ITAUTEC S.A. - GRUPO ITAUTEC MANAGEMENT REPORT DECEMBER 31, 2013

Transcription

1 ITAUTEC S.A. - GRUPO ITAUTEC MANAGEMENT REPORT DECEMBER 31, 2013 Itautec S.A., a publicly traded Brazilian company operating in the technology sector and providing solutions for banking automation, retail automation, computing equipments and technological services, has pleasure in presenting its consolidated results for the fourth quarter of 2013 (4Q13) and the full year of 2013, prepared and presented in accordance with the BR GAAP, including the pronouncements issued by the Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis - CPC), and with the International Financial Reporting Standards (IFRS) issued by the IASB (International Accounting Standards Board), and audited by Baker Tilly Brasil Auditores Independentes S/S, which have approved the accounts. Strategic Repositioning Partnership with Oki Electric Industry Co. Ltd. As set forth in the execution of the agreement on May 15, 2013 and after the conclusion of certain conditions established in the agreement, Oki Electric Industry Co. Ltd. ( OKI ), a company established in compliance with the laws of Japan, formalized on January 10, 2014 the acquisition of 70% of interest that Itautec S.A. and Itautec Participações e Comércio S.A. held in the company named BR Indústria e Comércio de Produtos e Tecnologia em Automação S.A. ( BR Automação ), which received all support required to operate in the market, including technology, patents, intellectual property and other assets, and also agreements and transfer of employees and experts in the Automation and Services segments. Since September 1, 2013, the company has been in charge of the supply of equipment, software and services, in addition to demanded warranty and maintenance related to the Automation and Services segments. On January 10, 2014 a strategic partnership was formalized with OKI, involving banking automation, retail automation and services. The buildings located at the Jundiai Industrial District will continue to be the property of Itautec and were allocated to BR Automação. The Extraordinary Shareholders Meeting held on January 14, 2014 approved the amendment to the purpose of Itautec S.A., due to the strategic partnership with OKI, since the Company will start to carry out activities of the banking and retail automation areas, and to provide services indirectly and in partnership with OKI. Decommissioning of the Computing Segment As reported to the market on May 15, 2013, Itautec s management decided to gradually decommission the activities of the Computing Unit, not giving rise to any prejudice to the full compliance with all agreements and obligations to supply Itautec/InfoWay-branded equipment, nor with the customer service and maintenance-related services. In this process, the operation of sales of products in the personal computing segment was terminated in the third quarter. Main Financial Impacts of Operations In compliance with the accounting standards in force, the effects of the Company s decisions to dispose of part of the Automation Solutions and Technological Services Units, and to gradually descontinue the Computing Unit, were accounted for in the second quarter of The Company recognized impacts related to strategic repositioning, which had negative effects on the result and on the main financial indicators for the period. The noteworthy effects are as follows: 1

2 Write-off of financial surplus of contributions to the Defined Contribution Plan ( CD Plan ) Pension Plan -, carried out in advance and recognized as an asset in the proportion that said contributions caused an effective reduction of future payments (R$70.5 million); Recognition of a provision related to unrealized tax credits (R$113.7 million); Recognition of a provision for obsolescence of inventories in the Computing segment (R$21.8 million), and, Recognition of a provision for restructuring of the Computing segment and other provisions (R$26.8 million). Total: (R$ million). CONSOLIDATED PERFORMANCE The analysis of the Company s performance in the periods ended December 2013 and 2012 considers the consolidated financial information before the reclassification of results, assets and liabilities of the Automation and Technological Services operations. Our financial statements include results from these operations under "Net result from discontinued operations". Consolidated selling and services revenue for the year was R$1,050.8 million, 32.0% lower as compared to the same period of 2012, mainly due to the reductions from the gradual decommissioning of the Computing Unit, which resulted in a decreased number of equipment items shipped in the period, reductions in the scope and contractual renegotiations with banking sector clients and loss of a large logistics service agreement as from the second quarter of 2012, which affected the performance of the Technological Services Unit, in addition to the lower shipment of ATMs as compared to the same period of the previous year. Gross profit for the year was R$50.2 million, 73.9% lower than that reported in the same period of 2012, due to a decrease in the margin of the Computing Solutions Unit, as a result of the beginning of decommissioning of the operation, and of the lower net revenues of the Automation Solutions and Technological Services units. By virtue of the aforementioned factors, including the financial impacts related to the Company s restructuring, net income for the fourth quarter 2013 was a loss of R$63.9 million. The balance of cash and cash equivalents at the end of December 2013 was R$53.0 million and the gross financial debt was R$208.4 million, resulting in a net debt of R$155.4 million. Investment Capacity (R$ million) Cash available of R$ 53.0 Million on (44.6) (14.4) Dec/12 Mar/13 Jun/13 Sep/13 Dec/13 Gross Debt Net Debt 2

3 Consolidated Financial Information Variation Variation Variation In million of Reais 4Q13 3Q13 4Q12 4Q12 3Q vs 2012 Net Revenue of Sales and Services (35.3%) 17.7% 1, ,545.3 (32.0%) Automation Solutions (25.1%) 41.7% (22.0%) Computing Solutions (56.8%) 10.4% (37.3%) Technology Services (4.0%) 3.0% (32.8%) Gross Profit (66.7%) (61.5%) (73.9%) Operating Expenses (53.0) (58.6) (65.9) (19.6%) (9.7%) (243.8) (257.1) (5.1%) Other Gains (Losses), Net (25.5) (5.7) % (135.4) LAJIDA (EBITDA)¹ (67.7) (43.3) % (310.4) LAJIDA (EBITDA) Adjusted (67.7) (43.3) (45.5) 48.8% 56.4% (179.0) (53.4) 235.0% Operational Profit / (Loss) before taxes (69.4) (49.2) % (328.8) (2.7) % Net Income / (Loss) (63.9) (51.0) % (388.7) Nature Extraordinary Events ² - - (65.1) (65.1) - Net Income / (Loss) Adjusted (63.9) (51.0) (45.1) 41.5% 25.3% (155.9) (63.6) 145.1% Gross M argin 2.6% 7.8% 5.0% (2.4 pp) (5.3 pp) 4.8% 12.4% (7.7 pp) LAJIDA (EBITDA) M argin Adjusted (27.6%) (20.8%) (12.0%) (15.6 pp) (6.8 pp) (17.0%) (3.5%) (13.6 pp) EBITDA M argin (27.6%) (20.8%) 5.2% (32.8 pp) (6.8 pp) (29.5%) 0.8% (30.3 pp) Operating M argin (28.3%) (23.6%) 4.1% (32.4 pp) (4.7 pp) (31.3%) (0.2%) (31.1 pp) Net M argin (26.1%) (24.5%) 5.3% (31.3 pp) (1.6 pp) (37.0%) 0.1% (37.1 pp) Total Asset ,075.6 (32.0%) 4.3% ,075.6 (32.0%) Cash and Cash Equivalents (73.0%) 1.0% (73.0%) Gross Debt % 52.9% % Net Debt (44.6) % (44.6) - Stockholders' Equity (71.3%) (28.6%) (71.3%) (1) LAJIDA (Lucro antes dos Juros, Impostos, Depreciação e Amortização) or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) (2) Nature Extraordinary Events: : Impacts arising from the Company's strstegic repositioning : Assets arising from a special judicial order (precatório judicial). Shipments (Thousand units) 4Q13 3Q13 4Q12 Banking Automation Equipments Variation Variation Variation 4Q12 3Q vs 2012 ATMs (13.7%) 74.6% (20.7%) Computers Notebooks / Netbooks (96.5%) (78.5%) (58.3%) Desktops / All-in-Ones / Servers (35.1%) 40.6% (26.2%) Total (74.3%) (4.7%) (47.1%) In terms of the accumulated result for 2013, EBITDA was negative by R$ million. Adjusted EBITDA for the year, including the impacts of the company s reorganization that took place in the second half of 2013, was negative by R$ million. The following table shows the reconciliation of the EBITDA according to CVM Instruction No. 527/12, excluding from the indicator, when applicable, non-recurring events in order to provide better information about the company s ability to generate cash from operations. 3

4 In million of Reais 4Q13 3Q13 4Q Net Income / (Loss) (63,9) (51,0) 20,0 (388,7) 1,5 Income Taxes and Social Contribution (5,5) 1,8 (4,5) 59,9 (4,2) Financial Results, Net (2,9) 1,2 0,2 (0,3) (3,8) LAJIR (EBIT) (72,2) (48,0) 15,6 (329,0) (6,5) Depreciation and Amortization 4,5 4,7 4,0 18,7 18,2 LAJIDA (EBITDA) ¹ (67,7) (43,3) 19,6 (310,4) 11,7 Nature Extraordinary Events - - (65,1) 131,4 (65,1) LAJIDA (EBITDA) Adjusted (67,7) (43,3) (45,5) (179,0) (53,4) LAJIDA (EBITDA) M argin Adjusted (27,6%) (20,8%) (12,0%) (17,0%) (3,5%) LAJIDA (EBITDA) M argin (27,6%) (20,8%) 5,2% (29,5%) 0,8% (1) LAJIDA or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ITAUTEC S OPERATIONS AUTOMATION SOLUTIONS UNIT BR AUTOMAÇÃO The Automation Solutions Unit sells banking and business automation products and solutions intended for the Brazilian and international markets. The Unit s net revenue in 2013 stood at R$ million, 22.0% lower than the figure reported in 2012, on account of the fewer ATMs shipped during the period (6.4 thousand units in 2013 against 8.0 units in 2012), while during that period the portion of net revenue referring to the biometry project for private Brazilian bank was recognized. In 4Q13 net revenue stood at R$ 93.9 million, 25.1% lower than for the same period of 2012, on account of the lower volume of ATMs shipped and the lower volume of business involving biometry. TECHNOLOGY SERVICES UNIT BR AUTOMAÇÃO The Technology Services Unit provides technology park maintenance services and in companies investment projects, including installation, infrastructure, cabling and network, monitoring, maintenance and repair services for its own and third-party equipment in the areas of computing, banking and retail automation and telecommunications. The Unit s net revenue in 2013 was R$ million, 32.8% lower than that registered in the same period of This result reflects the reductions arising from the diminished scope and the renegotiations of contracts with the banking sector, in addition to the loss of a huge logistics services contract beginning in the second quarter of In 4Q13 net revenue from sales stood at R$ 75.9 million, 4.0% less than the figure reported in 4Q12, on account of the lower volume of business in the banking and stores segments. COMPUTING SOLUTIONS UNIT - ITAUTEC The Computing Solutions Unit sells microcomputers (desktops, notebooks, netbooks and servers), as well as integrated solutions and resale of software. The Unit s net revenue in 2013 was R$ million, 37.3% lower than the figure registered the same period of the previous year, on account of the gradual decommissioning of the operation. In 4Q13 net revenue from sales stood at R$ 75.2 million, 56.8% lower than in the same period of the previous year. DIVIDENDS No dividends were proposed for the financial year ended on December 31, 2013 on account of the net loss ascertained in the period. 4

5 INVESTMENTS - CONSOLIDATED The amount of R$85.1 million was invested in the year, of which R$64.3 million in research and development (R&D), mainly focused on the development of products in the retail and banking automation segments, including hardware and software, and R$20.8 million were invested in fixed assets. NEW PRODUCTS BR AUTOMAÇÃO In the Automation segment, Itautec launched banking automation products at Latin America s top financial industry and IT event, CIAB FEBRABAN Products launched included: Banking Automation ATM Adattis 2userS latest-generation ATM combining a single safe box, a CPU and a bill dispenser, so that one single device will provide two points of customer service. The device, which has a patent filing pending in Brazil, lowers operational costs and enhances security for banking institutions. Terminal de Atendimento Móvel Itautec (TAMI) - This is a single mobile device holding all customer service peripherals, such as biometric data, cards, documents, and personal document digitization, ensuring greater mobility in and around branches, more agility for opening accounts, convenience for customers and productivity for banks. Terminal Interface Cliente (TIC) - The TIC combines a pinpad, biometric reader and interactive touchscreen and enables multi-task processing. Multibiometric Identity Management - Identification and authentication solution using multibiometry (fingerprint, facial recognition and digital signature), which may gradually eliminate the use of passwords and their confirmations. In the third quarter saw the launch of the Security Pass (a security solution for controlling access to treasury areas), an evolution of the Security Way solution, widening its application to include bank branch treasuries and adding biometric identification and an innovative system of automatic people counting. During Itautec s participation at Autocom 2013, the 15 th Exhibition and Congress on business Automation, Services and Solutions for Business, the Mobile POS was rolled out, a solution that enables the POS (Point of Sale) to be taken to the customer within the store environment, providing customers with greater convenience, and the Electronic Tag, a solution for simple, effective and centralized price management. RECOGNITION - CONSOLIDATED Itautec was awarded in three categories of the World Finance Technology Awards 2013, acknowledgment created by the World Finance magazine to identify the best practices in the finance and corporate environment. Best Security Technology Provider, Latin America (Editions: 2011/2012/2013); Best Automated Banking Branch Technology, Latin America (Editions: 2011/2012/2013); Best Middle and Back Office Solutions Provider, Latin America (Edition: 2013). For the fifth consecutive year, Itautec was the Latin-American company best ranked in Fintech 100, a yearly ranking with the one hundred best global technology suppliers to the financial sector. The Company is the 39th in this ranking, which is developed by the research company IDC Financial Insights and by the international publications American Banker and Bank Technology News. Itautec was nominated as finalist in the Communication and Transparency Category of the 2013 edition of the Ethics in Business award. Organized by the Brazilian Institute of Ethics in Business (Instituto Brasileiro de Ética nos Negócios), currently in its fourth 5

6 edition, this award acknowledges the organizations initiatives to promote ethics in the corporate environment. The choice of the Company as a finalist considered the concern and care to provide the internal and external audience, including business partners and other stakeholders, with specific information on the strategic repositioning of Itautec and the announcement of the OKI Electric partnership. SOCIAL AND ENVIRONMENTAL INITIATIVES - CONSOLIDATED In the first quarter of 2013 Itautec concluded its inventory of greenhouse gas (GHG) emissions for its operations in 2012, involving the manufacturing unit, the service branches and the administrative office, which amounted to 41,600 tons of CO 2 equivalent (tco2e). This study is in accordance with the GHG Protocol standards, the Intergovernmental Panel on Climate Change (IPCC). For the second consecutive year, Itautec responded voluntarily to a questionnaire for the Carbon Disclosure Project (CDP) based on its greenhouse gas emissions inventory. The CDP is a European financial industry initiative encouraging companies to disclose their climate-change related commitments and policies. On June 12, Brazil s Electrical and Electronics Industry Association (Associação Brasileira da Indústria Elétrica e Eletrônica - Abinee) submitted a proposal to the Ministry of Environment on Reverse Logistics for IT Equipment that the Association had developed together with the industry, including Itautec. This initiative is part of the process of developing a lifecycle sharedresponsibility model for electronic products, as stipulated by Brazil s Solid Waste policy. It will enable development of a sectorwide agreement regulating proper disposal of electronic waste, to be signed by government and business. HUMAN RESOURCES AND ORGANIZATIONAL DEVELOPMENT At the end of 2013, the staff complement consisted of 4,171 direct employees, of whom 3,964 were deployed at BR Automação and 207 at Itautec. During the financial year R$ million were consumed in direct compensation and R$ 35.4 million spent on benefits, including medical and dental assistance, meals, transportation and training for technical development and professional qualification. STRATEGIC REPOSITIONING As shown in the extensive and detailed report presented, in spite of all the effort, dedication and evolution in terms of products and management, the Company, on account of globalization and the scale of its competitors, concluded that will not be able to generate future value for its shareholders, for which reason it undertook a strategic repositioning that included decommissioning the computer segment, in addition to a strategic alliance with a global player in the Automation and Services segments. INDEPENDENT AUDITORS In accordance with CVM Instruction 381/03, we confirm that Baker Tilly Brasil Auditores Independentes were not engaged to carry out any services other than those relating to auditing during the fiscal year of Itautec s policy in engaging our independent auditors to carry out services unrelated to the external audit is based on the applicable regulations and on internationally accepted principles, which preserve the auditor s independence and state that: (a) auditors shall not audit their own work, (b) auditors shall not perform management functions for their clients and (c) auditors shall not promote the interests of their clients. ACKNOWLEDGMENTS We thank our staff for their commitment and dedication in the Company s strategic repositioning. São Paulo, February 10, The Management. 6