Companhia de Locação das Américas Quarterly information (ITR) at March 31, 2017 and report on review of quarterly information

Transcription

1 (A free translation of the original in Portuguese) Companhia de Locação das Américas Quarterly information (ITR) and report on review of quarterly information

2 (A free translation of the original in Portuguese) Report on review of quarterly information To the Board of Directors and Stockholders Companhia de Locação das Américas Introduction We have reviewed the accompanying interim accounting information of Companhia de Locação das Américas (the "Company"), included in the Quarterly Information Form (ITR) for the quarter ended March 31, 2017, comprising the balance sheet at that date and the statements of income, comprehensive income (loss), changes in equity and cash flows for the quarter then ended, and a summary of significant accounting policies and other explanatory information. Management is responsible for the preparation of the interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC) and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial 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 financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical 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 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 the interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the Brazilian Securities Commission (CVM). 2 PricewaterhouseCoopers, Rua dos Inconfidentes 911, 17º e 18º, Belo Horizonte, MG, Brasil , Caixa Postal 289 T: (31) , F: (31) ,

3 Other matters Statement of Value Added We have also reviewed the statement of value added for the quarter ended March 31, This statement is the responsibility of the Company's management, and is required to be presented in accordance with standards issued by the CVM applicable to the preparation of Quarterly Information (ITR) and is considered supplementary information under IFRS, which do not require the presentation of the statement of value added. This statement has been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that it has not been prepared, in all material respects, in a manner consistent with the interim accounting information taken as a whole. Belo Horizonte, May 3, 2017 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 Carlos Augusto da Silva Contador CRC 1SP197007/O-2 3

4 Balance sheet All amounts in thousands of reais (A free translation of the original in Portuguese) Assets 3/31/ /31/2016 Liabilities and equity 3/31/ /31/2016 Current assets Current liabilities Cash and cash equivalents (Note 5 (a)) 188, ,478 Trade payables (Note 11) 74,426 71,258 Trade receivables (Note 6) 86,717 87,688 Borrowings and debentures (Note 13) 128, ,648 Marketable securities (Note 5(b)) 3,589 29,544 Derivative financial instruments (Note 15) 17,606 9,680 Vehicles decommissioned for fleet renewal (Note 7) 47,214 47,616 Assignment of credits by suppliers (Note 12) 101,665 82,753 Taxes recoverable 31,696 33,959 Salaries, charges, and social contributions 5,490 5,484 Prepaid expenses 15,431 2,948 Tax liabilities 1,560 1,600 Assets held for sale 2,373 2,373 Dividends and interest on capital payable (Note 18) 5,101 Other receivables 7,263 7,212 Other payables 14,473 12,754 Total current assets 382, ,818 Total current liabilities 348, ,177 Non-current assets Non-current liabilities Trade receivables (Note 6) 6,995 7,425 Borrowings and debentures (Note 13) 662, ,975 Marketable securities (Note 5(b)) 3,333 3,333 Provision for contingencies (Note 14) 4,621 2,595 Prepaid expenses Deferred taxes (Note 8) 15,595 17,715 Other receivables 1,792 2,371 Other payables Deposits in court (Note 14) 11,889 9,521 Related parties (Note 17) Total non-current liabilities 683, ,147 24,528 23,192 Total liabilities 1,032,204 1,028,324 Property and equipment (Note 9) 923, ,407 Equity (Note 18) Intangible assets (Note 10) 4,769 4,800 Share capital 299, ,279 Share issuance expenses (15,038) (15,038) Total non-current assets 953, ,399 Treasury shares (4,927) (5,061) Capital reserve and options granted 7,757 7,647 Revenue reserves 23,242 23,242 Carrying value adjustments (13,597) (9,176) Retained earnings (accumulated deficit) 6,832 Total equity 303, ,893 Total assets 1,335,752 1,329,217 Total liabilities and equity 1,335,752 1,329,217 The accompanying notes are an integral part of this quarterly information. 1 of 44

5 Statement of income Quarter ended March 31 (A free translation of the original in Portuguese) Operating revenue (Note 19) 204, ,840 Cost of rental and sales of vehicles (Note 20) (143,980) (120,994) Gross income 60,922 51,846 Selling expenses (Note 21) (11,007) (8,332) General and administrative expenses (Note 22) (8,291) (7,329) Other operating income (expenses) Profit before finance income (costs) and taxes 41,671 36,197 Finance income (Note 23) 5,792 8,967 Finance costs (Note 23) (31,144) (38,774) Finance costs, net (Note 23) (25,352) (29,807) Profit before income tax and social contribution 16,319 6,390 Current income tax and social contribution (Note 24) (3,720) Deferred income tax and social contribution (Note 24) (157) (886) Profit for the period 12,442 5,504 Basic earnings per share - R$ (Note 26) Diluted earnings per share - R$ (Note 26) The accompanying notes are an integral part of this quarterly information. 2 of 44

6 Statement of comprehensive income (loss) Quarters ended March 31 All amounts in thousands of reais (A free translation of the original in Portuguese) Profit for the period 12,442 5,504 Other comprehensive income (loss) Hedge accounting - cash flow (6,698) (13,966) Income tax and social contribution - hedge accounting 2,277 4,748 Other comprehensive income (loss) for the period, net of tax effects (4,421) (9,218) Total comprehensive income (loss) for the period 8,021 (3,714) The accompanying notes are an integral part of this quarterly information. 3 of 44

7 Statements of changes in equity All amounts in thousands of reais (A free translation of the original in Portuguese) Capital reserves Revenue reserves Share Share Treasury Options Reserves Legal Investment Carrying Retained Total equity At January 1, ,279 (15,038) (5,906) 2,509 4,505 4,295 31,088 4, ,596 Profit for the period 5,504 5,504 Hedge accounting - cash flow (Note 15) (13,966) (13,966) Income tax and social contribution - hedge accounting (Note 8) 4,748 4,748 Total comprehensive loss for the period (9,218) 5,504 (3,714) Options granted (Note 18) Interest on capital (Note 18) (3,906) (3,906) Total transactions with shareholders 214 (3,906) (3,692) At March 31, ,279 (15,038) (5,906) 2,723 4,505 4,295 31,088 (4,354) 1, ,190 At January 1, ,279 (15,038) (5,061) 2,639 5,008 5,740 17,502 (9,176) 300,893 Profit for the period 12,442 12,442 Hedge accounting - cash flow (Note 15) (6,698) (6,698) Income tax and social contribution - hedge accounting (Note 8) 2,277 2,277 Total comprehensive income for the period (4,421) 12,442 8,021 Share buyback program (228) (228) Options granted (Note 18) Options exercised 362 (241) Interest on capital (Note 18) (5,610) (5,610) Total transactions with shareholders 134 (137) 247 (5,610) (5,366) At March 31, ,279 (15,038) (4,927) 2,502 5,255 5,740 17,502 (13,597) 6, ,548 The accompanying notes are an integral part of this quarterly information. 4 of 44

8 Statement of cash flows Quarters ended March 31 All amounts in thousands of reais (A free translation of the original in Portuguese) Cash flows from operating activities Profit for the period 12,442 5,504 Adjustments for revenues and expenses not affecting cash Income tax and social contribution on net income 3, Depreciation and amortization 23,942 24,492 Write off of residual value of cars decommissioned for fleet renewal 92,152 72,332 Residual value of stolen vehicles and total losses on vehicles 3,169 4,413 Provision for share-based payment Financial charges on borrowings 27,389 38,535 Provision for impairment of trade receivables 2, Profit sharing 2, Adjustment to present value (250) 67 Provision for (reversal of) impairment (3) (12) Assignment costs 1,903 1,876 Other 1, , ,446 Changes in working capital Trade receivables (1,147) 2,487 Taxes recoverable (1,457) (3,799) Prepaid expenses (12,460) (12,323) Trade payables - except automakers 16,602 18,165 Other assets (1,840) 1,940 Acquisition of vehicles net of the balance payable to suppliers - automakers and assignment of credits by automakers (120,570) (135,702) Other liabilities Net cash provided by operating activities 51,737 20,739 Cash flows from investing activities Net changes in other property and equipment and intangible assets (1,053) (676) Net changes in marketable securities 25,955 (17,501) Net cash (used in) provided by investing activities 24,902 (18,177) Cash flows from financing activities Proceeds from borrowings and debentures - net of funding costs (4) 50,000 Repayments of borrowings and debentures (20,303) (6,177) Interest paid on borrowings, debentures and preferred shares (40,553) (33,342) Proceeds from the stock option plan 368 Share buyback program (228) Net cash (used in) provided by financing activities (60,720) 10,481 Increase (decrease) in cash and cash equivalents 15,919 13,043 Cash and cash equivalents at the beginning of the period 172, ,779 Cash and cash equivalents at the end of the period 188, ,822 Activities not affecting cash Derivatives - hedge (6,698) 9,218 Interest on subscribed and unpaid capital 5,101 3,906 Supplemental disclosure of cash flow information Total vehicles + accessories purchased for property and equipment (124,145) (35,163) Net changes in the balance of trade payables - automakers and assignment of credits by suppliers 3,575 (131,993) Acquisition of assets with direct assumption of related liabilities or through finance lease 31,454 Total cash paid or provisioned on acquisition of vehicles (120,570) (135,702) The accompanying notes are an integral part of this quarterly information. 5 of 44

9 Statement of value added Quarters ended March 31 All amounts in thousands of reais (A free translation of the original in Portuguese) Revenue Gross revenue less discounts 215, ,375 Estimated impairment loss on trade receivables (2,798) (2,149) 212, ,226 Inputs acquired from third parties Materials, electricity, third-party services and other (4,522) (3,282) Cost of rentals of vehicles/fleets and leased vehicles (15,866) (12,226) Cost of sales of vehicles (96,023) (77,604) (116,411) (93,112) Gross value added 96,254 88,114 Depreciation, amortization and impairment (23,942) (24,492) Net value added generated 72,312 63,622 Value added received through transfer Finance income (costs) 16,628 19,672 Total value added to distribute 88,940 83,294 Distribution of value added Taxes, charges and contributions Federal 16,229 12,702 State 5,843 5,729 Municipal Personnel Direct compensation 8,921 6,594 Benefits 1,382 1,252 Government Severance Indemnity Fund for Employees (FGTS) Remuneration of third-party capital Interest 41,982 45,574 Rentals 1,365 1,200 Remuneration of own capital Dividends and interest on capital 5,610 3,906 Retained earnings 6,832 5,504 Value added distributed 88,940 83,294 The accompanying notes are an integral part of this quarterly information. 6 of 44

10 1 Operations Companhia de Locação das Américas ("Company" or "Locamerica") is a listed corporation domiciled in Brazil, established on July 18, 2008, and engaged in renting national and imported vehicles with or without drivers. The Company has its registered office at Avenida Engenheiro Caetano Álvares, 150, Bairro Limão, São Paulo, State of São Paulo, and operates in a number of Brazilian states through its branches. Its main operating bases are located in the States of São Paulo, Minas Gerais and Rio de Janeiro. The Company is listed on the São Paulo Commodities, Futures and Stock Exchange (BM&F Bovespa) and its shares are traded in the Novo Mercado (New Market) listing segment under the symbol LCAM3 as a result of its Corporate Governance practices. At March 31, 2017, the Company's fleet consisted of 27,628 cars (27,731 cars at December 31, 2016). The Company's fleet is renewed after the end of the vehicles' economic useful lives, which range from 12 to 60 months, according to the characteristics of the vehicles rented and the terms of the agreements entered into with customers. After the end of their economic useful lives, the vehicles are sold to independent dealers who have their own sales points, or are sold in the Company's own shops. The issue of this quarterly information was authorized by the Board of Directors on May 3, (a) Acquisition of an equity interest in Auto Ricci S.A. On March 19, 2017, the Company entered into an investment agreement with the shareholders of Auto Ricci S.A. ("Auto Ricci"), which was approved by the Board of Directors on the same date, aiming at the implementation of the terms and conditions for the business combination between Auto Ricci and Locamerica. This transaction was approved and disclosed by the Administrative Council for Economic Defense (CADE) on April 10, 2017, and the investment agreement was approved by the Board of Directors on April 25, The agreement for investment and merger of the shares of Auto Ricci is subject to the verification of the conditions established in the investment agreement and approval at the Company's Extraordinary General Shareholders' Meeting, which will be held on May 11, (b) Acquisition of 2,022 vehicles and assignment for consideration agreements On October 28, 2016, the Company's Board of Directors approved the acquisition of 2,022 vehicles from the company Panda de Itu Ltda., as well as of the rights over the rental agreements applicable to these vehicles. The total amount of this transaction was R$47,700 (forty-seven million and seven hundred thousand reais). Pursuant to the agreement, Locamerica will be entitled to the revenue from the agreements acquired only as from January 1, The completion of the deal was contingent upon the prior approval of the Administrative Council for Economic Defense (CADE), which was granted by this body without restrictions on December 9, of 44

11 The Company allocated the purchase price (R$47,700) between the two assets acquired, considering their fair value on the approval date. The value of this acquisition is broken down as follows: In thousands of R$ Property and equipment (vehicles) 46,630 Intangible assets (agreements) 1,070 This acquisition referred only to the assets described above, and, therefore, there was no other joint acquisition of the following items: The Company did not acquire the National Corporate Taxpayers' Register of the company that sold the assets; The Company will have to develop a new supplier base in the area of the assets acquired; The Company did not transfer any employees of the company that owned the assets. Therefore, there was no transfer of business processes either; The Company did not concomitantly purchase any system to manage the assets acquired; The Company did not assume liabilities or any other obligations inherent to this purchase transaction. (c) 11th Issue of Debentures On August 24, 2016 (date of registration with the Board of Trade), the Company completed the 11th issue of debentures, in the amount of R$190 million. These funds have been and will be used to meet the Company's basic management requirements, as described below: (i) (ii) Restructuring of the Company's debts, through the settlement of all debentures of the 1st series of the 8th issue of debentures, amounting to approximately R$125 million, plus interest accrued up to the payment date, and prepayment of the 2nd series of the 8th issue, amounting to R$25 million, plus interest accrued up to the respective payment date; and Improvement of the cash position. Details of this issue are as follows: Approved in the minutes of a Board of Directors' meeting on August 1, 2016; Public Issue of Debentures with restricted placement efforts, in accordance with CVM Instruction 476 ("Restricted Offer"); The Company issued 19,000 (nineteen thousand) unsecured debentures, in a single series; Date of issue - August 10, 2016; Maturity - the nominal unit value of the debentures will be amortized over six (6) semi-annual installments, falling due from February 10, 2018 to August 10, 2020; Interest rate - Interbank Deposit (DI) plus a spread of 3% p.a. Convertibility - the debentures are not convertible into shares of the Issuer. 8 of 44

12 2 Basis of preparation and presentation of the quarterly information The quarterly information has been prepared under the historical cost convention and adjusted to reflect the remeasurement of derivative financial instruments at fair value. The quarterly information has been prepared in accordance with the Technical Pronouncement CPC 21(R1) - Interim Financial Statements, and International Accounting Standard IAS 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB). This financial information is presented in accordance with the standards issued by the Brazilian Securities Commission (CVM) applicable to the preparation of Quarterly Information (ITR). This quarterly information has been prepared in accordance with the accounting principles, practices and criteria adopted to prepare the annual financial statements at December 31, 2016, and should, therefore, be read in conjunction with those financial statements, which were approved by the Executive Board and the Board of Directors on February 13, 2017 and filed on the same date. Because the accounting practices adopted in Brazil applicable to parent company financial statements, as from 2014, do not differ from the International Financial Reporting Standards (IFRS) applicable to separate financial statements, which now allow entities to use the equity method to account for investments in subsidiaries, associates and joint ventures in the separate financial statements, they are also in compliance with the IFRS issued by the International Accounting Standards Board (IASB). The preparation of quarterly information requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the quarterly information, are disclosed in Note 3. (a) Consolidation On January 7, 2015, the Company carried out the merger of Locarvel Locadora de Veículos Ltda., with the purpose of streamlining operational processes. As from this date, the Company started to have a single subsidiary, Agile Car Ltda. ("Agile"). Considering that Agile is currently non-operational and its assets and liabilities are immaterial, the Company has decided not to prepare consolidated financial statements. The main financial information on Agile is presented below: 3/31/2017 Ownership interest Total assets Total liabilities Total equity Agile Car Ltda % (53) (b) Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with other components of the Company. Operating segments are defined based on how management assesses the performance of the business, and the availability of separate financial information. 9 of 44

13 Management understands that the Company's operations comprise a single identifiable operating segment, since the renewal of the fleet is inherent in the process of renting vehicles, and, considering the structure of the Company's business, its activities are not separable from each other. 3 Critical accounting estimates and judgments Accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Based on assumptions, the Company makes estimates concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are addressed below: (a) Residual value of vehicles The Company frequently estimates the residual value of vehicles (estimated selling price at the end of the useful life, less estimated selling costs), which has an impact on the depreciation costs of operational vehicles. This estimate takes into consideration a number of assumptions involving a high degree of judgment, such as the estimated selling price. Any changes in these assumptions might imply a change in the result of the discounted cash flow and, consequently, the appreciation or depreciation of these assets. (b) Fair value of derivatives The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses judgment to select among a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. (c) Income tax and social contribution The Company is subject to taxes on its income, and significant judgment is required in determining the provision for such taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company also recognizes provisions as a result of situations in which it is probable that additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax assets and liabilities in the period in which such determination is made. (d) Provision for impairment of trade receivables The Company continually assesses its receivables portfolio, so as to identify whether there is evidence of impairment of the receivables from each customer that comprises the portfolio. If so, the Company assesses whether the customer in default has provided secured guarantees, and these guarantees are sufficient to cover the Company's net exposure. 10 of 44

14 In the event the guarantees are not sufficient, the Company recognizes a provision for impairment of trade receivables, classified as "Selling expenses". 4 Financial risk and fair value management 4.1 Financial risk factors The Company's activities expose it to a variety of financial risks: market risk (including currency risk and cash flow or fair value interest rate risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out by the Company's treasury department. The Company's treasury department identifies, evaluates and hedges financial risks. The Executive Board has overall responsibility for establishing and overseeing the Company's risk management framework and regularly reports to the Board of Directors on its activities. The Company's risk management practices are established in order to identify and analyze the risks, define risk limits and controls, and monitor risks and adherence to the limits. The Company's management has established specialized committees (Internal Audit Committee, People Management Committee and Semi-New Vehicles Committee) to address critical business topics, and has implemented an internal control system that contributes to the achievement of the Company's operational and strategic goals. (a) (i) Market risk Foreign exchange risk Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities, and net investments in foreign operations. In conformity with its financial risk management policy, the Company enters into derivative financial instruments to hedge its exchange rate exposure through a currency swap for active contracts. At March 31, 2017, the Company had no material operation subject to foreign exchange risk. (ii) Cash flow and fair value interest rate risk This risk arises from the possibility that the Company may obtain gains or incur losses due to fluctuations in interest rates to which its financial assets and liabilities are subject. Aiming to mitigate this risk, the Company seeks to diversify its funding strategy in terms of fixed and floating rates contracted with financial institutions. 11 of 44

15 The Company carries out transactions with financial instruments, which are managed through operating strategies and internal controls that aim at ensuring liquidity, profitability and security. The contracting of financial instruments for hedging purposes is carried out through a periodical analysis of the exposure to risk that management intends to hedge (exchange rate, interest rate), which is reviewed by the Executive Board for approval and implementation of the strategy presented. Management's control policy consists of the ongoing monitoring of the conditions contracted as compared with the conditions prevailing in the market. The Company did not invest in derivatives or any other risk assets for speculative purposes. The results obtained from these transactions are consistent with the practices and strategies defined by the Company's management. In conformity with its financial risk management practice, the Company contracts derivative financial instruments for the purpose of maintaining its interest rate exposure on finance costs within certain levels. On the reporting dates, the profile of the Company's interest-earning financial instruments was as follows: Carrying amount 3/31/ /31/2016 Instruments linked to the CDI variation Financial assets 195, ,578 Financial liabilities (716,007) (743,054) (520,830) (538,476) Fixed-rate instruments Financial liabilities (74,874) (80,569) (74,874) (80,569) (b) Credit risk Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and other financial institutions, as well as from credit exposures to customers, including outstanding receivables and commitments. Only prime banks and financial institutions that have been assigned high credit ratings by Standard and Poor's are accepted. The Company's credit analysis department assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Company. The utilization of credit limits is regularly monitored. No credit limits were exceeded during the reporting period, and management does not expect any losses from non-performance by these counterparties. The carrying amount of financial assets represents the maximum exposure to credit. On the reporting date, the maximum exposure to credit risk was as follows: 12 of 44 3/31/ /31/2016 Cash and cash equivalents (Note 5.a) 188, ,478 Related parties (Note 17) Marketable securities (Note 5.b) 6,922 32,877 Trade and other receivables 100, ,325 Total 296, ,982

16 (i) Credit quality of financial assets The credit quality of financial assets that are neither past due nor impaired is assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Cash and cash equivalents and marketable securities 3/31/ /31/2016 Bank deposits in current accounts (Standard & Poor's) AA Financial investments (Standard & Poor's) AA- 143, ,378 A+ 44,958 67, , ,700 Marketable securities (Standard & Poor's) AA- 6,922 32,877 Trade and other receivables 6,922 32,877 The Company's exposure to credit risk is mainly influenced by the individual characteristics of each customer. The Company's customers are widely dispersed, and the Company's largest customer represents 5% of total revenue for the period, and 6% of total trade receivables. Therefore, the Company does not consider that its receivables are concentrated, and the Executive Board conducts periodic analyses, with the objective of spreading the customer base even more. The Company assesses evidence of impairment losses on trade receivables per customer, both on an individual and aggregate basis. All individually significant receivables, as well as the risk posed by the customer, are assessed for the specific amount of impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. The Company continually assesses its receivables portfolio, so as to identify whether there is evidence of impairment of the receivables from each customer that comprises the portfolio. If so, the Company assesses whether the customer in default has provided secured guarantees and these guarantees are sufficient to cover the Company's net exposure. In the event the guarantees are not sufficient, the Company recognizes a provision for impairment of trade receivables, classified as "Selling expenses". 13 of 44

17 In Note 6, the Company presents its receivables portfolio by maturity range, and the amount of the provision for impairment of trade receivables established. 3/31/ /31/2016 Trade receivables 86,506 90,901 Trade receivables - credit cards (Standard & Poor's) 7,206 4,212 AAA AA- 6,596 4,093 Other Total trade receivables 93,712 95,113 (c) Liquidity risk Liquidity risk is the risk that the Company may have difficulty in fulfilling the obligations associated with its financial liabilities that are to be settled in cash or through other financial assets. The Company's approach to managing liquidity is to ensure, to the maximum extent possible, that it will always have sufficient liquidity to pay its obligations as they fall due, under normal or stress conditions, without incurring unacceptable losses or adversely affecting its reputation. The contractual exposures of financial liabilities, including payments of estimated future interest and excluding the net impact of currency negotiation agreements, are as follows: March 31, 2017 Non-derivative financial liabilities Carrying amount 12 months or less From 1 to 2 years From 2 to 5 years Over 5 years Total Borrowings and debentures (Note 13) 790, ,020 60, ,283 35,652 1,054,239 Trade payables, credit assignments and other payables (Notes 11 and 12) 191, , ,350 Total 982, ,370 60, ,283 35,652 1,245,589 The Company does not expect the cash outflows included in its maturity analyses to occur significantly sooner or to significantly differ from the amounts presented. 14 of 44

18 (e) Additional sensitivity analysis required by the Brazilian Securities Commission (CVM) With respect to the most significant interest rate risk, the Company, based on external research with financial institutions, estimates that, in a Probable Scenario, the CDI rate for the period ended March 31, 2018 will be 9.67%. The Company entered into swaps with financial institutions in order to hedge its exposure to floating interest rates. The Company conducted a Sensitivity Analysis of the effects an increase in the CDI rate of 25% and 50% for financial assets and liabilities indexed to floating CDI rates would have on its results, as follows: 3/31/2017 (12 months ahead) Probable scenario Possible scenario Remote scenario Carrying amount Index Rate Gain (loss) Rate Gain (loss) Rate Gain (loss) 195,177 Interbank Financial investments and marketable securities Deposit Certificate (CDI) 9.67% 11, % 13, % 15,831 Derivative financial instruments (17,606) CDI 9.67% (12,462) 12.09% (113) 14.51% 12,097 Borrowings and debentures 716,263 CDI+Spread(*) 9.67% (69,263) 12.09% (86,596) 14.51% (103,930) Net effect on results (70,032) (73,093) (76,002) Change in results in relation to the probable scenario (3,061) (5,970) (*) As mentioned in Note 13, funding operations linked to the CDI rate have an additional spread. Accordingly, below we present the impact of the sensitivity of the balance of "Borrowings and debentures" with and without the spread: 3/31/2017 (12 months ahead) Probable scenario Possible scenario Remote scenario Carrying amount Index Rate Gain (loss) Rate Gain (loss) Rate Gain (loss) 716,263 Interbank Deposit Borrowings and debentures Certificate (CDI) 9.67% (62,960) 12.09% (78,157) 14.51% (93,153) Borrowings and debentures 716,263 CDI+Spread(*) 9.67% (78,093) 12.09% (93,422) 14.51% (108,548) 4.2 Capital management The Executive Board's policy is to maintain a solid capital basis to preserve the trust of the shareholders, creditors and the market and sustain the future development of the business. Capital consists of Share Capital and Reserves. The Executive Board seeks to maintain a balance between the highest returns possible and adequate levels of borrowings, and the advantages and security afforded by a sound capital position. 15 of 44

19 The Company's liabilities-to-capital ratio at the end of the period was as follows: 3/31/ /31/2016 Total current and non-current liabilities 1,032,204 1,028,324 Less: cash and cash equivalents (Note 5.a), marketable securities (Note 5.b) and derivative assets (Note 15) (195,319) (205,355) 836, ,969 Total equity (Note 18) 303, ,893 Debt-to-equity ratio 276% 274% The Company's net debt at the end of the period was as follows: 3/31/ /31/2016 Borrowings, debentures and derivative liabilities (Note 13) (808,487) (833,303) Cash and cash equivalents (Note 5.a), marketable securities (Note 5.b) and derivative assets (Note 15) 195, ,355 Net exposure (613,168) (627,948) There were no changes in the Company's approach to capital management during the period. The Company is not subject to external capital requirements, and manages its internal capital requirements on an aggregate basis. 4.3 Fair value estimation The carrying values of trade receivables and payables, less impairment provision in the case of trade receivables, are assumed to approximate their fair values. The table below classifies financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:. Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).. Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The hierarchy of the assets and liabilities carried at fair value is disclosed in Note of 44

20 (i) Share-based payment transactions The fair value of employee stock options and share appreciation rights are measured using the Black- Scholes option pricing model. This model takes into consideration measurement variations that include the fair value at the measurement date, the instrument's exercise price, the expected volatility based on competitors' share prices for Plans contracted before the Company's IPO and the volatility of the Company's shares for Plans after the IPO, the weighted average life of the instruments, expected dividends and risk-free interest rates (based on government bonds), and total capital shares. Nonmarket service and performance conditions inherent in the transactions are not taken into account when determining fair value. The fair value of the options granted to the Company's directors and key executive managers is measured at the grant date, and the expense is recognized in the statement of income during the vesting period, after certain specific conditions are met. The Company's management reviews the estimates with respect to the number of options at the balance sheet dates, the rights of which should be recognized, based on pre-defined conditions, in profit or loss for the period, with a corresponding entry to equity, where applicable. (ii) Main financial instruments contracted and their respective fair values Carrying amount 3/31/ /31/2016 Fair value Carrying amount Fair value Assets measured at fair value Cash equivalents (i) 188, , , ,700 Marketable securities (i) 6,922 6,922 32,877 32,877 Derivative financial instruments (ii) (17,606) (17,606) (9,680) (9,680) Loans and receivables Trade and other receivables (iii) 100, , , ,325 Related parties (iii) Borrowings and debentures (iv) (790,881) (778,691) (823,623) (812,172) Trade payables, credit assignments and other payables (iii) (191,350) (191,350) (166,765) (166,765) The market value of borrowings and debentures was estimated by management considering the future value of such instruments on their maturity dates at the contracted rates and discounted to present value by the market rates (Level 2 Hierarchy). Management believes that the carrying amounts of other financial instruments recognized in the quarterly information, such as trade receivables, trade payables, cash and cash equivalents, marketable securities and related parties, do not differ significantly from their fair values, as the maturity dates of these instruments are close to the reporting date. The following methods and assumptions were used to determine fair value: (i) Cash equivalents and marketable securities - The carrying amounts recorded in the balance sheet substantially correspond to the fair values due to the fact that the interest rates are based on the CDI variation. On the reporting date, there were no differences between the carrying amount and the fair value of cash and cash equivalents. The fair value of financial investments is calculated based on quoted market prices for the securities, or market inputs that allow this calculation, taking into consideration future rates for similar securities. 17 of 44

21 (ii) Derivative financial instruments - The fair value of interest rate swaps is based on active market rates for identical financial instruments. The reasonableness of these rates is tested through the discount of estimated future cash flows based on the conditions and maturity of each contract. The fair value reflects the credit risk of the instrument and includes adjustments to consider the credit risk of the Company and the counterparty, where appropriate. (iii) Trade and other receivables and trade and other payables - These balances arise directly from the Company's operations, and are measured at amortized cost and stated at their original amounts, less the provision for impairment and adjustment to present value, where applicable or relevant. The balances classified in other payables referring to the fair value of derivative financial instruments are not included in this amount. (iv) Borrowings and debentures - These are classified as financial liabilities not measured at fair value and are carried at amortized cost, in accordance with the contractual terms. This definition was adopted because the amounts are not held for trading, and management understands that it reflects the most relevant accounting information. The fair values of these borrowings are similar to their carrying amounts, as their rates are in line with the market rates and they have exclusive characteristics, deriving from specific sources of financing for the Company's activities 5 Cash and cash equivalents and marketable securities (a) Cash and cash equivalents 3/31/ /31/2016 Cash at bank and on hand Financial investments 188, ,700 Total cash and cash equivalents 188, ,478 Highly liquid short-term financial investments are readily convertible into a known amount of cash and are subject to immaterial risk of change in value. The Company has the option to early redeem the aforementioned financial investments, without facing any loss of return. These financial investments comprise Bank Deposit Certificates (CDBs) and securities purchased under resale agreements, with a return ranging from 93% to 101.5% of the Interbank Deposit Certificate (CDI) variation at March 31, (b) Securities 3/31/ /31/2016 Current 3,589 29,544 Non-current 3,333 3,333 Total marketable securities 6,922 32,877 Marketable securities, totaling R$6,922 (R$32,877 at December 31, 2016), comprise Bank Deposit Certificates (CDBs) and securities purchased under resale agreements that accrue interest from 93% to 101.5% of the CDI rate variation, which were pledged as collateral for the establishment of a debenture amortization fund, as disclosed in Note 13. The financial investments classified as cash and cash equivalents and marketable securities are valued by reference to external credit ratings and presented in Note of 44

22 At March 31, 2017, there were no differences between the carrying amount and the fair value of cash and cash equivalents and marketable securities. Fair value measurement is presented in Note Trade receivables 3/31/ /31/2016 Vehicle rentals 104, ,536 Vehicle sales 33,880 35,436 Sub-total 138, ,972 (-) Adjustment to present value (938) (1,188) (-) Estimated impairment loss on trade receivables (43,469) (40,671) Total 93,712 95,113 Current 86,717 87,688 Non-current 6,995 7,425 The Company has balances of trade receivables pledged as collateral for borrowings, as disclosed in Note 13. In order to calculate the adjustment to present value, the Company applied an interest rate of 12.52% p.a., which represents the expected yield curve for the average maturity term of noncurrent trade receivables, increased by a spread on the cost of the debt, calculated on the estimated amounts of long-term contractual cash flows. The Company considered as a risk factor the possibility of an increase in domestic interest rates. The maximum exposure to credit risk on the reporting date corresponds to the carrying amounts within each maturity range, as shown below: Maturity range 3/31/ /31/2016 Not yet due 82,541 77,282 Overdue: From 1 to 60 days 5,678 11,530 From 61 to 90 days From 91 to 180 days 2,273 4,687 Over 181 days 46,639 42,694 Total 138, ,972 At March 31, 2017, R$12,109 was overdue but not impaired (with embedded loss)(r$ 19,019 at December 31, 2016). The change in the provision for impairment of trade receivables for 2017 is presented below: At December 31, ,671 Provision recorded for the year 2,798 Balance 43, of 44

23 The expense incurred with the constitution of the provision for impairment of trade receivables was recognized within "Selling expenses" in the statement of income. Receivables that are no longer expected to be recovered are written off. 7 Vehicles being decommissioned for fleet renewal 3/31/ /31/2016 Vehicles 47,604 48,009 Adjustment to realizable value (390) (393) Total 47,214 47,616 The Company has policies and procedures in place to review and compare the carrying amount of vehicles that are being decommissioned for fleet renewal purposes with their fair value. When there are uncertainties as to the realization of the net realizable value, a provision for write-down to net realizable value is recorded. The change in the provision for adjustment of vehicles that are being decommissioned to their net realizable value was as follows: At December 31, Reversal of provision (3) Balance (390) None of the vehicles being decommissioned has been pledged as collateral. The vehicles pledged as collateral are disclosed in Note of 44

24 8 Deferred taxes Deferred tax assets (liabilities) recognized Deferred tax assets and liabilities were allocated as follows: 3/31/ /31/2016 Provision for impairment of trade receivables 5,049 3,729 Adjustment to present value Profit sharing Impairment of assets Non-deductible provisions 119 Provision for contingencies 1, Financial instruments (1,021) (1,436) Stock options Debenture issuance costs (1,956) (2,131) Leases (4,367) (3,307) Depreciation (46,051) (46,150) Hedge accounting* 7,004 4,727 Income tax and social contribution losses 22,039 23,664 Total (15,595) (17,715) Deferred income tax and social contribution are recorded to reflect the future tax effects attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts. The Company's deferred tax assets were substantially generated as a result of income tax and social contribution losses and temporary differences, caused by the constitution of provisions to write down trade receivables to their net recoverable value and provisions for contingencies. Deferred tax liabilities are substantially generated as a result of the Company computing the installments paid with respect to finance leases for the acquisition of vehicles in the tax base of current taxes, as established by the tax legislation. 21 of 44

25 The changes in deferred taxes in the year ended December 31, 2016 and quarter ended March 31, 2017 were as follows: 12/31/2015 Changes - profit/loss 12/31/2016 Changes - profit/loss 3/31/2017 Provision for impairment of trade receivables 3, ,729 1,320 5,049 Adjustment to present value (85) 319 Profit sharing (156) 643 Impairment of assets 145 (11) Non-deductible provisions Provision for contingencies ,571 Financial instruments (2,226) 790 (1,436) 415 (1,021) Stock options (48) 922 Debenture issuance costs (793) (1,338) (2,131) 175 (1,956) Leases (1,793) (1,514) (3,307) (1,060) (4,367) Depreciation (43,658) (2,492) (46,150) 99 (46,051) Hedge accounting* (2,506) 7,233 4,727 2,277 7,004 Income tax and social contribution losses 24,822 (1,158) 23,664 (1,625) 22,039 Deferred tax assets (liabilities) (20,735) 3,020 (17,715) 2,120 (15,595) * Hedge accounting effects do not impact profit or loss and are recognized in equity. Deductible temporary differences and accumulated tax losses can be carried forward indefinitely pursuant to the prevailing tax legislation. Deferred tax assets are recognized for unused tax losses and credits and deductible temporary differences only to the extent it is probable that future taxable profit will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax liabilities are presented net of deferred tax assets in the balance sheet. 22 of 44

26 9 Property and equipment Changes in cost and depreciation Cost Vehicles Other property and equipment Total At December 31, ,052,732 25,030 1,077,762 Additions 124, ,702 Write-offs (3,655) (3,655) Transfer of vehicles being decommissioned for fleet renewal (113,260) (113,260) At March 31, ,059,972 25,587 1,085,549 Depreciation At December 31, 2016 (152,647) (7,708) (160,355) Depreciation for the period (22,684) (731) (23,415) Write-off Transfer of vehicles being decommissioned for fleet renewal 21,104 21,104 At March 31, 2017 (153,335) (8,439) (161,774) At December 31, ,085 17, ,407 At March 31, ,627 17, ,775 Cost Vehicles Other property and equipment Total At December 31, ,111,135 23,062 1,134,197 Additions 329,046 1, ,014 Write-offs (6,877) (6,877) Transfer of vehicles being decommissioned for fleet renewal (380,572) (380,572) At December 31, ,052,732 25,030 1,077,762 Depreciation At December 31, 2015 (129,133) (6,308) (135,441) Depreciation for the period (95,096) (1,400) (96,496) Write-off 1,053 1,053 Transfer of vehicles being decommissioned for fleet renewal 70,529 70,529 At December 31, 2016 (152,647) (7,708) (160,355) At December 31, ,002 16, ,756 At December 31, ,085 17, , of 44