Académique Documents
Professionnel Documents
Culture Documents
Management Proposal
To the Companys Shareholders,
Pursuant to Instruction CVM 481 of December 17, 2009 of the Securities and Exchange Commission ("CVM"), as amended ("ICVM 481/09"), the
administration of Mills Estruturas e Servios de Engenharia S.A. ("Mills" or the "Company") presents below its proposal for the items to be
approved at the Ordinary and Extraordinary Shareholders Meeting to be held on 28 April 2016.
At Ordinary Shareholders Meeting
1. Take the accounts of Management, Examine, Discuss and Vote on the Management Report and the Financial Statements for
the fiscal year ended December 31, 2015.
The Management of the Company proposes to be approved the Financial Statements, the Management Report and the accounts of the
administrators, all related to the fiscal year ended on 31 December 2015.
The Company's Financial Statements and the Management Report for the year ended 31 December 2015 were approved by the Board of Directors
in a meeting held on 8 March 2016 and published, together with the opinion of the Board of Auditors and the independent auditors report, in the
newspaper Valor Econmico and Dirio Oficial do Estado do Rio de Janeiro on day 21 March 2016.
The comments of the management on the financial situation of the Company, pursuant to Item 10 of the Reference Form, is listed in the Annex
A that follows with this proposal.
Additionally, the Company's management has made available for the analysis of its shareholders by means of Informaes Peridicas EventuaisIPE, the following documents:
(i) Management Report on social business and the main administrative facts year in ended December 31, 2015;
(ii) Financial Statements and explanatory notes;
(iii) Standard Financial Statements DFP;
(iv) Independent Auditors report; and
(v) Opinion of the Fiscal Council.
2. Distribution of the results of the fiscal year ended on December 31, 2015 and the distribution of dividends.
Since the Company recognized net loss in the fiscal year of December 31, 2015, there will be no decision on the allocation of net income, to the
extent that the company did not provide any profit during this period.
For this reason, the information set out in annex 9-1-II of CVM 481/09 will not be presented by the Company.
3. Election of the members of the Board of Directors for the period of 2016 until 2018.
The Company proposes to elect, with a mandate until the holding of the Ordinary Shareholders Meeting to approve the accounts for the year
ended 31 December 2017, the members of the Board of Directors: Mr. Andres Cristian Nacht, Mr. Elio Demier and Mrs. Francisca Kjellerup Nacht
Until the date of submission of this proposal, there is no definition on the behalf of all the members that will be part of the Board of Directors to
be submitted to the shareholders.
Pursuant to article 10 of ICVM 481/09, Annex B to the present proposal contains the information specified in items 12.5 to 12.10 of the Reference
Form, with respect to the members of the Board of Directors appointed above.
4. Approval of Administrations remuneration.
The Administration proposes that the overall remuneration of the administrators of the Company for the fiscal year of 2016, to be approved in
the value of R$17,095,320.43 (seventeen million, ninety five thousand three hundred and twenty reais and forty three cents).
This amount, which will not necessarily be taken in its entirety, will be allocated by the Board of Directors between the directors, the members
of the Board of Directors and the members of the Advisory Committee.
Pursuant to article 12 of ICVM 481/09, Annex C to the present proposal contains the information specified in item 13 of the Reference Form.
5. Election of the members of the Fiscal Council and approval of the remuneration of the members of the Fiscal Council.
Pursuant to article 10 of ICVM 481/09, Annex B to the present proposal contains the information specified in items 12.5 to 12.10 of the Reference
Form, with respect to the members of the Fiscal Council appointed or supported by the administration and by controlling shareholders.
The Company proposes to the Ordinary Shareholders Meeting overall remuneration for the elected members of the Fiscal Council 10% of the
average remuneration of the statutory Board, pursuant to art. 162, paragraph 3, of law No. 6,404/76.
At Extraordinary Shareholders Meeting
1. Approval of the Companys new stock option plan
Pursuant to article 13 pf ICVM 481/09, Annex D to this proposal contains the information specified in Annex 13 of CVM 481/09.
Annex A
ITEM 10 OF THE REFERENCE FORM
Documentation required by article 9 of CVM Instruction 481
(Instruo CVM 481), issued by CVM on December 17, 2009
Management comments on Companys Financial Status, pursuant to
item 10 of Reference Form (free translation)
a.
The company presented, in 2015, net revenue of R$ 576.1 million and free cash flow (net cash generated by the operating activities minus net
cash applied in investment activities) of R$ 202.4 million. This is the second time Mills achieved positive cash generation, after years of high
investments, which enabled its organic growth, geographic expansion, and mainly, the consolidation of its leadership in its markets. Net revenue
amounted R$ 794.2 million in 2014 and R$ 832.3 million in 2013.
Applying the premises of Technical Pronouncement CPC-01 - Impairment of Assets, the Company performed impairment tests on its assets. After
said tests, it was verified that it was necessary to establish an impairment provision amounting to R$ 26.2 million for the investment in Rohr and
R$ 30.9 million for the Construction Cash Generating Unit. For the assets of the Rental business unit and other assets of the Company, no need
to perform impairment tests were identified.
The recoverable amount of those assets was determined based on economic forecasts for determining the market value of the investee, upon
through a revenue approach, through a 10-year term discounted cash flow forecast, for purposes of substantiating the amount paid, considering
the long maturity period of infrastructure and civil construction investments. The main assumptions included: (i) revenues were forecast based
on historical data and growth prospective for the segment and Brazilian economy; (ii) negative operating loss for 2015, resulting from the reduced
activity of the industry; (iii) performance of a continuous productivity improvement program and reduction of costs and expenses will cause the
evolution thereof to be lower than revenue growth percentage, (iii) the corresponding cash flows are discounted at the average discount rate,
obtained using a methodology typically applied by the market, taking into account the weighed average cost of capital (WACC); (iv) a strict
working capital evolution control policy, during the forecasted period.
In 2015 there were non-recurring items with a negative effect of R$ 82.7 million, of which: (i) R$ 57.1 million related to the impairment for
Construction business unit and for the investment in Rohr; (ii) Reorganization costs of R$ 9.0 million; (iii) ADD related to clients involved with
ongoing investigations of Lava Jato (R$ 12.9 million); and (iv) R$ 3.7 million from the Industrial Services business unit due to the payment of
indemnity, related to events that happened before the completion of the sale.
The cash generation, measured by EBITDA, reached R$ 104.1 million in 2015. Excluding non-recurring items listed above, EBITDA would reach
R$ 186.7 million. In 2014, EBITDA amounted R$ 326.2 million and, in 2013, R$ 438.8 million.
Net loss amounted to R$ 97.8 million in 2015, versus R$ 64.3 million of net earnings from continuing operations in 2014 and R$ 167.7 million in
2013. In 2013 there was a net positive effect of R$ 8.2 million due to the sale of the Industrial Services business unit.
Mills total debt was R$ 620.8 million as of December 31, 2015 versus R$ 745.4 million at the end of 2014 and R$ 632.6 million at the end of
2013. At the end of the year our net debt position was R$ 388.8 million, versus R$ 551.7 million at the end of 2014 and R$ 606.5 million at the
end of 2013. The debt amortization schedule includes payment of R$ 430 million of principal until 2018, and the first issuance of debentures will
end in April, 2016. We will amortize R$ 90 million of principal, reducing our gross debt.
Considering non-recurring items to determine the adjusted EBITDA, all covenants have been complied with, as of December 31, 2015. Our
leverage, as measured by net debt/LTM EBITDA, was at 2.1 times as of December 31, 2015, while interest coverage, as measured by LTM
EBITDA/LTM interest payments, was 3.0 times, excluding non-recurring items for both.
The Companys leverage, in 2014, was at 1.6 time, while interest coverage was 4.8 times. In 2013, the Companys leverage was 1.5 time, while
interest coverage was 8.3 times.
b.
According to the Company's balance sheet on December 31, 2015, the capital structure of Mills was 58.7% equity, measured by the stockholders
equity, and 41.3% capital from third party, measured by total liabilities.
According to the Company's balance sheet on December 31, 2014, the capital structure of Mills was 56.0% equity, measured by the stockholders
equity, and 44.0% capital from third party, measured by total liabilities.
According to the Company's balance sheet on December 31, 2013, the capital structure of Mills was 56.4% equity, measured by the stockholders
equity, and 43.6% capital from third party, measured by total liabilities.
On December 31, 2015, our debt was 31% short-term and 69% long-term, with an average maturity of 2.8 years, at an average cost of
CDI+1.21%. In terms of currency, 100% of Mills debt is in Brazilian Reais. On December 31, 2014, our debt was 21% short-term and 79% longterm, with an average maturity of 2.4 years, at an average cost of CDI+0.68%. On December 31, 2013, our debt was 20% short-term and 80%
long-term, with an average maturity of 2.1 years, at an average cost of CDI+1.00%.
On November 10th, 2014 Mills Board of Directors approved a program to repurchase common shares of Mills issuance, with the objective of
acquiring up to 4,000,000 shares, with a deadline of 365 days as of the date of approval, for treasury and subsequent cancellation or alienation,
including in the context of any exercise of options under its stock option program, in the case of exercise of options. The board of directors
approved, in the second quarter of 2015, the alienation of 6,878 shares, that were in treasury, to attend the stock option plan. Up to December
31st, 2014, the Company kept in treasury 2,278,422 shares.
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.
The Companys EBITDA for the year ended December 31st 2015, was R$ 104.1 million. Excluding the non-recurring items of reorganization and
impairment, EBITDA would reach R$ 186.7 million. Financial expenses, net of financial revenue in the same period were R$ 63.1 million. Thus,
the Companys EBITDA for year ended December 31st 2015 presented a coverage ratio of 3.0 times its net financial expenses during the same
period, excluding non-recurring items. Only considering its financial expenses, which amounted to R$ 100.1 million as of December 31st, 2015,
the coverage ratio would be 1.9 time.
The Companys total indebtedness for the year ended December 31st 2015, amounted to R$ 620.8 million, or 2.1 times the Companys EBITDA
excluding the non-recurring items for the year ended December 31st 2015. The flow of payment from this debt, considering the debt profile as of
that date, will take place in a period of six years, of which R$ 229.9 million in less than one year, R$ 550.4 million from 2 to 5 years, and R$ 2.6
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.
In addition, on December 31st 2015, 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. The Company is compliant to the remainder installments amounting R$ 9.6 million,
of which the last installment matures in December, 2024.
This way, the Company's management believes that its cash generation and current liquid assets are sufficient to meet its financial commitments.
The Companys EBITDA for the year ended December 31st 2014, was R$ 335.7 million and its financial expenses, net of financial revenue in the
same period were R$ 67.6 million. Thus, the Companys EBITDA for year ended December 31st 2014 presented a coverage ratio of 5.0 times its
net financial expenses during the same period. Only considering its financial expenses, which amounted to R$ 67.6 million as of December 31st,
2014, the coverage ratio would be 3.6 times.
The Companys total indebtedness for the year ended December 31st 2014, amounted to R$ 745.4 million, or 2.2 times the Companys EBITDA
for the year ended December 31st 2014. The flow of payment from this debt, considering the debt profile as of that date, will take place in a
period of seven years, of which R$ 153.8 million in less than one year, R$ 172.8 million from 1 to 3 years, R$ 373.2 million in a period between
3 to 5 years and R$ 44.5 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.
In addition, on December 31st 2014, the Company had registered on its balance sheet the amount of R$ 10.1 million, which refers to the Tax
Recovery Program (REFIS) with a maturity of 180 months. The Company is compliant to the remainder installments amounting R$ 10.1 million,
of which the last installment matures in December, 2024.
The Companys EBITDA for the year ended 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 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
December 31st 2013, the coverage ratio would be 6.7 times.
The Companys total indebtedness for the year ended December 31st 2013, amounted to R$ 632.6 million, or, 1.6 times the Companys EBITDA
for the year ended December 31st 2013. In addition, on December 31st 2013, the Company had registered on its balance sheet liabilities in the
amount of R$ 10.4 million, which refers to the Tax Recovery Program (REFIS).
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 December 31st of 2013, 2014 and 2015, the Company was within the limits of contractual financial indicators.
d.
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 to
capital from its shareholders or third parties, through the issuance of shares.
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$40.0 million, with a dollar rate on December 6th, 2013). The settlement of the loan will be made in a single installment, paid on
January 30, 2015, without rolling over. Payment of interest will occurred twice a year. In order to eliminate the foreign exchange risk on this
borrowing, on the same date a swap was contracted with Banco Ita BBA S.A. in the amount of R$ 40 million so that the obligations (principal
and interest) are fully converted into local currency and carried out on the same maturity dates.
On April 11th, 2014 the Company issued commercial promissory notes with a total amount of R$ 200.0 million. Remuneration interest charges will
fall due corresponding to 106% of the accumulated variation in the average daily Domestic Demand (DI) rates. The net proceeds of the offering
were used for: (a) refinancing of Companys debt, (b) rental equipment acquisition and (c) Companys general uses and expenses.
On May 30th, 2014 the Company issued a series of simple debentures for a total amount of R$ 200 million, non-convertible into shares, unsecured,
with maturity date on May 30rd, 2019. The nominal value of the this series debentures will be amortized in three annual installments starting on
the third year of the issuance, and the interest paid semi-annually and equal to surtax of 108.75% per annum of 100% of DI accrued variation.
The liquid resources obtained by the Company through the third debenture issuance were fully used to settlement of Companys 4th edition
promissory notes, issued on 11th April, 2014.
e.
Potential sources of financing used for working capital and for investments in non-current 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.
2013
2014
2015
CDI+0.29%
40.2
44.72
TJLP+0.2% to 0.9%
23.4
18.7
15.1
8.2
112.5% of CDI
274.4
184.4
92.8
165.9
168.1
169.7
120.6
128.7
142.3
202.0
202.5
632.6
746.6
622.3
Non-convertible debentures
Non-convertible debentures
Total
108.75% of CDI
Short-Term Debt
As of December 31, 2015, short-term debt amounted to R$ 189.8 million, compared to R$ 155.0 million as of December 31, 2014, an increase of
R$ 34.9 million or 22.5%. This increase was due to, mainly: (i) loan agreement with the Nassau Branch of Banco Ita BBA S.A. totaling US$ 16.9
million (equivalent to R$ 40.0 million, with dollar rate of December 6th, 2013); and (ii) transfer from long-term debt to short-term debt of the first
portion of the amortization, in August, 2016, of the second issuance of debentures, CDI first series, launched in August, 2012. In April 2015 there
was an amortization, and the last one will occur in April, 2016.
As of December 31, 2014, short-term debt amounted to R$ 155.0 million, compared to R$ 125.3 million as of December 31, 2011, an increase of
R$ 29.7 million or 23.7%. This increase was due to the interest and monetary adjustment of Companys 3rd debentures issuances issued in May,
2014.
Long-Term Debt
As of December 31st, 2015, the Companys long-term debt amounted to R$ 431.0 million, compared to R$ 590.4 million as of December 31, 2014,
an reduction of R$ 159.4 million or 27.0%. This decrease was mainly due to following points: (i) to the transfer of long-term debt to short-term
debt of third installment amortization of the first issuance of debentures issued in April 2011; and (ii) transfer from long-term debt to short-term
debt of the first portion of the amortization, in August, 2016, of the second issuance of debentures, CDI first series, launched in August, 2012.
As of December 31st, 2014, the Companys long-term debt amounted to R$ 590.4 million, compared to R$ 507.3 million as of December 31, 2013,
an increase of R$ 83.2 million or 16.4%. This increase was mainly due to following points: (i) the liquid effect of 3rd debentures issuances in May
2014; and (ii) to the transfer of long-term debt to short-term debt of 2nd installment amortization in April 2014, of debentures issued in April
2011.
Borrowings were used for financing the expansion of Companys investments and for its general expenses and uses, being indexed to CDI, TJLP
and US dollars. For borrowings in foreign currency, financial instruments were contracted to hedge the Company against fluctuations in foreign
exchange rates.
Financing agreement for rental equipment were agreed based on Long-Term Interest Rate (TJLP in Brazil) plus interest of 0.2% to 0.9% per
year, with monthly amortization through June 2021.
The financial institutions with which the Company has borrowings as at December 31, 2014 are as follows:
Banco do Brasil
Ita BBA
On December 6, 2013 the Company entered into a borrowing agreement with Banco Ita BBA S.A., Nassau Branch, in the amount of US$16.9
million (equivalent to R$40.0 million, with dollar exchange rate on December 6, 2013). The settlement of the loan will be made in a single
installment, paid on January 30, 2015, without rolling over. Payment of interest will occurred twice a year. In order to eliminate the foreign
exchange risk on this borrowing, on the same date of the borrowing the Company entered into a swap transaction with Banco Ita BBA S.A. in
the amount of R$40.0 million in order to convert the obligations (principal and interest) into local currency and on the same maturity dates.
Debentures
On April 8, 2011 approval was granted for the issuance by the Company of a total of 27,000 debentures in a single tranche, of non-convertible
unsecured debentures, of a total amount of R$ 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 August 15, 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 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. Transaction costs related to this issuance are recognized as capital funding expenses, according to
contract terms.
On April 23, 2014 approval was granted for the issuance by the Company of a total of 20,000 debentures in a single tranche, of non-convertible
unsecured debentures, of a total amount of R$ 200.0 million, and unit face value of R$ 10,000, issued on June 18, 2014. The debentures have
maturity on May 30, 2019, with remuneration equivalent to 108.75% of the CDI rate and semi-annual payments of interest and amortization in
three consecutive installments, with the first maturity date on May 30, 2017. The transaction costs associated with this issue, in the amount of
R$ 0.7 million, are being recognized as Company funding expenses, in accordance with the contractual terms of the issue.
As of December 31, 2015 the balance of debentures including transaction costs was R$ 187.3 million in current liabilities and R$ 419.9 million in
non-current liabilities, and R$ 186.6 million and R$ 419.1 million, net of transaction costs, respectively.
Promissory Notes
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.
On April 11, 2014 the Company issued in a single series 20 commercial promissory notes with unit face value of R$10,000, totaling R$200,000
and with maturity on August 8, 2014. The unit value of the promissory notes bears interest equivalent to 106% of the accumulated fluctuation
of the average daily interbank deposit (DI) rates. On June 18, 2014 the Company fully paid these promissory notes with the proceeds from its
third issue of debentures.
Finance leases
Referred basically to agreements for purchase of rental equipment with periods between 36 and 60 months, maturities through 2015 and indexed
to the CDI plus interest of 2.50% to 3.80% per year. This obligation was collateralized by the its own leased assets. The Company settled in
advance all the existing finance lease agreements during the third quarter of 2014.
The Company adopts the policy of reducing the cash risk relating to foreign exchange variation on a conservative basis since all its revenues are
earned in Brazilian reais. Therefore, the Company enters into NDF contracts with financial institutions for hedging purposes. All these contracts
set the future exchange rate from reais to dollars.
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.
The Company has also borrowing agreements in dollars and in order to cover substantially the foreign exchange risk it entered into swap
transactions.
On December 6, 2013 the Company entered into a borrowing agreement with Banco Ita BBA S.A., Nassau Branch, in the amount of US$16.9
million (equivalent to R$40.0 million, with a dollar exchange rate as of the date of the contract settlement). Principal was settled in a bullet
payment on January 30, 2015 without rolling over. In order to eliminate the foreign exchange risk on this borrowing, on the same date of the
borrowing the Company entered into a swap transaction with Banco Ita BBA S.A. in the amount of R$40.0 million in order to convert the
obligations (principal and interest) into local currency and on the same maturity dates.
On December 31st, 2015, the Company did not have any purchase orders with foreign suppliers of equipment, being the value presented US$ 0.2 million in
foreign suppliers account related basically to installment purchase of equipment (in 2014 these orders totaled US$ 0.3 million, and in 2013 these orders totaled
US$ 71.3 million).
Most of the guarantees offered by the Company refers to loans contracted in previous years, prior to the Initial Public Offering (IPO), when the
financial situation required that the Company offered substantial guarantees to facilitate its access to credit.
After its initial public offer of shares held in April 2010, the Company conducted financing operations with real guarantee only for FINAME, credit
line from BNDES to finance investments in manufacturing portion of its equipment, where, at the request of the financing contract, the equipment
manufactured is disposed to the end of the financing contract, presenting a balance of R$ 27.1 million in guarantees on 31st of December, 2015.
The management of the Company believes that the existing terms relating to the provision of guarantees does not significantly restrict the
ability to contract new debt to meet our capital needs.
(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, 2013, 2014 and 2015, the Company was in compliance with the required levels for
the indicators.
Additionally, some of the Companys long term financial instruments have restrictions related to (i) change of transfer of the controlling stake
(direct or indirect) and (ii) asset disposals when the amount represents more than 15% of the total assets of the Company, based on the
consolidated Financial Statements of the Company. In the case the Company is in default of any of its financial obligations, it will not be able to
distribute any profits to its shareholders above the minimum mandatory dividend as determined by Law, as defined in the relevant documents.
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, 2015, the Company had no limits to use in financing transactions already contracted. At the same date the Company had
unsecured overdraft account, not used, reviewed annually of R$ 109.6 million and secured bank credit account used of R$ 15.1 million, 12.1%
of the total amount, with varying maturities and that can be extended in a common agreement.
On December 31, 2014, the Company had no limits to use in financing transactions already contracted. At the same date the Company had
unsecured overdraft account, not used, reviewed annually of 570.2 million and Secured bank credit account used of R$ 64.5 million, with varying
maturities and that can be extended in a common agreement.
On December 31, 2013, the Company had no limits to use in financing transactions already contracted. At the same date the Company had
unsecured overdraft account, not used, reviewed annually of 477.5 million and Secured bank credit account used of R$ 71.5 million, with varying
maturities and that can be extended in a common agreement.
The Company maintains relationships with major financial institutions operating in Brazil and, 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 31st, 2013, 2014 and 2015 refer only to net revenue, not to the gross revenue.
2013
AV(1)
AH(2)
(%)
(%)
2014
AV(1) (%)
AH(2)
(%)
2015
AV(1)
(%)
AH(2) (%)
832.3
100.0%
-5.3%
794.2
100.0%
-4.6%
576.1
100.0%
-27.5%
Heavy Construction
217.0
26.1%
24.6%
211.0
26.6%
-2.7%
165.7
28.8%
-21.5%
Real Estate
258.0
31.0%
8.4%
212.4
26.7%
-17.7%
117.2
20.3%
-44.8%
-100.0%
357.3
42.9%
41.0%
370.8
46.7%
3.8%
293.2
50.9%
-20.9%
-334.9
40.2%
-18.5%
-362.4
45.6%
8.2%
-343.8
-59.7%
-5.1%
497.3
59.8%
6.2%
431.8
54.4%
-13.2%
232.3
40.3%
-46.2%
8.3
1.0%
-57.1
-225.4
27.1%
3.2%
-273.8
34.5%
21.5%
-240.8
-41.8%
-12.1%
Operating Profit
280.2
33.7%
12.1%
157.9
19.9%
-43.6%
-65.6
-11.4%
-141.5%
Financial Expenses
-60.0
7.2%
17.2%
-92.8
11.7%
54.6%
-100.1
-17.4%
7.8%
and services
Industrial Services
Rental
Gross Profit
Operating Revenues
(Expenses)
General and
Administrative
Financial Income
13.2
1.6%
9.1%
25.2
3.2%
90.9%
36.9
6.4%
46.4%
233.4
28.0%
10.8%
90.3
11.4%
-61.3%
-128.7
-22.3%
-242.6%
-65.7
7.9%
11.0%
-26.1
3.3%
-60.3%
30.9
5.4%
-218.5%
167.7
20.1%
10.7%
64.3
8.1%
-61.7%
-97.8
-17.0%
-252.2%
4.9
0.6%
172.6
20.7%
13.9%
64.3
8.1%
-62.8%
-97.8
-17.0%
(1)
(2)
Horizontal analysis, which is the percentage of variation in the income statement accounts between fiscal years indicated.
-252.1%
Year ended December 31st, 2015 compared with year ended December 31st, 2014
In the year ended December 31st, 2015 the Companys net revenue from sales and services reached R$ 576.1 million. For comparison purposes,
there was a reduction of R$ 218.1 million, or 27.9% yoy. This decrease comes mainly from the lower rental revenue, with a contribution of 82%
of this reduction. The analysis of the Company's management regarding the factors that led to these changes is listed below.
In September 2015, Heavy Construction and Real Estate commercial management have been brought together in a single business unit.
Engineering and operational Officers functions were also consolidated. As a result, the Heavy Construction and Real Estate business units will
now be reported together, under the label Construction. We will continue to monitor Heavy Construction and Real Estate revenues separately,
due to its different market dynamics.
Heavy Construction
Net revenue from the Heavy Construction business unit totaled R$ 165.7 million in 2015, with a drop of 21.5% compared to 2014. The
management of the Company attributed this reduction as a result of the 24.1% drop in rental revenues, due to a less number of contracts.
Real Estate
Net revenue from the Real Estate business unit, totaled R$ 117.2 million in 2015, with a drop of 44.8% compared to 2014, negatively impacted
by a decrease of 55.8% in sales revenues and of 40.9% in rental revenues. The sales of semi-new equipment related to Easyset product
represented 78% of sales in 2014. The management of the Company attributed this reduction as a result of a deterioration of the Real Estate
market in Brazil, influenced by political and economic uncertainties, higher interest rates and weakness of economic activity.
Rental
Net revenue from the Rental business unit totaled R$ 293.2 million in 2015, being 20.9% lower yoy. On the evaluation of the management of the
company, this decrease is mainly associated with market retraction, with consequent higher idleness and pressure on prices.
Cost of products sold and services rendered and general and administrative expenses
The table below shows the Companys cost of goods sold and services rendered by nature in fiscal years ended December 31, 2014 and 2015.
2015
Direct
Nature
2014
General
Direct
project
and
and administrative
rental
costs
2015 x 2014
General
Direct
project
and
and administrative
expenses and
others
Total
General
project
and
and administrative
Total
Personnel
-74.2
-97.6
-171.8
-63.0
-113.3
-176.4
-11.2
15.7
4.5
Third parties
-4.9
-20.5
-25.4
-6.5
-28.2
-34.7
1.6
7.7
9.3
Freight
-12.1
-3.3
-15.4
-16.3
-0.6
-16.9
4.2
-2.7
1.5
2.2
1.2
3.3
-42.3
-5.8
-48.2
-44.5
-7.0
-51.5
0.0
0.0
0.0
-0.5
-1.3
-1.8
0.0
0.0
0.0
Construction/maintenance
and repair materials
Equipment rental
-5.8
-19.5
-25.4
-5.3
-18.2
-23.6
and others
Travel
-2.4
-6.4
-8.8
-3.8
-10.5
-14.3
1.4
4.1
5.5
Cost of
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-34.7
-53.2
-53.2
18.5
0.0
18.5
sales
-34.7
-151.9
Write-off of assets
-12.8
-17.7
-169.6
-152.9
-12.8
-13.7
-15.4
-168.3
1.0
-2.3
-1.4
-13.7
0.9
0.0
0.9
-38.2
-38.2
-42.3
-42.3
0.0
4.1
4.1
-9.6
-9.6
-9.5
-9.5
0.0
-0.1
-0.1
Provisions
-4.4
-4.4
-2.5
-2.5
0.0
-1.9
-1.9
-57.1
-57.1
0.0
-57.1
-57.1
-2.6
-17.6
-20.2
-3.2
-26.2
-29.4
0.6
8.6
9.2
-343.8
-297.9
-641.7
-362.4
-273.8
-636.2
18.6
-24.1
-5.5
Others
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, 2014 and 2015. The information provided in this table does not reflect the effects of depreciation on such
costs.
(%)
(1)
2015
2015 x 2014
(1)
Var. (%)
59.6%
-1.0%
(%)
(in R$ million)
Construction
(284.4)
60.8%
Heavy Construction
(122.1)
26.1%
Real Estate
(162.3)
34.7%
(281.6)
(2)
Industrial Services
Rental
Total
(174.1)
37.2%
(160.6)
34.0%
-7.8%
(9.5)
2.0%
(30.9)
6.4%
216.0%
(468.0)
100.0%
(472.0)
100.0%
0.9%
(1)
Percentage share of the business unit of goods sold and services provided and general and administrative expenses
(2)
Percentage increase (decrease) of the total registered from one period to another.
Cost of goods sold and services provided and General and Administrative expenses, excluding the effects of depreciation, went from R$ 468.0
million in the year ended December 31, 2014 to R$ 472.0 million year ended December 31, 2015, an increase of R$ 4.1 million, or 0.9%. Excluding
the impairment cost of R$ 30.9 million in Construction business unit, the total costs would be R$ 441.1 million, 5.7% lower when compared to
2014.
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services rendered increased, from R$ 168.3
million for the year ended on December 31, 2014 to R$ 169.6 million in the fiscal year ended December 31, 2015, maintaining the average
depreciation period of 10 years.
The ratio between the Companys operating, general, and administrative expenses in relation to the net operating income went from 27.1% in
the fiscal year ended December 31, 2013 to 34.5% in the fiscal year ended December, 2014 and to 41.8% in the fiscal year ended December,
2015.
Operating Profit
Operating profit before financial result decreased from R$ 157.9 million in the fiscal year ended December 31, 2014 to a net loss of R$ 65.6
million in the fiscal year ended December 31, 2015. Such reduction was a consequence of the impairment in Construction business unit and
investment on Rohr of R$ 57.1 million, and lower rental revenues.
Financial Results
Net financial expenses decreased from R$ 67.6 million in the fiscal year ended December 31, 2014 to R$ 63.1 million in the fiscal year ended
December 31, 2015, representing a decrease of R$ 4.5 million. The Company's bank debt, which was R$ 745.4 million in December 31, 2014
decreased to R$ 620.8 million in December 31, 2015.
Expenditure on income tax and social contribution went from R$ 26.1 million in the fiscal year ended December 31, 2014 to a positive value of
R$ 30.9 million in the fiscal year ended December 31, 2015. As of December 31, 2015, the Company has not determined taxable income from
income tax and social contribution. The amounts prepaid in 2015 and withheld at source on invoices and financial investments make up the
negative balance of IRPJ and CSLl that will be used during 2016.
In the fiscal year ended December 31, 2014, the Companys deducted from its income tax and social contribution the amount of R$ 8.5 million,
due to the provisioning of interest on equity for distribution of part of the annual results, while in fiscal year ended December 31, 2013 this
deduction totaled R$ 14.6 million. Moreover, the effective rate of 2014 was of 28.9%, after non-deductible tax items adjustment, against 28.2%
in 2013.
Net Income
For 2015, the Company reported a net loss of R$ 97.8 million, compared to R$ 64.3 million net profit in 2014.
In 2015, net profit was negatively impacted by non-recurring effects amounting to R$ 82.7 million, relating to (i) R$ 8.6 million restructuring
indemnities, (ii) R$ 12.9 million in ADD expenses related to on going investigations of Lava Jato, and (iii) R$ 0.4 million related to branch office
relocation/closing.
In 2014 there were non-recurring items with a negative effect of R$ 21.7 million, of which (i) R$ 7.1 million from the Industrial Services business
unit due to the payment of indemnity, related to events that happened before the completion of the sale, although the request for indemnity
occurred this year; (ii) R$ 12.3 million from Easy Set formwork cost adjustment, due to higher raw material use than technical specifications and
to customized equipment sale as scrap ate the end of the rental contract ; and (iii) R$ 2.3 million in cost provision and adjustments from the raw
material and goods for resale inventories. The increase of depreciation (R$ 37.3 million) and negative financial result (R$ 20.8 million) figures
also contributed to the Net Income decrease.
Year ended December 31st, 2014 compared with year ended December 31st, 2013
In the year ended December 31st, 2014 the Companys net revenue from sales and services reached R$ 794.2 million. For comparison purposes,
there was an reduction of R$ 38.1 million, or 4.6% yoy. This decrease comes mainly from the lower revenue from sales and technical assistance.
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$ 211.0 million in 2014, with a slight drop of 2.7% compared to 2013. The
management of the Company attributed this reduction as a result of the 29.7% drop in sales revenues, technical assistance and others, due to
projects not favorable to equipment purchase, instead of renting.
Real Estate
Net revenue from the Real Estate business unit, totaled R$ 212.4 million in 2014, with a drop of 17.7% compared to 2013, negatively impacted
by a decrease of 17.9% in rental revenues and of 25.3%, in sales revenues. The management of the Company attributed this reduction as a
result of a deterioration of Real Estate market in Brazil, influenced by political and economic uncertainties, higher interest rates and weakness of
economic activity.
Rental
Net revenue from the Rental business unit totaled R$ 370.8 million in 2014, new annual record, being 3.8% greater than that 2013. On the
evaluation of the management of the company, this increase is mainly associated with increasing fleet of equipment and, therefore, in rented
volume due to investments in organic growth since 2010.
Cost of products sold and services rendered and general and administrative expenses
The table below shows the Companys cost of goods sold and services rendered by nature in fiscal years ended December 31, 2013 and 2014.
General and
Administrative
Expenses
Total
Direct cost of
construction and
renting
General and
Administrative
Expenses
Total
Direct cost of
construction and
renting
General and
Administrative
Expenses
Total
(in R$ million)
Labor
-58.8
-107.4
-166.2
-63.0
-113.3
-176.4
-4.3
-5.9
-10.2
Third-party Services
-5.0
-20.4
-25.5
-6.5
-28.2
-34.7
-1.5
-7.8
-9.2
Freight
-15.5
-0.8
-16.2
-16.3
-0.6
-16.9
-0.8
0.1
-0.7
-43.5
-6.1
-49.6
-44.5
-7.0
-51.5
-1.0
-0.9
-1.9
Rent Equipment
-5.9
-15.0
-20.8
-5.3
-18.2
-23.6
0.5
-3.3
-2.8
Travel
-5.0
-11.6
-16.5
-3.8
-10.5
-14.3
1.2
1.0
2.2
Cost of Sales
-68.0
0.0
-68.0
-53.2
0.0
-53.2
14.9
0.0
14.9
Depreciation ad Amortization
-122.6
-8.4
-131.0
-152.9
-15.4
-168.3
-30.3
-7.0
-37.3
-8.9
0.0
-8.9
-13.7
0.0
-13.7
-4.9
0.0
-4.9
Asset impairment
0.0
-16.2
-16.2
0.0
-42.3
-42.3
0.0
-26.1
-26.1
Stcok Option
0.0
-9.0
-9.0
0.0
-9.5
-9.5
0.0
-0.6
-0.6
Update provisions
0.0
0.2
0.2
0.0
-2.5
-2.5
0.0
-2.7
-2.7
Profit sharing
0.0
-18.8
-18.8
0.0
0.0
0.0
0.0
18.8
18.8
Others
-1.9
-12.0
-13.8
-3.2
-26.2
-29.4
-1.3
-14.2
-15.6
Total
-334.9
-225.4
-560.4
-362.4
-273.8
-636.2
-27.4
-48.4
-75.8
(1)
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, 2013 and 2014. The information provided in this table does not reflect the effects of depreciation on such
costs.
(%)
(1)
2014
2014 x 2013
(%)
(1)
Var. (%)
(2)
(in R$ million)
Heavy Construction ....................................
(108.9)
25.9%
(122.1)
26.1%
12.1%
(164.2)
39.0%
(162.3)
34.7%
-1.2%
(156.1)
37.1%
(174.1)
37.2%
11.6%
Rental .......................................................
8.2
-1.9%
(9.5)
2.0%
N.A.
Total .....................................................
(421.0)
100.0%
(468.0)
100.0%
11.2%
(1)
Percentage share of the business unit of goods sold and services provided and general and administrative expenses
(2)
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$ 421.0 million in the year ended December 31, 2013
to R$ 468.0 million year ended December 31, 2014, a increase of R$ 47.0 million, or 11.2%, mainly due to a greater allowance for doubtful debts
(ADD).
The depreciation of assets used in services rendered, which is part of the costs of goods sold and services rendered increased 28.4% due to
higher investments in the past years, from R$ 131.0 million for the year ended on December 31, 2013 to R$ 168.3 million in the fiscal year ended
December 31, 2014, maintaining the average depreciation period of 10 years.
The ratio between the Companys operating, general, and administrative expenses in relation to the net operating income went from 27.1% in
the fiscal year ended December 31, 2013 to 34.5% in the fiscal year ended December, 2014.
Operating Profit
Operating profit before financial result increased from R$ 280.2 million in the fiscal year ended December 31, 2013 to R$ 157.9 million in the
fiscal year ended December 31, 2014, a reduction of R$ 122.3 million, or 43.6%. Such reduction was a consequence of higher depreciation, and
General, administrative and operating expenses, both mainly impacted by increase in ADD of the fiscal year. Operating profit represented 19.9%
of net revenues in December 31, 2014, compared to 33.7% of net revenues in December 31, 2013.
Financial Results
Net financial expenses decreased from R$ 46.8 million in the fiscal year ended December 31, 2013 to R$ 26.1 million in the fiscal year ended
December 31, 2014, representing decrease of R$ 20.8 million due to higher gross debt level and interest rates in the period. The Company's bank
debt, which was R$ 632.6 million in December 31, 2013 increased to R$ 745.4 million in December 31, 2014.
Expenditure on income tax and social contribution went from R$ 65.7 million in the fiscal year ended December 31, 2013 to R$ 26.1 million in
the fiscal year ended December 31, 2014, decreasing R$ 39.6 million, or 60.3%.
In the fiscal year ended December 31, 2014, the Companys deducted from its income tax and social contribution the amount of R$ 8.5 million,
due to the provisioning of interest on equity for distribution of part of the annual results, while in fiscal year ended December 31, 2013 this
deduction totaled R$ 14.6 million. Moreover, the effective rate of 2014 was of 28,9%, after non-deductible tax items adjustment, against 28.2%
in 2013.
Net Income
The net profit increased from R$ 172.6 million in the fiscal year ended December 31, 2013 to R$ 64.3 million in the fiscal year ended December
31, 2014, a R$ 108.3 million decrease. In 2013 there was a net positive effect of R$ 8.2 million in the net earnings from continuing operations
due to the sale of the Industrial Services business unit. In 2014 there were non-recurring items with a negative effect of R$ 21.7 million, of which
(i) R$ 7.1 million from the Industrial Services business unit due to the payment of indemnity, related to events that happened before the
completion of the sale, although the request for indemnity occurred this year; (ii) R$ 12.3 million from Easy Set formwork cost adjustment, due
to higher raw material use than technical specifications and to customized equipment sale as scrap ate the end of the rental contract ; and (iii)
R$ 2.3 million in cost provision and adjustments from the raw material and goods for resale inventories. The increase of depreciation (R$ 37.3
million) and negative financial result (R$ 20.8 million) figures also contributed to the Net Income decrease.
Year ended December 31st, 2015 compared to year ended December 31st, 2014
Current Assets
The Companys current assets increased from R$ 425.3 million as of December 31, 2014 to R$ 435.5 million as of December 31, 2015, an increase
of R$ 10.2 million or 2.4%. The main reasons for such increase, in the assessment of the management of the Company, were:
Increase of R$ 38.4 million in cash and cash equivalents, due to higher liquidity mainly derived from the slower pace of investments in rental
equipment and sales;
Increase of R$ 20.7 million in assets maintained for sale, as a result of the sale contract in Rental business unit;
Increase of 10.0 million in recoverable taxes;
decrease of R$ 54.8 million in accounts receivable, including revenue from the sale of the investee; and
Reduction of R$ 3.4 million in inventories.
Non-current Assets
The Companys non-current assets of R$ 103.7 million as of December 31, 2014 was decreased to R$ 90.4 million as of December 31, 2015, a
reduction of R$ 13.3 million or 12.9%.
Investment
The investment dropped from R$ 87.4 million as of December 31, 2014 to R$ 61.2 million as of December 31, 2015, a reduction of R$ 26.2
million, or 30.0%, related to the impaiment in investment on Rohr.
The Companys PP&E decreased from R$ 1,200.1 million as of December 31, 2014 to R$ 1,004.1 million at December 31, 2015, a decrease of R$
196.1 million, or 16.3%.
Intangible assets
The Companys intangible assets decreased from R$ 76.1 million as of December 31, 2014 to R$ 46.8 million as of December 31, 2015.
In the beginning of 2014, the Company concluded SAP implementation, unifying and standardizing its information systems aiming at achieving a
higher efficiency level for its internal controls, mainly on the financial and operational sides.
Current liabilities
The Companys current liabilities decreased from R$ 221.2 million as of December 31, 2014, to R$ 218.9 million as of December 31, 2015, a
reduction of R$ 2.3 million. The main factors that led to this change, according to the managements opinion, were:
Increase of R$ 81.3 million in the sort-term debentures balance, as a result of the reclassification of the first installment of the second issue
from the long to the short term.
decrease of R$ 46.5 million in the short-term loans and financing balance, due to a reclassification from long to short-term referring to
installment to be settled in 2015;
reduction of R$ 21.8 million in the balance of dividends and interest on equity, as dividends or interest on equity were not distributed in
2015; and
reduction of R$ 9.7 million in suppliers account, due reduction of acquisition of rental equipment of our PPE.
Non-current liabilities
The non-current liabilities decreased from R$ 612.1 million as of December 31, 2014 to R$ 456.8 million as of December 31, 2015, a reduction
of R$ 155.3 million, or 25.4%. On the Companys management evaluation, the main factor that led to this variation was:
Reduction of R$ 156.5 million in the long-term debentures balance, as a result of the reclassification of the third installment of the first
issuance of the debentures, the first installment of the second issue of the long to the short term and also the proceeds from the third
issuance of debentures.
Stockholders Equity
Shareholders equity decreased from R$ 1,059.4 million as of December 31, 2014 to R$ 962.2 million as of December 31, 2015, a reduction of
R$ 97.2 million, or 9.2%. On the Companys management evaluation, the main factor that led to this variation was:
Reduction of R$ 97.8 million in earnings reserve account, as a result of the reduction of profit.
Year ended December 31st, 2014 compared to year ended December 31st, 2013
Current Assets
The Companys current assets increased from R$ 319.5 million as of December 31, 2013 to R$ 425.3 million as of December 31, 2014, an increase
of R$ 105.8 million or 33.1%. The main reasons for such increase, in the assessment of the management of the Company, were:
increase of R$ 167.9 million in cash and cash equivalents, due to higher liquidity mainly derived from the slower pace of investments in rental
equipment.
decrease of R$ 29.9 million in accounts receivable, including revenue from the sale of the investee;
reduction of R$ 14.5 million in inventories;
Non-current Assets
The Companys non-current assets of R$ 101.5 million as of December 31, 2013 was increased to R$ 103.7 million as of December 31, 2014, a
growth of R$ 2.2 million or 2.2%.
Investment
In 2014 the Company maintained the same registered investment value as 2013 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 Companys PP&E increased from R$ 1,224.5 million as of December 31, 2013 to R$ 1,200.1 million at December 31, 2014, a decrease of R$
24.4 million, or 1.99% reflecting investments in line with book depreciation and sale of semi-new equipment.
Intangible assets
The Companys intangible assets increased from R$ 68.4 million as of December 31, 2013 to R$ 76.1 million as of December 31, 2014, mainly
due to R$ 7.7 million in software acquisition.
In the beginning of 2014, the Company concluded SAP implementation, unifying and standardizing its information systems aiming at achieving a
higher efficiency level for its internal controls, mainly on the financial and operational sides.
Current liabilities
The Companys current liabilities increased from R$ 255.0 million as of December 31, 2013, to R$ 221.2 million as of December 31, 2014, a
reduction of R$ 33.8 million. The main factors that led to this change, according to the managements opinion, were:
increase of R$ 36.9 million in the short-term loans and financing balance, due to a reclassification from long to short-term referring to
installment to be settled in 2015.
reduction of R$ 21.4 million in suppliers account, due to installment purchase of rental equipment of our PPE.
reduction of R$ 19.2 million in dividends and payable interest on capital, due to the lower level of profit distribution of 2014;
decrease of R$ 18.7 million in the profit sharing payable account, since there will not be profit sharing in 2014;
reduction of R$ 7.2 million, in the short-term debentures balance, due to the amortization of part of the debentures in 2014.
Non-current liabilities
The non-current liabilities increased from R$ 529.7 million as of December 31, 2013 to R$ 612.1 million as of December 31, 2014, an increase of
R$ 82.4 million, or 15.6%. On the Companys management evaluation, the main factor that led to this variation were:
increase of R$ 201.2 million referring to the third issuance of Debentures held by the Company;
reduction of R$ 90 million referring to amortization of principal of first Debentures issuance;
reduction of R$ 43.9 million in long-term borrowings and financing due to its transfer to short-term.
Stockholders Equity
Shareholders equity increased from R$ 1,016.51 million as of December 31, 2013 to R$ 1,059.4 million as of December 31, 2014, an increase of
R$ 42.9 million, or 4.2%. On the Companys management evaluation, the main factor that led to this variation were:
increase of R$ 39.1 million in earnings reserve account referring to the net earning registered in 2014 of R$ 64.3 million deducted R$ 25.1
million of dividends and payable interest on capital registered in 2014;
increase of R$ 10.1 million in stockholders equity due to the exercise of options by the beneficiaries;
reduction of R$ 1.4 million in capital reserve account, due to R$ 11.0 million in buyback of shares and to R$ 9.5 in stock option premium
reserve amounting; and
Reduction of R$ 5.0 million in valuation adjustment to equity, due to cash flow hedges in 2014.
CASH FLOW
Year ended December 31st
2013
2014
2015
(in R$ millions)
Cash flow from operating services ...................................................................................
263.4
120.9
200.3
(258.1)
(4.7)
2.1
(23.7)
51.7
(164.1)
(18.4)
167.9
38.4
In 2015 the Company changed the accounting method for acquisition of fixed assets for rental in its cash flow from investment activities to
operational activities. The cash flow values of 2014 and 2015 already reflect this change. The main reason is that the company considers as
operational activities sales of fixed assets, and, therefore, its cash flow should reflect this reality.
For comparison purposes, below is the 2013 adjusted cash flow reflecting this change:
Cash Flow
DFs 2013
changes
DFs 2013
adjusted
263.4
538.4
801.8
-258.1
-538.4
-796.5
-23.7
-23.7
-18.4
-18.4
In the fiscal years of 2013, 2014 and 2015, the company operating result, was R$ 263.4 million, R$ 120.9 million and R$ 200.3 million, respectively.
In 2015, there was a growth of 65.7%. According do managements opinion, the increase was impacted by significant drop in the Companys
investments.
The gross investments in PPE for the years ended December 31, 2013, 2014 and 2015 amounted to R$ 489.4, R$ 186.7 million, and R$ 21.3
million, respectively.
In 2013, the Company invested to continue seizing attractive opportunities in its operating markets.
In 2014 due to the market contraction due to economic and politic uncertainties, the Company reduced its investments.
In 2015 due to continuous market contraction as a result of economic and politic uncertainties, the Company reduced, even more, its investments.
The table below shows the investments in PP&E made in 2013, 2014 and 2015:
2013
2014
2015
(in R$ millions)
Gross investments, before PIS and COFINS credits ...........................................................
(489.4)
(186.7)
(21.3)
(489.4)
(186.7)
(21.3)
43.4
18.2
1.0
(446.0)
(168.5)
(20.3)
The gross investments in intangible assets in the years ended December 31st 2013, 2014 and 2015 totaled, R$ 16.5 million, R$ 12.4 million and
R$ 6.9 million, respectively.
2013
2014
2015
(in R$ millions)
15.6
10.1
(11.0)
(8.7)
(41.8)
(46.7)
(21.8)
(38.5)
(300.6)
(133.5)
Borrowings raised............................................................................................
41.0
400.0
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 2014, the Company issued promissory notes totaling R$ 200 million, and its third debentures issuance, in May, amounting to R$ 200 million,
which were used, in June, to fully pay the promissory notes issued in April.
On April 11, 2014 the Company issued in a single series 20 commercial promissory notes with unit face value of R$10,000, totaling R$200,000
and with maturity on August 8, 2014. The unit value of the promissory notes bears interest equivalent to 106% of the accumulated fluctuation
of the average daily interbank deposit (DI) rates. On June 18, 2014 the Company fully paid these promissory notes with the proceeds from its
third issue of debentures.
In 2014, the Company captured R$ 200.0 million through its third issue of Company debentures simple, nonconvertible, registered, unsecured,
in a single series with unit face value of R$10.00. These debentures mature on May 30, 2019 and pay interest equivalent to 108.75% of the CDI,
payable semiannually, and amortized in three annual, consecutive installments, commencing on May 30, 2017. The proceeds obtained by the
Company with the third issue of debentures were fully used to settle the commercial promissory notes amounting R$ 200 million of the Companys
fourth issue, issued on April 11, 2014.
a.
(i)
2014
2015
81.0%
83.5%
84.1%
12.2%
10.1%
9.4%
2.6%
1.0%
1.4%
Indemnifications..............................................................................
4.2%
5.3%
5.1%
(ii)
Cost of Products Sold and Services Rendered and Operational, General and Administrative Expenses
The main cost of products sold and services rendered relates to costs for executing the projects in which the Company are involved, including (i)
personnel for assembly and disassembly of equipment rented to its clients when such tasks are carried out by the Company; (ii) cost of the
equipment sub-leased from third parties when the Companys inventories are insufficient to meet demand; (iii) expenses with materials used in
the provision of its services, which include individual safety equipment, wood, paint and insulation material; and (iv) freight costs relating to the
transportation of equipment between its branches and eventually to its clients. Costs related to the execution of its projects represented 43.7%,
43.9% and 45.1% of its principal costs of sales and services rendered, excluding depreciation, in the years ended December 31, 2013, 2014 and
2015, respectively.
The Companys main general and administrative expenses refer to contract coordination, encompassing the project teams and engineers in the
commercial area, responsible for the management and supervision of each of its projects, which correspond basically to salaries, payroll charges
and benefits, with the rest relating to travel, representation and communications expenses, as well as the overhead of the administrative areas.
Other material general and administrative expenses include: (i) administrative expenses incurred with respect to its financial, investor relations,
and human resources departments, as well as its executive management, including salaries and benefits, (ii) expenses in connection with the
Companys employee profit-sharing plans and expenses related to its stock option plans, and (iii) other administrative expenses, which include,
in particular, expenses resulting from adjustments to its provisions for contingencies.
ADD represented 6.6% of net revenues in 2015, versus 5.3% in 2014 and 2.0% in 2013.
With equipment and maintenance operational synergy from Heavy Construction and Real Estate, we will see improvement in operational efficiency
and, consequently, a reduction in unit costs for maintenance. In 2014, we had intense maintenance activities, despite of weaker demand, to
equalize deferred maintenance of our equipment.
Furthermore, we have some initiatives underway in order to reduce Company expenses, such as (i) a leaner corporate structure and, thus, the
disposal of some administrative and management positions; (ii) procurement centralization; and (iii) insourcing of some third-party services, such
as IT; (iv) Closure of three branches in the Rental business unit and five branches in the Construction business unit; and (v) In October, we
moved our head office from Barra da Tijuca to our address in Jacarepagu, where our warehouse is located.
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.
The net financial result was a negative R$ 46.8 million, R$ 67.6 million and R$ 63.1 million in 2013, 2014 and 2015, respectively.
In 2015, the Federal Government announced a new phase of the program of investment in logistics (PIL Programa de Investimento em
Logstica), which will privatize airports, highways, railways and ports. The plan announced by the Government stipulates that the companies that
win the concessions will invest R$ 198.4 billion in infrastructure works in the country. These resources will be invested in construction and reform
of highways, railways, ports and airports. Of this amount, R$ 69.25 billion should be applied between 2015 and 2018, according to the Federal
Government. The other R$ 129.2 billion will be invested from 2019 and until the end of the concession period, which varies according to the
work, and may reach 30 years. Has not yet been defined how will the model be adopted to each grant. Therefore, there is no prediction of how
much the Government will raise with the auctions.
The expansion or contraction of housing credit and changes in interest rates influenced Real Estate market in the past, therefore, it can affect
future revenues of Construction business unit.
b.
Changes attributable to changes in prices, volume changes and introduction of new products and services
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 impacts 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. The increase in
revenues in 2013 was due to an increase in rented and sales volume, given the favorable market conditions and its geographic expansion. In
2014, rental revenues were stable compared to 2013, being the consolidated revenues affected by lower sales volume in the year. In 2015, there
was a reduction of 27.5% in revenues, of which 82% from rental revenues.
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.
Companys operations and results are directly impacted by variations of: (i) Inflation rates, which index are used to adjustment of Companys
long-term contracts; (ii) Interest rates, that affect interest-bearing debt of the Company; and (iii) cost of material used in construction works or
equipment maintenance of the Company.
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.
The indebtedness of the Company is subject to floating interest rates, especially CDI rate, IPCA (inflation) and TJLP. There is a risk of the
Company come to incur losses due to fluctuations in interest rates, which increases financial expenses related to loans, financings and debentures
obtained on the market
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 2014 and 2015.
b.
On July 10, 2013, the Company entered into an agreement for the sale of its Industrial Services business unit for R$ 102 million through the sale
of its stake in the company Albuquerque Participaes Ltda.
for the nine months ended September 2013 (end of the last quarter before the actual sale), net profit of R$ 6.1 million 30 representing in
the same period, 4.8% of total net profit of Mills, and net income of R$ 168.4 million, over the same period, 21.3% of consolidated net revenue
of Mills;
in fiscal year 2012, net income of R$ 2.3 million, in the same period, 1.2% of total net profit of the Mills, and net income of R$ 213.8
million, over the same period, 24.3% of consolidated net revenue of Mills.
The sale is aligned with the Companhys strategy to focus on businesses in which its competencies are able to add higher value to its shareholders
and clients. Therefore, the Company ceased to operate in the Industrial Services sector, in which were offered access services, industrial painting,
surface treatment and thermal insulation, during both construction and maintenance phase of large industrial plants.
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, (i) R$ 25 million was received on the date of the sale agreement, in July; (ii) R$ 17 million were
paid in April 2014, net of R$ 6.8 million related to adjusts settled between the Buyer and the Company; and (iii) the outstanding amount of R$
60 million will be paid in installments adjusted by the Interbank Deposit Certificate CDI rate. 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.
c.
There were no unusual transactions or events in fiscal years 2013 and 2014, except as described above.
In 2015, the Company recognized R$ 57.1 million of impairment in Construction business unit and in the investment on Rohr.
Applying the premises of Technical Pronouncement CPC-01 - Impairment of Assets, the Company performed impairment tests on its assets. After
said tests, it was verified that it was necessary to establish an impairment provision amounting to R$ 26.2 million for the investment in Rohr and
R$ 30.9 million for the Construction Cash Generating Unit. For the assets of the Rental business unit and other assets of the Company, no need
to perform impairment tests were identified.
The recoverable amount of those assets was determined based on economic forecasts for determining the market value of the investee, upon
through a revenue approach, through a 10-year term discounted cash flow forecast, for purposes of substantiating the amount paid, considering
the long maturity period of infrastructure and civil construction investments. The main assumptions included: (i) revenues were forecast based
on historical data and growth prospective for the segment and Brazilian economy; (ii) negative operating loss for 2015, resulting from the reduced
activity of the industry; (iii) performance of a continuous productivity improvement program and reduction of costs and expenses will cause the
evolution thereof to be lower than revenue growth percentage, (iii) the corresponding cash flows are discounted at the average discount rate,
obtained using a methodology typically applied by the market, taking into account the weighed average cost of capital (WACC); (iv) a strict
working capital evolution control policy, during the forecasted period.
a.
a) New standards and interpretations and amendments to existing standards that are effective since January 1, 2014:
Effective for annual periods beginning on or after July 1, 2014:
IAS 19/CPC 33 Employee Benefits The amendments clarify how an entity should account for contributions made by employees or third parties
based on whether those contributions are dependent on the number of years of service provided by the employee.
Annual Improvements to IFRSs 2010-2012 and 2011-2013 Cycles Minor amendments to existing pronouncements.
Management has not identified any impact of these amendments to existing standards.
b) New standards, interpretations of and amendments to existing standards that are not yet effective at December 31, 2015:
Effective for annual periods beginning on or after January 1, 2016:
IAS 16 and IAS 38 Amendments to these standards to clarify the acceptable methods of depreciation and amortization.
IFRS 11 Amendments that address accounting for acquisitions of interests in joint operations. The amendments provide guidance on how to account
for the acquisition of a joint operation that constitutes a business as defined in IFRS 3, the amendments state that the relevant principles on accounting
for business combinations in IFRS 3 and other standards should be applied, except when there is a conflict with IFRS 11, and that a joint operator is
also required to disclose the relevant information required by IFRS 3 and other standards for business combinations. Applicable both for the initial
acquisition of interest in a joint operation and for the acquisition of additional interest, in the latter case, the investment previously held is not remeasured
with prospective effect.
IAS 27 Amendments to standard to include the option to account for investments in subsidiaries, joint ventures and associates using the equity
method in separate financial statements.
IAS 1 Amendments to standard to address potential hindrances identified in exercising judgment in the preparation of financial statements. These
amendments clarify that the concept of materiality should be considered both for reporting purposes, either the information is required or not, and in
the presentation of the notes to financial statements and in the use of aggregation criteria.
IFRS 15 Revenue from Contracts with Customers establish five simple steps to be applied to contracts with customers for revenue
recognition and disclosure. It will replace the standards (IAS 18 and IAS 11) and interpretations (IFRIC 13, IFRIC 15 and IFRIC 18) currently
effective on the matter.
IFRS 9 Financial Instruments New standard (with amendments subsequent to it) that introduces new requirements for the classification,
measurement, impairment, hedge accounting and derecognition of financial assets and liabilities
IFRS 16 Specification of recognition, measurement and disclosure of leases, through a single accounting model of lessee.
IFRS 10 and IAS 28 Amendments to these standards to clarify the treatment of sale or entry of assets of an investor to its associate or
joint venture.
The Company intends to adopt these standards when they become effective. The Company is analyzing the impacts of these standards and so
far no material impact on its financial statements has been identified.
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, 2013, 2014 and 2015.
c.
10.5 The management shall indicate and comment on critical accounting policies adopted by the issuer, by exposing mainly
the accounting estimates made by management on uncertain and relevant questions for description of the financial situation
and the results, which require subjective or complex judgments, such as: provisions, contingencies, recognition of revenue,
fiscal credits, long-term assets, useful life of non-current assets, pension plans, conversion adjustments in foreign currency,
recovery environmental costs, standards for testing the recovery of assets and financial instruments.
In the preparation of the Company's financial statements, management is required to make judgments, estimates and assumptions about the
carrying amounts of revenues, expenses, assets and liabilities, as well as the disclosure of contingent liabilities at the end of the reporting period.
However, the uncertainty related to these assumptions and estimates might lead to results that require a significant adjustment to the carrying
amount of the affected asset or liability in future periods.
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period,
hat may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next fiscal year.
(i)
An asset is impaired when its carrying amount exceeds its recoverable amount, which is the higher of an asset's fair value less costs to sell and
its value in use. The value in use calculation is based on the discounted cash flow model. Cash flows derive from the budget and Managements
expectations for the next five years and do not include reorganization activities to which the Company has not yet committed or significant future
investments that will improve the asset base of the cash-generating unit or investment subject to testing. The recoverable amount is sensitive to
the discount rate used in the discounted cash flow method, as well as to the expected future cash receipts and to the growth rate used for
extrapolation purposes.
(ii)
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair value of
share-based payments requires the determination of the most appropriate valuation model for the granting of equity instruments, which depends
on the terms and conditions of the grant. This also requires the determination of the most appropriate valuation model, including the expected
life of the option, volatility and dividend yield and related assumptions.
(iii)
Taxes
There are uncertainties regarding the interpretation of complex tax regulations, as well as the amount and timing of future taxable profits.
Differences between actual results and the assumptions adopted, or future changes in these assumptions, may require future adjustments in tax
income and expenses already recorded. The Company recognizes provisions based on applicable estimates, for potential consequences of audits
by tax authorities. The amount of these provisions is based on several factors, such as experience of prior tax audits and interpretations diverging
from the tax regulations by the taxable entity and by the responsible tax authority. These diverging interpretations may arise in a wide variety of
matters, depending on the prevailing conditions prevailing at the Companys domicile. Deferred tax assets are recognized for all temporary
differences to the extent that it is probable that sufficient taxable profits will be available to allow their utilization.
Significant judgment by management is required to determine the amount of deferred tax assets that can be recognized, based on the probable
term and level of future taxable profits, together with strategies for future tax planning.
(iv)
When the fair value of financial assets and liabilities, such as stock options, securities and hedging instruments presented in the statement of
financial position, cannot be obtained from active markets, it is determined by using valuation techniques, including the discounted cash flow
method. Inputs for these methods are based on market inputs, when possible; however, when this is not feasible, a certain level of judgment is
required to establish the fair value. Judgment includes considerations on the inputs used, such as liquidity risk, credit risk and volatility. Changes
in assumptions on these factors could affect the reported fair value of the financial instruments.
(v)
The need to recognize such allowance involves an analysis of the available evidence as regards the Company's ability to pay customers, including
in a manner so as to classify some of them as preferred customers and base other cases that will be sent to legal collection. Significant judgment
by Management is required in classifying its customers, in defining the criteria applied, and in assessing its accuracy.
(vi)
The Company recognizes a provision for tax, civil and labor risks. The assessment of the likelihood of loss includes examining available evidence,
the hierarchy of laws, former court decisions, the most recent court decisions and their relevance in the legal system, and the assessment of the
outside legal counsel. The provision is reviewed and adjusted to take into account any changes in circumstances, such as the applicable
prescriptive periods, conclusions of tax audits or additional exposures identified based on new matters or court decisions.
(vii)
The Company reviews the estimated useful lives of its property, plant and equipment annually at the end of each reporting period. During the
year the Company assessed the useful lives of its assets and concluded that the ten-year period adopted in prior years reasonably represents the
average useful life of the Company's assets and should be maintained for its equipment in 2015.
(viii)
Revenue recognition
Service revenue is recognized in profit or loss based on the stage of completion of the services at the end of the reporting period.
Following, the Companys Management presents a discussion about what they consider relevant as accounting practices for the presentation of
Companys financial information.
(i)
Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the respective instrument.
Financial assets and 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 thousand, 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.
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.
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.
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
At the end of each reporting period, the Company reviews the carrying amount of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs, for this purpose the Company
considers its divisions as cash-generating units. When a reasonable and consistent basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use, and the latter is the method used by the Company in testing
the impairment of the goodwill recognized in the cash-generating unit Construction. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognized immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized
immediately in profit or loss.
(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.
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.
(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.
This recognizes the impact of the revision of the initial estimates, if any, in the statement of profit or loss, 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. The Companys policy for recognition of revenue is the date at which goods are delivered to the buyer.
The rental income is prorated and recognized on a straight-line basis over the term of the equipment rental agreements.
The Company separates the identifiable components of a single contract or a group of contracts to reflect the substance of the contract or group
of contracts, recognizing the revenue of each of the elements proportionally to its fair value. Therefore, the Company's revenue is divided into
rental, technical assistance, sales and indemnities/expense recoveries.
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 payment has been established (provided that it is
probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
10.6 Regarding the internal controls adopted to ensure the preparation of reliable financial statements, the management shall
comment on:
a.
the assets and liabilities held by the Company, directly or indirectly, that do not appear on its balance sheet (off-balance sheet items),
such as: (i) commercial leases, operating assets and liabilities, (ii) Receivables portfolios written-off over which the entity keep risks and
responsibilities, indicating their respective liabilities, (iii) future contracts, purchase and sale of products or services, (iv) construction
contracts not terminated (v) future receivables financing contracts
The Company does not have relevant assets and liabilities not evidenced in the financial statements of the years 2013, 2014 and 2015.
b.
In the evaluation of the management, there are no significant items not included in the balance sheet of the Company in the years 2013, 2014
and 2015.
10.7 For each of the items that are not evidenced in the financial statements listed in item 10.6, management must comment:
how such items change or may change the revenues, expenses, operating results, financial expenses or other items of the financial
statements of the company
a.
In the evaluation of the Management, there are no relevant items not evidenced in the financial statements of the company of in the years 2013,
2014 and 2015.
b.
nature and amount of the obligations assumed and rights generated in favor of the company as a result of the operations
In the evaluation of the Management, there are no relevant items not evidenced in the financial statements of the company of in the years 2013, 2014 and
2015.
10.8 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 demand prospects, 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 2013, 2014 and 2015.
In 2015 the Company recognized net loss, therefore no reserve constitution was necessary.
In 2014, the amount of R$ 2.4 million were designated to this reservation, whereas there was not any amount for this reservation in 2013.
The management presents below the major investments made in the course of the years ended December 31, 2013, 2014 and 2015, and highlight
the investment budget for fiscal year 2016.
Heavy Construction
In the fiscal years ended by December, 31st, 2013, 2014 and 2015, the Heavy Construction business unit invested, mainly, in shoring structures and industrialized
steel and aluminum formwork acquisition, amounting to R$ 106.3 million in 2013, R$ 47.5 million in 2014 and R$ 9.4 million in 2015.
Real Estate
Over the past three fiscal years ended by December, 31st, 2013, 2014 and 2015, the Real Estate business unit invested mainly in acquisition of shoring
equipment, suspended scaffolding and industrialized formworks, having disbursed R$ 90.1 million in 2013, R$ 19.3 million in 2014 and R$ 2.2 million in 2015.
Rental
Over the financial years ended 31 December 2013, 2014 and 2015, the Company carried out investments of R$ 267.2 million, R$ 105.3 million and R$ 0.6
millioN, respectively.
In 2013 and 2014, the Company continued to implement its strategy of expanding its portfolio
of aerial work platforms and telescopic handlers, investing R$ 267.2 million, R$ 105.3 million and R$ 0.6 million in the acquisition of such equipment, respectively.
The Company intends to finance its investments with (i) cash generated in its own activities, and (ii) indebtedness. For strategic operations, when
necessary, the Company may resort to the capital from their shareholders or third parties, through the issuance of shares.
Investments planned for 2016
In 2016, the Company does not intend to make investments for the acquisition of rental equipment, since the market is retracted and recognized net loss of R$
97.8 million in 2015.
b.
If already disclosed, indicate the purchase of plants, equipment, patents or other assets that could influence materially
the productive capacity of the company.
In 2016, the Company does not plan to invest to purchase rental equipment in 2016.
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.
10.9 Management is expected to discuss and analyze other material factors that influenced operating performance, which
were not discussed under previous items in this section.
There are no other factors to comment on about operational performance of 2013, 2014 and 2015 results.
For being a service company with its main target audience quite segmented, advertising investments are focused on targeted actions, whether
they are direct marketing, email marketing, relationship actions or online advertising. Furthermore, as the services provided by the Company are,
for the most part, in activities related to construction, the Company prioritizes the sponsorship of projects focused on reconstruction and
development of the urban space or using the Companys equipment. Following this line, in 2015, the Company sponsored actions related to urban
art with graffiti, in projects in Rio de Janeiro, Sao Paulo, Fortaleza, Belo Horizonte, Brasilia and Salvador. The Company also sponsored the show
"pera do Malandro", which used the Company's equipment as scenario and had presentation in nine of the locations where the Company
operates, providing relationships with clients who were invited to watch the show.
Annex B
12.5
Board of Directors
The Companys Board of Directors is currently comprised of six members, elected by the controlling shareholders 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.
The table below presents the information of the candidates appointed for the Board of Directors by the controlling shareholders.
Until the date of submission of this proposal, there is no definition on the behalf of all the members that will be part of the Board of Directors to be submitted
to the shareholders. Information indicated on items 12.5 until 12.10 of the Reference Form is presented below, as determination of article 10 of ICVM 481/09,
about the 3 members already appointed. The definition of the remaining names depends, among other things, of the conclusion of the capital increase approved
at the Board of Directos meeting held on February 5th, 2016.
Date of
Birth
Profession
08/1/1942
Business
Administrator
Elio
Demier
Francisca
Kjellerup
Nacht
Name
Andres
Cristian
Nacht
CPF
Title
098.921.337Chaiman
49
Date of
Last
Election
Date of
Office
Termo f
Office
Other titles in
the Company
Elected by
the
Controlling
Shareholder
If independent
member,criterion used to
determine the
independence
Number of
consecutive
terms
Not applicable
No
Yes
01/28/1951
Bachelor of
260.066.507- Vice
Social
20
Chairmar
Communication
Yes, is member of
the Human
Resources
Committee
Yes
Not applicable
12/28/1970
Business
Administrator
No
Yes
Not applicable
124.175.657Director
06
Fiscal Council
At the Extraordinary General Meeting held on April 20, 2012, the Fiscal Council became a permanent body.
For the purposes of article 10 of CVM Instruction 481/2009, the controlling shareholders of the Company support the election, in the fiscal year of 2016, of the
members of the Fiscal Council as indicated below, with the Company's minority shareholders to decide on the election of the other members.
The table below presentes information of the candidates appointed by the controlling shareholders
Name
Eduardo
Botelho
Kiralyhegy
Leonardo
Roslindo
Pimenta
Marcus
Vincius Dias
Severini
Vera Lucia de
Almeida
Pereira Elias
Date of
Birth
Profession
CPF
Title
Date of Last
Election
Date of
Office
Termo f
Office
Other titles in
the Company
Elected by
the
Controlling
Shareholder
If independent
member,criterion
used to determine
the independence
Number of
consecutive
terms
03/13/1979
Lawyer
082.613.217-03 President
04/28/2015
04/28/2015
1 year
No
Yes
Not applicable
05/25/1976
Lawyer
016.749.907-66 Alternate
1 year
No
Yes
Not applicable
10/02/1957
Accountant/
Engineer
632.856.067-20 Member
04/28/2015
04/28/2015
1 year
No
Yes
Not applicable
08/11/1958
Accountant
492.846.497-49 Alternate
04/28/2015
04/28/2015
1 year
No
Yes
Not applicable
Board of Directors
Fiscal Council
Company in 1994, coming from Arthur Andersen S/C, where he worked in auditing. Member of IBGC with
fiscal advisor certification and acted as effective or alternate member of fiscal councils of the following
companies: Fertilizantes Fosfatados S/A- Fosfrtil, Associao Brasileira de Alumnio ABAL, Usinas Minas
Gerais S/A USIMINAS, Companhia Siderrgica de Tubaro - CST e Caemi Minerao S.A. He was president
of the deliberative council of Fundao Vale do Rio Doce de Seguridade Social VALIA from May 2007 to
March 2015. From april 2015 until March 2016 he was member of the Fiscal Council of BRF S.A., company
from the food industry.
Mr. Marcus Vincius Dias Severini has not been involved in any criminal conviction, in any conviction in a CVM
administrative proceeding and in any final unfavorable judicial or administrative decision, which has resulted
in his suspension or impediment to the exercise of any professional or commercial activity, being thus
qualified to practice his professional activities.
Vera Lucia de Almeida Pereira Elias - 492.846.497-49
Mrs. Vera Lucia de Almeida Pereira Elias graduated in Accounting and Law, post graduated in Finance. Mrs.
Vera Lucia de Almeida Pereira Elias acted as accountant of Vale S.A. until September 2013. Since December
2013 she holds the position of International Standards Officer and CPC in the Associao Nacional dos
Executivos de Finanas, Administrao e Contabilidade ANEFAC. Mrs. Vera Lucia de Almeida Pereira acted
and/or act as effective or alternate member of the fiscal council of the following companies: Norte Energia
S.A., Vale do Rio Doce de Seguridade VALIA, Fundao Vale do Rio Doce, Ferrovia Centro-Atlntica, Caemi
Minerao e Metalurgia AS and Associao Mulheres Geniais.
Mrs. Vera Lucia de Almeida Pereira Elias has not been involved in any criminal conviction, in any conviction
in a CVM administrative proceeding and in any final unfavorable judicial or administrative decision, which
has resulted in her suspension or impediment to the exercise of any professional or commercial activity,
being thus qualified to practice her professional activities.
12.6 For each person who acted as member of the Board of Directors or Fiscal
Council in the last financial year, inform, in table format, the percentage of
participation in meetings held by the agency in the same period, which occurred since
taken office
49
% participation of the
member in the meetings
after election
94.2%
Elio Demier
50
96.2%
49
94.2%
Board of Directors
11
% participation of the
member in the meetings
after election
100.0%
Fiscal Councel
11
100.0%
0*
0%
*Alternate member of the Fiscal Council that was not invited to participate of any meeting during its term.
** Was elected in April 2015
12.7 Provide the information referred to in item 12.5 in respect of members of the
statutory committees, as well as audit committees, risk, and financial remuneration,
even if these committees or structures are non-statutory
Currently, the Company has only a Human Resources Committee, whose members are elected
by the Board of Directors.
For the purposes of art. 10 of CVM Instruction 481/2009, the appointed member of Board of
Directors, Elio Dernier, is a member of that Committee, and his information is on item 12.5 above.
12.8 For each of the person who acted as a member of the statutory committees,
as well as audit committees, risk, and financial remuneration, even if such structures
or committees are not statutory, inform, in table format, the percentage of
participation in meetings held by the agency in the same period, which occurred after
the tenure in Office
Currently, the Company has only a Human Resources Committee, whose members are elected
by the Board of Directors.
For the purposes of art. 10 of CVM Instruction 481/2009, below is a table with the participation
in meetings for the Human Resources Committee for the appointed member of Board of Directors
Elio Dernier:
Board of Directors
Elio Dernier
% participation of the
member in the meetings
after election
100%
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 kinship up to the second degree between the
Company's administrators and managers of subsidiaries, directly or indirectly, of the Company.
Related person:
Name: Francisca Kjellerup Nachtt / CPF: 124.175.657-06
Corporate name of the issuer company or controlled: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: member of the Board of Directors
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 or controlled: Mills Estruturas e Servios de
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 or controlled: Mills Estruturas e Servios de
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 or controlled: Mills Estruturas e Servios de
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 or controlled: Mills Estruturas e Servios de
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: Francisca Kjellerup Nacht / CPF: 124.175.657-06
Corporate name of the issuer company or controlled: 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 or controlled: Mills Estruturas e Servios de
Engenharia S.A. / CNPJ: 27.093.558/0001-15
Title: Direct Controlling Shareholder
Type of relationship: Mother/daughter
--------------------------------------
d. (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 relationship or kinship up to the second degree between
the management of the Company and administrators of entities controlled direct or indirectly by
the Company.
12.10 Subordination, rendering of services or control relationships for the previous
three fiscal years between administrators and:
a.
Controlled entities, either directly or indirectly by the company, with the
exception of those in which the company holds, directly or indirectly, the entire share
capital
Not applicable. The Company does not control, directly or indirectly, any entity.
b.
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. Andres Cristian
Nacht.
In case its relevant, supplier, client, debtor or creditor of the Company or its
controlled or controlling shareholders
c.
Mr. Eduardo Kiralyhegy is an associate of Negreiro, Medeiros & Kiralyhegy Advogados, which
provided services of legal advisory to the Company over the past three fiscal years.
Annex C
ITEM 13 OF THE REFERENCE FORM
Documentation required by article 12 of CVM Instruction 481
(Instruo CVM 481), issued by CVM on December 17, 2009
Information contained in items 13 of the Reference Form
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.
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
profit-sharing and stock option programs benefiting statutory directors and non-statutory
directors is a way to motivate them to carry out the Companys business in its best
interest, thus stimulating an entrepreneurial and results orientated culture in line with
the interests of both shareholders and management.
Fiscal Council
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 Committee
The members of the existing committees will be entitled to remuneration, from May 2016
onwards, equivalent to 100% 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; (iv) reasons for the composition of remuneration;
and (v) the existence of unremunerated members by the issuer and its reason
The fixed remuneration of the statutory directors and non-statutory directors is designed
to recognize and reflect the value of the job position internally and externally, considering
the competitors of the Company and companies of similar size in terms of their gross
revenues. The comparison with the market remuneration is carried out by a hired market
research consulting firm or through database purchased from a consultant. The
Company conducted market research with company Towers Watson in 2013 and 2014.
In 2015, the Company used the database of market remuneration from the consulting
company Towers Watson.
For the Board of Directors of the Company (and consequently the Advisory Committee),
the remuneration, fixed and/or variable (the last as bonus), is discretionary 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 objetive of a
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.
For the members of the Board of Directors who participate on Advisory Committees are
entitled to individual monthly remuneration equivalent to 100% of the individual monthly
remuneration of the Board of Directors members. Statutory directors who participate on
Advisory Committees are not entitled to any compensation.
Granted exclusively to statutory directors and non-statutory directors, the direct and
indirect benefits include medical assistance, life insurance, vehicle leasing and food
vouchers, aiming to ensure competitiveness in the market. The comparison with the
benefits of the market is carried out by a market research conducted by a hired
consulting firm or through database purchased from a consultant. The Company
conducted market research with company Towers Watson in 2013 and 2014. In 2015,
the Company used the database with market remuneration from the consulting company
Towers Watson. The member of the Board of Directors, Fiscal Council and Advisory
Committees are not entitled to any direct and indirect benefits.
The members of the Fiscal Council and Advisory Committee are not entitled to the profitsharing program.
Members of the Board of Directors, Fiscal Council and Advisory Committees are not
entitled to stock option or profit sharing.
According to the table below the ratio for the years 2013, 2014 and 2015 were:
2013 -
Salary and
Pro-labore
Bonus
Profit sharing
Grant of
options
Total
Board of Directors
73.4%
0.00%
26.6%
0.00%
0.00%
100.0%
Executive Officers
58.7%
3.2%
0.00%
11.9%
26.3%
100.0%
100.0%
0.00%
0.00%
0.00%
0.00%
100.0%
Fiscal Council
100.0%
0.00%
0.00%
0.00%
0.00%
100.0%
Including taxes.
2014 -
Salary and
Pro-labore
Direct and
indirect benefits
Bonus
Profit sharing
Grant of
options
Total
Board of Directors
100.00%
0.00%
0.00
%
0.00%
0.00%
100.00%
Executive Officers
62.73%
4.16%
0.00
%
0.00%
33.11%
100.00%
100.00%
0.00%
0.00
%
0.00%
0.00%
100.00%
Fiscal Council
100.00%
0.00%
0.00
%
0.00%
0.00%
100.00%
Including taxes.
2015 -
Salary and
Pro-labore
Direct and
indirect benefits
Bonus
Profit sharing
Grant of
options
Total
Board of Directors
100.00%
0.00%
0.00
%
0.00%
0.00%
100.00%
Executive Officers
92.79%
7.21%
0.00
%
0.00%
0.00%
100.00%
100.00%
0.00%
0.00
%
0.00%
0.00%
100.00%
Fiscal Council
100.00%
0.00%
0.00
%
0.00%
0.00%
100.00%
Including taxes.
(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.
Regarding the profit sharing program previously adopted by the Company until 2015, in
2013 the Company distributed R$ 20.1 million for the results of 2012 and in 2014 the
Company distributed R$ 18.7 million for the results of 2013. In 2015, the Company did
not distribute any amount related to the results of 2014.
Regarding the to the stock option plan to purchase or subscribe shares, granted to the
statutory directors and non-statutory directors, the number of options granted is defined
by the Board of Directos, based on performance and results.
For the Board of Directors of the Company (and the Advisory Committees), 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.
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
Committees), 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 financial indicators to determine the variable portion of the remuneration are
the EBITDA and the cash flow. The variable portion of the remunerations of the
managers is determined from the achievement of financial indicators and the results
obtained by their respective business segments.
d.
How the compensation package is structured to reflect the
development of the performance indicators
e.
How the compensation policy is aligned with the Companys short-,
medium- and long-term interests
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.
For the Board of Directors, the bonus, which is based on profit-sharing, being also
directly proportional to the financial indicators (EBITDA and cash flow), 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
Board of Executive
Officers
Fiscal Council
Total
7.00
3.83
3.00
13.83
7.00
3.83
3.00
13.83
Annual fixed
compensation
2,299,077
5,216,297
348,973
7,864,347
1,609,231
3,547,153
290,811
5,447,195
321,226
321,226
Compensation for
participation in
Committees
340,000
340,000
Others
349,846
1,347,918
58,162
1,755,926
1,640,000
2,764,315
4,404,315
Number of members
Number of
remunerated
members
Variable
Compensation
1,400,000
906,106
2,306,106
1,513,889
1,513,889
Compensation for
participation in
meetings
Comissions
240,000
344,320
584,320
Post-employment
benefits
Employment
cessation benefits
Stock-based
compensation
5,175,631
5,175,631
3,939,077
13,156,243
Bonus
Profit sharing
Others
Total Compensation
348,973
17,444,294
(1) Value based on annual amortization of all existing plans, at fair value. For the granting of 2016 we
are considering the total expenditure of the plan.
Stock option plan in 2016: total expenditure of the plan: R$ 2,520.0, being in 2016 recognized: R$
240.0 thousand.
Board of Directors
Board of
Executive
Officers
Fiscal Council
Total
Number of members
6.50
3.92
3.00
13.42
Number of remunerated
6.50
3.92
3.00
13.42
1,219,051
6,091,936
286,735
7,597,723
874,584
4,457,665
238,946
5,571,195
439,394
439,394
Compensation for
participation in
Committees
132,573
132,573
Others
211,894
1,194,877
47,789
1,454,561
Variable
Compensation
Bonus
members
Annual fixed
compensation
Salaries or pro-labore
fees
Profit sharing
Compensation for
participation in meetings
Comissions
Others
Post-employment
benefits
Employment cessation
benefits
Stock-based
compensation
3,382,000
3,382,000
1,219,051
9,473,936
286,735
10,979,723
Total Compensation
Observations
(1) Value based on annual amortization of all existing plans, at fair value.
Board of Directors
Board of
Executive
Officers
Fiscal Council
Total
Number of members
6.67
15.67
Number of remunerated
6.67
15.67
1,351,779
7,210,760
279,553
8,842,092
1,031,559
4,715,612
232,961
5,980,132
members
Annual fixed
compensation
Salaries or pro-labore
fees
Direct and indirect
benefits
448,315
Compensation for
participation in
Committees
112,707
Others
207,513
Variable
Compensation
Bonus
Profit sharing
Compensation for
participation in meetings
Comissions
448,315
112,707
2,046,833
46,592
2,300,938
Others
Post-employment
benefits
Employment cessation
benefits
Stock-based
compensation
Total Compensation
Observations
3,570,000
1,351,779
10,780,760
3,570,000
279,553
12,412,092
(1) Value based on annual amortization of all existing plans, at fair value.
Board of Directors
Board of
Executive
Officers
Fiscal Council
Total
Number of members
6.08
5.17
3.00
14.25
Number of remunerated
6.08
5.17
3.00
14.25
893,619
4,360,016
323,744
323,743
Compensation for
participation in
Committees
164,423
164,423
Others
211,608
1,658,550
41,458
1,911,616
383,066
383,066
1,224,640
1,224,640
Compensation for
participation in meetings
Comissions
76,613
76,613
members
Annual fixed
compensation
Salaries or pro-labore
fees
5,460,923
Variable
Compensation
Bonus
Profit sharing
Others
Post-employment
benefits
Employment cessation
benefits
Stock-based
compensation
2,694,144
2,694,144
1,729,329
10,261,094
248,746
12,239,169
Total Compensation
Observations
(1) Value based on annual amortization of all existing plans, at fair value.
Board of Executive
Officers
Fiscal Council
Total
Number of members
7.00
3.83
3.00
13.83
Number of
7.00
3.83
3.00
13.83
remunerated members
Bonus
Minimum amount
estimated by
compensation plan
Maximum amount
estimated by
compensation plan
954,235
1,250,427
954,235
Minimum amount
estimated by
compensation plan
Maximum amount
estimated by
compensation plan
1,513,889
1,513,889
Board of
Executive Officers
Fiscal Council
Total
3.92
3.00
13.42
6.50
3.92
3.00
13.42
Minimum amount
estimated by
compensation plan
Maximum amount
estimated by
compensation plan
Value effectively
recognized in results of
the fiscal year
Minimum amount
estimated by
compensation plan
Maximum amount
estimated by
compensation plan
Value effectively
recognized in results of
the fiscal year
Number of members
Number of
remunerated
members
Bonus
Profit sharing
Board of Directors
Board of Executive
Officers
Fiscal Council
Total
Number of members
6.67
15.67
Number of
remunerated members
6.67
15.67
Bonus
Minimum amount
estimated by
compensation plan
Maximum amount
estimated by
compensation plan
20% to 30%
of Eva
20% to 30%
of Eva
0 (Negative
Eva)
0 (Negative
Eva)
20% to 30%
of Eva
20% to 30%
of Eva
0 (Negative
Eva)
0 (Negative
Eva)
Board of Directors
Board of Executive
Officers
Fiscal Council
Total
6.08
5.17
14.25
6.67
15.67
Minimum amount
estimated by
compensation plan
Maximum amount
estimated by
compensation plan
Number of members
Number of
remunerated members
Bonus
25% of Eva
25% of Eva
383.0
383.0
Minimum amount
estimated by
compensation plan
Maximum amount
estimated by
compensation plan
25% of Eva
25% of Eva
Value effectively
recognized in results of
the fiscal year
1,224.6
1,224.6
Value effectively
recognized in results of
the fiscal year
Profit sharing
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:
STOCK-BASED COMPENSATION PLANS
On December 31st, 2015, the Company had a single stock option plan for the benefit of
its managers, approved at the Extraordinary General Shareholders meeting on February
8, 2010, with amendments approved in the Extraordinary General Shareholders meeting
held on April 20, 2012. Until December 31st of 2015, a total of 857,966 options had been
exercised associated with this plan, remaining 315,681 previously granted but not yet
redeemed purchase options remaining.
On May 28th, 2016 the Board of Directors approved in the Board of Directors meeting
held on March 28, 2016, proposed stock option plan, to be submitted for consideration
and approval of the Company's shareholders at the Ordinary and Extraordinary
Shareholders Meeting, on 28 April 2016 ("2016 Plan" and, in conjunction with the 2010
Plan, "the Company's plans").
All stock options plans created prior to the Companys IPO, held on 15 April 2010, had
all their granted options exercised.
At the Extraordinary General Shareholders meeting held on February 8, 2010, the Stock
Option Plan for Shares Issued by the Company was approved called Plano de Opes
de Compra de Aes 2010 (Stock Option Plan - 2010), with amendments approved by
the Board of Directors Meeting held on May 31, 2010 and by the Extraordinary General
Shareholders meeting held on April 20, 2012. The Board of Directors approved (i) on
March 11th, 2010, the Companys Program 1/2010 Stock Options Plan (1/2010
Program); (ii) on March 25th, 2011, the Program 1/2011 Stock Options Plan (1/2011
Program); (iii) on May 30th, 2012, the Program 1/2012 Stock Options Plan (1/2012
Program); (iv) on March 25th, 2013, the Program 1/2013 Stock Options Plan (1/2013
Program), and (v) on March 31th, 2014, the Program 1/2014 Stock Options Plan
(1/2014 Program).
In 2016, the Board of Directors shall approve a stock options plan to the Company 's
management, under the Plan in 2016 , once it is approved by the shareholders at the
General Meeting .
The Stock Options Plan is managed by our Board of Directors, which considers the
contribution of each beneficiary to achieving the targets designed to create added value,
the development potential of each, and the essential nature of their jobs among other
characteristics considered strategically relevant.
The Board of Directors elected as beneficiaries of the 2010 Stock Options Plan (i) for the 1/2010
Program, all the directors (or executives with similar roles) of the Company, and Company
managers who have held their positions in 2009 for more than 6 (six) months; (ii) for the
1/2011 Program, all the directors (or executives with similar roles) of the Company, and
Company managers who have held their positions in 2010 for more than 6 (six) months; (iii) for
the 1/2012 Program, all the directors (or executives with similar roles) of the Company, and
Company managers who have held their positions in 2011 for more than 6 (six) months; (iv) for
the 1/2013 Program, all the directors (or executives with similar roles) of the Company, and
Company managers who have held their positions in 2012 for more than 6 (six) months; and
(v) for the 1/2014 Program, all the directors (or executives with similar roles) of the Company,
and Company managers who have held their positions in 2013 for more than 6 (six) months.
There were no stock options granted in 2015.
b. Major Plan Objectives
The Plan has as objective, allow the Companys managers or employees or those in any
of its subsidiaries, subject to determined conditions, to acquire shares in the Company,
for the purpose of: (i) align the interests of the Companys shareholders with those of
its managers and employees or other entities it controls; (ii) mitigate agency conflicts;
(iii) increase the generation of sustainable results; and (iv) reinforce the orientation of
long-term in taking decisions by managers and employees of the Company.
c.
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
f.
As part of the 1/2010 Program, 479,473 options have been granted that will be converted
into ordinary shares in the Company. Up to December 31st, 2015, 468,845 options have
been exercised.
As part of the 1/2011 Program, 458,065 options have been granted that will be converted
into ordinary shares in the Company. Up to December 31st, 2015, 254,109 options have
been exercised.
As part of the 1/2012 Program, 321,016 options have been granted that will be converted
into ordinary shares in the Company. Up to December 31st, 2015, 112,017 options have
been exercised.
As part of the 1/2013 Program, 277,024 options have been granted that will be converted
into ordinary shares in the Company. Up to December 31st, 2015, 23,005 options have
been exercised.
As part of the 1/2014 Program, 71,852 options have been granted that will be converted
into ordinary shares in the Company. Up to December 31st, 2015, no options have been
exercised.
The plan 2016 disposesThe granted stock options according to the Plan may confer rights
of purchase on a number of shares that do not exceed 1,700,000 of shares from the
Companys capital stock throughout the whole term of the Plan, computing in this
calculation all options already granted under the Plan, exercised or not, except those
that have been extinct and not exercised, provided that the total number of issued shares
or expected to be issued under the Plan is always within the limit of the Company's
authorized capital.
Each option granted under the Company's plans entitles its beneficiary the right to
acquire or subscribe one (1) common share, nominative, book entry and with no par
value representing the Company's share capital. Thus, the maximum number of options
to be granted by the Company's plans is the maximum number of shares covered by the
Company's plans, as described in the previous section
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.
To receive the stock options in the 1/2014 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 2013
financial year, to acquire shares issued by the Company.
Additionally, the Board of Directors approved grants within the 1/2011, 1/2012, 1/2013
and 1/2014 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.
For the 2016 Plan, at any time it deems appropriate during its term, the Board of
Directors shall determine, at its discretion, the beneficiaries of which are granted stock
options under the Plan 2016, the number of shares that may be acquired with the
exercise of each option, the conditions for payment of the exercise price, the terms and
conditions of exercise of each option and any other conditions relating to such options,
always observing the limit of the authorized capital and the parameters established in
the 2016 Plan.
i.
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 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 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 Discricionary Program, the exercise price of the options will be the
average share price on the BM&FBOVESPA in the year of 2011 (R$19.22), weighted by
the trading volume, monetarily adjusted by the inflation according to the IPCA or by
another index determined by the Board of Directors or committee, according to the case,
from the date of conclusion of the stock option agreement until the date the option is
exercised, deducting the value of dividends and interest on equity per share paid by the
Company as from the stock option date.
Regarding the 1/2013 Basic Program, the exercise price of the options will be equal to
the book value of shares on December 31st of the fiscal year of the Company immediately
preceding the stock option date (R$ 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$26.16), weighted by
the trading volume, monetarily adjusted by the inflation according to the IPCA or by
another index determined by the Board of Directors or committee created for this
purpose, according to the case, from the date of conclusion of the stock option
agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
Regarding the 1/2014 Basic Program, the exercise price of the options will be equal to
the book value of shares on December 31st of the fiscal year of the Company immediately
preceding the stock option date (R$ 7.98), 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 1/2014 Discricionary Program, the exercise price of the options will be the
average share price on the BM&FBOVESPA in the year of 2013 (R$30.94), weighted by
the trading volume, monetarily adjusted by the inflation according to the IPCA or by
another index determined by the Board of Directors or committee created for this
purpose, according to the case, from the date of conclusion of the stock option
agreement until the date the option is exercised, deducting the value of dividends and
interest on equity per share paid by the Company as from the stock option date.
Regarding the 2016 Plan, the exercise price of options granted under the Plan is R$ 2.63
(two reais and sixty three cents), based on value of the Company's stock issuance
approved by the Board of Directors in February 5, 2016. The exercise price of the options
will be restated according to the IPCA (Broad consumer price index), 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), deducting the value of
dividends and interest on equity per share paid by the Company from the stock option
date. The Investor Relations area of the Company will calculate the updated exercise
price of the options.
j.
For the 2016 Plan, the Board of Directors shall decide in its sole discretion, to each
program of granting of stock options, the dates on which the options may be exercised,
the deadline for the exercise of stock options and the other terms and conditions of
granting, exercise and stock options contracts to beneficiaries.The options granted under
the 2016 Plan may be exercised, in full or in part, provided that they observe the time
limits, not under 12 (twelve) months, determined by the Board of Directors, and the
other terms and conditions contained in the respective Option Contracts.
k. Form of liquidation/settlement
The options granted under the Company's Plans give their holders the right to subscribe
and/or purchase shares representing the Companys capital, against the payment of the
respective issue or acquisition price or, as the case may be, in an amount corresponding
to the exercise price of each option. With the purpose to satisfy the exercise of stock
options granted under the Companys Plans, the Company may, at the discretion of the
Board of Directors: (i) issue new shares within the limits of the authorized capital; and/or
(ii) divest and/or use shares held in Treasury.
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.
Based on the terms of the respective Option Contract, no beneficiary will be allowed to
trade the shares acquired for a period of 5 (five) years, observing the following rules:
(i) after a period of one year after signing the respective Option Contract, beneficiaries
will be free to trade up to 25% of the shares acquired;
(ii) after a period of one year after the term defined in item i, beneficiaries will be free
to trade an additional 25% of the shares acquired;
(iii) after a period of one year after the term defined in item ii, beneficiaries will be free
to trade an additional 25% of the shares acquired; and
(iv) after a period of one year after the term defined in item iii, beneficiaries will be
free to trade the outstanding balance of the shares acquired.
The stock option Plan 2016 provides that the Board of Directors, at its discretion, may
impose restrictions on the transfer of shares acquired through the exercise of options
granted
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; (v) if the beneficiary
fails to observe the trading restriction rules described in item l above; or (vi) trading
restriction rules described in item n below.
The options granted under the 2016 Plan extinguish automatically, ceasing all its full
effects in the following cases: (i) through its full exercise; (ii) after the expiry of the
period of validity of the option; (iii) by means of the end of the stock option agreement;
(iv) if the Company is dissolved, liquidated or is bankrupt; (v) in the cases of the item
"n" below; or (vi) in other events contemplated in stock option agreement.
If at any time during the validity of the Stock Options 2016 Plan , the beneficiary 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, (1) the still not exercisable rights, (2)
50% (fifty per cent) of the already exercisable rights, in both cases, in accordance with
the respective contract, on the day they leave the Company; and (ii) On the date they
leave the Company may be exercised within a period of 30 days from the same date,
the balance of 50% (fifty per cent) of the exercisable rights in accordance with respective
Option contract, on the date they leave the company. After this period, all rights will
automatically all be cancelled, with no need for any prior warning or notification, and
with no right to any indemnity;
In other cases of dismissal, if, at any time during the term of the Company's Plans, the
beneficiary:
(i)
leaves the Company as a result of being fired for just cause, or failure to fulfill
their duties adequately as a manager, all the right (exercised and not exercised) in
accordance with the respective Option Contract on the date they leave the Company will
automatically all be cancelled, with no need for any prior warning or notification, and
with no right to any indemnity;
(ii)
leaves the Company as a result of being fired with no just cause, or failure to
fulfill their duties adequately as a manager: (i) the rights not exercised in accordance
with the respective Option Contract on the date they leave the Company will
automatically all be cancelled, with no need for any prior warning or notification, and
with no right to any indemnity; except if the Board decides to anticipate the grace period
term for some or all of these rights, and the beneficiary leaves the Company within a
period of up to 12 (twelve) months after the change in share control in the Company all
the unexercised rights in accordance with the respective Option Contract on the date
they leave the Company may be exercised within a period of 30 days from the same
date, after which all rights will automatically all be cancelled, with no need for any prior
warning or notification, and with no right to any indemnity, will have their grace period
anticipated; and (ii) the rights already exercised in accordance with the respective Option
Contract on the date they leave the Company may be exercised within a period of 30
days from the same date, after which all rights will automatically all be cancelled, with
no need for any prior warning or notification, and with no right to any indemnity;
(iii)
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;
(iv)
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.
Despite the disposed above, the Board or Committee (according to the case) can, at
their exclusive criteria, whenever they deem that 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.
The tables below show the impact of those stock option plans on the compensation of
our statutory directors in the years 2013, 2014 and 2015 and the estimated impact for
2016. The Companys Board of Directors does not have stock based compensation.
2013
2014
2015
2016
5.17
6.00
3.92
3.83
Number of remunerated
Members of the Board of
Executive Officers
5.17
6.00
3.00
3.00
05/31/2010
05/31/2010
05/31/2010
05/31/2010
Number of non-redeemable
options
134,678
3,769
10,628
25% by year,
from the year
after the date of
the Grant
25% by year,
from the year
after the date of
the Grant
25% by year,
from the year
after the date of
the Grant
25% by year,
from the year
after the date of
the Grant
05/31/2016
05/31/2016
05/31/2016
05/31/2016
Program 1/2010
Grant Date
400,267
534,574
534,574
534,574
R$ 12.63
R$ 13.01
R$ 12.86
R$ 13.44
0.11%
0.43%
0.00%
0.00%
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 and 2015 considers the balance of options granted to the new directors elected , minus
the balance of the options of the Directors who resigned , as stated on the resigning terms
available on the Company headquarters and on the minutes of the Board of Directors meeting.
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 2013, the amount of shares were 127.385.996, and
at the end of fiscal year 2014 and 2015, the total number of shares was equal to 128.057.925.
2013
2014
2015
2016
5.17
6.00
3.92
3.83
5.17
6.00
3.00
3.00
04/16/2011
04/16/2011
04/16/2011
04/16/2011
196,023
143,442
65,742
170,385
86,888
86,888
25% by year,
from the year
after the date of
the Grant
Program 1/2011
Grant Date
Number of granted options
Number of non-redeemable options
04/16/2017
04/16/2017
04/16/2017
04/16/2017
130,281
169,080
169,080
169,080
R$ 20.60
R$ 21.50
R$ 23.02
R$ 25.27
R$ 20.82
R$ 22.20
0.21%
0.38%
0.07%
0.07%
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 and 2015 considers the balance of options granted to the new directors elected , minus
the balance of the options of the Directors who resigned , as stated on the resigning terms
available on the Company headquarters and on the minutes of the Board of Directors meeting.
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 2013, the amount of shares were 127.385.996, and
at the end of fiscal year 2014 and 2015, the total number of shares was equal to 128.057.925.
2013
2014
2015
2016
5.17
6.00
3.92
3.83
5.17
6.00
3.00
3.00
06/30/2012
06/30/2012
06/30/2012
06/30/2012
Grant Date
Number of granted options
Number of non-redeemable options
Number of redeemable options
28,847
25,190
3,927
3,927
7,854
25% by year,
from the year
after the date of
the Grant
25% by year,
from the year
after the date of
the Grant
25% by year,
from the year
after the date of
the Grant
25% by year,
from the year
after the date of
the Grant
06/30/2018
06/30/2018
06/30/2018
06/30/2018
9,615
22,210
22,210
22,210
R$ 5.74
R$ 5.75
R$ 6.03
R$ 6.67
R$ 5.82
R$ 5.93
0.02%
0.04%
0.01%
0.01%
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 and 2015 considers the balance of options granted to the new directors elected , minus
the balance of the options of the Directors who resigned , as stated on the resigning terms
available on the Company headquarters and on the minutes of the Board of Directors meeting.
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 2013, the amount of shares were 127.385.996, and
at the end of fiscal year 2014 and 2015, the total number of shares was equal to 128.057.925.
2013
2014
2015
2016
5.17
6.00
3.92
3.83
5.17
6.00
2.00
2.00
06/30/2012
06/30/2012
06/30/2012
06/30/2012
145,500
164,000
31,000
31,500
91,500
55,750
86,750
06/30/2018
06/30/2018
06/30/2018
06/30/2018
Grant Date
Number of granted options
Number of non-redeemable options
17,000
39,000
39,000
39,000
R$ 19.57
R$ 20.37
R$ 21.79
R$ 23.90
R$ 20.60
R$ 21.03
0.14%
0.23%
0.07%
0.07%
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 and 2015 considers the balance of options granted to the new directors elected , minus
the balance of the options of the Directors who resigned , as stated on the resigning terms
available on the Company headquarters and on the minutes of the Board of Directors meeting.
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 2013, the amount of shares were 127.385.996, and
at the end of fiscal year 2014 and 2015, the total number of shares was equal to 128.057.925.
2013
2014
2015
2016
5.17
6.00
3.92
3.83
5.17
6.00
2.00
2.00
04/30/2013
04/30/2013
04/30/2013
04/30/2013
105,770
105,770
104,153
16,660
8,331
8,329
16,658
04/30/2019
04/30/2019
04/30/2019
04/30/2019
Grant Date
34,717
34,717
34,717
R$ 6.72
R$ 7.04
R$ 7.75
R$ 6.95
0.11%
0.02%
0.02%
R$ 2,620.981
0.08%
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 and 2015 considers the balance of options granted to the new directors elected , minus
the balance of the options of the Directors who resigned , as stated on the resigning terms
available on the Company headquarters and on the minutes of the Board of Directors meeting.
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 2013, the amount of shares were 127.385.996, and
at the end of fiscal year 2014 and 2015, the total number of shares was equal to 128.057.925.
2013
2014
2015
2016
5.17
6.00
3.92
3.83
5.17
6.00
2.00
2.00
04/30/2013
04/30/2013
04/30/2013
04/30/2013
105,000
105,000
157,500
9,376
4,689
52,500
9,374
14,061
Grant Date
04/30/2019
04/30/2019
04/30/2019
04/30/2019
R$ 26.78
R$ 28.67
R$ 31.39
0.16%
0.01%
R$ 1,251.600
0.08%
0.01%
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 and 2015 considers the balance of options granted to the new directors elected , minus
the balance of the options of the Directors who resigned , as stated on the resigning terms
available on the Company headquarters and on the minutes of the Board of Directors meeting.
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 2013, the amount of shares were 127.385.996, and
at the end of fiscal year 2014 and 2015, the total number of shares was equal to 128.057.925.
20142
2015
2016
6.00
3.92
3.83
6.00
2.00
2.00
04/30/2014
04/30/2014
04/30/2014
101.852
101.852
25.650
17.100
8.550
17.100
Grant Date
04/30/2020
04/30/2020
04/30/2020
R$ 8.17
R$ 8.95
R$ 2.299.818
0.08%
0.03%
0.03%
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 and 2015 considers the balance of options granted to the new directors elected , minus
the balance of the options of the Directors who resigned , as stated on the resigning terms
available on the Company headquarters and on the minutes of the Board of Directors meeting.
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 2013, the amount of shares were 127.385.996, and
at the end of fiscal year 2014 and 2015, the total number of shares was equal to 128.057.925.
13.6 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
Program
1/2010
Program
1/2011
Program
1/2012 Basic
Program
1/2012 Discretion
ary
Program
1/2013 Basic
Program
1/2013 Discretio
nary
Program
1/2014
Basic
Total
Number of
members
2,5
Number of
2,5
3,927
31,000
16,660
9,376
25,650
86,613
members
remunered
NonOutstanding
options
Number of
shares
Deadline for
options to
become
redeemable
Deadline for
05/31/2016
redeeming
04/16/201
3.927
31.000
8.329
4.687
8.550
opes se
opes se
opes se
opes se
opes se
tornam
tornam
tornam
tornam
tornam
exercveis a
exercveis a
exercveis a
exercveis
exercveis
cada ano
cada ano
cada ano
a cada
a cada
at 2016
at 2016
at 2017
ano at
ano at
2017
2018
04/30/201
04/30/202
05/31/2018
05/31/2018
04/30/2019
options
Fair value of
R$ 0
R$ 3,088
R$ 4,625
R$ 11,289
R$ 855
R$ 14,876
R$ 37,734
86,888
3,927
55,750
8,329
9,374
8,550
172,818
05/31/2016
04/16/201
05/31/2018
05/31/2018
04/30/2019
04/30/201
04/30/202
options on the
last the of the
fiscal year
Outstanding
options
Number
Deadline for
redeeming
options
Weighted
R$ 23.02
R$ 6.03
R$ 21.79
R$ 7.04
R$ 28.67
R$ 8.17
R$ 4.99
R$ 11.796
R$ 3.088
R$ 8.317
R$ 5.644
R$ 855
R$ 4.959
R$ 34.659
R$ 0
R$
R$ 6.177
R$ 12.942
R$ 16.932
R$ 1.711
R$
R$ 69.393
average exercise
price
Fair value of
options on the
last the of the
fiscal year
Total fair
value of the
options on the
last day of the
fiscal year
11.796
19.835
Board of Directors
13.7 With respect to exercised 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
1/2014
Program
1/2010
Program
1/2011
Program
1/2012 Basic
Program 1/2012
- Discretionary
Program
1/2013 Basic
Program 1/2013
- Discretionary
5,17
5,17
5,06
5,17
5,17
5,06
134,307
38,799
12,595
22,000
34,717
242,418
R$ 13.44
R$ 22.20
R$ 5.93
R$ 21.03
R$ 6.95
R$ 26.78
R$ 5.96
R$
903,886
-R$
78,762
R$
179,353
-R$ 18,920
R$
458,959
R$
1,444,516
Basic
Number of
members
remunered
Exercised
options
Number of shares
Weighted average
exercise price
Total value of the
difference between
the exercise value
and market value of
shares related to
options exercised 1
Shares Granted
Number of granted
shares
134,307
38,799
12,595
22,000
34,717
242,418
R$ 13.44
R$ 22.20
R$ 5.93
R$ 21.03
R$ 6.95
R$ 26.78
R$ 5.96
R$
903,886
-R$
78,762
R$
179,353
-R$ 18,920
R$
458,959
R$
1,444,516
Pondered
average price of
acquisition
Total value of the
difference between
the exercise value
and market value of
shares related to
options exercised 1
1.
Average market price, pondered by volume, in the last trading day of the fiscal year, equals R$ 20.17 at the end of 2014.
Program
1/2010
Program
1/2011
Program
1/2012 Basic
Program
1/2012 Discretionary
Total
Number of members
5.17
5.17
5.17
5.17
5.17
5.17
5.17
5.17
5.17
5.17
Number of shares
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
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
Exercised options
1 Average market price, pondered by volume, in the last trading day of the fiscal year,
equals R$ 30.94 at the end of 2012.
Board of Directors
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
measured again 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.
The table below shows the data and assumptions of our pricing model:
Exercise price
R$11.50
R$11.50
R$11.95
R$14.10
Expected volatility1
31%
31%
1,461
1,461
Dividend yield
1.52%
1.28%
6.60%
6.37%
R$3.86
R$5.49
Grant Date
R$11.65
R$11.59
R$20.55
R$20.55
Expected volatility1
34.92%
34.92%
1,247
1,282
Dividend yield
1.71%
1.71%
6.08%
6.08%
R$10.49
R$10.56
Exercise price
R$12.22
R$12.16
R$17.55
R$17.55
Expected volatility1
38.68%
38.68%
882
917
Dividend yield
1.06%
1.06%
4.81%
4.83%
R$7.27
R$7.37
Exercise price
R$12.63
R$12.57
R$33.43
R$33.43
Expected volatility1
35.92%
35.92%
516
551
Dividend yield
0.70%
0.70%
1.04%
1.08%
R$20.69
R$20.75
Exercise price
R$13.01
R$13.01
R$33.00
R$33.00
Expected volatility1
33.86%
33.86%
182
186
Dividend yield
0.64%
0.64%
3.06%
3.12%
R$20.08
R$20.09
Exercise price
R$13.70
R$13.70
R$9.55
R$9.55
Expected volatility1
36.00%
36.00%
548
552
0.54%
0.54%
5.47%
5.47%
Exercise price
R$15.30
R$15.30
R$2.66
R$2.66
Expected volatility1
43.65%
43.65%
183
187
Dividend yield
0.00%
0.00%
4.18%
4.26%
R$0.20
R$0.21
Grant Date
Exercise price
R$19.28
R$21.08
Expected volatility1
35.79%
1,461
Dividend yield
1.73%
6.53%
R$6.57
R$19.77
R$17.55
Expected volatility1
38.68%
1,202
Dividend yield
1.06%
4.94%
R$4.70
R$20.60
Expected volatility
R$33.43
35.92%
836
Dividend yield
0.70%
1.70%
R$14.36
R$21.50
R$33.00
Expected volatility1
33.86%
471
Dividend yield
0.64%
3.77%
R$22.72
R$9.55
Expected volatility1
36.00%
106
Dividend yield
0.54%
2.25%
R$0,00
R$23.02
R$2.66
Expected volatility1
43.65%
Dividend yield
0.00%
6.05%
R$0.12
Measured by the historical behavior of the value of the stock of the Company
1/2012
Basic (06/30/2012)
Discretionary (06/30/2012)
Exercise price
R$5.86
R$19.22
R$27.10
R$27.10
Expected volatility1
37.41%
37.41%
1,461
1,461
Dividend yield
0.87%
0.87%
3.92%
3.92%
R$21.20
R$12.18
Exercise price
R$5.74
R$19.57
R$33.43
R$33.43
Expected volatility1
35.92%
35.92%
1,277
1,277
Dividend yield
0.70%
0.70%
2.15%
2.15%
R$27.30
R$16.14
Exercise price
R$5.75
R$20.37
R$33.00
R$33.00
Expected volatility1
33.86%
33.86%
882
882
Dividend yield
0.64%
0.64%
4.84%
4.84%
Exercise price
R$5.95
R$21.51
R$9.55
R$9.55
Expected volatility1
36.00%
36.00%
517
517
Dividend yield
0.54%
0.54%
5.30%
5.30%
R$4.11
R$0.10
Exercise price
R$6.03
R$21.79
R$2.66
R$2.66
Expected volatility1
43.65%
43.65%
152
152
Dividend yield
0.00%
0.00%
3.33%
3.33%
R$0.63
R$0.10
Measured by the historical behavior of the value of the stock of the Company
1/2013
Basic (04/30/2013)
Discretionary (04/30/2013)
Exercise price
R$6.81
R$26.16
R$31.72
R$31.72
Expected volatility1
35.34%
35.34%
1,461
1,461
Dividend yield
0.82%
0.82%
3.37%
3.37%
R$24.78
R$11.92
Exercise price
R$6.72
R$26.78
R$33.00
R$33.00
Expected volatility1
33.86%
33.86%
1,216
1,216
Dividend yield
0.64%
0.64%
5.48%
5.48%
Exercise price
R$6.95
R$28.31
R$9.55
R$9.55
Expected volatility1
36.00%
36.00%
851
851
Dividend yield
0.54%
0.54%
5.72%
5.72%
R$3.84
R$0.12
Exercise price
R$7.04
R$28.67
R$2.66
R$2.66
Expected volatility1
43.65%
43.65%
486
486
Dividend yield
0.00%
0.00%
6.05%
6.05%
R$0.63
R$0.08
Measured by the historical behavior of the value of the stock of the Company
1/2014
Basic (04/30/2013)
Discretionary (04/30/2013)
Exercise price
R$7.98
R$30.94
R$28.12
R$28.12
Expected volatility1
33.45%
35.34%
1,461
1,461
Dividend yield
0.75%
0.75%
12.47%
12.47%
R$22.58
R$11.16
Exercise price
R$8.06
R$31.83
R$9.55
R$9.55
Expected volatility1
36.00%
36.00%
1,216
1,216
Dividend yield
0.54%
0.54%
6.02%
6.02%
R$3.72
R$0.26
Exercise price
R$8.17
R$35.25
R$2.66
R$2.66
Expected volatility1
43.65%
43.65%
851
851
Dividend yield
0.00%
0.00%
6.74%
6.74%
R$0.56
R$0.06
c. Method used and assumed premises to incorporate the effects from expected early
exercise
There was no early exercise.
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, 2015.
Number of shares
(%)
14,713,692
11,49%
56,233
0.04%
0%
Fiscal Council
The Company does not sponsor or pay private pension funds for the members of the
Board of Executive Officers and members of the Fiscal Council.
Compensation
2013
2014
2015
6.08
6.67
6.50
6.08
6.67
6.50
334,510
350,098
238,632
248,544
257,612
132,573
284,429
202,665
187,546
5.17
6.00
3.92
5.17
6.00
3.92
3,843,450
4,027,230
2,438,413
1,066,639
1,147,781
2,438,413
1,984,738
1,796,793
2,416,820
82,915
93,184
95,578
82,915
93,184
95,578
82,915
93,184
95,578
_______________________________________________
(1)
The Executive Officer occupied the position for the 12 months of the year.
(2)
Compensation paid for the Executive Officers who occupied the position for the 12 months of the year.
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.
Year ended on December 31
2013
2014
2015
Board of Directors
14%
11%
11%
84%
87%
86%
2%
2%
3%
Board or Committee
Fiscal Council
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 2013, 2014 and 2015, grouped by board or committee, for any purpose other
than the function they perform, such as commissions, consulting or advisory services.
13.15 In the last 3 fiscal years, indicate the amounts recognized in the result
of direct or indirect companies under common control and subsidiaries of the
issuer, related compensation of Executive Officers and Fiscal Council
members of Company members, grouped by body, specifying why these
amounts were assigned to these individuals
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 Company in the fiscal years
ended in 2013, 2014 and 2015.
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 Ofcio-Circular/CVM/SEP / No. 002/2015, as detailed in the
following spreadsheet for each fiscal year:
Number of members of
Fiscal year 2016 (estimated)
Board of Directors
Board of Executive
Officers
Fiscal Council
January
February
March
April
May
June
July
August
September
October
November
December
84
46
36
7.00
3.83
3.00
Total
Number of Members (Total
divided by the number of
months)
Number of members of
Fiscal year 2015:
Board of Directors
Board of Executive
Officers
Fiscal Council
January
February
March
April
May
June
July
August
September
October
November
December
Total
78
47
36
6.5
3.92
Number of members of
Fiscal year 2014:
Board of Directors
Board of
Executive Officers
Fiscal Council
January
February
March
April
May
June
July
August
September
October
November
December
80
72
36
6.67
Total
Number of Members (Total
divided by the number of
months)
Number of members of
Fiscal year 2013:
Board of Directors
Board of
Executive Officers
Fiscal Council
January
February
March
April
May
June
July
August
September
October
November
December
73
62
36
6.08
5.17
Total
Number of Members (Total
divided by the number of
months)
Annex D
a. Potencial beneficiaries
May be elected as beneficiaries of the stock option plan according to the Plans term the
administrators and employees in a leadership position in the Company or other companies under
its control ("Beneficiaries").
The determination of the Beneficiaries, as well as the number of options to be granted to each
one, is made by the Board of Directors of the Company, when it deems appropriate, during the
term of the Plan. Please refer to item (d) below.
Each option granted under the Plan gives the Beneficiary the right to acquire or subscribe one
(1) common stock, without certificate and without face value representative of the Company's
capital. Thus, the maximum number of shares covered by the Plan corresponds to the maximum
number of options to be granted.
The granted stock options according to the Plan may confer rights of purchase on a number of
shares that do not exceed 1,700,000 (one million seven thousand) shares from the Companys
capital stock throughout the whole term of the Plan, computing in this calculation all options
already granted under the Plan, exercised or not, except those that have been extinct and not
exercised, provided that the total number of issued shares or expected to be issued under the
Plan is always within the limit of the Company's authorized capital.
d. Conditions of purchase
The Plan will be administrated by the Companys Board of Directors, which may, according to
restrictions set forth in Law, establish a committee specifically created to assist him in
administrating the Plan ("Committee").
3.2.
Obeying the general conditions of the Plan and the guidelines established by the
Extraordinary General Shareholders meeting, the Companys Board of Directors will have broad
powers to take all necessary and appropriate measures for the administration of the Plan,
including:
(i)
the creation and application of general rules on the granting of options according to the
terms of the Plan and the solution of interpretation doubts of the Plan;
(ii)
the establishment of goals related to the managers and employees' performance of the
Company or other companies under its control, in order to establish objective criteria for
the beneficiaries' election;
(iii) the election of the Plan's Beneficiaries and the authorization to grant stock options in
their favor, establishing all of the options' conditions to be granted, as well as the
modification of such conditions when necessary to adjust to the options' law terms, rule
or supervening regulation;
(iv) the decision as to the dates on which the options will be granted, as well as on the
opportunity of when it will be granted in relation to the Company's interests, preserving
the concepts established in this Plan;
(v)
the establishment and amendment of the terms of the Option Agreement (as defined
below), to be concluded between the Company and each beneficiary;
(vi) the establishment and amendment of the dates on which the options may be exercised,
the deadline for the exercise of the options, and the other terms and conditions of
granting, exercise and option contract;
(vii) the issuance of new shares from the Company within the authorized capital limit or the
sale of shares from treasury to meet the exercised stock options granted according to the
Plan; and
(viii) the analysis of exceptional cases arising from, or related to, this Plan.
Whenever it deems appropriate, the Companys Board of Directors determines the Beneficiaries
for whom should be granted options according to the Plans terms, the number of shares that
may be acquired through the exercise of each option, the exercise price of each option and the
conditions of its payment, the terms and exercise conditions of each option and any other
conditions relating to these options, always observing the limit of the authorized capital and the
parameters set out in this Plan.
The granting of the stock options according to the Plans terms is performed by entering into
granting contract agreements between the Company and the Beneficiaries, which shall specify,
without harming other determined conditions by the Board of Directors or the Committee
(according to the case): (a) the amount of granted shares; (b) the terms and conditions to acquire
the right of exercising the option, (c) the deadline for exercising the stock option, and (d) the
exercise price and payment terms.
The Option Agreements will be individually designed for each Beneficiary, enabling the Board of
Directors or the Committee (according to the case) establish terms and differentiated conditions
for each Option Agreement, without the necessity of applying any rule of equality or analogy
between the Beneficiaries, even if they are in similar or identical situations.
The Board of Directors or the Committee (as the case may be) may impose other terms and/or
conditions not foreseen in this Plan for the exercise of the option, and restrictions on transfer of
shares acquired by the exercise of options (lock up), and can also book for the Company
repurchase options rights and/or preferencial rights in the event of transference by the Beneficiary
of such stocks.
h.
Criteria and events that, when checked, will bring about the suspension, amendment or
termination of the plan
The Board of Directors or the Committee (as the case may be) may order the suspension of the
right to exercise the options, where verified situations in which, pursuant to law or regulations in
force, restrict or prevent stock trading by the Beneficiaries or by the Company.
Any significant legal change with regard to corporate regulation, the publicly held companies in
labor law and/or tax effects of a plan to purchase options, can lead to the full review of the Plan.
In addition, the general meeting of shareholders of the Company may revise the Plan at any time,
and the Board of Directors, in the interest of the Company and its shareholders, may revise the
terms of the plan, as long as they do not change their basic principles.
The Plan can be extinguished at any time by a decision of the General Meeting or by the
dissolution, liquidation or bankruptcy ruling against the Company. The rights guaranteed to
Beneficiaries pursuant to existing option contracts applicable at the time, will be kept in case of
extinction of the Plan, unless otherwise provided in the Plan or Option Contract.
3. Justify the proposed plan, explaining:
d. How the plan alignes the interests of the Beneficiaries and of the company in the short,
medium and long term
The granting of stock options, generally, aligns the interests of medium and long term to
encourage the Administration to conduct the Company's business successfully, by stimulating
entrepreneurial and results-oriented culture, to the extent that both the shareholders how much
administrators and employees benefit from improvements in income and increases in stock
market quotation.
4. Estimate the cost of the Company arising from the Plan, according to the accounting rules
that deal with this subject
For the fiscal year of 2016, the Company estimates expenses reltated to the Plano Of R$
240,000.
Appendix A
STOCK OPTION PLAN
The present Stock Option Plan of MILLS ESTRUTURAS E SERVIOS DE ENGENHARIA S.A.
(Company), approved at the Extraordinary General Shareholders meeting held on April 28,
2016, establishes the general conditions for granting options to purchase shares of Company
pursuant to article 168, 3rd paragraph, from Law n 6,404/76.
1.
Plan Objectives
1.1.
The Plan has as objective, allow the Companys managers or employees or those in any
of its subsidiaries, subject to determined conditions, to acquire shares in the Company, for the
purpose of: (i) align the interests of the Companys shareholders with those of its managers and
employees or other entities it controls; (ii) mitigate agency conflicts; (iii) increase the generation
of sustainable results; and (iv) reinforce the orientation of long-term in taking decisions by
managers and employees of the Company.
2.
Eligible beneficiaries
2.1.
May be elected as beneficiaries of the stock option plan according to the Plans term the
administrators and employees in a leadership position in the Company or other companies under
its control ("Beneficiaries").
3.
Plans Administration
3.1.
The Plan will be administrated by the Companys Board of Directors, which may, according
to restrictions set forth in Law, establish a committee specifically created to assist him in
administrating the Plan ("Committee").
3.1.1.
Notwithstanding caput, no decision of the Board of Directors and/or the Committee may
increase the total limit of stock options that can be granted, according to limits set by
this Plan, by the articles of bylaws and by the General Shareholders Meeting.
3.2.
Obeying the general conditions of the Plan and the guidelines established by the
Extraordinary General Shareholders meeting, the Companys Board of Directors will have broad
powers to take all necessary and appropriate measures for the administration of the Plan,
including:
(a)
the creation and application of general rules on the granting of options according to the
terms of the Plan and the solution of interpretation doubts of the Plan;
(b)
the establishment of goals related to the managers and employees performance of the
Company or other companies under its control, in order to establish objective criteria for
the beneficiaries election;
(c)
the election of the Plans Beneficiaries and the authorization to grant stock options in
their favor, establishing all of the options conditions to be granted, as well as the
modification of such conditions when necessary to adjust to the options law terms, rule
or supervening regulation;
(d)
the decision as to the dates on which the options will be granted, as well as on the
opportunity of when it will be granted in relation to the Company's interests, preserving
the concepts established in this Plan;
(e)
the establishment and amendment of the terms of the Option Agreement (as defined
the establishment and amendment of the dates on which the options may be exercised,
the deadline for the exercise of the options, and the other terms and conditions of granting,
exercise and option contract;
(g)
the issuance of new shares from the Company within the authorized capital limit or the
sale of shares from treasury to meet the exercised stock options granted according to the
Plan; and
(h)
the analysis of exceptional cases arising from, or related to, this Plan.
3.3.
Exercising its authority, the Board of Directors shall be subject only to the limits
established by law, the rules of the Securities Commission and the Plan, respecting the guidelines
of General Shareholders meeting.
3.4.
In the exercise of its jurisdiction, the Board of Directors may treat differentiated way
administrators and employees of the Company or Companies under its control that are in a similar
situation and elect, at its criteria, Beneficiaries, not being obliged by any rule of equality or
analogy, to extend to all the conditions to understand applicable only to one or a few.
3.5.
the case) have binding force on all of the Companys matters regarding the Plan.
4.
Granting of Options
4.1.
Beneficiaries for whom should be granted options according to the Plans terms, the number of
shares that may be acquired through the exercise of each option, the exercise price of each option
and the conditions of its payment, the terms and exercise conditions of each option and any other
conditions relating to these options.
4.2.
The granting of the stock options according to the Plans terms is performed by entering
into granting contract agreements between the Company and the Beneficiaries, which shall
specify, without harming other determined conditions by the Board of Directors or the Committee
(according to the case): (a) the amount of granted shares; (b) the terms and conditions to acquire
the right of exercising the option, (c) the deadline for exercising the stock option, and (d) the
exercise price and payment terms ("Option Agreement").
4.3.
The Option Agreements will be individually designed for each Beneficiary, enabling the
Board of Directors or the Committee (according to the case) establish terms and differentiated
conditions for each Option Agreement, without the necessity of applying any rule of equality or
analogy between the Beneficiaries, even if they are in similar or identical situations.
4.4.
The granted stock options according to the Plan, as well as the exercise by the
Beneficiaries, do not have any relationship or are linked to their remuneration, fixed or variable,
or any profit sharing. The plan does not have remuneration or consideration nature.
4.5.
The acceptance of the options granted under this Plan and the signing of the contract by
the Beneficiary are optional; however, with the signing of the option contract, the Beneficiaries
will be agreeing to all the terms, as well as with the conditions of this Plan. To this end, this Plan
and stock options programs established by the Board of Directors shall be an integral part of
Option contracts.
4.6.
The granting of options to the Beneficiary under this Plan assures the right to subsequent
grants. The definition of Beneficiaries of each grant is exclusive competence of the Board of
Directors.
4.7.
Without prejudicing any contrary provision contained in the Plan or Option Agreement,
the granted options according to the terms of the Plan will all automatically be cancelled in the
following cases:
(a)
(b)
(c)
(d)
(e)
(f)
5.
5.1.
The granted stock options according to the Plan may confer rights of purchase on a
number of shares that do not exceed 1,700,000 of shares from the Companys capital stock
throughout the whole term of the Plan, computing in this calculation all options already granted
under the Plan, exercised or not, except those that have been extinct and not exercised, provided
that the total number of issued shares or expected to be issued under the Plan is always within
the limit of the Company's authorized capital.
5.2.
With the purpose to satisfy the exercise of stock options granted under the Plan, the
Company may, at the discretion of the Board of Directors: (a) issue new shares within the limit
of authorized capital; or (b) sell shares held in Treasury.
5.3.
Shareholders do not have right of preference in granting or exercise of stock option under
the Plan, according stated in article 171, 3rd paragraph of Law 6,404/76.
5.4.
The acquired shares by the exercised stock options under the Plans terms will retain all
of the relevant rights to their kind, except as provided in item 6.2.1. below, as well as possible
contrary statement established by the Board of Directors.
6.
6.1.
exercise price of options granted under the Plan is R$ 2.63 (two reais and sixty three
cents), based on value of the Company's stock issuance approved by the Board of Directors in
February 5, 2016.
6.1.1.
The exercise price of the options will be restated according to the IPCA (Broad consumer
price index), 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), deducting the value of dividends and interest on equity per share paid by the
Company from the stock option date. The Investor Relations area of the Company will
6.2.
The exercise price shall be paid by the Beneficiaries in the forms and time limits
determined by the Board of Directors or by the Committee (as the case may be).
6.2.1.
While the exercise price is not paid in full, the shares acquired in the exercise of the
option under the Plan may not be transferred to third parties, unless prior authorization
of the Board of Directors, hypothesis in which the proceeds from the sale will be intended
first and foremost for Beneficiary debt discharge towards the Company.
6.3.
The Company is forbidden to finance the payment of the issue price or acquisition of the
shares to be subscribed or acquired as a result of the exercise of options granted under this Plan.
The Board of Directors may authorize the creation of liens on options or shares arising from the
exercise to ensure loan to finance the exercise of options.
7.
Exercise of options
7.1.
The options granted under the Plan may be exercised, in full or in part, provided that
they observe the time limits, not under 12 (twelve) months, determined by the Board of Directors,
and the other terms and conditions contained in the respective Option Contracts.
7.1.1.
The options that were not exercised within the time limits and under the conditions
stipulated shall be considered automatically extinguished, without indemnity, subject to
the maximum period of duration of the option, which shall be 9 (nine) years from its
grant.
7.2.
The Beneficiary who wants to exercise their option to purchase shares must notify the
Company in writing of their intention to do so and indicate the quantity of shares they wish to
purchase, in accordance with the model notification as published by the Board of Directors or by
the Committee (as the case may be).
7.2.1.
The Human Resources area of the company will inform the Beneficiary within 2 (two)
working days from the receipt of the communication referred to in item 7.2. above, the
exercise price to be paid, based on the number of shares reported by the Beneficiary,
and the administration of the Company take all necessary measures to formalize the
purchase of the shares object of the exercise.
7.3.
The Board of directors or the Committee (as the case may be) may determine the
suspension of the right to the exercise of options, where verified situations which, under the law
or regulations in force, restrict or prevent the stock trading on the part of the Beneficiaries.
7.4.
The Board of Directors or the Committee (as the case may be) may impose other terms
and/or conditions not foreseen in this Plan for the exercise of the option, and restrictions on
transfer of shares acquired by the exercise of options (lock up), and can also book for the
Company repurchase options rights and/or preferencial rights in the event of transference by the
Beneficiary of such stocks.
7.5.
No Beneficiary will have any of the rights and privileges of a shareholder of the Company
until their option is fully exercised, pursuant to the Plan and its Option Contract. No share shall
be delivered to the holder due to the exercising of the option unless all legal and regulatory
requirements have been fully met.
7.6.
This Plan, the grant of stock options under this Plan and the exercise of the options are
costly exclusively of business and civil nature, without remuneration or consideration, character
and do not create any obligation to labor or social security between the Company and the
Beneficiary.
8.
8.1.
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 8.2. below.
8.2.
If, at any time during the validity of the Plan, the Beneficiary:
(a)
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, (1) the still not exercisable rights, (2)
50% (fifty per cent) of the already exercisable rights, in both cases, in accordance with
the respective contract, on the day they leave the Company; and (ii) On the date they
leave the Company may be exercised within a period of 30 days from the same date, the
balance of 50% (fifty per cent) of the exercisable rights in accordance with respective
Option contract, on the date they leave the company. After this period, all rights will
automatically all be cancelled, with no need for any prior warning or notification, and with
no right to any indemnity;
(b)
leaves the Company as a result of being fired for just cause, or failure to fulfill their duties
adequately as a manager, all the right (exercised and not exercised) in accordance with
the respective Option Contract on the date they leave the Company will automatically all
be cancelled, with no need for any prior warning or notification, and with no right to any
indemnity;
(c)
leaves the Company as a result of being fired with no just cause, or failure to fulfill their
duties adequately as a manager: (i) the rights not exercised in accordance with the
respective Option Contract on the date they leave the Company will automatically all be
cancelled, with no need for any prior warning or notification, and with no right to any
indemnity; except if the Board decides to anticipate the grace period term for some or all
of these rights, and the beneficiary leaves the Company within a period of up to 12
(twelve) months after the change in share control in the Company all the unexercised
rights in accordance with the respective Option Contract on the date they leave the
Company may be exercised within a period of 30 days from the same date, after which
all rights will automatically all be cancelled, with no need for any prior warning or
notification, and with no right to any indemnity, will have their grace period anticipated;
and (ii) the rights already exercised in accordance with the respective Option Contract on
the date they leave the Company may be exercised within a period of 30 days from the
same date, after which all rights will automatically all be cancelled, with no need for any
prior warning or notification, and with no right to any indemnity;
(d)
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;
(e)
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.
8.3.
For the purposes of items 8.1 and 8.2 above, the term with cause shall include, in
addition to the events contemplated in labor legislation, the condemnation of administrator with
transit in trial in civil lawsuits filed on the basis of the corporate law and in criminal actions that
prevent the exercise of his office.
8.4.
Despite the 8.2 item, the Board or Committee (according to the case) can, at their
exclusive criteria, whenever they deem that social interests are better met by this approach,
chose not to abide by the rules stipulated in 8.2 item, and treat a determined Beneficiary in a
differentiated and individual manner.
9.
Plan threshold
9.1.
The Plan will take effect on the date of its approval by the General Shareholders Meeting
of the Company and may be terminated at any time, by resolution of the General Shareholders
Meeting. The termination of the Plan will not affect the effectiveness of options still in effect
granted bases on it.
10.
will be maintained in case of extinction of the Plan, except as otherwise provided in this Plan or
option.
11.
11.1.
In compliance with the specific provisions of this Plan, the shares acquired by the
Beneficiaries will make jus to dividends, interest on equity and other earnings declared by the
Company from the date of subscription or acquisition of shares issued by the Company by virtue
of the exercise of options.
12.
General arrangements
12.1.
The granting of options under the Plan will not prevent the Company from : (i) engaging
12.2.
In the hypothesis of 11.1 item above, The Board of Directors of the Company and the
companies involved in such operations may decide by equity, at its discretion, determine, without
prejudice to other measures: (a) the replacement of the shares of a purchase option, shares or
other securities issued by the successor company of the Company, (b) the anticipation of the
acquiring the right to exercise the option to acquire the shares in order to ensure the inclusion of
the corresponding shares in the transaction in question; or (iii) the adoption of other measures
aimed at preserving wholly or partly the position of the Beneficiaries under the circumstances.
The provisions of this item have optional and discretionary, without creating right or expectation
to Beneficiaries under any circumstances.
12.3.
If the number, type and class of shares on the date of approval of the Plan may be
amended as a result of bonuses, stock splits, reverse splits or conversion of shares of one class
into another species or conversion into shares or other securities issued by the Company , the
Board of Directors of the Company or the Committee (as applicable) shall perform the
corresponding adjustment in the number, type and class of shares subject to options granted and
the respective exercise price, to avoid distortions in the implementation of the Plan, including the
purposes of item 5 of the Plan and within the limits of the Plan.
12.4.
No arrangements of the Plan or option granted under the Plan will grant any Beneficiary
the right to remain as an administrator and/or employee of the Company, or to interfere in any
way in the right of the Company, at any time and subject to legal conditions and contract, to
terminate the contract of employment of the employee and/or discontinue the mandate of the
administrator.
12.5.
Each Beneficiary shall expressly agree to the terms of the Plan by written declaration,
without any exception, as defined by the Board of Directors or the Committee (as appropriate).
12.6.
The Board of Directors, on behalf of the Company and its shareholders interests, may
revise the terms of the Plan, as long as that does not change its basic principles.
12.7.
Any legal change regarding the regulation of corporations to publicly held companies,
labor legislation and/or tax effects of a stock option plan, may lead to a complete review of the
Plan.
12.8.
The options granted in accordance with this Plan are personal and not transferable, so
the beneficiary cannot, under any circumstances, give, transfer or otherwise dispose of any third
party options, or the rights and obligations attached to them.
12.9.
The present plan does not substitute, change or repeal plans or option programs in
existence.
12.10.
Omitted cases will be regulated by the Board of Directors or the Committee (as
appropriate), consulted when he deems it is appropriate, the General Meeting. Any option granted
under the Plan shall be subject to all terms and conditions here established, terms and conditions
shall prevail in case of inconsistency regarding provisions of any contract or document mentioned
in this document.
12.11.
It is hereby agreed that the courts of the City of Rio de Janeiro, to the exclusion
of any other one, being more privileged or not, to resolve any dispute which may arise with
respect to the Plan Option contracts and/or the Option Contract.