PDG Realty S.A. Empreendimento s e Participações

Transcription

1 PDG Realty S.A. Empreendimento s e Participações - ITR Quarter ended (A free translation of the original financial statements in Portuguese prepared in accordance with the accounting practices adopted in Brazil) KPDS

2 - ITR Quarter ended Contents Report on the review of quarterly information - ITR 3 Composition of capital stock 6 Balance sheets - Parent Company 7 Statements of profit/ (loss) for the years - Parent Company 9 Statements of Comprehensive income/(loss) for the years - Parent Company 10 Statements of cash flows - Indirect method - Parent Company 11 Statements of changes in shareholders' equity - Parent Company 12 Statements of added valued - Parent Company 14 Balance sheets - Consolidated 15 Statements of profit or loss for the years - Consolidated 17 Statements of Comprehensive income/(loss) for the years - Consolidated 18 Statements of cash flows - Indirect method - Consolidated 19 Statements of changes in shareholders' equity - Consolidated 20 Statements of added valued - Consolidated 22 Message from Management 23 Notes to the quarterly information - ITR 25 Other information that the company considers relevant 73 Fiscal Council Opinion 76 Statement of the Executive Officers on the Financial Statements 77 Statement of the Executive Officers on the Independent auditors' report 78 2

3 KPMG Auditores Independentes Rua Arquiteto Olavo Redig de Campos, 105, 6º andar - Torre A São Paulo/SP - Brasil Caixa Postal CEP São Paulo/SP - Brasil Telefone 55 (11) , Fax 55 (11) Report on the review of quarterly information - ITR To The Management and Shareholders of PDG Realty S.A. Empreendimentos e Participações São Paulo - SP We have reviewed the interim, individual and consolidated financial information of PDG Realty S.A. Empreendimentos e Participações ("Company") contained in the Quarterly Information - ITR Form for the quarter ended, which comprise the balance sheet as of and the related statements of income, comprehensive income changes in shareholders' equity and cash flows for the three-month period then ended, including the explanatory notes. Company s Management is responsible for the preparation of the individual interim accounting information in accordance with Technical Pronouncement CPC 21(R1)- Interim statements, and of consolidated interim accounting information in accordance with CPC 21(R1) and IAS 34 - Interim Financial Reporting issued by International Accounting Standards Board - IASB, which considers OCPC 4 Guidance on the application of Technical Interpretation ICPC 02 to Real Estate Development Entities in Brazil issued by the Accounting Pronouncements Committee (CPC) and approved by the Brazilian Securities Commission (CVM) and the Federal Accounting Council (CFC), as well as for the presentation of this information in a manner consistent with the standards issued by the Securities Commission, applicable to the preparation of the Quarterly Information - ITR. Our responsibility is to express a conclusion on these interim financial information based on our review. Scope of review We conducted our review in accordance with the Brazilian and international review standards for interim information (NBC TR Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists in asking questions, chiefly to the persons in charge of financial and accounting affairs, and in applying analytical procedures and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 3

4 that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on individual and consolidated interim information prepared in accordance with CPC 21(R1) Based on our review, we are not aware of any facts that would lead us to believe that the individual and consolidated interim accounting information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) applicable to the preparation of Quarterly Information - ITR, and presented in a manner consistent with the standards issued by the Securities Commission. Conclusion on consolidated interim information prepared in accordance with IAS 34, which considers OCPC 04 Guideline on the application of Technical Interpretation ICPC 02 to Real Estate Development Entities in Brazil, issued by the Accounting Pronouncements Committee (CPC) and approved by the Brazilian Securities and Exchange Commission (CVM) and the Federal Accounting Council (CFC) Based on our review, we are not aware of any facts that would lead us to believe that the consolidated interim accounting information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with IAS 34 issued by IASB, which considers OCPC 04 Guidance on the application of Technical Interpretation ICPC 02 to the Brazilian Real Estate Development Entities issued by the Accounting Pronouncements Committee (CPC) and approved by the Brazilian Securities Exchange Commission (CVM) and Federal Accounting Council (CFC), applicable to the preparation of Quarterly Information - ITR, and presented in a manner consistent with the standards issued by the Brazilian Securities Commission. Emphasis OCPC 04 Guideline issued by the Accounting Pronouncements Committee As described in note 2.2, individual and consolidated interim accounting information have been prepared in accordance with accounting practices adopted in Brazil (CPC 21(R1)). Consolidated interim financial information prepared in accordance with IFRS applicable to real estate development entities also consider OCPC 04 Guideline issued by the Accounting Pronouncements Committee. This guideline addresses revenue recognition of this industry and involves matters related to the meaning and application of the risk and benefit continuous transfer concept and of the control on sale of real estate units concept, as further described in Note Our conclusion is not qualified in this respect. Going Concern Without qualifying our opinion, we draw attention to Note 1 of the financial statements, which describes the plan defined by Management to balance the financial liabilities to the cash flow of the Company, which incurred a net loss in the three-month period ending on and, as of that date, current liabilities exceeded its current assets, mainly due to the reclassification of the debts from long to short-term, for the non-compliance of covenants in certain loan and financing agreements. The risk of non performance of the described plan indicates the existence of a material uncertainty that may cast significant doubt about the Company s ability to continue as a going concern. KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 4

5 Other issues Statements of added value We also reviewed the Individual and consolidated value-added statements for the threemonth period ended on, prepared by the Company's management, whose presentation in the interim information is required according to the standards issued by the CVM - Securities and Exchange Commission, applicable to the preparation of Quarterly Information - ITR and considered supplementary information by the IFRS, which do not require the presentation of the statement of added value. These statements were subjected to the review procedures previously described and, based on our review, we are not aware of any other event that make us believe that those were not prepared, in all material respects, in accordance with the individual and consolidated interim information taken as a whole. São Paulo, May 11, 2016 KPMG Auditores Independentes CRC 2SP014428/O-6 Original report in Portuguese signed by Ederson Rodrigues de Carvalho Accountant CRC 1SP199028/O-1 KPMG Auditores Independentes, uma sociedade simples brasileira e firma-membro da rede KPMG de firmas-membro independentes e afiliadas à KPMG International Cooperative ( KPMG International ), uma entidade suíça. KPMG Auditores Independentes, a Brazilian entity and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. 5

6 PDG Realty S.A Empreendimentos e Participações Composition of capital stock Number of shares (thousand) Current quarter 03/31/2016 Common shares from paid-in capital 49,192 Preferred - Of the Paid-up Capital - Total from paid-in capital 49,192 Common shares - in treasury - Preferred shares - in treasury - Total - in treasury - 6

7 Balance sheets Parent Company (In thousand of reais) Code of account Account description Current quarter 03/31/2016 Prior year 12/31/ Total assets 6,310,270 6,506, Current assets 120, , Cash and cash equivalents 13,898 17, Cash and banks 6,573 7, Interest earning bank deposits 7,325 9, Accounts receivable 38,139 61, Trade accounts receivable 38,139 61, Inventories 14,056 14, Real estate inventories for sale 14,056 14, Recoverable taxes 15,089 22, Current taxes recoverable 15,089 22, Other current assets 39,218 57, Others 39,218 57, Others assets 39,218 57, Non-current assets 6,189,870 6,332, Long term assets 2,091,869 2,272, Accounts receivable 20,315 33, Trade accounts receivable 20,315 33, Inventories 22,385 22, Real estate inventories for sale 22,385 22, Other non-current assets 2,049,169 2,216, Advances for future capital increase 1,813,043 1,918, Loan agreements 42,414 41, Credit receivables purchased 154, , Others assets 39, , Investments 4,062,866 4,024, Equity interest 4,062,866 4,024, Interest in associated companies 13,906 24, Interest in subsidiaries 3,943,529 3,892, Other equity interest 105, , Property, plant and equipment 1, Fixed assets in operation 1, Intangible assets 34,027 33, Intangible assets 34,027 33,864 7

8 Balance sheets Parent Company (In thousand of reais) Code of account Account description Current quarter 03/31/2016 Prior year 12/31/ Total liabilities 6,310,270 6,506, Current liabilities 4,059,716 3,775, Social and labor obligations 2,755 1, Labor obligations 2,755 1, Suppliers 24,244 23, Domestic suppliers 24,244 23, Tax liabilities 1,801 7, Federal tax liabilities 1,801 7, Deferred tax liabilities 1,323 1, Other current liabilities 478 5, Loans and financing 1,787,132 1,682, Loans and financing 894, , In domestic currency 894, , Debentures 892, , Other liabilities 2,242,558 2,057, Others 2,242,558 2,057, Liabilities for acquisition of real estate 6,528 6, Advances from clients Liabilities for acquisition of equity interest 246,084 3, Other liabilities 9,974 6, Liabilities from CCB/CCI issuance 1,979,938 2,039, Provisions 1,226 2, Tax, social security, labor and civil provisions 1,202 1, Provision for contingencies 1,202 1, Other provisions Provisions for guarantees Non-current liabilities 726, , Loans and financing 67, , Loans and financing 67, , In domestic currency 67, , Other liabilities 652, , Others 652, , Advances from clients 2,750 2, Liabilities from CCB/CCI issuance 5,899 22, Other liabilities 643, , Provisions 6,676 7, Tax, social security, labor and civil provisions 6,175 7, Provision for contingencies 6,175 7, Other provisions Provisions for guarantees Shareholders' equity 1,524,153 1,934, Realized capital 4,917,843 4,917, Capital reserves 1,235,720 1,235, Goodwill in the issue of shares 1,206,746 1,206, Options granted 28,974 28, Retained Earnings/Losses - 4,629,410-4,218,933 8

9 Income statement Parent Company (In thousand of reais) Code of account Account description Accumulated of the Current Year 01/01/ /31/2016 Accumulated of the prior year 01/01/ /31/ Income from sales of goods and/or services 494 9, Cost of goods and/or services sold , Gross income , Operating expenses/income - 241,276-80, Sales expenses General and administrative expenses - 14,138-9, Other operating income Others Other operating expenses - 11,783-16, Tax expenses Depreciation/Amortization - 4,110-9, Losses in equity interest - 3,846-6, Others - 3, Equity income (loss) - 215,467-53, Income (loss) before financial income and taxes - 241,656-74, Financial income (loss) - 168,569-87, Financial income 3,771 45, Financial expenses - 172, , Income (loss) before income tax - 410, , Income and social contribution taxes Current Net income (loss) of continued operations - 410, , Income/loss for the period - 410, , Basic earnings per share ON Diluted earning per share ON

10 Statements of Comprehensive income / (loss) for the years Parent Company (In thousand of reais) Accumulated of the Current Year Code of account Account description 01/01/ /31/ Net income for the period 410,477 Accumulated of the prior year 01/01/ /31/ , Other comprehensive income - 1, Comprehensive income for the period - 410, ,307 10

11 Statements of cash flows Indirect method Parent Company (In thousand of reais) Code of account Account description Accumulated of the Current Year 01/01/ /31/2016 Accumulated of the prior year 01/01/ /31/ Net cash from operational activities 41, , Cash generated in operations - 22,040 52, Income (loss) before income and social contribution taxes - 410, , Depreciation and amortization 4,110 9, Capital gains/losses in subsidiaries 3,846 6, Financial Expenses - Interest paid and monetary variation 163, , Fair value on financial instruments - 1, Recognition Stand Expenses Stock options expenses 375 3, Amortization of appreciation goodwill 207 8, Equity in net income of subsidiaries 215,467 53, Adjustment to present value Provision for warranty and contingencies 866 1, Estimated losses with doubtful accounts Changes in assets and liabilities 140,755-42, Operation of Assignment of Credit rights 1,444-30, Loan agreement receivable - 1, Accounts receivable 36,282 3, Recoverable taxes Real estate inventories for sale 660-7, Unrecognized expenses Active debentures - - 1, Advances from clients Liabilities for acquisition of real estate Tax Liabilities and Taxes Payable 3, Suppliers Other movements 100,215-5, Others - 77, , Income and social contribution taxes Interest paid on loans - 77, , Net cash used in investment activities 105, , Increase (Decrease) in Interest in Associates and Subsidiaries 2, , Intangible assets - 1,970-1, Advances for future capital increase 105,284 49, Interest earning bank deposits measured at fair value Acquisition of property, plant and equipment Net cash from financing activities - 150, , Loans 30, , Loan amortization - 180, , Increase (decrease) in cash and cash equivalents - 3, , Opening balance of cash and cash equivalents 17, , Closing balance of cash and cash equivalents 13, ,296 11

12 Statements of changes in shareholders' equity Parent Company - 01/01/ /31/2016 (In thousand of reais) Code of account Account description Paid-up capital Capital reserves, Options granted and Treasury shares Profit reserves Retained earnings (loss) Other comprehensive income Shareholders' equity 5.01 Opening balances 4,917,843 1,235, ,218,933-1,934, Adjusted opening balances 4,917,843 1,235, ,218,933-1,934, Capital transactions with partners Recognized options granted Total comprehensive income , , Net income for the period , , Closing balances 4,917,843 1,235, ,629,410-1,524,153 12

13 Statements of changes in shareholders' equity Parent Company - 01/01/ /31/2015 (In thousand of reais) Code of account Account description Paid-up capital Capital reserves, Options granted and Treasury shares Profit reserves Retained earnings (loss) Other comprehensive income Shareholders' equity 5.01 Opening balances 4,907, , ,403,191-66,592 4,182, Adjusted opening balances 4,907, , ,403,191-66,592 4,182, Capital transactions with partners - 3, , Recognized options granted - 3, , Total comprehensive income ,651 1, , Net income for the period , , Other comprehensive income ,344 1, Translation adjustments in the period ,344 1, Closing balances 4,907, , ,564,842-65,248 4,025,002 13

14 Statements of added valued Parent Company (In thousand of reais) Code of account Account description Accumulated of the Current Year 01/01/ /31/2016 Accumulated of the prior year 01/01/ /31/ Income 1,147 9, Sale of merchandise, products and services - 1,164 9, Other income 2, Inputs acquired from third parties - 13,544-18, Cost of products, merchandise and services sold , Materials, Energy, Third-party services and other - 5,973-8, Loss/recovery of asset values - 3,846-6, Others - 2, Gross added value - 12,397-9, Retentions - 4,110-9, Depreciation, amortization and depletion - 4,110-9, Net added value produced - 16,507-18, Added value received as transfer - 211,696-8, Equity income (loss) - 215,467-53, Financial income 3,771 45, Total added value payable - 228,203-26, Distribution of added value - 228,203-26, Personnel 7,061 1, Direct remuneration 6,444 1, Benefits Severance Pay Fund (FGTS) Taxes, duties and contributions 2, Federal 2, Municipal Third-party capital remuneration 172, , Interest 169, , Rents Others 2,445 1, Remuneration of own capital - 410, , Retained earnings / Loss for the period - 410, ,651 14

15 Balance sheets Consolidated (In thousand of reais) Code of account Account description Current quarter 03/31/2016 Prior year 12/31/ Total assets 10,139,122 10,958, Current assets 4,529,651 4,850, Cash and cash equivalents 372, , Cash and banks 111, , Interest earning bank deposits 261, , Accounts receivable 2,187,268 2,227, Trade accounts receivable 2,187,268 2,227, Inventories 1,713,365 1,722, Real estate inventories for sale 1,713,365 1,722, Recoverable taxes 64,725 87, Current taxes recoverable 64,725 87, Prepaid expenses 9,036 9, Unrecognized expenses 9,036 9, Other current assets 182, , Others 182, , Loan agreement 67,759 69, Other receivables 111, , Deferred taxes 3,549 2, Non-current assets 5,609,471 6,107, Long term assets 4,811,485 5,251, Accounts receivable 2,879,014 3,264, Trade accounts receivable 2,879,014 3,264, Inventories 1,728,026 1,798, Real estate inventories for sale 1,728,026 1,798, Other non-current assets 204, , Current accounts with partners in projects 202, , Other receivables 1,545 2, Investments 645, , Equity interest 189, , Interest in associated companies 189, , Investment property 455, , Property, plant and equipment 32,502 36, Fixed assets in operation 32,502 36, Intangible assets 119, , Intangible assets 119, ,923 15

16 Balance sheets Consolidated (In thousand of reais) Code of account Account description Current quarter 03/31/2016 Prior year 12/31/ Total liabilities 10,139,122 10,958, Current liabilities 6,381,746 6,567, Social and labor obligations 42,130 47, Labor obligations 42,130 47, Suppliers 232, , Domestic suppliers 232, , Tax liabilities 320, , Federal tax liabilities 320, , Income and social contribution tax payable 79,672 76, Deferred tax liabilities 88, , Other current liabilities 152, , Loans and financing 2,692,892 2,693, Loans and financing 1,733,042 1,735, In domestic currency 1,733,042 1,735, Debentures 959, , Other liabilities 2,944,298 3,056, Others 2,944,298 3,056, Liabilities for acquisition of real estate 149, , Advances from clients 171, , Current account with partners in undertakings 8,778 9, Co-obligation in the assignment of receivables 28,594 31, Other liabilities 212, , Liabilities from CCB/CCI issuance 2,373,850 2,460, Provisions 148, , Tax, social security, labor and civil provisions 99, , Provision for contingencies 99, , Other provisions 49,745 62, Provisions for guarantees 49,745 62, Non-current liabilities 1,818,458 2,006, Loans and financing 676, , Loans and financing 676, , In domestic currency 676, , Other liabilities 733, , Others 733, , Advances from clients 129, , Liabilities for acquisition of real estate 101, , Deferred tax liabilities 173, , Liabilities from CCB/CCI issuance 41,697 45, Provision with guarantee 74,570 67, Other liabilities 213, , Provisions 409, , Tax, social security, labor and civil provisions 409, , Provision for contingencies 409, , Consolidated shareholders' equity 1,938,918 2,384, Realized capital 4,917,843 4,917, Capital reserves 1,235,720 1,235, Goodwill in the issue of shares 1,206,746 1,206, Options granted 28,974 28, Retained Earnings/Losses - 4,629,410-4,218, Interest of non-controlling shareholders 414, ,310 16

17 Income statement Consolidated (In thousand of reais) Code of account Account description Accumulated of the Current Year 01/01/ /31/2016 Accumulated of the prior year 01/01/ /31/ Income from sales of goods and/or services 139, , Cost of goods and/or services sold - 155, , Gross income - 15, , Operating expenses/income - 188, , Sales expenses - 24,471-32, General and administrative expenses - 54,784-70, Other operating income 13,126 22, Gain in equity interests - 17, Others 13,126 4, Other operating expenses - 122,873-49, Tax expenses - 1,830-2, Depreciation/Amortization - 21,910-13, Losses in equity interest - 14,814-11, Others - 84,319-20, Equity income (loss) , Income (loss) before financial income and taxes - 204,814 2, Financial income (loss) - 190, , Financial income 41,382 66, Financial expenses - 231, , Income (loss) before income tax - 395, , Income and social contribution taxes - 15,250-32, Current - 22,599-45, Deferred 7,349 12, Net income (loss) of continued operations - 410, , Income/loss for the period - 410, , Attributed to the Parent company's partners - 410, , Attributed to non-controlling partners , Basic earnings per share ON Diluted earning per share ON

18 Statements of Comprehensive income / (loss) for the years Consolidated (In thousand of reais) Code of account Account description Accumulated of the Current Year 01/01/ /31/2016 Accumulated of the prior year 01/01/ /31/ Consolidated net income for the period - 410, , Other comprehensive income - 1, Consolidated comprehensive income for the period - 410, , Attributed to the Parent company's partners - 410, , Attributed to non-controlling partners ,649 18

19 Statements of cash flows Indirect method Consolidated (In thousand of reais) Code of account Account description Accumulated of the Current Year 01/01/ /31/2016 Accumulated of the prior year 01/01/ /31/ Net cash from operational activities 204, , Cash generated in operations - 81, , Income (loss) before income and social contribution taxes - 395, , Depreciation and amortization 21,910 13, Gains/Lesses em Subsidiaries 14,814-5, Financial liabilities, interest paid and monetary variation 215, , Fair value on financial instruments - 1, Recognition Stand Expenses 2,046 4, Stock options expenses 375 3, Equity in net income of subsidiaries , Adjustment to present value 9,886 6, Provision for warranty and contingencies 42,474 28, Provision for profit sharing 5,005 2, Estimated losses with doubtful accounts 2, Changes in assets and liabilities 411, , Assignment of credit right operations - - 2, Loan agreement receivable 2, Accounts receivable 413, , Recoverable taxes 449 1, Real estate inventories for sale 79,855-35, Unrecognized expenses 101 2, Current account with partners in undertakings - 17,282 4, Active debentures - - 1, Advances from clients - 3,892-41, Liabilities for acquisition of real estate - 25,768 10, Tax Obligations/ Taxes payable , Suppliers 2,496-10, Other movements - 39,261 87, Others - 125, , Income and social contribution taxes - 27,335-42, Interest paid - 97, , Net cash used in investment activities 20,395 4, Increase (Decrease) in Interest in Associates and Subsidiaries 4,742 9, Intangible assets - 1,970-3, Interest earning bank deposits measured at fair value Investment property 17,649-3, Acquisition of property, plant and equipment , Sale of property, plant and equipment Net cash from financing activities - 456, , Loans 38, , Loan amortization - 495,633-1,100, Increase (decrease) in cash and cash equivalents - 231, , Opening balance of cash and cash equivalents 604,093 1,044, Closing balance of cash and cash equivalents 372, ,032 19

20 Statements of changes in shareholders' equity Consolidated - 01/01/ /31/2016 (In thousand of reais) Code of account Account description Paid-up capital Capital reserves, Options granted and Treasury shares Profit reserves Retained earnings (loss) Other comprehensive income Shareholders' equity Interest of noncontrolling shareholders Consolidated shareholders' equity 5.01 Opening balances 4,917,843 1,235, ,218,933-1,934, ,310 2,384, Adjusted opening balances 4,917,843 1,235, ,218,933-1,934, ,310 2,384, Capital transactions with partners ,482-35, Recognized options granted Net change in non-controlling shareholders ,482-35, Total comprehensive income , , , Net income for the period , , , Closing balances 4,917,843 1,235, ,629,410-1,524, ,765 1,938,918 20

21 Statements of changes in shareholders' equity Consolidated - 01/01/ /31/2015 (In thousand of reais) Code of account Account description Paid-up capital Capital reserves, Options granted and Treasury shares Profit reserves Retained earnings (loss) Other comprehensive income Shareholders' equity Interest of noncontrolling shareholders Consolidated shareholders' equity 5.01 Opening balances 4,907, , ,403,191-66,592 4,182, ,527 5,061, Adjusted opening balances 4,907, , ,403,191-66,592 4,182, ,527 5,061, Capital transactions with partners - 3, ,087 58,185 61, Recognized options granted - 3, ,087-3, Net change in non-controlling shareholders ,185 58, Total comprehensive income ,651 1, ,307 6, , Net income for the period , ,651 6, , Other comprehensive income ,344 1,344-1, Taxes on adjustments of translation in the period ,344 1,344-1, Closing balances 4,907, , ,564,842-65,248 4,025, ,361 4,969,363 21

22 Statements of added valued Consolidated (In thousand of reais) Accumulated of the Current Year 01/01/ /31/2016 Accumulated of the prior year 01/01/ /31/2015 Code of account Account description 7.01 Income 148, , Sale of merchandise, products and services 118, , Other income 30,053 29, Inputs acquired from third parties - 276, , Cost of products, merchandise and services sold - 155, , Materials, Energy, Third-party services and other - 35,074-57, Loss/recovery of asset values - 14,814 5, Others - 71,193-16, Gross added value - 128,336 53, Retentions - 21,910-13, Depreciation, amortization and depletion - 21,910-13, Net added value produced - 150,246 39, Added value received as transfer 41,568 94, Equity income (loss) , Financial income 41,382 66, Total added value payable - 108, , Distribution of added value - 108, , Personnel 29,800 33, Direct remuneration 25,381 27, Benefits 2,468 3, Severance Pay Fund (FGTS) 1,951 2, Taxes, duties and contributions 36,810 59, Federal 29,323 59, Municipal 7, Third-party capital remuneration 235, , Interest 219, , Rents 3,394 5, Others 11,930 6, Remuneration of own capital - 410, , Retained earnings / Loss for the period - 410, , Interest of non-controlling shareholders in retained earnings ,649 22

23 Message from the Board On the last day of May, we took a key step in the process of restructuring the Company s debts by signing the Memorandum of Understanding for restructuring debts with our four biggest creditors (Banco do Brasil, Bradesco, CEF and Itaú Unibanco). This agreement refers to approximately R$3.7 billion (base date: Dec 15), representing 60% of the Company s gross debt and its main purposes are: (i) set out the Company s financing needs and; (ii) conform debts maturities with Banks considering future cash flow. Main measurements provided for in the agreement are as follows extension of corporate debts by 48 months with payment of interest and amortizations in a single installment (bullet); granting of new financing by banks to cover the Company s general and administrative expenses, with maturity in three years and interest rate equivalent to new interest rate provided for other corporate debts; possibility of granting financing to cover costs and expenses to complete construction work and trade projects financed by creditors involved in the agreement. In addition, current maturities of debts incurred to finance production must be postponed by a period from 12 to 24 months; Participation of one of our shareholders, Vinci Partners, in financing of the Company s general and administrative expenses. Also, Banks granted a formal standstill to the Company for a period of 60 days, subject to appreciation of respective Credit Committees. Implementation of measures provided for in the agreement depends on signature of definitive contracts, which we expect to execute in the next 60 days. In line with our strategy of selling assets and reducing leverage, also on May 4, we executed the contract for sale of our whole interest (58%) in REP to LDI. In total, PDG will receive the equivalent to R$34 million in real estate units located in São Paulo. This sale will reduce the Company s net indebtedness by R$237 million (base date Dec 2015). Conclusion of this transaction is subject to approval of competition defense authorities and of some creditors of REP and PDG. Also in relation to restructuring the Company s debts and selling assets, we are still negotiating with Grupo Votorantim the disposal of a group of projects, as disclosed in January this year, and we expect to conclude this transaction in the second quarter. As regards operating aspect, we can highlight another quarter in which positive cash was generated, thus reducing net indebtedness by R$111 million, demonstrating that the Company is in the right path to accelerate deleverage. This is the seventh consecutive quarter in which positive operating cash is generated, accumulating over R$1.5 billion of reduction in net debt since the 3Q14. 23

24 Gross sales totaled R$403 million in this quarter, a reduction of 44% in relation to the 1Q15. However, termination of agreements fell, going from R$465 million in the 1Q15 to R$306 million in the 1Q16, a reduction of 34% in the period. With this, net sales totaled R$97 million in the quarter, 61% lower than the 1Q15, however, 52% higher than the 4Q15. Even though the first quarter of the year is historically weaker, sales in cash totaled R$82 million, representing 20% of gross sales. Even without sales campaign in the quarter, resale of terminated units during the period was higher than 30%, an average that is being maintained over time, proving demand resiliency and quality of units available for resale. As a reflex of continued difficult macro-economic scenario and of credit restrictions faced by the industry, in addition to lower number of deliveries in the last quarters, volume of units transferred fell 57% in relation to the 1Q15, totaling 1,823 units or R$393 million during the 1Q16. Continuing the plan to reduce the Company s risk of court collection, cost to incur closed the period at R$765 million, a reduction of 47% in relation to the same quarter of last year. In this quarter, we delivered 2 other projects, which together total 1,444 units and R$147 million of VGV. Accordingly, we closed the 1Q16 with 42 projects in progress. General and administrative expenses reached R$55 million, a fall of 22% in relation to the 1Q15, as a result of strict discipline in controlling costs and continued adaptation of structure. We closed the quarter with 1,315 employees, a reduction of 22% in relation to the 4Q15 and of 65% in relation to the 1Q15. While debt balance with SFH was reduced by R$272 million, or 16% in relation to the 4Q15. The Company s total leverage, including net debt and unincurred costs, continues to fall quarter by quarter, with decrease of 54% or R$7.2 billion since the end of 2012, and of R$125 million from the 4Q15 to the 1Q16, continuously decreasing operating complexity and risk of court collection on assets. Last events demonstrate that the Company is going through one of the most important stages of its restructuring process and we have obtained important victories, mainly selling assets, restructuring debts and deleveraging. Although economic scenario continues to pose great commercial challenges to the industry, relief on the Company s cash pressure with agreement for restructuring of debts will permit us to face this period with greater security. 24

25 Notes to the quarterly information (In thousands of reais) 1 Operations A PDG Realty S.A. Empreendimentos e Participações ("Company"), its subsidiaries and joint ventures are engaged in: (a) holding interest in other companies that operate in the real estate industry, as shareholder, quotaholder, consortium member, or through other types of investment, such as subscription or acquisition of debentures, subscription bonus or other real estate amounts; (b) acquisition of investment properties; and (c) real estate properties for real estate development. Established as a corporation domiciled in Brazil, the Company s shares are traded at BM&FBOVESPA - PDGR3. The Company s head office is located at Avenida Engenheiro Luis Carlos Berrini, nº 105, 11º andar, bairro Cidade Monções, São Paulo - SP. The Company has some real estate development projects that were structured through subsidiaries, associates and jointly-owned subsidiaries. Third parties interest in investees is held through Special Purpose Entities (SPE s). In addition to funds generated from its operations, the Company uses funds from the House Financing System ( SFH ) and from prime financial institutions. The Company classifies and allocates the credit facilities for working capital, at regular market conditions, or to produce its real estate projects entered into at SFH conditions and equivalent. In the Company s strategic planning, Management expected, up to the end of 2015, to deliver almost all construction work existing before 2013, sell these projects remaining units and, consequently, increase operating cash generation. Generated cash would be used to accelerate deleveraging process and resume its growth. The Company continues to be successful in executing its strategic plan and continues to generate operating cash that contributes to its deleveraging process. Since the end of 2012, the Company s total leverage, which includes total unincurred costs, plus onerous net debt, decreased by R$6,856,854, as it was reduced from R$13,062,914 to R$6,206,060. Despite success until now, current economic scenario also poses extra risks to execution of our strategic plan. Management continues to adopt actions intended to improve the Company s capital structure. 1- Extend corporate debts and those incurred to support production. This extension involves renegotiation of contracts intended to conform the Company s indebtedness profile to short, medium and long-term perspectives, strengthening working capital and capital structure for the purpose of ensuring full development of our activities. 2- Conclude sale of non-core assets and inventories aiming at guaranteeing additional liquidity margin. 3- Other actions focused on preserving the Company s cash, whose biggest effort is to sell inventories and accelerate transfer, reducing costs and liabilities, in addition to concluding and registering construction work. 25

26 When completed, these actions will consolidate our restructuring process provided for in our strategic planning and will result in greater alignment between materialization of our assets and liabilities. With signature of memorandum of understanding with Banks involved in our debt restructuring process (note 30), the Company reached the determining stage to equalize the Company s financing needs and guarantee adequacy of maturities of debts with Banks with the Company s future cash flow perspective. 2 Presentation of quarterly information and main accounting policies 2.1. Basis of presentation The individual and consolidated quarterly information was prepared based on the going concern assumption for the Company and its subsidiaries and associates ( Group ). The preparation of Quarterly Information statements requires the adoption of assumptions to account for certain assets, liabilities and other transactions, such as: budgeted cost of building projects under construction, allowance for doubtful accounts, useful life of fixed assets, provision for contingencies and guarantees and, classification of short and longterm assets and liabilities, among other. The results calculated upon the realization of the facts that led to the recognition of these estimates may differ from the amounts recognized in this quarterly information. Management periodically and timely monitors and reviews these estimates and the assumptions at least once a year. The functional currency in which the individual and consolidated quarterly information is reported is Real (R$). All amounts presented in these quarterly information are expressed in thousands of Reais, except when otherwise indicated. The Company s accounting policies have been consistently applied to all the periods presented in this individual and consolidated quarterly information Statement of conformity Individual quarterly information of PDG Realty S.A Empreendimentos e Participações ( Parent Company ) has been prepared in accordance with accounting practices adopted in Brazil (BR GAAP), which, in the Company s case, differ from separate statements in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), referring to: a. Capitalization of interest incurred by the parent company and recorded under caption investments in relation to assets under construction of its subsidiaries, which, for IFRS purposes, this capitalization is only permitted in consolidated quarterly information and not in separate quarterly information. Consolidated quarterly information has been prepared in accordance with IFRS s issued by IASB and in accordance with BR GAAP practices. Specifically, consolidated quarterly information is in conformity with IFRS s applicable to entities of real estate development in Brazil, including Guideline OCPC 04, as further described in Note 2.10, regarding treatment given to recognition of revenue in real estate industry, which involves matters related to the application of the concept of continuous transfer of risks, benefits and control over sold real estate units. There is no difference between consolidated shareholders' equity and consolidated income attributable to the parent company s shareholders, according to consolidated information prepared in accordance with IFRS. 26

27 The issuance of the quarterly information of the Company was authorized by the Management on May 11, Presentation of segment information Information per operating segment is presented consistently with the internal report provided to the main operating decision maker, the executive responsible for the finance and inventors relations offices, mostly comprised of home real estate development Financial instruments The financial instruments may be classified as financial assets or liabilities at fair value through profit or loss, loans and receivables, investments held to maturity and available for sale or derivatives classified as effective hedge instruments or financial liabilities at amortized cost, according to the specific case. The Company determines the classification of its financial instruments upon its initial recognition, when it becomes part of the contractual provisions. The Company s financial assets and liabilities include cash and cash equivalents, interest earning bank deposits, trade accounts receivable, other accounts receivable, debentures receivable and payable, bank credit notes ( CCBs ), suppliers, real estate acquisition, loans or financing and related parties. The subsequent measurement of financial assets and liabilities depends on their classification, which can be as follows: Financial assets at fair value through profit or loss a. Cash and cash equivalents Cash equivalents are maintained for the purpose of meeting short-term cash commitments rather than for investment or other purposes. The Company considers as cash equivalent, interest earning bank deposits that are immediately convertible into a known cash amount. The Company s interest earning bank deposits are represented by DI funds, Bank Deposit Certificates (CDBs) and repurchase and resale commitments with redemption period lower than 90 days of respective transactions dates. b. Interest earning bank deposits They are classified into the heading Interest earning bank deposits recognized as contra-entry in income. Classification depends on the purpose for which investment was acquired. The Company s interest earning bank deposits are trading securities measured at cost plus interest, pricelevel restatements, adjustment to market value, less impairment losses, when applicable, incurred up to dates of individual and consolidated quarterly information not subject to significant changes in value. The breakdown of these interest earning bank deposits is shown in Note 4. Receivables and loans a. Trade accounts receivable Presented at nominal or realization value, subject to adjustment to present value (AVP), indicated in note 5, including price-level restatement and interest, when applicable. Monetary variation and earnings on the balance of accounts receivable from units under construction are recorded in income (loss) for the year as Income from real estate sales. After the construction period, interest is accounted for as Financial income. The Company forms allowance for doubtful accounts ( PCLD ) for amounts whose recovery is considered remote in a sum considered sufficient by Management. Estimates used to recognize the allowance for doubtful accounts are based on contracts that are considered as difficult to collect and for which there are no 27

28 actual guarantees and that, in the Company's case, are directly related to the transfer of real estate unit to buyers. b. Financial liabilities They are classified as financial liabilities are classified as financial liabilities at fair value through profit or loss, financial liabilities at amortized cost, or as derivatives classified as hedge instruments, as the case may be. The Company classifies its financial liabilities upon initial recognition. Financial liabilities are initially recognized at fair value, and in the case of financial liabilities at amortized cost, include directly related transaction costs. The Company s financial liabilities include mainly accounts payable to suppliers, Accounts payable for the purchase of real estate, Other accounts payable, loans and financing, derivative financial instruments and costs and premiums on securities issuance. c. Derivative financial instruments (liabilities) They are recognized only as from the date the Company become a party to their contractual provisions. When recognized, they are initially recorded at its fair value plus any transaction costs directly attributed to its acquisition or issue, when applicable. Its subsequent measurement takes place at the balance sheet date and in accordance with the rules set forth and features for each type of classification of financial liabilities. Classification as debt or equity Debt instruments or equity instruments are either way classified, according to the substance of contract terms. Liabilities at amortized cost Loans and financing, certificates of real estate receivables (CRIs) and debentures payable The initial recognition of Loans and financing, certificates of real estate receivables and debentures (except the debentures of the 8 th issuance which are stated at fair value through profit or loss - see Note 13b and 19) subject to interests are subsequently measured at amortized cost, using the effective interest rate method. Gains and losses are recognized in the income statement upon settlement of liabilities, as well as during the amortization process by the effective interest rate method. Loans and financing are restated by the monetary variance and charges agreed on in a contract, and allocated up to the balance sheet date. Debentures payable are adjusted in conformity with indices provided for in contract up to the balance sheet date. The Company settles real estate receivables credit grants when securitization and respective issuance of CRI s is performed. This assignment has right of recourse against the Company and, accordingly, the balance of accounts receivable granted is recorded in the balance sheet as a contra entry to the amount received in advance and recorded in current and non-current liabilities. Contracted credit facilities are presented per type of debt and classified as financing, support to production and working capital. The Company reports debts at the funded amount deducted from transaction costs, discounts and incurred premiums. Payables for acquisition of real estate Obligations established in contract for land acquisitions are recorded at the original value plus, when applicable, corresponding charges and price-level restatements. 28