Management Report Queiroz Galvão Participações - Concessões S.A.

Transcription

1 Management Report Queiroz Galvão Participações Concessões S.A. To the Stockholders, In accordance with the bylaws, we are submitting for your consideration the annual report of the management, and the related financial statements for the year ended December 31,, of Queiroz Galvão Participações Concessões S. A. The Management is grateful to all those who contributed toward the results achieved, especially our team of collaborators for their hard work and dedication, to suppliers and service providers for their good quality and punctuality and to clients for their faith in our work. March 26th, ADMINISTRATIVE COUNCIL Roberto de Queiroz Galvão President Ricardo de Queiroz Galvão Amilcar Bastos Falcão Counselor EXECUTIVE BOARD Mardonildo Oliveira Olímpio André de Oliveira Câncio Matheus Guimarães Antunes Director ACCOUNTANT Flávio de Castro e Souza CRCRJ

2 Independent Auditors' Report (A translation of the original report in Portuguese containing financial statements prepared in accordance To Directors and Shareholders Queiroz Galvão Participações Concessões S/A Rio de Janeiro RJ We have audited the individual and consolidated financial statements of Queiroz Galvão Participações Concessões S/A, identified as Holding Company and Consolidated, respectively, which comprise the balance sheet at 31 December and the related statements of income, changes in equity and cash flows for the year ended on that date, as well as the summary of significant accounting policies and other explanatory notes. Management's Responsibility on Financial Statements The Company's management is responsible for the preparation and fair presentation of the individual financial statements according to accounting practices adopted in Brazil, and the consolidated financial statements in accordance with international financial reporting standards (IFRS) issued by the International Accounting Standards Board IASB and in accordance with accounting practices adopted in Brazil, as well as the internal controls established by it as necessary to permit preparation of these financial statements free of material misstatement, regardless if it was caused by fraud or error. Independent Auditor's Responsibilities Our responsibility is to express an opinion on these financial statements based on our audit conducted in accordance with auditing standards and international auditing. Those standards demands compliance of ethical requirements by the auditors and that the audit is planned and implemented in order to obtain reasonable assurance that the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's method of analysis, including assessment of the risks of material misstatement of the financial statements, regardless if it was caused by fraud or error. In this risk assessment, the auditor considers internal control relevant to the preparation and fair presentation of financial statements of the Company to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of those internal controls of the Company. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the presentation of the financial statements taken as a whole. We believe that the audit evidence obtained is sufficient and appropriate to base our opinion. 02

3 Opinion about the Individual Financial Statements In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Queiroz Galvão Participações Concessões S/A on December 31,, the performance of its operations and its cash flows for the year ended on that date in accordance with accounting practices adopted in Brazil. Opinion on the Consolidated Financial Statements In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Queiroz Galvão Participações Concessões S/A on December 31,, the consolidated performance of its operations and its cash flows for the year ended on that date in accordance with international financial reporting standards (IFRS) issued by the International Accounting Standards Board IASB and the accounting practices adopted in Brazil. Emphasis As described in the explanatory note nº 4, the individual financial statements were prepared in accordance with accounting practices adopted in Brazil. In the case of Queiroz Galvão Participações Concessões S/A these practices differ from the IFRS, applicable to separated financial statements, only in relation to the valuation of investments in subsidiaries, associates and jointly controlled by the equity method, whereas under IFRS it would be cost or fair value. March 26, Mário Vieira Lopes ContadorCRCRJ /O 03

4 Financial Statements QUEIROZ GALVÃO PARTICIPAÇÕES CONCESSÕES S.A. CONSOLIDATED BALANCE SHEETS At December 31, and (In thousand of US dollars) Consolidated Holding Company Assets Current assets: Cash Marketable securities (note 3a) 89, ,486 2, Trade accounts receivable (note 3b) 218,810 79,529 2,220 2,418 Inventories (note 5) 40,581 2,830 Taxes recoverable 18,764 15,015 1,820 1,844 Other accounts receivable 8,325 31, , ,151 6,077 4,508 Non current assets: Longterm assets: Marketable securities 3,067 11, Judicial deposits 2, Deferred income tax 7,621 6,983 Other accounts receivable (note 6) 336, ,531 Subsidiaries and Affiliates (note 9) 256, ,504 Agio (note 9) 8,472 Other investments Fixed assets (note 7) 727, ,867 Intangible (note 7) 145, ,581 Deferred assets 7,847 9,562 1,239, , , ,612 1,615,479 1,286, , ,120 See notes to financial statements. 04

5 Financial Statements QUEIROZ GALVÃO PARTICIPAÇÕES CONCESSÕES S.A. CONSOLIDATED BALANCE SHEETS At December 31, and (In thousand of US dollars) Consolidated Holding Company Liabilities Current liabilities: Loans and debentures 216, , Trade accounts payable 75,279 8,234 6 Fiscal and social obligations 7,770 6, Payroll and social securities 15,974 8,500 Other accounts payable 86, , , , Non current liabilities: Loans 392, ,104 Related parties (note 8) 99, ,203 97,686 81,580 Fiscal and social obligations 7,801 9, Lender by grant (note 11) 203,137 54,746 Other accounts payable (note 10) 344,031 30,186 Deferred income ,047, ,024 98,151 82,178 Shareholders' equity: Capital stock (note 12) 374, , , ,233 Capital reserve Accumulated Loss (210,752) (235,004) (210,752) (235,004) Equity Valuation Adjustment Participation of controlling shareholders 164, , , ,827 Participation of non controlling shareholders 2,153 2, , , , ,827 1,615,479 1,286, , ,120 See notes to financial statements. 05

6 Financial Statements QUEIROZ GALVÃO PARTICIPAÇÕES CONCESSÕES S.A. CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, and (In thousand of US dollars) Consolidated Holding Company Service income 547, ,959 Equity in earnings (note 9) 8,676 (299,238) Taxes over revenue (16,429) (14,182) Cost of services (302,445) (431,461) Gross profit (loss) 228,323 (118,684) 8,676 (299,238) Operating income (expenses): Administrative (107,506) (57,214) (2,211) (345) Depreciation (10,519) (1,363) Tax expenses (1,222) (4,781) (53) (13) Other 220 (1,659) (119,027) (65,017) (2,264) (358) Financial income 43,616 46, ,031 Financial expenses (99,899) (115,005) (1,579) (27) (56,283) (68,197) (1,446) 1,004 Profit (Loss) before income tax and social contribution 53,013 (251,898) 4,966 (298,592) Social contribution (12,976) (5,171) (163) Income tax (4,882) (14,750) (63) Deferred income tax and social contribution 2, Net income (loss) for the year 37,198 (271,630) 4,966 (298,818) Participation of non controlling shareholders (note 13) (32,232) (27,188) Participation of controlling shareholders 4,966 (298,818) 4,966 (298,818) Earning (Loss) per share 0.75 (45.42) Number of shares of the capital stock 6,578,834 6,578,834 See notes to financial statements. 06

7

8 Financial Statements QUEIROZ GALVÃO PARTICIPAÇÕES CONCESSÕES S.A. STATEMENT OF CASH FLOW Years Ended December 31, and (In thousands of US dollars) Consolidated Holding Company Cash flows from operating activities: Profit (Loss) for the year 4,966 (298,818) 4,966 (298,818) Adjustments for: Depreciation 33,144 33,181 Equity in earnings (8,676) 299,238 Minority interest 2,153 2,739 Assets write off 2,736 (18) Interest expenses 56,283 68,197 1,446 (1,004) 99,282 (165,659) (2,264) (584) Decrease (increase) in accounts receivable (139,281) (57,722) 198 1,344 Decrease (increase) in inventories (37,751) (648) Decrease (increase) in recoverable taxes (3,749) (8,563) 24 (773) Decrease (increase) in other accounts receivable (186,970) (123,848) (1) 802 Increase (decrease) in suppliers 67,045 4,340 6 Increase (decrease) in salaries, charges and tax 8,489 9,581 (140) (174) obligations to pay Increase (decrease) in related parties (73,332) 187,687 16, ,622 Increase (decrease) in other trade accounts payable 390, ,467 Cash flows from operating activities 124,697 12,635 13, ,237 ( ) interests paid (99,899) (115,005) (1,579) (27) Net cash used in operating activities 24,798 (102,370) 12, ,210 See notes to financial statements. 08

9 Financial Statements STATEMENT OF CASH FLOW QUEIROZ GALVÃO PARTICIPAÇÕES CONCESSÕES S.A. Years Ended December 31, and (In thousands of US dollars) Consolidated Holding Company Cash flows used in investing activities ( ) Additions in Fixed assets (80,333) (659,322) ( ) Additions Subsidiary and Associated (11,197) (2,476) 3,954 (392,548) Interests received 43,616 46, ,031 Net cash used in investing activities (47,914) (614,990) 4,087 (391,517) Cash flows from financing activities Capital increase 296, ,281 Financing (paid) received (54,622) 606, Equity adjustments (392) 577 (392) 577 Dividends paid (800) (800) Net cash used in financing activities (55,014) 902,781 (383) 296,059 Increase in cash and cash equivalents (78,130) 185,421 16,054 16,752 Cash and cash equivalents, beginning of the year 181,486 18, ,708 Cash and cash equivalents, end of the year 89, ,486 2, Gain on translation 14,263 22,214 14,263 22,214 Increase in cash and cash equivalents (78,130) 185,421 16,054 16,752 See notes to financial statements. 09

10 Years Ended December 31, and (In thousand of US dollars) 1 Operations The Queiroz Galvão Participações Concessões S.A. is a privately held Company whole owned subsidiary of Queiroz Galvão S.A. The Company was incorporated on February 01, 1998 as part of an ample corporate reorganization process of the Queiroz Galvão S.A. group which included new strategic plans and the realignment of operation by area of activity within that scenery the Company was created with the objective to increment the participation of the Queiroz Galvão Group in other companies originated from public concessions in the areas of sanitation, energy, highways and engineering. The investments and the respective activity areas are as follow: SANITATION Saneamento Ambiental Águas do Brasil Headlight Vital Energia S.A. GMS Gestão e Manut. de Saneam. Básico (direct participation 24,18%) (direct participation 21,95%) (direct participation 24,18%) (direct participation 21,95%) HIGHWAY / SUBWAY Concessionária Rio Teresópolis S.A. Rodovias Integradas do Paraná S.A. Concessionária Rio Barra S.A. (direct participation 11,87%) (direct participation 24,08%) (direct participation 33,34%) (direct participation 11,87%) (direct participation 24,08%) (direct participation 33,34%) ENERGY Companhia Energética Santa Clara Queiroz Galvão Energética S.A. Companhia Energética Chapecó Mucuri Energética S/A RBF Energia S/A (direct participation 59,00%) (direct participation 59,00%) SHIPBUILDING INDUSTRY Estaleiro Atlântico Sul S.A. (direct participation 49,63%) (direct participation 46,63%) 10

11 Years Ended December 31, and (In thousand of US dollars) 2 Presentation of Financial Statements The financial statements have been prepared and are presented in accordance with accounting practices adopted in Brazil, which include the provisions of the Corporations Law, and the accounting standards and procedures issued by the Securities and Exchange Commission CVM and Accounting Pronouncements Committee CPC, resolutions approved by the Federal Accounting Council CFC. The preparation of financial statements according to IFRS standards and the CPC require management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Estimates and assumptions are reviewed on a continuous basis. Review with respect to accounting estimates are recognized in the fiscal year in which the estimates are revised and in any future periods affected. The financial statements were authorized for issue by the Board of Directors on March 26, Summary of Significant Accounting Policies a. Cash and cash equivalent Represent the company's resources without restrictions for immediate use, in moving the company's operations include cash balances, bank deposits and investments of immediate liquidity. They are classified as financial assets at fair value through income available for trading and are recorded at the original value plus accrued interest until the closing dates of the statements made by the prorata criterion which is equivalent to their market values. b. Financial assets (including receivables) A financial asset is not measured at fair value through profit or loss is assessed to each filing date to determine whether there is objective evidence that there has been loss of its recoverable amount. An asset is lost in its recoverable amount if objective evidence indicates that a loss event occurred after the initial recognition of assets, and that loss event had a negative effect on projected future cash flows that can be estimated in a reliable manner. c. Financial assets (including receivables) A financial asset is not measured at fair value through profit or loss is assessed to each filing date to determine whether there is objective evidence that there has been loss of its recoverable amount. An asset is lost in its recoverable amount if objective evidence indicates that a loss event occurred after the initial recognition of assets, and that loss event had a negative effect on projected future cash flows that can be estimated in a reliable manner. 11

12 Years Ended December 31, and (In thousand of US dollars) d. Inventories Inventories are valued at lower of cost and net realizable value. The cost of inventories is based on the principle of the Average Cost of Acquisition and includes expenditure incurred for the purchase of inventory, production and processing costs and other costs incurred in bringing them their locations and conditions. e. Fixed assets The items of equipment are measured at historical cost of acquisition or construction, including revaluations in prior years and the asset valuation adjustments attributable to the cost, less accumulated depreciation and losses on impairment (impairment) accumulated. Cost includes expenditures that are directly attributable to the acquisition of an asset. Where parts of an item of fixed assets have different useful lives, they are recorded as separate items (major components) of property. Gains and losses on disposal of an item of fixed assets (calculated as the difference between the proceeds of the sale and the book value of fixed assets) are recognized in other income / expenses in the result. The items of equipment are depreciated on the straight in the income statement based on the useful lives of each component. Items of fixed assets are depreciated from the date they are installed and available for use, or in case of internally constructed assets, from the day on which construction is completed and the asset is available for use. Depreciation methods, useful lives and residual values are reviewed every year and any closing adjustments are recognized as a change in accounting estimates. f. Investments Investment in subsidiaries and associated companies valued at equity method, based in Financial Statements of the investee companies. The results obtained are shown as operating income on account of equity income. Investments in subsidiaries and associates Controlled entities are those that directly or indirectly, the holding company has the power to regulate the accounting policies and operations, to obtain benefits from its activities are usually accompanied by a participation of more than half of the voting rights (voting capital). Affiliates are investments where the company has the power to exercise significant influence, but they do not have control or joint control through participation in the financial and operational decisions of the Company. Using the equity method is suspended from the date the Company fails to have significant influence over the affiliate. 12

13 Years Ended December 31, and (In thousand of US dollars) g. Income tax and social contribution Income tax and social contribution for the current year and deferred taxes are calculated based on the rates of 15% plus an additional 10% on taxable income in excess of $ 240,000 for income tax and 9% on taxable income for social contribution on net income, and consider the offsetting of tax losses and negative social contribution, limited to 30% of taxable income. The expense for income tax and social contribution comprises current and deferred taxes. Current tax and deferred tax are recognized in income unless they are related to the business combination, or items directly recognized in equity. In determining the current income tax and deferred, the Company takes into account the impact of uncertainties related to tax positions taken and the additional payment of income tax and interest have to be performed. The Company believes that the provision for income tax liabilities are adequate for all open tax years based on estimates and assumptions that may involve a series of judgments about future events. New information may be provided which would cause the Company to change its judgment as to the adequacy of existing provision, such changes will impact spending on income tax in the year they are made. h. Deferred revenues In compliance with Law /07, the result of the works of shortterm (previously classified as Deferred Income) is recorded in Deferred Revenue. The recognition in the income statement is made at the close of the work. i. Provisions A provision is recognized on the basis of a past event, the Company has a legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are cleared thru the discounting expected future cash flows at a pretax rate that reflects current market assessments of the value of money over time and risks specific to the liability. The financial costs incurred are recorded as income. j. Results of operations Revenues from services, associated costs and other income and expenses are recognized on an accrual for the year. k. Translation into united states dollars The United States dollar amounts result from translation of the financial statements at the yearend rate of exchange as follows: R$ 2,0435 to US$1.00 R$ 1,8758 to US$

14 Years Ended December 31, and (In thousand of US dollars) The translation should not be construed as representation that the real (R$) amounts actually represent or have been, or could be converted into United States dollars. 4 Summary of the Main Procedures used in the Consolidated of the Financial Statements The consolidated financial statements at December 31, and cover the parent Queiroz Galvão S.A. and subsidiaries in which it has made participation as detailed in note 9; The financial statements have been prepared in accordance with the rules and procedures adopted in Brazil, which include accounting principles issued by the Brazilian corporate law. The process of consolidating the balance sheet and income is the sum of balances of assets, liabilities, revenues and expenses according to their nature, supplemented with the following eliminations: Of profit sharing, reserves and accumulated results held between them; The balance of current accounts and other asset and / or liability held between the companies whose balance sheets were consolidated; Effects arising from transactions between these companies and the rights of minority shareholders are recorded as liabilities and results in "participation of minority shareholders. 5 Inventories CONSOLIDATED Storehouse Raw materials

15 Years Ended December 31, and (In thousand of US dollars) 6 Other Accounts Receivables (non current) CONSOLIDATED Investee Grant (note 10) Conc. Rio Barra Advances to suppliers (a) Estaleiro A. Sul Taxes recoverable Estaleiro A. Sul Accounts recivable Estaleiro A. Sul Other receivables Various a) Advances to suppliers for the South Atlantic Shipyard totaling U$D 100,920 thousand dollars, are basically for main and auxiliary engines of 15 vessels, equipment cargo and ship ballast, rudders, anchors and boilers, steel and equipment suppliers for drilling platforms that include marine package (dynamic positioning navigation), engines and trusts and basic engineering design and detailed. 7 Fixed Assets and Intangible 7.1 Fixed Assets CONSOLIDATED Estimated usefull lives (years) Buildings Field equipments and other Highway improvements Other fixed assets Vehicles Less: Accumulated depreciation 25 5 and ( ) ( ) Lands Work in process

16 Years Ended December 31, and (In thousand of US dollars) 7.2 Intangible CONSOLIDATED Trademarks and technology Telephone lines Developing and Research Award rights of concession Software Related Parties The balance of loan contracts and transactions with related parties are: COMPANIES Agropecuária Rio Arataú S.A. Saneamento Ambiental Águas do Brasil S/A Construtora Queiroz Galvão S/A Queiroz Galvão S/A ( ) (99.871) (58.300) ( ) ( ) 16

17 Years Ended December 31, and (In thousand of US dollars) 9 Investments in Subsidiaries and Affiliates Following are the details of the Investments in Queiroz Galvão Paticipações Concessões S.A. at December 31, and : Quantity of ON* shares Quantity of Preferred shares Participation % Capital Shareholders* Stock Equity Equity Equity in Earnings Saneamento Ambiental Águas do Brasil , Headlight Vital Energia S.A Rodovias Integradas do Paraná S.A , Concessionária Rio Barra S.A , (2.257) Concessionária RioTeresópolis S.A , Queiroz Galvão Energética S.A Companhia Energética Santa Clara Companhia Energética Chapecó , Mucuri Energética S/A (3.226) R B F Geração de Energia S/A (1) Estaleiro Atlântico Sul S/A , (33.514) * ON = Ordinary a) Purchase of 50% of shares owned by Samsung Heavy Industries in Brazil Consulting Business Projects Ltda., referring to 3% of the capital of the Estaleiro Atlântico Sul S / A as contract of purchase of shares 20/07/, with goodwill of R $ 17,312 (U$D 8.472). Quantity of ON* shares Quantity of Preferred shares Participation % Capital Shareholders* Stock Equity Equity Equity in Earnings Saneamento Ambiental Águas do Brasil , Headlight Vital Energia S.A Rodovias Integradas do Paraná S.A , Concessionária Rio Barra S.A , Concessionária RioTeresópolis S.A , Queiroz Galvão Energética S.A Companhia Energética Santa Clara Companhia Energética Chapecó , Mucuri Energética S/A (3.279) R B F Geração de Energia S/A (516) (516) (403) Estaleiro Atlântico Sul S/A , ( ) * ON = Ordinary ( ) 17

18 Years Ended December 31, and (In thousand of US dollars) 10 Other Accounts Payable (non current) Consolidated Advances from customer (i) Contingencies Other liabilities i) The South Atlantic Shipyard has a balance of advances from customers, which are the values provided by Petrobras Transportes SA Transpetro, which corresponds to 5% of the purchase and sale for the construction of 5 Aframax vessels contracted, the advances made during execution of the construction of 10 Suezmax vessels, and advances made by Petrobras Netherlands BV for the construction of the hull of the P55. Represent the difference between the total revenue recognized and the amount of advances received from customers in each of the projects. 11 Lender by Grant The balance of this account refers primarily (U$D 202,402 thousand dollars) to GRANT METRO PROJECT / LINE 4 RJ, and consist of works for implementation of the entire structure of Line 4 (four) as the basic design approved by Metro, the amounts contributed by the state as grant, which were used exclusively to works executed for the account and risk of the Concessionaire Rio Barra. These values are not amortized and works and goods to be used, including the undercarriage, will be added to assets reversible dealership this line. The Concession Agreement is effective 25 (twenty five) years and according to criteria of the State, may be extended for the same period, only once. At the end of the concession, the reversible assets held by the dealership, from the works executed along with the purchased goods will be returned to the state and reimbursed to the Concessionaire Rio Barra S/A by value has not depreciated or amortized. 12 Capital The capital, subscribed and fully paid, comprises ordinary nominative shares with no par value. The shareholders have the right to a minimum dividend of 3% of the net income for the year, according to the company's bylaw on December 31, the equity value of each share is R$ 50,98 equivalent to US$ 24,95. 18

19 Years Ended December 31, and (In thousand of US dollars) 13 Participation of Non Controlling Shareholders The South Atlantic Shipyard sold its 50.96% stake in Oil & Gas Rig Contractor Inc as decided by the Board of Directors on December 18,, having as basis the balance sheet date of 30 November. Was included in the consolidated financial statements of December 31, the result of the Rig until November 30,, which generated the result row noncontrolling value in thousands of Reais, R$ 127,914 (U$D ). With the participation of Queiroz Galvão Participações Concessions S / A 49.63%, the value was released in thousands of Reais, R$ 63,484 (U$D ). 14 Financial Instruments The financial instruments are recorded for in the balance sheet accounts as of December 31, and at compatible market value. The management of these instruments is made in a strategic way with the objective of liquidity, rentability and security. The investment control consists of a permanent followup of the contracted rates compared to the daily market rates. The company does not operate with derivatives or any other risk asset. 15 Contingencies The Company's management, based on the opinion of its legal advisors believes that the appropriate referrals and arrangements for any fiscal, tax, pension and labor liability purposes; have been taken in each situation and are sufficient to preserve the company's equity no indications, in December 31,, of the need to recognize any provision for contingencies in the financial statements. The accounting records and operations are subject to examination of tax authorities in different mature dates according to the specific tax laws applicable. 19