculating the redemption
temporis since the date of issue until the date of effective payment, but without payment of prize or
value
penalty, according to the terms and conditions set forth in the notes.
210
(ii) interest
(iii) .
guarantee and, if
in the form of collateral,
Not applicable. The fourth issue of promissory notes does not have collateral or surety.
description of the goods used
as collateral
(iv)
in the absence of a
guarantee, if the credit is The credit of the promossory note is unsecured.
secured or subordinate
(v)
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
211
None
Debentures
Identification of securities
Issue date
Maturity date
Quantity
27,000
Total amount
270,000,000.00
Restrictions on trading
Description
restrictions
of
Yes
The debentures were the subject of public distribution with restricted placement efforts, pursuant to
trading CVM Instruction 476, under the firm commitment and, consequently, can only be traded between
qualified investors. The trading restriction period laid down in article 13 of that 90 days after the
statement expired date of issue
Convertibility
Not applicable
Possibility of redemption
Not applicable
The obligations may be declared mature in advance, if the terms and conditions set forth in the
Deed of Issue are maintained, in the occurrence of any of the events summarized below: I. Default
by non-payment of the Nominal Value, of Remuneration, premium, or any other amounts owed to
the debenture holders; V. assignment or pledge any form of transfer or promise of transfer to third
parties in whole or in part by the Company, any of its obligations under the Deed, without the prior
consent in writing of Debenture Holders representing at least 75% of the outstanding; VI. invalidity,
unenforceability or invalidity of the deed and / or the Distribution Agreement, is not remedied within
10 days from the date of the respective event; VII. (a) bankruptcy of the Company, and /or any of
its subsidiary or controlling Company; (b) voluntary bankruptcy application made by the Company
and / or any of its subsidiary or controlling Company; (c) bankruptcy filing by the Company, and /or
any of its subsidiary or controlling Company, formulated by others, not elided within legal; (d)
petition for judicial or extrajudicial recovery of the Company and /or any of its subsidiary or
controlling Company, regardless of approval of the request; or (e) liquidation, dissolution or
extinction of the Company, and /or any of its subsidiary or controlling Company, unless the
liquidation, dissolution and / or extinction during the course of a corporate transaction which does
not constitute an Event of Default; VIII. changing the company into a limited liability company,
pursuant to articles 220 to 222 of Law No. 6,404/76;IX. approval of incorporation, merger or split of
the company or sale, by the company, of all or substantially all of its assets or its mining properties,
with some exceptions: (a) if the transaction has been approved in advance by the Debenture
Holders representing at least 75% of the outstanding Debentures; or (b) if the Debenture Holders
that wish to do so, be assured that, during the minimum period of six months from the date of
publication of the minutes of corporate acts in the transaction, the redemption of the Debentures
held by them, by paying the outstanding balance of the Nominal Value, plus Remuneration,
calculated pro rata from the Issue Date or the date of payment of compensation immediately
preceding, whichever is applicable until the date of actual paymentse; or (c) by the incorporation of
the Company (so that the Company is the remaining entity), of any Subsidiary; or (d) if the
operation is carried out solely between Subsidiaries; X. capital reduction, except if previously
approved by Debenture Holders representing at least 75% of the outstanding Debentures, pursuant
212
to Article 174, paragraph 3, of Law No. 6,404/76; XI. change or transfer of control (as defined
under Article 116 of Law No. 6,404/76), direct or indirect, of the Company, from any Controlling
Company and / or any Subsidiary, except if previously approved by Debenture Holders representing
at least 75% of the outstanding Debentures; XV. early maturity of any financial obligation of the
Company and / or any Subsidiary, which amount, individual or aggregate, is equal to or greater
than R$ 5,000,000.00 or its equivalent in other currencies, and/or occurrence of any event or
default of any obligation which, after the expiration of any period provided in their document, or in
other cases, within 10 days from the date of their default, give rise to the declaration of acceleration
any financial obligation of the Company and / or any Subsidiary, which amount, individual or
aggregate, is equal to or greater than R$ 5,000,000.00 or its equivalent in other currencies.
The face value of the debentures of the first issue will not be monetarily updated.
Interest paid semi-annually will account for 112.5% of the accumulated variation of the interest rate
of CDI.
ii.
The remuneration provided above shall be paid every six months from the date of issue, being the
first payment on October 18, 2011, and the last payment of the maturity date, or on the date of any
settlement.
Interest
In case of payment after the deadline of any amount due in respect of any obligation under the
Commercial Papers, on any and all amounts in arrears would address, without notice, notification or
judicial or extrajudicial, and subject to the Remuneration, calculated pro rata from the date of
default to the date of actual payment, (i) fines of 2% (two percent), and (ii) interest of 1% (one
percent) per month or fraction of a month, calculated pro rata from the date of default until the
date of actual payment
iii.
guarantee and, if in
the form of collateral,
Not applicable. The first issue of debentures does not have collateral or surety.
description of the goods used
as collateral
iv.
in the absence of a
guarantee, if the credit is The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
secured or subordinate
v.
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
Remuneration: The performance of duties and tasks assigned to compete in accordance with the
law and its deed of issue, the fiduciary agent, or the institution which will replace him in that
capacity, he shall receive a remuneration: (i) R$13,000.00 per year, due from the company, being
the first instalment of remuneration payable within 30 days from the date of conclusion of the deed
of issue, and the other, on the same day of subsequent years; (ii) Additionally, in the event of a
close-out netting of obligations of the company under the debentures of the first emission,
vi the fiduciary agent,
equivalent to R$500.00 per hour-working man devoted to activities related to the issue and the
indicating the key terms of
debentures, to be paid within 5 days from the date of attestation of delivery by the trustee and
the contract
approval by the company, of the report, concerning hours of activities (a) advice to debenture
holders in the process of renegotiation required by the company; (b) attendance at formal meetings
with the company eou debentureholders eou general meetings of debenture holders; and (c)
implementation of the decisions taken by the debenture holders (iii) brought out yearly since the
date of payment of the first annual instalment by the change in the general price index-market,
published by Fundao Getlio Vargas, or by any other that eventually is replaced, calculated pro
rata temporis, if necessary; (iv) plus the sales tax of any kind TAXES, contributing to the Social
Integration Programme PIS, Social contribution on net income CSLL, contributing to the
213
financing of Social Security COFINS and any other taxes that may relate to the remuneration
payable to the trustee, except for tax on income and proceeds of Any Nature GOunder existing
rates for the dates of each payment; (v) due to maturity, redemption or cancellation of debentures
of the first issue, and even after its maturity, redemption or cancellation in the event of actions of
the trustee in charge of any defaults on bonds not remedied by the company, in cases where the
remuneration payable to the trustee shall be calculated in proportion to the months of operation of
the fiduciary agent, based on the value specified in item i, readjusted as the paragraph iii; and (vi)
plus, where lives in your payment, regardless of notice, judicial or extrajudicial notification or
notification, on the valores arrears, (a) fine 2 moratorium; and (b) interest on arrears of 1 month,
calculated pro rata temporis since the date of default until the payment date.
Reimbursement of expenses: the Trustee shall be repaid by the company for all reasonable costs
incurred that have proven to protect the rights and interests of the debenture holders or to perform
their claims within 30 (thirty) days from the delivery of the evidentiary documents accordingly,
provided that, where possible, the costs have been approved in advance by the company, which
shall be deemed to be approved if the company does not appear within 2 (two) working days from
the date of receipt of their request by fiduciary agent.
Obligations. The fiduciary agent, as provided for in the deed of issue, will have the functions laid
down in the law and in accordance with the rules and regulations of the Securities and Exchange
Commission, and use of any action to protect rights or defend interests of the debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial or
extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer of the
debentures of the first issue, proceed with the replacement of the trustee and the indication of his
replacement, general meeting of debenture holders especially convened for this purpose; (ii) if the
Trustee is unable to continue to perform their duties by supervening circumstances to the deed of
issue, shall immediately communicate the fact to debentureholders, requesting his replacement and
convene a general meeting of debenture holders for this purpose; (iii) if the fiduciary agent,
renounces functions, should remain in the exercise of their duties until a replacement is indicated by
the institution and approved by general meeting of debenture holders, and assume their functions
effectively; (iv) shall be performed, within the maximum period of 30 (thirty) days from the date of
the event that determine, general meeting of debenture holders, for choosing the new fiduciary
agent; (v) replacement, on a permanent basis, the fiduciary agent (a) shall be subject to prior
notification to the CVM and its manifestation on the attendance to the requirements provided for in
article 9 of CVM Instruction No. 28, November 23, 1983, as amended, and (b) shall be subject to
the addition to the deed of issue; payments to the trustee replaced shall be effected in accordance
with the proportionality to the period of effective service delivery; (vi) the trustee will be entitled to
the same salary replacement perceived by the previous, if (a) the company has not agreed with the
new value of the remuneration of the trustee proposed by general meeting of debenture holders, or
(b) the general meeting of debenture holders does not act on the matter; (vii) the fiduciary agent
should substitute, immediately after his appointment, communicate it to the company and to
debentureholders; and (viii) shall apply to cases of substitution of Trustee the norms and precepts
from the Securities and Exchange Commission.
During deliberations of the General Meetings of debenture holders for each of the series, for each
outstanding Debenture one vote will be granted, permitting the establishment of proxy, whether
Debenture holder or not. Except for the provisions below, all deliberations to be taken in the
General Meeting of debenture holders will depend on approval of debenture holders representing at
least 75% of outstanding Debentures.
Conditions for amendment of
Not included in the quorum above are: I. quorums expressly provided for in other clauses of the
the rights conferred by such
deed of issue; and II. changes, which should be approved by debenture holders representing at
securities
least 90% of outstanding Debentures: (a) of the provisions of this clause; (b) of the quorums for
approval provided for in the Deed of issue; (c) the remuneration, except as provided in Clause of
the Deed of issuance; (d) any dates for payment of any amounts provided for in the Deed of
issuance; (e) of the term of the Debentures; (f) of the type of Debentures; (g) creation of a
repricing event; (j) of any Event of Default.
Other
relevant
None
characteristics
Debentures
Identification of securities
Issue date
214
Quantity
27,000
Total amount
R$ 270,000,000.00
Restrictions on trading
Description
restrictions
of
Yes
The debentures were subject of public distribution with restricted placement efforts, pursuant to
CVM Instruction 476, under the firm commitment to the placement of 20,000 debentures, and under
trading the best-efforts placement in relation to the remaining debentures. The debentures can only be
traded between qualified investors and after a 90 days period from the date of subscription or
purchase according to the articles 13 and 15 of CVM Instruction 476, and compliance by the
Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
Not applicable
The obligations may be declared mature in advance, on the terms and conditions set forth in the
Deed of Issue, in the occurrence of any of the events summarized below: I. Default by the Company
of any financial obligation on the Debentures, due under the Deed of Issue, at the date of payment
provided for in the Deed of Issue; II. Default by the Company of any non-financial obligation on the
Debentures foreseen in the Deed of Issue (a) that is not properly solved within specific remedy; or
(b) not having specific term remediation, if it is not properly solved within 15 days from the date of
such default, being the period provided in this subsection does not apply to obligations to which it
has a deadline stipulated or specific cure for which the period of cure has been expressly excluded;
III. judicial questioning by the Company for any controlling company, directly or indirectly
(controlling as defined in article 116 of the Corporate Law) of the Company (Controlling), and / or
controlled company (controlled as defined in article 116 of the Corporate Law) by the Company
(Controlled), of the Issue of Deed; IV. judicial questioning by any person not mentioned in section
III above, the Issue of Deed, suspended or not remedied within 15 days from the date on which the
Company becomes aware of the judging of such legal challenge; V. assignment or pledge any form
of transfer or promise of transfer to third parties in whole or in part by the Company, any of its
obligations under the Deed, without the prior consent in writing of Debenture Holders representing
at least 75% of the outstanding; VI. invalidity, unenforceability or invalidity of the Deed and/or the
Distribution Agreement, is not remedied within 15 days from the date of the respective event; VII.
(a) bankruptcy of the Company, and/or any of its subsidiary or controlling Company; (b) voluntary
bankruptcy application made by the Company and / or any of its subsidiary or controlling Company;
(c) bankruptcy filing by the Company, and/or any of its subsidiary or controlling Company,
formulated by others, not suppressed within the legal deadline; (d) petition for judicial or
extrajudicial recovery of the Company and /or any of its subsidiary or controlling Company,
215
regardless of approval of the request; or (e) liquidation, dissolution or extinction of the Company,
and/or any of its subsidiary or controlling Company, unless the liquidation, dissolution and/or
extinction during the course of a corporate transaction which does not constitute an Event of
Default, pursuant to section IX below; VIII. changing the company into a limited liability company,
pursuant to articles 220 to 222 of Law No. 6,404/76; IX. approval of incorporation, merger or split
of the company or sale, by the company, of all or substantially all of its assets or its mining
properties, with some exceptions: (a) if the transaction has been approved in advance by the
Debenture Holders representing at least 75% of the outstanding Debentures; or (b) if the
Debenture Holders that wish to do so, be assured that, during the minimum period of 6 months
from the date of publication of the minutes of corporate acts in the transaction, the redemption of
the Debentures held by them, by paying the outstanding balance of the Nominal Value, plus
Remuneration, calculated pro rata from the Issue Date or the date of payment of compensation
immediately preceding, whichever is applicable until the date of actual payments; or (c) by the
incorporation of the Company (so that the Company is the remaining entity), of any Subsidiary; or
(d) if the operation is carried out solely between Subsidiaries; X. capital reduction, except if
previously approved by Debenture Holders representing at least 75% of the outstanding
Debentures, pursuant to Article 174, paragraph 3, of Law No. 6,404/76; XI. change or transfer of
control (as defined under Article 116 of Law No. 6,404/76), direct or indirect, of the Company, from
any Controlling Company and / or any Subsidiary, except if previously approved by Debenture
Holders representing at least 75% of the outstanding Debentures; XII. amendment of the
Company's purposes and / or any Subsidiary, as provided in its bylaws or social contract as
applicable, in effect on the Issue Date, unless such amendment: (a) if the transaction has been
approved in advance by the Debenture Holders representing at least 75% of the outstanding
Debentures; (b) does not lead to a change in the principal activity of the Company or its Subsidiary;
XIII. non-renewal, cancellation, revocation or suspension of licenses and permits, including
environmental, required by the competent bodies to carry out regular activities of the Company,
since its effects have not solved or suspended within 15 days from the date of its non-renewal,
cancellation, revocation or suspension respective (s) permit (s) or license (s); XIV. occurrence of
any event that causes (a) in relation to the Company, (i) any material adverse effect on the
condition (financial or of any nature), business, property, results of operations and/or prospects; (ii)
any adverse effect on the powers or legal capacity and/or economic-financial to fulfill any of the
obligations under the Deed of Issue, and/or (iii) any event or condition that, after the deadline,
formal notice, or both, may result in a Default event, or (b) with respect to Deed of Issue, any
adverse effect on (i) the proper execution, legality, validity and / or enforceability of the obligations
documents, and / or (ii) the rights contained in the Debenture Deed of Issue, since it has not solved
its effects or suspended within 15 days from the date of knowledge of event the Company ("Material
Adverse Effect"); XV. non maintenance by the Company and/or any Subsidiary, insurance, as the
current best practices in the market segment of the Company with respect to its material operating
assets, not solved within 15 days from whatever happens first: (a) the date on which the Company
becomes aware of the event, and promptly notifies the Fiduciary Agent or (b) the date on which the
Company receives written notice from the Fiduciary Agent; XVI. early maturity of any financial
obligation of the Company and/or any Subsidiary, which amount, individual or aggregate, is equal to
or greater than R$ 10,000,000.00, annually updated, from the Issue Date, by the positive variation
of the IPCA, or its equivalent in other currencies, and / or the occurrence of any event or default of
any obligation which, after the expiration of any cure period provided for in the respective
document, may give rise, immediately the declaration of acceleration of any financial obligation of
the Company and/or any Subsidiary, which amount, individual or aggregate, is equal to or greater
than R$ 10,000,000.00, annually updated, from the Issue Date, by the positive variation of the
IPCA, or its equivalent in other currencies XVII. securities protest against the Company and / or any
Subsidiary, which amount, individual or aggregate, is equal to or greater than R$ 10,000,000.00(ten
million reais), annually updated, from the Issue Date, by the positive variation of the IPCA, or its
equivalent in other currencies, unless, within 10 (ten) days from the date of their protest has been
proven that (a) the protest has been made in error or bad faith of the third and was taken to the
appropriate judicial order restraining or cancellation of their effects; b) the protest was canceled, or
(c) the value (s) of title (s) protested (s) was deposited in court; XVIII. default by the Company and
/ or any subsidiary of any decision or final court judgment or any judgment or arbitral award not
subject to appeal against the Company and / or any Subsidiary, which amount, individual or
aggregate, is equal to or greater than R$ 10,000,000.00, annually updated, from the Issue Date, by
the positive variation of the IPCA, or its equivalent in other currencies, not paid within the stipulated
payment for their decision or judgment XIX. attachment or sequestration of assets of the Company
and / or any Subsidiary, which amount, individual or aggregate, is equal to or greater than R$
10,000,000.00, annually updated, from the Issue Date, by the positive variation of the IPCA, or its
equivalent in other currencies, unless, within ten days from the date of their arrest or abduction,
has been proven that the arrest or abduction was challenged or replaced by other security; XX.
expropriation, confiscation or any other measure of any governmental entity in any jurisdiction that
results in loss by the Company and / or any Subsidiary of the property and / or the direct or indirect
ownership of a substantial portion of its assets; XXI. sale, assignment, or alienation in any form or
216
constitution of mortgage, pledge, lien, Fiduciary assignment agreement, usufruct, trust, promise to
sell, purchase option, right of first refusal, charge, encumbrance or onus, judicial or extrajudicial,
voluntary or involuntary, or any other action which has the practical effect similar to any of the
above expressions ("Onus"), whether in a single transaction or a series of transactions, related or
not, on assets of the Company and/or any subsidiary amounting more than 15% of the total assets
of the Company, based on the latest Company's Consolidated Financial Statements (as defined in
Section 7.1 of Deed of Issue), unless (a) if the transaction has been approved in advance by the
Debenture Holders representing at least 75% of the outstanding Debentures; or (b) the
establishment of liens on any asset acquired by the Company or any Subsidiary, provided that the
lien consists exclusively on assets acquired and to finance the acquisition of such asset; XXII.
verifying that any of the statements made by the Company in the Issue Deed and / or the
Underwriting Agreement is false, inconsistent, inaccurate, incomplete, insufficient or incorrect in any
material respect, not cured within ten (10) days from the earlier of (a) the date upon which the
Company is aware of the incorrectness or (b) the date upon which the Company receives written
notice from the Fiduciary Agent; XXIII. non-use by the Company, the net resources obtained of the
Issue strictly in terms the Deed of Issue; XXIV. distribution and/or payment by the Company of
dividends, interest on capital or other distributions of profits to shareholders, if the Company is in
default of any of its obligations under the Issuance Deed, except for the payment of dividend must
not exceed 25% of net income under Article 202 of the Corporations Act, except for the payment of
the mandatory dividend of no more than 25% of net income under Article 202 of the Law No.
6,404/76, and XXV. non-compliance by the Company of any financial ratios below ("ndices
Financeiros"), to be determined by the Company under the Deed of Issue and verified by the
Fiduciary agent within 10 days from the date of receipt by the Fiduciary agent, the information
referred to the Deed of Issue based on the Consolidated Financial Statements of the Company for
each quarter of the calendar year, from and including the Consolidated Financial Statements of the
Company on December 31, 2012: (a) the financial index due to the quotient of dividing Net Debt (as
defined in the Issue Deed) to EBITDA (as defined in the Issue Deed), which must be less than or
equal to 3 and (b) the financial index due to the quotient of dividing EBITDA by Net Financial
Expenses (as defined in the Issue Deed), which should be equal or higher than 2.
The remuneration of each of the First Series Debentures will be as follows:
I. Monetary Adjustment: The nominal value of the debentures of the first issue will not be
monetarily updated.
II. Compensatory Interests: On the nominal value of each of the First Series Debentures will incur
interest corresponding to 100% of the cumulative variation of the DI rate plus surcharge of 0.88%
(eighty-eight per cent) per year.
ii.
Notwithstanding the payments due to early redemption of the First Series Debentures and/or
acceleration of the obligations under the Debentures, pursuant to the Deed of Issue, the First Series
Compensation will be paid semiannually from the Issue Date, with the first payment on February 15,
2013 and the last, on the maturity date of the First Series.
Interest
distribution
the
dividend
217
assets
the possibility of
new debt
securities
Reimbursement of expenses: the Fiduciary Agent shall be refunded by the company for all
vi the fiduciary agent, reasonable costs incurred that have proven to protect the rights and interests of the debenture
indicating the key terms of holders or to perform their claims within 30 days from the delivery of the evidentiary documents
the contract
accordingly, provided that, where possible, the costs have been approved in advance by the
company, which shall be considered approved if the company does not appear within 2 working
days from the date of receipt of their request by the Fiduciary Agent.
Obligations. The Fiduciary Agent, as provided for in the deed of issue, will have its duties
established in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission of Brazil (CVM), and use of any action to protect rights or defend interests of
the debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial or
extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer, to
proceed with the replacement of the fiduciary agent and the indication of its replacement at general
meeting of debenture holders especially convened for this purpose; (ii) if the fiduciary agent is
unable to continue to perform its duties by supervening circumstances to the deed of issue, shall
immediately communicate the fact to debenture holders, requesting its replacement and convene a
general meeting of debenture holders for this purpose; (iii) if the fiduciary agent, renounces its
functions, should remain in the exercise of its duties until another institution is indicated by the
Company fot its replacement and approved by general meeting of debenture holders, and assume
their functions effectively; (iv) shall be performed, within the maximum period of 30 days from the
date of the event that determine, general meeting of debenture holders, for choosing the new
fiduciary agent, that may be called by the fiduciary agent to be replaced, by the Company, by
debenture holders of the first series representing at least 10% of the debentures of the first series
in circulation, or for debenture holders of the second series representing at least 10% of the
second series ' debentures in circulation, or by CVM; in the event of convocation notice do not occur
within 15 days before the expiration of the time limit here predicted, it will be up to the Company
making it, being sure that the CVM may appoint interim replacement pending consummating the
process of choosing the new trustee; (v) replacement, on a permanent basis, of the fiduciary agent
(a) shall be subject to prior notice to the CVM and its manifestation on the attendance to the
218
requirements provided for in article 9 of CVM Instruction No. 28, November 23, 1983, as amended,
and (b) shall be subject to the addition to the deed of issue; (vi) payments to the fiduciary agent
replaced shall be effected in accordance with the proportionality to the period of effective service
delivery; (vii) the fiduciary agent will be entitled to the same compensation of the perceived by the
previous, if (a) the company has not agreed with the new value of the remuneration of the fiduciary
agent proposed by general meeting of the debenture holders, referred to in item iv above, or (b)
the general meeting of debenture holders referred to in item iv above does not act on the matter;
(vii) the fiduciary agent should replace, immediately after his appointment, communicate it to the
company and to debenture holders; and (viii) shall apply to cases of substitution of fiduciary agent
the norms and precepts from the brazilian Securities and Exchange Commission (CVM).
During deliberations of the General Meetings of first series debenture holders and General Meetings
of second series debenture holders, for each outstanding Debenture one vote will be granted,
permitting the establishment of proxy, whether Debenture holder or not. Except for the provisions
below, (i) all deliberations to be taken in the General Meeting of debenture holders will depend on
approval of debenture holders of the first series representing at least 75% of outstanding First
Series Debentures; and (ii) all deliberations to be taken in the General Meeting of debenture holders
will depend on approval of debenture holders of the second series representing at least 75% of
outstanding Second Series Debentures.
Debentures
Identification of securities
Issue date
Maturity date
Quantity
20,000
Total amount
R$ 200,000,000.00
Restrictions on trading
Description
restrictions
of
Yes
The debentures were subject of public distribution with restricted placement efforts, pursuant to
CVM Instruction 476, under the firm commitment to the placement of 20,000 debentures, and under
trading the best-efforts placement in relation to the remaining debentures. The debentures can only be
traded between qualified investors and after a 90 days period from the date of subscription or
purchase according to the articles 13 and 15 of CVM Instruction 476, and compliance by the
Company of its obligations under Article 17 of CVM Instruction 476.
Convertibility
Not applicable
Possibility of redemption
219
conditions set forth in the Indenture, upon athe occurrence of any of the certain events summarized
below: I. Default by the Company of any monetary obligation on the debentures, as described in the
Indenture, at the date of payment stated in the Indenture. II. default by the Company of any nonmonetary obligation in Scripture, that (a) is not adequately remedied within specific remediation; or
(b) there is no specific period of remediation, is not adequately remedied within fifteen (15) days
from the date of the default, and the period provided in this subsection shall not apply to obligations
for which a deadline has been set specific cure or where the period of cure has been expressly
excluded; III. Judicial inquiry of the Indenture by the Company, and / or any parent, directly or
indirectly company (as defined control provided for in Article 116 of the Corporations Act) of the
Company ("Parent"), and / or any subsidiary (as defined control under Article 116 of the
Corporations Act) by the Company ("Subsidiary"); IV. Judicial inquiry of the Indenture by the
Company by any person not mentioned in paragraph III above, not cured or suspended within
fifteen (15) days from the date on which the Company becomes aware of the filing of such inquiry;
V. assignment, promise of assignment, or any form of transfer or promise of transfer to third
parties, in whole or in part, by the Company, of any of its obligations under the Indenture, without
the prior written consent of Bondholders representing at least 75% (seventy five percent) of the
outstanding Debentures; VI. Invalidity, unenforceability or invalidity of the Indenture and / or the
Distribution Agreement, that is not remedied within fifteen (15) days from the date of the relevant
event; VII. (A) bankruptcy of the Company, any controlling company and / or any subsidiary; (B)
voluntary bankruptcy filed by the company, by any controlling company and / or any subsidiary; (C)
bankruptcy filing by the Company of any controlling company and / or any subsidiary, prepared by
third parties, not suppressed within the statutory period; (D) application for judicial or extrajudicial
reorganization of the Company, any controlling company and / or any subsidiary, regardless of
approval of their application; or (e) liquidation, dissolution or termination of the Company, any
controlling company and / or any subsidiary, unless the liquidation, dissolution and / or termination
during a corporate transaction which does not constitute an Event of Default under subsection IX
below; VIII. transformation of the corporate form of Company from public to a limited company or
other corporate type, in accordance with Articles 220 to 222 of the Corporations Law; IX. split,
merger or any other form of corporate reorganization involving the Company and / or any
Subsidiary, except (a) if the operation has been previously approved by debenture holders
representing at least 75% (seventy five percent) of the Debentures outstanding; or (b) if it is
secured to the Bondholders who wish, for a minimum period of 6 (six) months from the date of
publication of the minutes of corporate documents relating to the transaction, the redemption of the
Debentures held by them upon payment of the outstanding balance of the Face Value plus
Remuneration, calculated pro rata from the Issue Date or payment date immediately preceding
Compensation, as appropriate, until the date of actual payment; or (c) the incorporation by the
Company (so that the Company is the surviving entity) of any Subsidiary; or (d) if the operation is
conducted exclusively among Subsidiaries; X. capital reduction of the Company, unless previously
approved by debenture holders representing at least 75% (seventy five percent) of the outstanding
Debentures, pursuant to article 174, paragraph 3, of the Law of Corporations; XI. change or transfer
of control (as defined control provided for in Article 116 of the Corporations Act), directly or
indirectly, by the Company, any Company and / or any Subsidiary, unless the transaction has been
previously approved by Holders representing at least 75% (seventy five percent) of the outstanding
Debentures; XII. changing the corporate purposes of the Company and / or any Subsidiary, as
provided in its bylaws or articles of association, as applicable, in effect on the Issue Date, unless
such amendment (a) has been previously approved by debenture holders representing at least 75%
(seventy five percent) of the outstanding Debentures, or (b) does not result in change of principal
activity of the Company or its Subsidiary; XIII. non-renewal, cancellation, revocation or suspension
of licenses and permits, including environmental, required by the competent bodies for the regular
exercise of the activities of the Company, provided it has not solved or suspended their effects
within fifteen (15) days from the date non-renewal, cancellation, revocation or suspension (s)
thereof (s) permit (s) or license (s); XIV. occurrence of any event that causes (a) in relation to the
Company, (i) any material adverse effect on the condition (financial or otherwise), business,
property, operating results and / or prospects; (Ii) any adverse effect on the powers or legal
capacity and / or economic-financial to fulfill any of the obligations under the Indenture; and / or
(iii) any event or condition that, after the lapse of time or giving notice, or both, can result in an
Event of Default; or (b) with respect to the Indenture, any adverse effect (i) the correct
formalization, legality, validity and / or enforceability of the Notes Documents; and / or (ii) the rights
of Bondholders contained in the Indenture, provided it has not resolved his or suspended within 15
(fifteen) days from the date of acknowledgment of the event by the Company ("Material Adverse
Effect") effects; X. capital reduction of the Company, unless previously approved by debenture
holders representing at least 75% (seventy five percent) of the outstanding Debentures, pursuant to
article 174, paragraph 3, of the Corporations Act; XI. change or transfer of control (as defined
control provided for in Article 116 of the Corporations Act), directly or indirectly, by the Company,
any controlling company and / or any subsidiary, unless the transaction has been previously
approved by Holders representing at least 75% (seventy five percent) of the outstanding
Debentures; XII. Change in the corporate purposes of the Company and / or any Subsidiary, as
220
provided in its bylaws or articles of association, as applicable, in effect on the Issue Date, unless
such amendment (a) has been previously approved by debenture holders representing at least 75%
(seventy five percent) of the outstanding Debentures, or (b) does not result in change of principal
activity of the Company or its Subsidiary; XIII. non-renewal, cancellation, revocation or suspension
of licenses and permits, including environmental, required by the competent bodies for the regular
exercise of the activities of the Company, provided it has not solved or suspended their effects
within fifteen (15) days from the date of the non-renewal, cancellation, revocation or suspension (s)
of permit (s) or license (s); XIV. occurrence of any event that causes (a) in relation to the Company,
(i) any material adverse effect on the condition (financial or otherwise), business, property,
operating results and / or prospects; (Ii) any adverse effect on the powers or legal capacity and / or
economic-financial to fulfill any of the obligations under the Indenture; and / or (iii) any event or
condition that, after the deadline or notice, or both, can result in an Event of Default; or (b) with
respect to the Indenture, any adverse effect (i) the correct formalization, legality, validity and / or
enforceability of the Notes Documents; and / or (ii) the rights of Bondholders contained in the
Indenture, provided it has not resolved his or suspended within 15 (fifteen) days from the date of
acknowledgment of the event by the Company ("Material Adverse Effect") effects; XV.
descontinuation by the Company and / or by any Subsidiary of insurance, according to current best
practices in the market performance of the Company with respect to its principal operating assets,
not cured within fifteen (15) days from whichever earlier between (a) the date on which the
Company becomes aware of the event, and promptly notify the Trustee; or (b) the date the
Company receives written notice to that effect to the Trustee; XVI. acceleration of any financial
obligation of the Company and / or any Subsidiary, the value of which, individually or in aggregate,
is equal to or greater than R $ 10,000,000.00 (ten million reais), updated from the Issue Date
annually by the positive variation of the IPCA, or its equivalent in other currencies, and / or
occurrence of any event or default of any obligation after the expiration of any cure period provided
for in the respective document, may give rise immediately to early redemption of any financial
obligation of the Company and / or any Subsidiary, which amount, individually or in aggregate, is
equal to or greater than R $ 10,000,000.00 (ten million reais), updated annually, from the Issue
Date, by the variation of IPCA, or its equivalent in other currencies; XVII. protest of securities
against the Company and / or any Subsidiary, which amount, individually or in aggregate, is equal
to or greater than R $ 10,000,000.00 (ten million reais), updated from the Issued annually, by the
positive variation IPCA, or its equivalent in other currencies, unless, within ten (10) days from the
date of their protest has been proven that (a) the protest was made in error or bad faith of third
and has proper remedy been taken for the annulment or restraining their effects; (B) the protest
was canceled; or (c) the value (s) of title (s) protested (s) was filed in court; XVIII. default by the
Company and / or any Subsidiary of any decision or final judgment or any judgment or arbitral
award not subject to appeal against the Company and / or any Subsidiary, with a value, individually
or in the aggregate, equal or superior R $ 10,000,000.00 (ten million reais), updated annually, from
the Issue Date, by the positive variation of the IPCA, or its equivalent in other currencies, is not
remedied within the time stipulated for payment in its decision or judgment; XIX. attachment or
restraint of assets of the Company and / or of any Subsidiary, which value, individually or
collectively, is equal to or greater than R $ 10,000,000.00 (ten million reais), updated from the Issue
Date annually by the positive variation of the IPCA, or its equivalent in other currencies, unless,
within ten (10) days from the date of their restraint or abduction, has been proven that the arrest or
abduction was challenged or replaced by other security; XX. expropriation, confiscation or any other
action of any governmental authority of any jurisdiction that results in the loss for the Company and
/ or any Subsidiary of the property and / or the direct or indirect ownership of a substantial portion
of its assets; XXI. sale, assignment, or sale, of any form, or constitution of mortgage, pledge,
chattel mortgage, chattel mortgage, usufruct, trust, promise to sell or purchase option, right of first
refusal, charge, encumbrance or lien, judicial or extrajudicial, voluntary or involuntary, or other act
that has the practical effect similar to any of the above expressions ("Lien"), whether in a single
transaction or a series of transactions, related or not, on assets of the Company and / or any
Subsidiary whose value represents more than 15% (fifteen percent) of the total value of assets of
the Company, based on the most recent Consolidated Financial Statements of the Company (as
defined in Section 7.1 of the Indenture), unless (a) the operation has been previously approved by
debenture holders representing at least 75% (seventy five percent) of the outstanding Debentures;
or (b) the creation of Liens on any asset acquired by the Company or any Subsidiary, provided that
the Lien consists exclusively of the assets acquired and to finance the acquisition of such asset;
XXII. evidence that any of the statements made by the Company in the Indenture and / or the
Distribution Agreement is false, inconsistent, inaccurate, incomplete, incorrect or insufficient in any
material respect, not cured within ten (10) days from the earlier of (a) the date on which the
Company has knowledge of the incorrectness; or (b) the date the Company receives written notice
to that effect to the Trustee; XXIII. non utilization by the Company of the net proceeds from the
Issue strictly in terms of the Indenture; XXIV. distribution and / or payment by the Company of
dividends, interest on capital or other distributions of profits to shareholders, if the Company is in
default of any of its obligations under the Indenture, except for the payment of the minimum
mandatory dividend of 25% (twenty five percent) of net income under Article 202 of the
221
Corporations Act; and XXV. non-compliance by the Company with any financial ratios below
(collectively, "Financial Ratios"), to be determined by the Company pursuant to the Indenture and
verified by the Trustee within ten (10) days from the date of receipt by the Trustee of the
information referred to in the Indenture based on the Consolidated Financial Statements of the
Company for each quarter of the calendar year from and including the Consolidated Financial
Statements of the Company for the 31 December 2013: (a) the financial index resulting from the
quotient of dividing Net Debt (as defined in the Indenture) by the EBITDA (as defined in the
Indenture), which must be equal to or less than 3 (three); and (b) the financial index resulting from
the quotient of dividing EBITDA by Net Interest Expense (as defined in the Indenture), which must
be equal to or greater than 2 (two).
ii.
Interest
For more information on maturity date, please refer to item 18.10 below.
I. Monetary Adjustment: The nominal value of the debentures of the third issue will not be
monetarily updated.
II. Compensatory Interest: on the outstanding balance of the Nominal Value of the Debentures
outstanding focus interest corresponding to 108.75% (one hundred and seventy-eight point five
iii.
guarantee and, if
percent) of the accumulated variation of average daily DI - Interbank Deposits one day, calculated
in the form of collateral,
and published daily by CETIP in the daily bulletin on its website (http:// www.cetip.com.br)
description of the goods used
calculated exponentially and cumulatively pro rata by days elapsed from the Issue Date or payment
as collateral
date immediately preceding Compensation form as the case until the date of actual payment.
Without prejudice to the payments related to early redemption of the Debentures and / or early
maturity of obligations on the Debentures, the remuneration will be payable semiannually from the
Issue Date, on the 30th of May and November of each year, with the first payment on November
30, 2014 and the last on the Maturity Date.
iv.
in the absence of a
guarantee, if the credit is The Debentures will be unsecured, in accordance with Article 58, caput of the Law No. 6,404/76.
secured or subordinate
v.
possible
restrictions imposed on the
issuer
distribution
assets
the
dividend
the possibility of
new debt
securities
Compensation: The performance of duties and tasks assigned to compete in accordance with the
law and its deed of issue, the fiduciary agent, or the institution which will replace him in that
capacity, shall receive a remuneration: (i) R$3,000.00 per year, due from the company, being the
first installment of remuneration payable on the fifth business day following the date of celebration
of the deed of issue, and the remaining, on the same day of subsequent years, until the maturity of
the issue, or as long as the fiduciary agent is representing the debentures holders interests;(ii)
monetary adjustment yearly from the date of payment of the first annual instalment by the change
in the general price index-market, published by Fundao Getlio Vargas, or by any other that
eventually is replaced, calculated pro rata temporis, if necessary; (iii) plus the sales tax of any kind
vi the fiduciary agent,
TAXES, contributing to the Social Integration Programme PIS, Social contribution on net income
indicating the key terms of
CSLL, contributing to the financing of Social Security COFINS and any other taxes that may
the contract
relate to the remuneration payable to the trustee, except for tax on income and proceeds of Any
Nature go under existing rates for the dates of each payment; (iv) due to maturity, redemption or
cancellation of debentures, and even after its maturity, redemption or cancellation in the event of
actions of the trustee in charge of any defaults on debentures not remedied by the Company, in
cases where the remuneration payable to the fiduciary agent shall be calculated in proportion to the
months of operation of the fiduciary agent, based on the value specified in item i, readjusted as the
paragraph ii above; (v) plus, in cases of delay in payment, regardless of notice, judicial or
extrajudicial notification, on the delinquent amounts, without prejudice to monetary restatement, (a)
interest for late payment of 1% per month, calculated pro rata temporis since the date of default
until the date of actual payment; (b) moratorium fine of 2%, non-compensatory and rigid; (c)
restatement by IGPM variation, calculated pro rata from the date of default until the date of actual
222
payment; and (vi) realized upon deposit held in the current account to be specified in writing by the
Fiduciary Agent to the Company, serving the receipt as settlement of payment.
Reimbursement of expenses: the Fiduciary Agent shall be refunded by the company for all
reasonable costs incurred that have proven to protect the rights and interests of the debenture
holders or to perform their claims within 30 days from the delivery of the evidentiary documents
accordingly, provided that, where possible, the costs have been approved in advance by the
company, which shall be considered approved if the company does not appear within 2 working
days from the date of receipt of their request by the Fiduciary Agent.
Obligations. The Fiduciary Agent, as provided for in the deed of issue, will have its duties
established in the law and in accordance with the rules and regulations of the Securities and
Exchange Commission of Brazil (CVM), and use of any action to protect rights or defend interests of
the debenture holders.
Replacement: In case of absence, temporary impediments, renunciation, intervention, judicial or
extrajudicial settlement, bankruptcy, or any other case of vacancy in the fiduciary agent, the
following rules shall apply: (i) is provided to debenture holders, after the closing of the offer, to
proceed with the replacement of the fiduciary agent and the indication of its replacement at general
meeting of debenture holders especially convened for this purpose; (ii) if the fiduciary agent is
unable to continue to perform its duties by supervening circumstances to the deed of issue, shall
immediately communicate the fact to debenture holders, requesting its replacement and convene a
general meeting of debenture holders for this purpose; (iii) if the fiduciary agent, renounces its
functions, should remain in the exercise of its duties until another institution is indicated by the
Company fot its replacement and approved by general meeting of debenture holders, and assume
their functions effectively; (iv) shall be performed, within the maximum period of 30 days from the
date of the event that determine, general meeting of debenture holders, for choosing the new
fiduciary agent, that may be called by the fiduciary agent to be replaced, by the Company, by
debenture holders of the first series representing at least 10% of the debentures in circulation, or by
CVM; in the event of convocation notice do not occur within 15 days before the expiration of the
time limit here predicted, it will be up to the Company making it, being sure that the CVM may
appoint interim replacement pending consummating the process of choosing the new trustee; (v)
replacement, on a permanent basis, of the fiduciary agent (a) shall be subject to prior notice to the
CVM and its manifestation on the attendance to the requirements provided for in article 9 of CVM
Instruction No. 28, November 23, 1983, as amended, and (b) shall be subject to the addition to the
deed of issue; (vi) payments to the fiduciary agent replaced shall be effected in accordance with the
proportionality to the period of effective service delivery; (vii) the fiduciary agent will be entitled to
the same compensation of the perceived by the previous, if (a) the company has not agreed with
the new value of the remuneration of the fiduciary agent proposed by general meeting of the
debenture holders, referred to in item iv above, or (b) the general meeting of debenture holders
referred to in item iv above does not act on the matter; (vii) the fiduciary agent should replace,
immediately after his appointment, communicate it to the company and to debenture holders; and
(viii) shall apply to cases of substitution of fiduciary agent the norms and precepts from the brazilian
Securities and Exchange Commission (CVM).
During deliberations of the General Meetings of first series debenture holders and General Meetings
of second series debenture holders, for each outstanding Debenture one vote will be granted,
permitting the establishment of proxy, whether Debenture holder or not. Except for the provisions
below, (i) all deliberations to be taken in the General Meeting of debenture holders will depend on
approval of debenture holders of the first series representing at least 75% of outstanding First
Series Debentures; and (ii) all deliberations to be taken in the General Meeting of debenture holders
will depend on approval of debenture holders of the second series representing at least 75% of
outstanding Second Series Debentures.
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19.
224
19.1
In fiscal years ended in December 31, 2011, 2012 and 2013 the Company did not have a share buyback
plan.
19.2
Quantity
(Units)
99,140
(99,140)
-
Total amount
(R$ thousand)
534.4
(534.4)
-
Weighted average
price (R$)
5.36
5.36
-
Total amount
(R$ thousand)
23.4
(23.4 )
-
Weighted average
price (R$)
5.86
5.86
-
Total amount
(R$ thousand)
-
Weighted average
price (R$)
-
Quantity
(Units)
4,000
(4,000)
-
Quantity
(Units)
-
19.3 Indicate shares held in treasury as of the last fiscal year-end, in tabular format,
segregated by type and class.
As of December 31, 2013, the Company did not have shares in Treasury.
19.4.
As a result of the exercise of the right of withdrawal by dissident shareholder of the deliberations of the
Extraordinary General Meeting held on August 1, 2011, the Company repaid to the unrealized profit
reserve, issuing 99,140 of its own shares, for R$ 535 thousand, and these shares were subsequently
cancelled, as the approval of the Board of Directors on September 23, 2011.
As a result of the exercise of the right of withdrawal by dissident shareholder of the deliberations of the
Extraordinary General Meeting held on April 20, 2012, the Company repaid to the unrealized profit
reserve, issuing 4,000 of its own shares, for R$ 23.4 thousand, and these shares were subsequently
cancelled, as the approval of the Board of Directors on June 21, 2012.
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20.
226
20.1 Description of the Companys policy for trading of securities by major shareholders,
direct or indirect, directors, members of the Board of Directors, or of any body with
consultative or technical functions, created by any statutory provision
a. Date of approval
February 8, 2010
b. Related parties
The Company, the Controlling Shareholder, the Administrators, members of the Fiscal Council, employees
(when they have insider information regarding the Company) and any person who adopted this trading
policy (Securities Trading Policy) due to their title, job or position in companies that control or are
controlled by the Company (Persons Bound to the Trading Policy).
c. Main characteristics
The main characteristics of the Trading Policy are:
I.
prohibiting the trading of securities issued by the Company by Bound Persons who have material
information about the Company;
II.
prohibiting the trading of securities issued by the Company by Bound Persons who leave board
positions, for the period of six months after they leave the position or until the material information
is disclosed;
III.
prohibiting the trading of securities issued by the Company by Related Parties whenever a
purchase or sale of shares issued by the Company is in progress, or execution of any agreement or
contract for the transfer of Companys share control, existence of intention of promoting
amalgamation, total or partial spin-off, transformation or corporate restructuring involving the
Company. This restriction only applies to controlling shareholders, direct or indirect, and
administrators when the ongoing purchase or sale of shares of the Company by the Company; and
IV.
prohibiting on trading in securities issued by the Company by persons linked to negotiating policy
within fifteen days prior to the release of quarterly and annual required by the CVM.
The full version of Mills Securities Trading Policy can be obtained in the following address:
http://mills.infoinvest.com.br/static/enu/arquivos/Politica_de_Negociacao_MILL_RCA_2010_02_08_i.pdf
227
21.
228
DISCLOSURE POLICY
229
The disclosure of any Material information, should be simultaneously to CVM and Market entities, and
shall take place before the opening or after the closing of trading on the Stock Exchanges, and in case of
hour incompatibility with other markets, the Brazilian market trading hours shall prevail.
If, exceptionally, it is imperative that the communication of Material information occurs during trading
hours, the Investor Relations Officer when disclosing the Material information, may simultaneously
request the Market entities in Brazil and abroad, the suspension of trading of securities issued by the
Company or related thereto, the time necessary to properly disclose their information. The Investor
Relations Officer must prove to Brazilian Market entities that the requested suspension of trading also was
accomplished in foreign Market entities.
The Company can disclose to the market expectations of future performance (guidance), for short and
long term, especially with regard to financial and operational figures of their businesses, by decision of
the board of directors, noted that such guidance shall be in accordance with CVM regulations, paragraph
4 of article 13 of CVM Instruction No. 358/02.
In the event that disclosure of such expectations, should be subject to the following assumptions:
(i)
(ii)
(iii)
If the projections are discontinued, it should be informed, together with the reasons that led to its loss of
validity in the form of Material Information.
21.2 Disclosure policy for relevant events or facts adopted by the issuer, indicating the
procedures for maintaining secrecy about relevant information not disclosed
The Companys policy on Disclosure of Material information is based on the following principles and
objectives:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
The controlling shareholder, directors, members of the board of directors and the fiscal council, as well as
other employees and agents of the Company, shall preserve the confidentiality of the information
pertaining Material Information to which they have privileged access due to the position they hold, until
their actual release to the market and ensure that subordinates and third parties they trust to do the
same, being jointly responsible with them in case of noncompliance.
230
For the purpose of maintaining confidentiality referred to in item 6.1 above, the individuals mentioned
therein shall observe and ensure observance of the following, without prejudice to the adoption of other
measures that are appropriate in front of each situation:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
disclose the confidential information strictly to those people who absolutely need to know
it;
not discuss confidential information in the presence of third parties who are not aware of
such information, though if expected that third party cannot understand the meaning of
the conversation;
not to discuss confidential information in conference calls in case one cannot be sure of
who actually will participate in it;
maintain documents of any kind relating to confidential information, including handwritten
personal notes in a safe, locked cabinet or file, to which only authorized persons have
access to the information;
create documents and electronic files related to confidential information always with
password protection systems;
to circulate internally documents containing confidential information in sealed envelopes,
which should always be delivered directly to the recipient;
not to send confidential documents through facsimile, unless there is certainty that only
authorized personnel to take notice of such information will have access to the receiver,
and
without prejudice to the responsibility of those who are transmitting confidential
information, require a third party outside the Company who need access to information to
sign a confidentiality agreement, which shall specify the nature of information and include
in the statement that it recognizes its confidential nature, pledging not to disclose it to
anyone else and do not trade securities issued by the Company prior to disclosure of
information to the market.
When confidential information needs to be disclosed to any employee of the Company or other person
holding title, function or position in the Company, its controlling shareholders, subsidiaries or affiliates,
other than a director, member of the Board of directors or the Fiscal Council of the Company, the
individual responsible for the transmission of information should make sure that the person receiving it is
aware of the Policy Disclosure of Material Information of the Company, requiring even to sign the Policy
Disclosure of Material Information before providing access to information.
21.3 Administrators responsible for implementation,
supervision of the information disclosure policy
maintenance,
evaluation
and
The full version of Mills Policy on Disclosure of Material Information can be obtained in the following
address:
http://mills.infoinvest.com.br/fck_temp/12_1//Politica_de_Divulgacao_MILLS_RCA_2010_02_08_i.pdf
231
22.
232
EXTRAORDINARY BUSINESS
22.1 Acquisition or disposal of any significant asset which does not belong to the normal
operations of the Company
In fiscal years ended in December 31, 2011, 2012 and 2013, there was no acquisition or disposal of any
significant assets which does not belong to the normal operations of the Company, except for the sale of
the Industrial Services business unit, as described in item 6.5 of this Reference Form.
22.2
In fiscal years ended in December 31, 2011, 2012 and 2013, there were no significant changes in the
running of the Companys business.
22.3 Identify relevant contracts concluded by the Company and its subsidiaries which are
not directly connected to its operations
In fiscal years ended in December 31, 2011, 2012 and 2013, no relevant contracts were concluded by the
Company and its subsidiaries which are not directly connected to its operations.
22.4
233