Unconsolidated and consolidated quarterly financial information Plascar Participações Industriais S.A. and subsidiaries.

Transcription

1 Unconsolidated and consolidated quarterly financial information Plascar Participações Industriais S.A. and subsidiaries March 31,

2 UNCONSOLIDATED AND CONSOLIDATED QUARTERLY FINANCIAL INFORMATION March 31, Contents Special review report of independent auditors... 1 Unaudited quarterly financial information Unaudited balance sheets... 3 Unaudited statements of income... 5 Unaudited statements of changes in shareholders equity... 6 Unaudited statements of cash flows... 7 Notes to unaudited quarterly financial information... 8 Report on Company's performance Other Company s relevant information... 40

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5 A free translation from Portuguese into English of Quarterly Financial Information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil PLASCAR PARTICIPAÇÕES INDUSTRIAIS S.A. AND SUBSIDIARIES Unaudited balance sheets March, 31 Parent Company December 31, 2009 March 31, Consolidated December 31, 2009 Assets Current assets Cash and cash equivalents 2 2 1,253 1,207 Trade accounts receivable (Note 3) ,085 99,189 Inventories (Note 4) , ,654 Recoverable taxes (Note 5) - - 9,133 8,997 Deferred taxes (Note 6.a) - - 2,115 2,115 Related companies (Note 7) Property held for sale ,526 Other accounts receivable - - 3,843 2, , ,114 Noncurrent assets Long-term assets Accounts receivable from sale of real estate - - 5,919 5,996 Related companies (Note 7) 21,399 21,579 8,040 8,152 Recoverable taxes (Note 5) - - 7,635 7,088 Judicial deposits ,313 Deferred taxes (Note 6.a) ,342 50,014 Recoverable actuarial asset (Note 14) - - 9,588 9,588 21,399 21,579 82,325 82,151 Investments (Note 8) 274, , Property, plant and equipment (Note 9) , ,155 Intangible assets - - 7,931 8, , , , , , , , ,998 Total assets 295, , , ,112 3

6 March, 31 Parent Company December 31, 2009 March 31, Consolidated December 31, 2009 Liabilities Current liabilities Loans and financing (Note 10) , ,616 Trade accounts payable ,860 49,760 Taxes payable 5 5 7,138 7,359 Salaries, vacation and social charges payable ,433 17,505 Advances from customers ,306 24,075 Related companies (Note 7) - - 1,800 1,986 Deferred taxes on revaluation (Note 6.a) - - 3,351 3,629 Other accounts payable - - 2,147 4, , ,230 Noncurrent assets Loans and financing (Note 10) ,179 78,298 Provision for judicial demands (Note 11) - - 1,432 2,121 Taxes payable in installments ,588 11,588 Deferred taxes on revaluation (Note 6.a) ,296 27,150 Other accounts payable , ,397 Minority shareholders interest Shareholders equity Capital (Note 12.a) 289, , , ,080 Options and shares granted (Notes 12.b and 13) 7,496 6,957 7,496 6,957 Revaluation reserve (Note 12.b) 50,465 52,313 50,465 52,313 Cumulative translation adjustment (1,605) (1,637) (1,605) (1,637) Accumulated losses (49,941) (51,776) (49,941) (51,776) 295, , , ,937 Total liabilities and shareholders equity 295, , , ,112 See accompanying notes to financial statements. 4

7 Unaudited statements of income Quarters ended March 31, and 2009 (In thousands of reais, except losses per share) Parent Company Consolidated March 31, March 31, 2009 March 31, March 31, 2009 Gross operating revenue , ,617 Deductions Sales taxes, returns and rebates - - (47,299) (36,898) Net operating revenue , ,719 Cost of sales - - (116,426) (97,012) Gross profit ,355 17,707 Other operating income (expenses) Selling expenses - - (8,321) (7,144) Administrative and general expenses (179) (136) (13,835) (11,002) Share-based payment (Note 13) (539) (1,487) (539) (1,487) Financial expenses (Note 16) - - (10,776) (11,592) Financial income (Note 16) ,285 Earnings (losses) on equity investment (Note 8) 705 (6,323) - - Other operating income - - 1, (13) (7,946) (31,072) (28,577) Income (loss) before taxes and minority interest (13) (7,946) 283 (10,870) Income and social contribution taxes deferred (Note 6.b) - - (295) 2, (295) 2,912 Loss before minority interest (13) (7,946) (12) (7,958) Minority interest - - (1) 12 Loss for the period (13) (7,946) (13) (7,946) Loss per share - R$ ( ) ( ) Number of shares at quarter end 166, ,430 See accompanying notes to financial statements. 5

8 Unaudited statements of changes in shareholders equity Quarter ended March 31, Capital Revaluation reserve Reserve Capital Options and shares granted In subsidiary Cumulative translation adjustment Accumulated losses Total Balances at December 31, ,080 6,957 52,313 (1,637) (51,776) 294,937 Realization of revaluation reserve Note 12.b - - (2,800) - 2,800 - Realization of deferred taxes on revaluation reserve Note 12.b (952) - Translation adjustment in foreign subsidiary Share-based payment Note Loss for the quarter (13) (13) Balances at March 31, 289,080 7,496 50,465 (1,605) (49,941) 295,495 See accompanying notes financial statements. 6

9 Unaudited statements of cash flows Quarters ended March 31, and 2009 March 31, Parent Company March 31, 2009 March 31, Consolidated March 31, 2009 Cash flow from operating activities: Loss for the quarter (13) (7,946) (13) (7,946) Adjustments to reconcile the loss to the cash provided by (used in) operating activities: Depreciation and amortization - - 7,160 10,067 Share-based payment 539 1, ,487 Loss on disposals of property, plant and equipments Interest and monetary variation, net - - 9,115 6,070 Provision for judicial demand - - (101) 987 Earning (loss) on equity investment (705) 6, Net effect of fine and interest on adhesion of tax installment instituted by Law No / Deferred income and social contribution taxes (2,898) Others (1) (5) (306) 10 (180) (141) 17,240 8,079 Decrease (increase) on assets: Trade accounts receivable - - (1,513) (29,796) Inventories - - (10,143) (6,045) Other assets, net - - 2,406 1,014 Increase (decrease) on liabilities: Trade accounts payable - - (2,900) 15,192 Provision for judicial demands (payments) - - (753) (389) Other liabilities, net - - 1,605 4,400 Net cash flow provided by (used in) operating activities - - 5,942 (7,545) Cash flows in investment activities Additions to intangible - - (120) (1,584) Additions to property, plant and equipment - - (15,857) (13,015) Proceeds from sale of PP&E and intangibles Increase in loans receivable from related companies ,073 Cash flow provided by (used in) investment activities (15,350) (13,526) Cash flow in financing activities Loans and financings ,385 83,368 Payments of loans and financings (principal and interest) - - (190,593) (75,345) Advances from customers and discounted trade bills - - 5,848 10,736 Reduction in loans payable to related companies - - (186) 2,324 Cash flow provided by financing activities - - 9,454 21,083 Net increase on cash and cash equivalent Cash and cash equivalents at the beginning of the period 2 2 1, Cash and cash equivalents at the end of the period 2 2 1, See accompanying notes to financial statements. 7

10 Notes to unaudited quarterly financial information 1. Operations The activity of Plascar Participações Industriais S.A. ( Plascar S.A. or Company ) is represented by its participation as the majority partner in its subsidiary Plascar Indústria de Componentes Plásticos Ltda. ( Plascar Ltda. or Subsidiary ), which operates in the automotive sector and whose operational activity is the manufacturing and selling of automotive internal and external component parts. The control of Permali do Brasil Ind. e Com. Ltda., parent company of Plascar Participações Industriais S.A., belongs to the International Automotive Components Group Brazil, LLC (IAC Group Brazil, LLC), headquartered in Delaware, United States. The subsidiary has 5 industrial plants, in the cities of Jundiaí and Pindamonhangaba in the state of São Paulo, and Varginha, Betim and Camanducaia, in the state of Minas Gerais. Additionally, the subsidiary has 100% interest in Plascar Indústria de Componentes Plásticos S.A., located in Argentina, currently with no relevant operations. IAC Group Established in October 2005, IAC is a joint venture between WL Ross & Co. LLC ( WLR ) and Franklin Mutual Advisers LLC ( FMA ), with minority interest held by Lear Corporation, an important worldwide auto parts. The IAC Group manufactures internal and external auto parts for the global automotive industry. The IAC group has companies established in North America, Europe, Japan, Asia and South America. The subsidiaries are specialized in supplying to the main original equipment manufacturers (OEM) parts including instrument panels, interior door panels, bumpers, center consoles, air vents, front grills and tail lights to leading car manufacturers. 8

11 Notes to unaudited quarterly financial information (Continued) 2. Basis of preparation and presentation of quarterly financial information The Quarterly Financial Information of the Company and its subsidiaries Plascar Indústria de Componentes Plásticos Ltda. (direct control) and Plascar Indústria de Componentes Plásticos S.A. (indirect control), including explanatory notes, is presented in thousands of reais, except where indicated otherwise. The accounting practices adopted in the preparation of quarterly information are consistent with those disclosed in the financial statements as of and for the year ended December 31, 2009, which were prepared based on the accounting practices adopted in Brazil, rules of the Brazilian Securities and Exchange Commission (CVM), accounting pronouncements issued by Accounting Pronouncements Committee (CPC) and accounting guidelines issued by Brazilian Corporation Law, changed by Law No /07 and Law 11941/09. The authorization for conclusion of these quarterly financial information was granted by the Board of Directors on April 22,. During 2009 CVM approved several Accounting Pronouncements, Interpretations and Guidelines issued by Accounting Pronouncements Committee (CPC), in force for, which changed the accounting practices adopted in Brazil. As permitted by CVM Resolution No. 603/09, changed by CVM Resolution No. 626/10 which expanded the presumption from CVM Resolution No. 603/09 for interim financial statements, the Company s management opted to present its Quarterly Financial Information according to accounting practices effective until December 31, 2009, that is, the new pronouncements in force for were not adopted by Company. The Company presents below, according to its best professional judgment, a brief description of the potential significant changes which could impact its financial statements for the year end. CPC 21 Interim Financial Statements, approved by CVM Resolution No. 581, dated July 31, 2009 It establishes the minimum contents of interim financial statements and the principles for recognition and measurement of certain assets and liabilities in the complete or condensed financial statements for the interim period. Company management expects that this pronouncement will generate significant changes on the volume of information to be disclosed in its Quarterly Financial Information ITR, since they are prepared on a summary basis and will include all significant information necessary for providing an adequate and complete set of accounting and financial indicators to users of its Quarterly Financial Information - ITR. 9

12 Notes to unaudited quarterly financial information (Continued) 2. Basis of preparation and presentation of quarterly financial information (Continued) CPC 22 Segmented Information approved by CVM Resolution No. 582, dated July 31, 2009 It establishes the requirement of disclosure of information segregated by operating segment of the Company. The determination of the operating segments to be considered in this disclosure will be evaluated by Company management during. CPC 26 Presentation of the Financial Statements, approved by CVM Resolution No. 595, dated September 15, 2009 It establishes the base for presentation of financial statements, through determination of general presentation requirements, guidelines for its structure and the minimum contents to be included in the financial statements. The Company believes that the referred Accounting Pronouncement will generate impacts on the presentation of its financial statements, since it defines extensive requirements for the disclosure of accounting policies and introduces the statement of comprehensive income, practice that must be applied by the Company in its financial statements to be prepared in (including the financial statements for the comparative period). ICPC 10 Interpretation about First Time Adoption to Property, Plant and Equipment and to Investment Property of Accounting Pronouncements CPC 27, 28, 37 and 43, approved by CVM Resolution No. 619, dated December 22, 2009 This interpretation aims at treating certain matters related to first time implementation of Accounting Pronouncements CPC 27 Property, Plant and Equipment, CPC 28 Investment Property, CPC 37 First Time Adoption of International Financial Reporting Standards and CPC 43 First Time Adoption of Accounting Pronouncements CPC 15 to 40. Due to changes in Brazilian accounting practices in order to be in full compliance with the convergence to international standards, in the first-time adoption of Accounting Pronouncements CPC 27 and CPC 28, there is the option to carry out adjustments in the opening balances similar to those allowed by international accounting standards, using the deemed cost concept as provided for in Accounting Pronouncements CPC 37 and

13 Notes to unaudited quarterly financial information (Continued) 2. Basis of preparation and presentation of quarterly financial information (Continued) ICPC 10 Interpretation about First Time Adoption to Property, Plant and Equipment and to Investment Property of Accounting Pronouncements CPC 27, 28, 37 and 43, approved by CVM Resolution No. 619, dated December 22, 2009 (Continued) The Company elected not to assess its property, plant and equipment at fair value as deemed cost considering that: (i) the cost method, less the allowance for losses, is the best method to assess the Company s property, plant and equipment; (ii) the Company s property, plant and equipment is segregated into well defined classes which relate to its operating activities in the manufacturing and selling of automotive internal and external component parts and the production of non-automotive items relating to plastic part injection molding; (iii) the Company recorded a revaluation of assets in 2003, and in 2007 obtained a new revaluation study that showed that asset book values were not outdated in relation to the fair values on that date; and (iv) the Company has effective controls over property, plant and equipment that enable the identification of losses and changes in the estimated useful lives of assets. For alignment with the form of presenting the quarterly financial information ended March 31,, certain reclassifications were made in the statements of income for the quarter ended March 31, 2009, as follows: reclassification of revenues, taxes and costs relating to tooling sales to gross operating revenue, sales deductions and cost of sales accounts, in the amount of R$7,999, R$1,677 and R$5,635, respectively, previously recorded in other operating income account. The reclassifications did not affect the result of the quarter ended March 31, Trade accounts receivable Consolidated March, 31 December 31, 2009 Third parties domestic 101,922 94,561 Third parties foreign (Note 15.b) 3,102 5,111 Tooling 10,236 14,075 Discounted trade bills (17,034) (14,417) Allowance for doubtful accounts (141) (141) 98,085 99,189 11

14 Notes to unaudited quarterly financial information (Continued) 4. Inventories Consolidated March, 31 December 31, 2009 Finished goods 3,487 3,825 Work in process 9,729 9,450 Raw materials 16,637 16,661 Imports in transit 1,717 1,552 Maintenance and auxiliary materials 5,168 5,520 Tooling in progress intended for sale 87,606 75,440 Advances to suppliers tooling 8,338 10,090 Provision for adjustment to market value and inventory obsolescence (2,580) (2,884) 130, , Recoverable taxes Consolidated March, 31 December 31, 2009 State VAT (ICMS) on purchase of property, plant and equipment 7,463 7,754 Value-added tax (IVA) - Argentina 1,597 1,341 Federal VAT (Cofins) PAES 3,546 3,483 Other 4,162 3,507 16,768 16,085 Current assets (9,133) (8,997) Noncurrent assets 7,635 7,088 12

15 Notes to unaudited quarterly financial information (Continued) 6. Income and social contribution taxes a) Deferred taxes are composed by as follows: March, 31 Consolidated December 31, 2009 Assets: Income tax loss carryforward (1) 37,093 36,763 Social contribution tax loss carryforward (1) 12,740 12,597 Provision for judicial demands and other temporary differences 2,624 2,769 52,457 52,129 Current assets (2,115) (2,115) Noncurrent assets 50,342 50,014 Liabilities: Revaluation reserve 26,298 27,252 Depreciation review of useful life Law No /07 (2) 5,349 3,527 31,647 30,779 Current liabilities (3,351) (3,629) Noncurrent liabilities 28,296 27,150 (1) Relate only to subsidiary Plascar Ltda. balances. Plascar S.A. has income and social contribution tax loss carryforwards amounting to R$5,938 e R$16,940 (R$5,759 and R$16,761 at December 31, 2009), respectively, with respect to which no deferred tax assets was recorded considering that there was no perspective of realization through future taxable profits. (2) Refers to deferred taxes calculated on the difference in fixed asset depreciation generated after the review of useful lives. According to CVM Rule No. 371/02, the subsidiary accounted for tax credits on income and social contribution tax loss carryforwards and temporary differences based on a technical report that shows the generation of future taxable profits, prepared by an independent firm and approved by the Board of Directors and the Fiscal Council. Income and social contribution tax losses can be carried forward indefinitely, and their recovery is limited to 30% of annual taxable profit. 13

16 Notes to unaudited quarterly financial information (Continued) 6. Income and social contribution taxes a) Deferred taxes are composed by as follows (Continued): Based on the technical study described above, the Company expects to fully recover tax credits as follows: Consolidated March, 31 December 31, ,115 2, ,900 2, ,733 3, to ,733 18, to ,976 24,609 52,457 52,129 The tax credits recovery forecasts were based on the projections of taxable profits, taking into consideration several financial and business assumptions considered at the closing of fiscal year ended December 31, 2009, which were reviewed at March 31, and no significant changes were detected the presumptions used. These projections may not be realized due to the uncertainness inherent to the estimation process. Management considers that deferred tax assets arising out of temporary differences shall be realized in proportion to the final outcome of respective legal claims and other events, which is expected to take place in the long term. b) Reconciliation of income (expense) related to income and social contribution taxes: Consolidated 01/01/10 to 03/31/10 01/01/09 to 03/31/09 Income (loss) before income and social contribution taxes 283 (10,870) Income and social contribution taxes at effective rates (34%) (96) 3,696 Adjustments for determining the effective rate: Installment Law No /09 (1) 39 - Share-based payments (Note 13) (183) (505) Permanent differences (55) (279) (295) 2,912 Income and social contribution taxes on net income for the quarters: Deferred (295) 2,912 (295) 2,912 (1) Refers to the tax effects on the reduction of financial charges (fines and interest) of quarter in the amount of R$115, stemming from tax installment instituted by Law No /09. 14

17 Notes to unaudited quarterly financial information (Continued) 7. Related companies The main assets and liabilities balances at as well as the main transactions that impacted the statements of income for quarters are as follows: Parent Company March, 31 December 31, 2009 March, 31 Consolidated December 31, 2009 Current assets (Note 15.b) Trade accounts receivable: IAC NA Warren USA IAC Madsnvil USA Plastal S.A Other Noncurrent assets Loan agreement: Plascar Ltda. 21,399 21, Plastal S.A. (Note 15.b) - - 8,040 8,152 21,399 21,579 8,040 8,152 Current liabilities Loan agreement: Permali do Brasil Indústria e Comércio Ltda ,800 1,986 March, 31 Consolidated March, Income statement Selling revenues Rental between Plascar Argentina and Plastal Financial expenses, net (112) (141) Trade accounts receivable relate to the sale of products denominated in foreign currencies, not received yet and not subject to interest rates. Loan recoverable between Plascar Indústria de Componentes Plásticos S.A. and Plastal S.A., both located in Argentina, denominated in Pesos Argentinos, accrues annual interest of 16.5%, has no maturity date. The balance of the loan between the Company and Plascar Ltda. is not subject to financial charges and was established with no maturity date. Loan payable between Plascar Ltda. and Permali do Brasil Indústria e Comércio Ltda. accrues monthly interest of 1.08% and has no maturity date. 15

18 Notes to unaudited quarterly financial information (Continued) 8. Investments March, 31 Consolidated December 31, 2009 In subsidiary: Plascar Indústria de Componentes Plásticos Ltda. 274, , , ,354 Relevant information related to Plascar Ltda. is as follows: March, 31 December 31, 2009 Capital 223, ,647 Total quotas of interest 223,647, ,647,000 Quotas of interest held 223,200, ,200,956 Equity interest 99,80% 99,80% Subsidiary s shareholders equity 274, ,902 Investment recognized in Plascar S.A. 274, ,354 Net income for the period ,911 Earnings on equity investment ,882 Plascar Ltda. has 100% interest in Plascar Indústria de Componentes Plásticos S.A., located in Pilar, Argentina, such relevant information is shown below: March, 31 December 31, 2009 Capital 3,524 3,524 Total units of shares 6,012 6,012 Shares held by Plascar Ltda. 6,012 6,012 Equity interest 100,00% 100,00% Subsidiary s shareholders equity 9,229 8,768 Investment recognized in Plascar Ltda. 9,229 8,768 Net income (loss) for the period 428 (5) Earnings (losses) on equity investment 428 (5) 16

19 Notes to unaudited quarterly financial information (Continued) 9. Property, plant and equipment (Consolidated) a. Breakdown of property, plant and equipment Annual depreciation rate % December 31, 2009 March 31, Cost Depreciation Net Net Buildings 2 to 4 130,531 (44,085) 86,446 86,519 Machinery and equipment 4 to ,514 (262,117) 271, ,605 Tooling 6 to 9 31,671 (18,879) 12,792 12,495 Furniture and fixtures 6 to 10 14,672 (10,629) 4,043 4,042 Vehicles 20 6,631 (3,051) 3,580 3,574 Computer equipment 15 7,772 (6,628) 1,144 1,463 Land - 14,479-14,479 14,479 Spare parts and materials Advances to suppliers - 8,220-8,220 1, ,724 (345,389) 402, ,155 b. Cost changes Quarter ended March 31, Opening balance Additions Disposals Transfer Ending balance Buildings 129, ,531 Machinery and equipment 531,504 7,847 (5,629) (208) 533,514 Tooling 31, ,671 Furniture and fixtures 14, (6) 2 14,672 Vehicles 6, (273) 60 6,631 Computer equipment 7, (11) (10) 7,772 Land 14, ,479 Spare parts and materials Advances to suppliers 1,744 6, , ,786 15,857 (5,919) - 747,724 The original revaluation was recorded at September 30, 2003 and revalued in The revaluation current residual value is R$77,346 (R$80,151 at December 31, 2009) and depreciation of assets revalued during the quarter ended March 31, was R$2,805 (R$2,637 in the same period of 2009). 17

20 Notes to unaudited quarterly financial information (Continued) 9. Property, plant and equipment (Consolidated) (Continued) As required by CPC-13 First-time adoption of Law No /07 and Provisional No. 449/08, the Company revised its estimates of the useful lives of its property, plant and equipment items used to determine depreciation rates. The new rates of useful lives were determined based on a technical study prepared in July 2009, considering the economic scenarios and projections available at June 30, The calculations and the adjustments were recorded prospectively to the study, i.e. as from July 1, As a result of this accounting, income for the quarter ended March 31, was increased by R$5,358, due to the lengthening of the useful lives of the assets, with correspondent reduction in depreciation rates. 10. Loans and financing Consolidated Type/purpose Financial charges at March, 31 December 31, 2009 Working capital local currency CDI + interests from 0.23% to 0.55% p.m. 225, ,131 Advance on export contracts Exchange variation (US$) 1,073 3,618 +interests of 0.38% p.m. Export credit notes CDI + interests of 0.50% p.m. 10,050 10,300 Leasing Interests from 1.07% to 1.80% p.m. 53,590 52, , ,914 Current liabilities (201,596) (198,616) Noncurrent liabilities 88,179 78,298 Noncurrent liabilities mature as follows: Consolidated March, 31 December 31, months 37,427 32, months 37,344 35, months 9,865 6, months 1,210 1, months 1,000 1, months 1,000 1, months ,179 78,298 18

21 Notes to unaudited quarterly financial information (Continued) 10. Loans and financing (Continued) Working capital loans, (substantially represented by overdraft accounts), Advance on Export Contracts and export credit notes were contracted by Plascar Ltda. and are guaranteed by receivables and Company sureties. Plascar Ltda. has entered into 30 financial lease agreements with first-class financial institutions for machines, equipment and vehicles. Leased assets are offered as guarantee for the financing arrangements. 11. Provision for judicial demands (Consolidated) The Company and its subsidiaries are parties to legal suits and administrative proceedings filed with several courts and governmental agencies, in the normal course of its operations, involving labor claims, tax and civil proceedings and other issues. Company management, based on information provided by its internal and outside legal advisors with respect to suits pending decision, set up a provision at an amount considered sufficient to cover any unfavorable outcome in relevant cases, as follows: March 31, December 31, 2009 Judicial deposit Net Net Provision Tax ,105 Labor 3,453 (2,021) 1,432 1,016 3,453 (2,021) 1,432 2,121 Change in provision for judicial demands Quarter ended March 31, Opening Monetary Closing balance Additions restatement Payments Reversal balance Tax 1, (1,196) - Labor 3,111 1,095 - (753) - 3,453 4,293 1, (753) (1,196) 3,453 At March 31,, the residual value of property, plant and equipment items securing tax administrative proceedings was R$84,487 (R$59,153 at December 31, 2009). 19

22 Notes to unaudited quarterly financial information (Continued) 11. Provision for judicial demands (Consolidated) (Continued) Tax At March 31,, Plascar Ltda. decided to reverse the provision recorded for losses on the tax proceedings corresponding to questioning of IPI on inputs in the amount of R$1,196, due the fact that the statute of limitation has run. At December 31, 2009, the provision amounted to R$1,182. The Company is also a party in other 12 tax proceedings in the amount of R$10,338 (10,277 at December 31, 2009), whose likelihood of an unfavorable outcome was assessed by the Company legal advisors as possible, and therefore no provision was set up. Labor Labor claims provision comprises, primarily, employees claims related to employment relationship and it was set up based on estimation provided by Company s legal advisors for labor proceedings, whose chances of loss were assessed as probable. The Company is also a party in other 274 labor proceedings in the amount of R$27,540 (R$27,577 at December 31, 2009), whose likelihood of an unfavorable outcome was assessed by the Company legal advisors as possible, and therefore no provision was set up. 12. Shareholders equity a) Capital Authorized capital is 200,000,000 shares and within this limit the Board of Directors is entitled to decide on the issue of new shares, their value and issue number, as well as to establish conditions for their subscription and payment. Also, within the authorized limit and according to the plan approved by the Annual General Meeting, directors and officers of the Company or its subsidiary may be granted stock options. Subscribed and paid-in capital comprises 166,430,346 uncertified, registered common shares, with no par value. 20

23 Notes to unaudited quarterly financial information (Continued) 12. Shareholders equity (Continued) b) Reserves Legal reserve Whenever applicable, the shareholders remuneration will be set up at a rate of 5% of the net income for each financial year under the terms of article 193 of Law No. 6404/76, capped at 20% of the capital. Capital reserve options and shares granted Recorded as per the share-based payment (Note 13) recognition, in accordance with Technical Pronouncement CPC 10 Share-based payment, approved by CVM Rule No. 562/08. Revaluation reserve This reserve relates to the revaluation of property, plant and equipment items in September 2003 recognized by Plascar Ltda., based on the appraisal report prepared by a specialized and independent company, in the amount of R$151,700, and revaluation reserve in subsidiaries in the amount of R$150,896. Revaluation reserve has been realized through depreciation and/or disposals of revaluated items against accumulated losses, net of taxes. c) Shareholders remuneration Under the Company s articles of organization, shareholders are entitled to minimum annual dividends of 25% of net income, adjusted pursuant to articles 189 and 202 of Law No. 6404/ Share-based payment In an Extraordinary General Meeting held on June 5, 2007, a plan for granting shares to certain management officers of the Company and/or subsidiary was approved. With the aim of encouraging these executives to remain in the Company, the opportunity of becoming shareholders was offered to them, creating the feeling of ownership and commitment to the Company and providing greater alignment of the interests of these executives with the shareholders expectations. 21

24 Notes to unaudited quarterly financial information (Continued) 13. Share-based payment (Continued) Management of the plan is the responsibility of the Board of Directors, which may grant up to 54,614 (54,614 lots of 1,000 shares, in conformity with how the shares were traded at the time) common shares issued by the Company and 109,228 stock options to be issued by the Company (1 option per 1,000 shares, at the subscription price of R$86.50 per 1,000 shares, in conformity with how the shares were traded at the time, corresponding to the average quotation of the Company s shares at the closing of trading of the São Paulo Stock Exchange (BOVESPA) on March 1, 2007). The plan for grating shares is subject to compliance with a vesting period of 4 years as from the date of signing of each agreement. During this period, the beneficiary must continue to work in the Company or in one of its subsidiaries. In the Plan for Grating a Purchase Option, the beneficiary acquires the right in the proportion of 25% for each year that the remains in the Company or any of its subsidiaries, attaining 100% at the end of 4 years from signing the agreement. In an Extraordinary General Meeting held on July 24, 2007, the grouping of the Company s shares in the proportion of 100 (one hundred) common shares to 1 (one) common share, without a change in capital was approved unanimously. Due to this grouping, the number of the shares in the stock option, as well as the subscription price of the shares was adjusted proportionately for: Total Shares of the Plan for Grating Shares - 546,150; Total Shares of the Plan Grating a Purchase Option 1,092,280; Subscription price per share - R$8.65. In the event any holder of stock option no longer remains as an employee or officer of the Company, as a result of death, retirement or permanent disability of the beneficiary, options whose exercise periods have not yet began shall terminate upon relevant employee or officer termination date. However, if the employment is terminated by the Company without cause, relevant employees shall be entitled to exercise 100% of their options related to that particular fiscal year under the terms established in the Stock Option Plan. Between the date of approval of the grant and March 31,, no exercise or loss of any share or option by beneficiaries took place. At March 31, 2009, the result of the quarter ended were reduced in the amount of R$1,487. Of this amount, R$878 is due to cancellation of shares and options after dismissal of a member. After such cancellation, the outstanding shares and options are in the total of 483,899 and 967,780, respectively. 22

25 Notes to unaudited quarterly financial information (Continued) 13. Share-based payment (Continued) At March 31,, the result of the quarter were reduced in the amount of R$539. In the event remaining shares and options (483,899 shares and 967,780 options) were also exercised through the issue of new common shares, current shareholders would have their equity interest decreased by 0.87% after the exercise of all remaining options, with no effect on the Company income statement. At March 31,, R$4,672, referring to the unrecognized compensation cost of share-based payment, will be recognized within approximately 2.2 years (R$5,211 at December 31, 2009 over approximately 2.4 years). The Company does not have treasury stocks. 14. Pension plan The Company, through the Plascar Ltda., has a retirement and pension plan conceded to its employees and former employees aiming to complement the benefits provided by the National Social Security System. This plan is structured as a variable contribution model, whose main characteristics are described below: Variable Contribution Plan, funded by Members and Sponsor s contributions, as set out below: Base Contribution: the Members can make contributions equal to full percentages between 1% and 5% of their contribution salary base, at their choice, provided the resulting contribution falls within the minimum limit set by the relevant chart; Voluntary Contribution: as long as the Members make the base contribution they can opt for making voluntary contributions under specified circumstances to be determined by the Sponsor; Regular Contribution: the Sponsor will include a credit to all Active Members whose contribution salary base exceeds 20 UP (Pension Unit), calculated in accordance with the credit formula provided in the chart; and Supplementary Contribution: the Sponsor will include a credit to Active Members who make base contributions, calculated on a percentage ranging between 50% and 100% of the Base Contribution. Currently, this credit corresponds to 50% of the Base Contribution. 23

26 Notes to unaudited quarterly financial information (Continued) 14. Pension plan (Continued) For active Members as of the transfer date, a Migration Credit was calculated, corresponding to accumulated rights under former Basic Plan, on top of the benefit guarantee to Members entitled to monthly annuity under former Basic Plan, as provided in the new plan chart. For inactive Members who remain entitled to any deferred benefit payable by the Plan (vesting period) were guaranteed under the same conditions as in former plans. The defined benefit plan components are as follows: 1. Benefits granted as monthly life annuity; 2. Guaranteed Benefit (founders group), set in excess of regular contribution and individual credit account balances; 3. Forecasted regular contributions for total disability and death; and, 4. Minimum Benefit of 6 salaries in proportion to the 30 years career with the company for total disability and death (set in excess of regular contribution and individual credit account balances). Based on the actuarial evaluation prepared by independent actuary at December 31, 2009, in accordance with deliberation issued by CMV No. 371, the plan presented a net actuarial asset in the amount of R$9,588, which was recorded under Recoverable actuarial assets, due to its probable realization through offset with future contributions to the plan. There were no relevant changes in contest of the plan, number of members and assumptions in the quarter ended March 31, compared to those used at December 31, Financial instruments (Consolidated) The financial instruments (Parent Company and Consolidated) are recorded in asset and liability accounts at amounts consistent with observable market values at the balance sheet dates. Management of such instruments is based on operating strategies, aiming at liquidity, profitability and security. The control policy consists in permanently monitoring the rates established in relation to those prevailing in the market. At, the Company and its subsidiaries held no outstanding positions related to derivative financial instruments. 24

27 Notes to unaudited quarterly financial information (Continued) 15. Financial instruments (Consolidated) (Continued) a. Credit risk The Company and its subsidiaries operate in two different markets, namely, original equipment manufacturers (OEM) and aftermarket/car dealers (DSH). The possibility that the company and its subsidiaries come to incur any losses on account of financial problems with their OEM customers is low given the profile of these customers (assemblers and other global companies). With respect to DSH sales, for which the Company management believes there is some risk of default, sales are centralized in sales representatives. On March 31,, sales accounts of this market represent less than 1.0% (0.5% on December 31, 2009) of the Company s total gross sales. b. Foreign exchange rate risk Plascar Ltda., and its subsidiary present assets and liabilities in foreign currency due to imports, exports and loans with related companies, in the amounts as follow: March, 31 December 31, 2009 Trade accounts receivables from third parties (Note 3) 3,102 5,111 Trade accounts receivables from related parties (Note 7) Loans from related companies (Note 7) 8,040 8,152 Trade accounts payables with third parties (2,072) (2,458) Net exposure 9,407 11,565 c. Foreign exchange rate risk The Company monitors the fluctuations in the diverse interest rates calculated on its monetary assets and liabilities and, should the volatility of these rates increase, it may operate with derivatives with a view to mitigating these risks. This instrument is not usually used by management face its inherent risks. 25

28 Notes to unaudited quarterly financial information (Continued) 15. Financial instruments (Consolidated) (Continued) d. Market values At March 31,, market values of trade accounts receivable and payable approximate amounts recorded in the financial statements because of their shortterm nature. With respect to loans and financing arrangements, their market values substantially approximate the amounts recorded in the financial statements because these financial instruments are subject to variable market interest rates, which reflect the Company s market rating. 16. Financial expenses, net (Consolidated) 01/01/10 to 03/31/10 01/01/09 to 03/31/09 Financial expenses Interest expenses (8,899) (8,751) Foreign exchange losses (935) (2,227) IOF Tax on financial operation (765) (440) Other (177) (174) (10,776) (11,592) Financial income Interest income Monetary variation gains Foreign exchange gains 725 1,275 Other ,285 (9,827) (9,307) 17. Insurance The Company and its subsidiary maintain insurance coverage in several lines, which are retained with a major insurance company in Brazil. Relevant policies were defined considering the group s insurance program, and take into consideration the nature and risk level involved. 26

29 Notes to unaudited quarterly financial information (Continued) 18. Subsequent event In a Extraordinary General Meeting held on April 7,, the Company s shareholders approved by a majority vote the issue of subordinated debentures mandatorily convertible into shares of the Company s issue. The maximum amount of the issue will be up to R$400,000, maturing in two years counted from the Issue date. The issue will be in a single tranche and the debentures will mature on May 7, ,000 (forty million) debentures with a face value of R$10 each will be issued. Through this issue, the Company will raise financial resources at a lower cost than its current average fundraising cost. The Company will use the proceeds from the issue to strengthen its capital structuring, reducing its current debt, and to implement its business plan. Because the Conversion Ratio will be based on the average price per Companyissued shared calculated during a significant trading period of the Company s shares, those shareholders that do not exercise the preference right that was granted to them will suffer justified dilution based on pre-established objective criteria. 27

30 Notes to unaudited quarterly financial information (Continued) Board of Directors Wilbur L. Ross, Jr. Chairman André Cambauva do Nascimento Vice Chairman Charles Dimetrius Popoff Member Francisco Nelson Satkunas Member Maurício Tadei Barthel Manfredi Member Board of Executive Officers André Cambauva do Nascimento José Donizete da Silva Gordiano Pessoa Filho CEO Member Officer and Investor Relations Officer Board of Executive Officers (Non-statutory) Emerson Caldo Guizilini Joel Luiz da Costa Ronaldo Prado Serenini Commercial Director Industrial Director Business Unit Director Varginha MG Rita Aparecida de Souza New Business Director Ana Lúcia de Aguiar Zacariotto Human Resources Director Claudio Batista Accounting Manager Accountant CRC 1SP170282/O-9 Fiscal Council Adauto Martins Costa Mauro Cesar Leschziner Alcides Morales Filho Member Member Member 28

31 Report on Company s performance (In thousands of reais, except as otherwise stated) Non-financial information included in this report, as well as the percentage derived from, was not reviewed by the independent auditors. Gross Profit Amounts in R$ Thousand R$132,278 R$147,781 R$114,719 R$33, % R$17, % R$31, % 1Q08 1Q09 1Q10 Net Revenue Gross Revenue... Gross Income % There was a strong recovery in production of vehicles in the first quarter of, compared to first quarter of From January to March, compared to same period of 2009 (Anfavea data), there was an increase of 24.4% in the production of vehicles. Following the increased production of vehicles between the quarters compared, the gross profit (R$31, % in the first quarter of and R$17,017 = 15.4% in the first quarter of 2009), showed an increase of R$13,648. ANFAVEA DATA 1Q 09 1Q 10 % CHG VEHICLE PRODUCTION % VEHICLE SALES % 29

32 Report on Company s performance (Continued) (In thousands of reais, except as otherwise stated) Selling Expenses The increase of R$1,177 shown in the first quarter of compared to the same quarter of last year is driven mainly by the increase in variable expenses with freights in connection with the increase in volume of billings in the quarters being compared. General and Administrative Expenses The increase of R$1,885 recorded in the first quarter compared to the same quarter of last year occurred proportionally among the main accounts of this group. Financial Income The decrease of R$1,336 when comparing the quarters basically reflects the negative exchange variation on the Company s operations in the first quarter versus the same period of last year. Financial Expenses The decrease of R$816 when comparing the quarters basically reflects the effects of interests on loans and leasing, combined with the positive exchange variation on the Company s operations. Other P&L Items Other P&L items represented a negative effect of R$2,133, basically resulting from the realization of deferred Income and Social Contribution taxes on tax losses and negative basis of Social Contribution recorded in the first quarter of. Results The combined result of all the above-mentioned factors as of March 31, show the break-even point achieved this quarter that led to generation of positive cash (EBITDA) in the amount of R$17,269 (11.7%) in the first quarter as shown in the table below: 30

33 Report on Company s performance (Continued) (In thousands of reais, except as otherwise stated) Net Income (Continued) EBITDA (R$) Margin EBITDA (%) 24,106 17, % 8, % 11.7% 1Q 08 1Q 09 1Q 10 Net sales Gross profit EBITDA Retained earnings (accumulated losses) in the period Quarter (R$) R$ % Sales R$ % sales (R$) Mar, ,970 23, % 16, % 9,204 Jun, ,436 48, % 32, % 12,006 Sep, ,687 75, % 48, % 42,281 Dec, , , % 64, % 45,702 Mar, ,913 29, % 20, % 7,847 Jun, ,638 58, % 39, % 12,185 Sep, ,057 91, % 60, % 17,453 Dec, , , % 79, % 51,060 Mar, ,278 33, % 24, % 6,820 Jun, ,227 71, % 48, % 23,745 Sep, , , % 77, % 32,455 Dec, , , % 74, % 14,991 Mar, ,719 17, % 8, % (7,946) Jun, ,718 43, % 25, % (9,717) Sep, ,276 79, % 50, % 41 Dec, , , % 81, % 10,084 Mar, 147,781 31, % 17, % (13) 31

34 Report on Company s performance (Continued) (In thousands of reais, except as otherwise stated) Human Resources Despite the economic adversities in Brazil, the Company continues investing in professional development of its employees, with approximately 205 teaching and training hours per employee (in the last 12 months), focused on Senai courses, trainee programs, fast-track high school courses, as well as training for technical and operating development. The school tuition fees refund program was implemented in 2007 in order to provide educational support to employees for technical, graduate and post-graduate courses as well as language courses. The number of employees on March 31, was 3,754 (3,027 on March 31, 2009). * Public acknowledgement People Management Great Place to Work Best Companies to Work for in Latin America For the second time, Plascar Indústria de Componentes Plásticos Ltda ranked among the top 100 companies to work for in Latin America The ranking, which includes companies from 18 countries, is prepared by the Great Place to Work Institute, which currently conducts surveys about work environments in 41 countries. A total of 21 Brazilian companies were included in the 100 Best - Latin America ranking. The result of the survey was disclosed on June 15, 2009 during an event at the Modern Art Museum of São Paulo and was attended by representatives of the companies included in the ranking. Gestão RH magazine 2009 Corporate Citizenship award On April 28, Plascar received the 2009 Corporate Citizenship award from Gestão RH magazine, a respected publication of the human resources and people management sector. The Company also stood out in the Social Responsibility category, along with companies such as Aracruz, Alpargatas, Carrefour, Copagaz, Cummins, Dow, GDK, Goodyear, Hospital Santa Catarina, Hospital Beneficência Portuguesa, Perdigão, Melhoramentos, Orsa, Rhodia and Visteon. The awards ceremony was held at the Rebouças Convention Center in São Paulo, SP. 32

35 Report on Company s performance (Continued) (In thousands of reais, except as otherwise stated) * Public acknowledgement People Management (Continued) Imprensa Magazine 41st most sustainable company Plascar was named the 41st most sustainable company in Brazil, according to the media according to the 50 Most Sustainable Companies According to the Media ranking elaborated from the 2nd edition of na exclusive study presenting the companies most positively cited in the media in This edition of the Media B study, sponsored by Imprensa magazine (Imprensa Editorial June/2009/ no. 246/ year 22), 1214 articles were analyzed and catalogued, including notes, reports, citations, fotographs and editorials, in finance, business and sustainability magazines Exame, Época Negócios, IstoÉ Dinheiro, AméricaEconomia and Amanhã. More than 500 companies were cited in the analyzed news articles. Exame magazine Best & Largest On July 7, 2009 during an event held in São Paulo, SP, Exame magazine, one of the most respected Brazilian publications, presented the 2009 ranking of the "Best & Largest" companies by their 2008 results. This year Plascar was 531 st among the 1,000 companies highlighted by the ranking. The cosmetics company Natura received the Company of the Year award. Suspensys was the winner in the automotive industry. Isto É Dinheiro magazine Best of Dinheiro In 2009, for another year Plascar earned excellent ratings in the survey by Isto é Dinheiro magazine and Trevisan, one of Brazil s most renowned consulting firms. The survey is based on information provided by the companies themselves and additional data on publicly-held companies provided by Economática, a major financial consulting firm. The Best of Dinheiro award features companies from 25 sectors rated according to the following criteria: Financial Sustainability, Human Resources, Innovation and Quality, Social and Environmental Responsibility and Corporate Governance. In the automotive parts sector, Plascar ranked: 33